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Exhibit 10(ee) HUMANA INC. STOCK OPTION AND RESTRICTED STOCK AGREEMENT WITH RESTRICTIVE COVENANTS UNDER THE 2003 STOCK INCENTIVE PLAN THIS AGREEMENT (“Agreement”) made as of                                                  ,              by and between HUMANA INC., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter referred to as the “Company”), and                                                              , a Grantee of the Company (hereinafter referred to as “Grantee”). WITNESSETH WHEREAS, the 2003 Stock Incentive Plan (the “Plan”), for certain employee and non-employee Directors of the Company and its subsidiaries was approved by the Company’s Board of Directors (the “Board”) and stockholders; and WHEREAS, the Company desires to grant to Grantee i) an option to purchase shares of common stock of the Company and ii) restricted shares of common stock of the Company in accordance with the Plan. NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter set forth, and other good and valuable consideration, the Company and Grantee agree as follows:   I. OPTION GRANT A. Grant of Option. The Company hereby grants to Grantee, as a matter of separate inducement and agreement and not in lieu of salary or other compensation for services, a non-qualified stock option to purchase                                                   (                ) shares of the $.16-2/3 par value common stock of the Company (“Common Stock”) at the purchase price of $             per share (the “Option”) exercisable on the terms and conditions set forth herein. B. Term. The term of the Option shall commence upon the date of grant,                                      ,           , and shall expire on                                          ,             , (“Expiration Date”). C. Vesting of Option. Except as otherwise set forth herein, this Option shall be exercisable by Grantee or his/her personal representative on and after the            anniversary of the date hereof in cumulative annual installments of                  of the number of shares covered hereby. D. Effect of Termination of Employment. 1. If the employment of Grantee by the Company is terminated for Cause, all the rights of Grantee under this Agreement, whether or not exercisable, shall terminate immediately.   1 -------------------------------------------------------------------------------- 2. If the employment of Grantee is terminated for any reason other than for Cause, Retirement, death or Disability, unless otherwise specified herein, all the rights of Grantee under this Agreement then exercisable shall remain exercisable at any time within ninety (90) days after the date of such termination, but in no event beyond the Expiration Date. 3. In the event of Grantee’s Retirement, this Option shall be exercisable at any time within two (2) years after the date of Retirement, but in no event beyond the Expiration Date, and only to the extent the Option was exercisable at the date of Retirement. 4. In the event of death or Disability of Grantee while in the employ of the Company, this Option shall become immediately exercisable and shall remain exercisable by Grantee or the person or the persons to whom those rights pass by will or by the laws of descent and distribution or, if appropriate, by the legal representative of the Grantee or the estate of the Grantee at any time within two (2) years after the date of such death or Disability, regardless of the Expiration Date. 5. In the event of a Change in Control, as defined in the Plan, the Option granted in Section I shall become fully vested and immediately exercisable in its entirety. In addition, Optionee will be permitted to surrender for cancellation within sixty (60) days after a Change in Control, any portion of this Option to the extent not yet exercised and Optionee will be entitled to receive a payment in an amount equal to the excess, if any, of (x) the greater of (1) the Fair Market Value on the date of surrender of the Shares subject to this Option or portion thereof surrendered, or (2) the Fair Market Value, as Adjusted, of the Shares subject to this Option or portion thereof surrendered, over (y) the aggregate purchase price for such Shares under this Option or portion thereof surrendered. The form of payment shall be determined by the Committee. In the event Optionee’s employment with the Company is terminated other than for Cause within three (3) years following a Change in Control, each Option held by the Optionee that was exercisable as of the date of termination of the Optionee’s employment or service shall remain exercisable for a period ending the earlier of the second anniversary of the termination of the Optionee’s employment or the expiration of the stated term of the Option. E. Exercise of Option. 1. This Option shall be exercisable only by written notice to the Secretary of the Company at the Company’s principal executive offices by Grantee or his/her legal representative as herein provided. Such notice shall state the number of shares to be exercised and shall be signed by Grantee or his/her legal representative, as applicable. 2. The purchase price shall be paid as follows: a) In full in cash upon the exercise of the Option; or b) By tendering to the Company shares of the Common Stock of Company owned by him/her prior to the date of exercise and having an aggregate fair market value equal to the cash exercise price applicable to his/her Option; or c) A combination of I.E.(2)(a) and I.E.(2)(b) above.   2 -------------------------------------------------------------------------------- 3. Federal, state and local income taxes and other amounts as may be required by law to be collected by the Company in connection with the exercise of this Option shall be paid pursuant to the Plan by Grantee prior to the delivery of any Common Stock under this Agreement.   II. RESTRICTED STOCK GRANT A. Purchase and Sale of Common Stock. Subject to the terms and conditions hereinafter set forth, and in accordance with the provisions of the Plan, the Company hereby grants to Grantee, and Grantee hereby accepts from the Company                                                                   (                    ) Shares. The purchase price, if any, for the Shares shall be determined by the Committee, but shall not be less than par value of $.16 2/3 per share. B. Restrictions on Non-Vested Shares. Until such time as the Shares purchased hereunder have vested in accordance with Section II.C. (Shares which are not vested are referred to herein as “Restricted Stock”), such Shares may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated. In addition, such Restricted Stock shall be subject to forfeiture in accordance with the provisions of Section II.D. Except for the restrictions provided for in this Section II.B., Grantee shall have all of the rights of a stockholder with respect to Restricted Stock including, but not limited to, the right to vote and receive dividends, or other distributions paid or made with respect to the Restricted Stock (other than dividends paid in Shares, which stock dividends shall be subject to the same restrictions as apply to the Restricted Stock with respect to which they were received). C. Vesting of Shares. 1. None of the Restricted Stock shall vest until February 23, 2009, the third anniversary of the date hereof, at which time it shall vest in full. 2. Notwithstanding the foregoing, upon (i) the death or Disability of Grantee, or (ii) a Change in Control, all restrictions shall lapse and the Restricted Stock shall thereafter be immediately transferable and non-forfeitable. 3. Upon the Restricted Stock becoming vested, such Shares shall be free of all restrictions provided for in this Section II. D. Forfeiture. Upon the termination of Grantee’s employment with the Company prior to the time the Restricted Stock has vested pursuant to Section II.C., the Restricted Stock shall thereupon be forfeited immediately by Grantee. E. Retention of Stock Certificate. Notwithstanding that Grantee has been awarded the Restricted Stock on the date hereof, the Company has caused all Restricted Stock to be issued in book entry format or under a Certificate representing the Restricted Stock prior to vesting. If a Certificate is issued, it shall bear the following legend: “The Shares represented by this certificate have been issued pursuant to the terms of the Humana Inc. 2003 Stock Incentive Plan and may not be sold, assigned, transferred, discounted, exchanged, pledged or otherwise encumbered or disposed of in any manner except as set forth in the terms of the agreement embodying the award of such Shares dated February 23, 2006.”   3 -------------------------------------------------------------------------------- Upon the vesting of the Restricted Stock, Grantee shall have the right to receive a Certificate evidencing such vested stock and shall have the right to have the legend provided for above removed from the Certificate representing such vested Shares. F. Taxes. Federal, state and local income taxes and other amounts as may be required by law to be collected by the Company in connection with the grant or vesting of an Award shall be paid by Grantee prior to the issuance of a Certificate representing the Shares. G. Execution. If Grantee shall fail to execute this Agreement and return the executed original to the Secretary of the Company, the Award shall be null and void.   III. AGREEMENT NOT TO COMPETE AND AGREEMENT NOT TO SOLICIT A. Agreement Not To Compete. Grantee hereby covenants and agrees that for a period commencing on the date hereof and ending twelve (12) months after the effective date of Grantee’s termination of employment with the Company, Grantee, directly or indirectly, personally, or as an Grantee, officer, director, partner, member, owner, shareholder, investor or principal of, or consultant or independent contractor with, another entity, shall not: Participate in any business which competes with the Company, including, without limitation, health maintenance organizations, insurance companies or prepaid health plan businesses, in which the Company has been actively engaged during any part of the two (2) year period immediately preceding the Grantee’s employment termination date (“Company Business”), in any of the markets in which the Company is then currently doing business. B. Agreement Not To Solicit. Grantee hereby covenants and agrees that for a period commencing on the date hereof and ending twelve (12) months after the effective date of Grantee’s termination of employment with the Company, Grantee, directly or indirectly, personally, or as an Grantee, officer, director, partner, member, owner, shareholder, investor or principal of, or consultant or independent contractor with, another entity, shall not: 1. Interfere with the relationship of the Company and any of its Grantees, agents, representatives, consultants or advisors. 2. Divert, or attempt to cause the diversion from the Company, any Company Business, nor interfere with relationships of the Company with its policyholders, agents, brokers, dealers, distributors, marketers, sources of supply or customers. 3. Solicit, recruit or otherwise induce or influence any Grantee of the Company to accept employment in any business which competes with the Company Business, in any of the markets in which the Company is then currently doing business. C. Effect of Termination of Employment. 1. In the event Grantee voluntarily resigns or is discharged by Company with Cause at any time prior to the vesting of the Restricted Stock, the prohibitions on Grantee set forth herein shall remain in full force and effect.   4 -------------------------------------------------------------------------------- 2. In the event Grantee is discharged by Company other than with Cause prior to the vesting herein of the Restricted Stock, the prohibitions set forth in Section III.A. shall remain in full force and effect only if the Company, solely at its option, pays to Grantee an amount at least equal to Grantee’s then current annual base salary, whether such amount is paid pursuant to this provision or pursuant to any other severance or separation plan or other plan or agreement between Grantee and Company. 3. In the event Grantee is discharged by Company other than with Cause prior to vesting herein of the Restricted Stock, the prohibitions set forth in Section III.B. above shall remain in full force and effect. 4. After the vesting of the Restricted Stock, the prohibitions on Grantee set forth herein shall remain in full force and effect, except as otherwise provided in Section III.D. D. Effect Of Change In Control. 1. In the event of a Change in Control, the prohibitions on Grantee set forth in Section III.A. shall remain in full force and effect only if the acquirer or successor to the Company following the Change in Control shall, solely at its option, pay, within thirty (30) days following Grantee’s employment termination date with the Company or its successor, to the Grantee an amount at least equal to Grantee’s then current annual base salary, plus Grantee’s maximum potential bonus pursuant to any bonus plan in which Grantee participated as of the date of the Change in Control. Such sums shall be in addition to any other amounts paid or payable to Grantee with respect to other change in control agreements. 2. In the event of a Change in Control, the prohibitions on Grantee set forth in Section III.B. shall remain in full force and effect. E. Governing Law. Notwithstanding any other provision herein to the contrary, the provisions of this Section III of the Agreement, shall be governed by, and construed in accordance with, the laws of the Commonwealth of Kentucky without regard to its conflicts or choice of laws rules or principles that might otherwise refer construction or interpretation of this Section III to the substantive law of another jurisdiction. F. Injunctive Relief; Invalidity of Any Provision. Grantee acknowledges that (1) his or her services to the Company are of a special, unique and extraordinary character, (2) his or her position with the Company will place him or her in a position of confidence and trust with respect to the operations of the Company, (3) he or she will benefit from continued employment with the Company, (4) the nature and periods of restrictions imposed by the covenants contained in this Sections III hereof are fair, reasonable and necessary to protect the Company, (5) the Company would sustain immediate and irreparable loss and damage if Grantee were to breach any of such covenants, and (6) the Company’s remedy at law for such a breach will be inadequate. Accordingly, Grantee agrees and consents that the Company, in addition to the recovery of damages and all other remedies available to it, at law or in equity, shall be entitled to seek both preliminary and permanent injunctions to prevent and/or halt a breach or   5 -------------------------------------------------------------------------------- threatened breach by Grantee of any covenant contained in Section III hereof. If any provision of this Section III is determined by a court of competent jurisdiction to be invalid in whole or in part, it shall be deemed to have been amended, whether as to time, area covered or otherwise, as and to the extent required for its validity under applicable law, and as so amended, shall be enforceable. The parties further agree to execute all documents necessary to evidence such amendment.   IV. MISCELLANEOUS PROVISIONS A. Binding Effect & Adjustment. This Agreement shall be binding and conclusive upon each successor and assign of the Company. Grantee’s obligations hereunder shall not be assignable to any other person or entity. It is the intent of the parties to this Agreement that the benefits of any appreciation of the underlying Common Stock during the term of the Award shall be preserved in any event, including but not limited to a recapitalization, merger, consolidation, reorganization, stock dividend, stock split, reverse stock split, spin-off or similar transaction, or other change in corporate structure affecting the Shares, as more fully described in Section 4.7 of the Plan. All obligations imposed upon Grantee and all rights granted to Grantee and to the Company shall be binding upon Grantee’s heirs and legal representatives. B. Amendment. This Agreement may only be amended by a writing executed by each of the parties hereto. C. Governing Law. Except as to matters of federal law and as otherwise provided herein, this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware without regard to its conflict of laws rules. This Agreement shall also be governed by, and construed in accordance with, the terms of the Plan. D. No Employment Agreement. Nothing herein confers on the Grantee any rights with respect to the continuance of employment or other service with the Company, nor will it interfere with any right the Company would otherwise have to terminate or modify the terms of Grantee’s employment or other service at any time. E. Severability. If any provision of this Agreement is or becomes or is deemed invalid, illegal or unenforceable in any relevant jurisdiction, or would disqualify this Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan, it shall be stricken and the remainder of the Agreement shall remain in full force and effect. F. Defined Terms. Any term used herein and not otherwise defined herein shall have the same meaning as in the Plan. Any conflict between this Agreement and the Plan will be resolved in favor of the Plan. Any disputes or questions of right or obligation which shall result from or relate to any interpretation of this Agreement shall be determined by the Committee. Any such determination shall be   6 -------------------------------------------------------------------------------- binding and conclusive upon Grantee and any person or persons claiming through Grantee as to any rights hereunder. IN WITNESS WHEREOF, Company has caused this Agreement to be executed on its behalf by its duly authorized officer, and Grantee has executed this Agreement, each as of the day first above written.       “Company” ATTEST:     HUMANA INC. BY:          BY:        ______________________________       Senior Vice President     and General Counsel   ___________________________________         Secretary             “Grantee”                    7

  Exhibit 10.1 June 6, 2006 Christine A. Russell Dear Christine: We are pleased to formally extend to you an offer of employment for the position of Vice President and Chief Financial Officer with Virage Logic Corporation (Virage Logic). As a member of our Executive Team and the leader of the Finance Group you will report to Adam Kablanian, President and Chief Executive Officer. To compensate you for your efforts and contribution in this position, you will receive a compensation package including base salary, eligibility for incentive compensation, stock options and a comprehensive benefits plan. Your base salary will be $19,584.00 per monthly (equivalent to $235,008 per annum), subject to standard payroll deductions and withholdings. This position is classified as Exempt. Your variable incentive compensation will be a Revenue/Earnings bonus plan based on profit sharing with an at plan opportunity of 35% of your actual base salary prorated to the actual company performance versus the approved plan for the fiscal year ending in September 30, 2006. You will be eligible to receive a stock option grant for 255,000 shares of Common Stock of Virage Logic Corporation. The price per share for this option will be fixed based on the closing sales price on the first 15th day of the month after your start date. The shares subject to this option will vest over a four-year period with 25% of the shares vesting one (1) year from your start date, and thereafter the shares shall vest at a rate of 1/48th of the shares per month for the remaining 36 months. If a change in control occurs and your employment is terminated or materially altered within the first two years of employment, 50% or 127,500 shares of your outstanding stock option grant shall immediately fully vest. With regard to benefits, you will receive all the employment benefits available to full time, regular exempt employees of Virage Logic. These benefits include a 401(k) plan; medical, dental, vision and life insurance plans, for which the premiums are paid 100% by the Company for an employee selecting an HMO plan. Other plans are available with a minimal pre-tax employee contribution. In addition, you will be eligible to accrue fifteen days paid time off during the year and 10 paid holidays per year. In addition, you will be eligible to participate in Virage Logic’s Employee Stock Purchase Plan effective August 15,2006. In accordance with the Immigration Reform & Control Act of 1986, employment in the United States is conditional upon proof of eligibility to legally work in the United States. On your first day of employment, you will need to provide us with this proof. If you do not have these documents, please contact me prior to your first day of employment. As an employee of Virage Logic you will have access to confidential information and you may, during the course of your employment, develop information or inventions that will be the property of Virage Logic. To protect the interests of Virage Logic, you will be required to sign the Company’s Employment Invention and Confidential Information Agreement as a condition of your starting employment. We wish to impress upon you that we do not wish you to bring with you any confidential or proprietary material of any former employer or to violate any other obligations you may have to your former employer. 1 --------------------------------------------------------------------------------   Your employment with Virage Logic is voluntarily entered into and you are free to resign at any time. Similarly, Virage Logic is free to conclude an employment relationship where it believes it is in its interest at any time and for no reason and for no cause While we hope our relationship will be mutually beneficial, it should be recognized that neither you, nor we have entered into any contract of employment expressed or implied. Our relationship is and always will be one of voluntary employment “at will.” This offer letter is an offer of employment and is not intended and shall not be construed as a contract proposal or contract of employment. This offer constitutes all conditions and agreements made on behalf of Virage Logic and supersedes any previous verbal or written commitments by the Company. No representative other than me has any authority to alter or add to any of the terms and conditions herein. This written offer is also contingent upon completion of your background check with acceptable results and your signing the company Employment Invention and Confidential Information and Code of Conduct agreements. This background check is a standard verification of criminal history, education and former employers. In addition, for this position a credit check will also be conducted Please contact me to indicate your response to this offer. Upon your acceptance please sign and return the original while retaining the copy of this offer for your records. You may send your signed copy to our confidential fax number: 510-743-8179 and return the original on your first day of employment. I have also enclosed an Employment Invention and Confidential Information Agreement. This employment offer expires on June 7, 2006 at 5:00 pm PST. Christine, we are excited about the opportunity to have you join Virage Logic and are certainly looking forward to your positive response. Regards, Adam Kablanian President and CEO           Accepted:   /s/ Christine A. Russell Date:  June 6, 2006               Christine A. Russell               Anticipated Start Date:                   2 --------------------------------------------------------------------------------   June 19, 2006 Christine A. Russell Dear Christine: Regarding your employment with Virage Logic, there have been two changes from your offer letter which I would like to memorialize in writing. First the grant date for your option will be the third business day following release of earnings for the June quarter. Accordingly, the price per share for this option will be fixed based on the closing sales price on that day. Second, your title will be Vice President of Finance and Chief Financial Officer and not simply Vice President and Chief Financial Officer. This letter serves as an addendum to your original offer letter, which otherwise remains in effect. Christine, we are excited about your joining Virage Logic. Regards, Adam Kablanian President and CEO           Accepted:   /s/ Christine A. Russell Date:  June 19, 2006               Christine A. Russell     3

Exhibit 10.2   RLI CORP. DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENT   THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into as of the              day of                 , 2006, by and between RLI Corp., an Illinois corporation (the “Company”), and                                      (“Indemnitee”).   RECITALS   A.            The Company is aware that competent and experienced persons are increasingly reluctant to serve or continue serving as directors or officers of companies unless they are protected by comprehensive liability insurance and adequate indemnification due to the increased exposure to litigation costs and risks resulting from service to such companies that often bear no relationship to the compensation of such directors or officers.   B.            The statutes and judicial decisions regarding the duties of directors and officers often fail to provide directors and officers with adequate, reliable knowledge of the legal risks to which they are exposed or the manner in which they are expected to execute their fiduciary duties and responsibilities.   C.            The Company and the Indemnitee recognize that plaintiffs often seek damages in such large amounts, and the costs of litigation may be so great (whether or not the case is meritorious), that the defense and/or settlement of such litigation can create an extraordinary burden on the personal resources of directors and officers.   D.            The board of directors of the Company has concluded that, to attract and retain competent and experienced persons to serve as directors and officers of the Company, it is not only reasonable and prudent but necessary to promote the best interests of the Company and its stockholders for the Company to contractually indemnify its directors and certain of its officers in the manner set forth herein, and to assume for itself liability for expenses and damages in connection with claims against such directors and officers in connection with their service to the Company as provided herein.   E.             The Company desires and has requested the Indemnitee to serve or continue to serve as a director and/or officer of the Company, and the Indemnitee is willing to serve, or to continue to serve, as a director and/or officer of the Company if the Indemnitee is furnished the indemnity provided for herein by the Company.   NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements set forth below, the parties hereto, intending to be legally bound, hereby agree as follows:   1.             DEFINITIONS. FOR PURPOSES OF THIS AGREEMENT, THE FOLLOWING TERMS SHALL HAVE THE CORRESPONDING MEANINGS SET FORTH BELOW.   --------------------------------------------------------------------------------   “Claim” means a claim or action asserted by a Person in a Proceeding or any other written demand for relief in connection with or arising from an Indemnification Event.   “Company Action” means a Proceeding in which a Claim has been brought by or in the name of the Company to procure a judgment in its favor.   “Covered Entity” means (i) the Company, (ii) any subsidiary of the Company or (iii) any other Person for which Indemnitee is or was or may be deemed to be serving, at the request of the Company or any subsidiary of the Company, as a director, officer, employee, controlling person, agent or fiduciary.   “Disinterested Director” means, with respect to any determination contemplated by this Agreement, any Person who, as of the time of such determination, is a member of the Company’s board of directors but is not a party to any Proceeding then pending with respect to any Indemnification Event.   “ERISA” means Employee Retirement Income Security Act of 1974, as amended, or any similar Federal statute then in effect.   “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar Federal statute then in effect.   “Expenses” means any and all direct and indirect fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating, printing and binding costs, telephone charges, postage and delivery service fees and all other disbursements or expenses of any type or nature whatsoever reasonably incurred by Indemnitee (including, subject to the limitations set forth in Section 3(c) below, reasonable attorneys’ fees) in connection with or arising from an Indemnification Event, including, without limitation: (i) the investigation or defense of a Claim; (ii) being, or preparing to be, a witness or otherwise participating, or preparing to participate, in any Proceeding; (iii) furnishing, or preparing to furnish, documents in response to a subpoena or otherwise in connection with any Proceeding; (iv) any appeal of any judgment, outcome or determination in any Proceeding (including, without limitation, any premium, security for and other costs relating to any cost bond, supersedeas bond or any other appeal bond or its equivalent); (v) establishing or enforcing any right to indemnification under this Agreement (including, without limitation, pursuant to Section 2(c) below), Illinois law or otherwise, regardless of whether Indemnitee is ultimately successful in such action, unless as a part of such action, a court of competent jurisdiction over such action determines that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous; (vi) Indemnitee’s defense of any Proceeding instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement (including, without limitation, costs and expenses incurred with respect to Indemnitee’s counterclaims and cross-claims made in such action); and (vii) any Federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, including all interest, assessments and other charges paid or payable with respect to such payments. For purposes of clarification, Expenses shall not include Losses.   --------------------------------------------------------------------------------   An “Indemnification Event” shall be deemed to have occurred if Indemnitee was or is or becomes, or is threatened to be made, a party to or witness or other participant in, or was or is or becomes obligated to furnish or furnishes documents in response to a subpoena or otherwise in connection with, any Proceeding by reason of the fact that Indemnitee is or was or may be deemed a director, officer, employee, controlling person, agent or fiduciary of any Covered Entity, or by reason of any action or inaction on the part of Indemnitee while serving in any such capacity (including, without limitation, rendering any written statement that is a Required Statement or is made to another officer or employee of the Covered Entity to support a Required Statement).   “Independent Legal Counsel” means an attorney or firm of attorneys designated by the Disinterested Directors (or, if there are no Disinterested Directors, the Company’s board of directors) that is experienced in matters of corporate law and neither presently is, nor in the thirty-six (36) months prior to such designation has been, retained to represent:  (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.   “Losses” means any and all losses, claims, damages, liabilities, judgments, fines, penalties, settlement payments, awards and amounts of any type whatsoever incurred by Indemnitee in connection with or arising from an Indemnification Event. For purposes of clarification, Losses shall not include Expenses.   “Organizational Documents” means any and all organizational documents, charters or similar agreements or governing documents, including, without limitation, (i) with respect to a corporation, its articles of incorporation and bylaws, (ii) with respect to a limited liability company, its operating agreement, and (iii) with respect to a limited partnership, its partnership agreement.   “Proceeding” means any threatened, pending or completed claim, action, suit, proceeding, arbitration or alternative dispute resolution mechanism, investigation, inquiry, administrative hearing or appeal or any other actual, threatened or completed proceeding, whether brought in the right of a Covered Entity or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative or investigative nature.   “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or other enterprise or government or agency or political subdivision thereof.   “Required Statement” means a written statement of a Person that is required to be, and is, filed with the SEC regarding the design, adequacy or evaluation of a Covered Entity’s internal controls or disclosure controls and procedures or the accuracy, sufficiency or completeness of reports or statements filed by a Covered Entity with the SEC pursuant to federal law and/or administrative regulations, including without limitation, the certifications contemplated by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, or any rule or regulation promulgated pursuant thereto.   --------------------------------------------------------------------------------   “Reviewing Party” means, with respect to any determination contemplated by this Agreement, any one of the following:  (i) a majority of the Disinterested Directors, even if such Persons would not constitute a quorum of the Company’s board of directors; (ii) a committee consisting solely of Disinterested Directors, even if such Persons would not constitute a quorum of the Company’s board of directors, so long as such committee was designated by a majority of the Disinterested Directors; (iii) Independent Legal Counsel (in which case, any determination shall be evidenced by the rendering of a written opinion); or (iv) in the absence of any Disinterested Directors, the Company’s stockholders.   “SEC” means the Securities and Exchange Commission.   “Securities Act” means the Securities Act of 1933, as amended, or any similar Federal statute then in effect.   2.             INDEMNIFICATION.   (A)           INDEMNIFICATION OF LOSSES AND EXPENSES. IF AN INDEMNIFICATION EVENT HAS OCCURRED, THEN, SUBJECT TO SECTION 9 BELOW, THE COMPANY SHALL INDEMNIFY AND HOLD HARMLESS INDEMNITEE, TO THE FULLEST EXTENT PERMITTED BY LAW, AGAINST ANY AND ALL LOSSES AND EXPENSES, BUT ONLY IF THE 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 PROCEEDING, HAD NO REASONABLE CAUSE TO BELIEVE INDEMNITEE’S CONDUCT WAS UNLAWFUL. THE TERMINATION OF ANY PROCEEDING BY JUDGMENT, ORDER, SETTLEMENT OR CONVICTION OR ON PLEA OF NOLO CONTENDERE, OR ITS EQUIVALENT, SHALL NOT, OF ITSELF, CREATE A PRESUMPTION THAT INDEMNITEE (I) 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 (II) WITH RESPECT TO ANY CRIMINAL PROCEEDING, HAD REASONABLE CAUSE TO BELIEVE THAT INDEMNITEE’S CONDUCT WAS UNLAWFUL.   (B)           LIMITATION WITH RESPECT TO COMPANY ACTIONS. NOTWITHSTANDING THE FOREGOING, THE COMPANY SHALL NOT INDEMNIFY AND HOLD HARMLESS INDEMNITEE WITH RESPECT TO ANY LOSSES OR EXPENSES IN CONNECTION WITH OR ARISING FROM ANY COMPANY ACTION AS TO WHICH THE INDEMNITEE SHALL HAVE BEEN FINALLY ADJUDGED TO BE LIABLE TO THE COMPANY BY A COURT OF COMPETENT JURISDICTION DUE TO INDEMNITEE’S NEGLIGENCE OR MISCONDUCT IN THE PERFORMANCE OF THE INDEMNITEE’S DUTIES TO THE COMPANY, UNLESS, AND THEN ONLY TO EXTENT THAT, ANY COURT IN WHICH SUCH COMPANY ACTION WAS BROUGHT SHALL DETERMINE UPON APPLICATION THAT, DESPITE THE ADJUDICATION OF LIABILITY, BUT IN VIEW OF ALL THE CIRCUMSTANCES OF THE CASE, THE INDEMNITEE IS FAIRLY AND REASONABLY ENTITLED TO EXPENSES FOR SUCH INDEMNIFICATION AS SUCH COURT SHALL DEEM PROPER.   (C)           ADVANCEMENT OF EXPENSES. THE COMPANY SHALL ADVANCE EXPENSES TO OR ON BEHALF OF INDEMNITEE AS SOON AS PRACTICABLE, BUT IN ANY EVENT NOT LATER THAN 30 DAYS AFTER WRITTEN REQUEST THEREFOR BY INDEMNITEE, WHICH REQUEST SHALL BE ACCOMPANIED BY VOUCHERS, INVOICES OR SIMILAR EVIDENCE DOCUMENTING IN REASONABLE DETAIL THE EXPENSES INCURRED OR TO BE INCURRED BY INDEMNITEE. THE 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 BY THIS AGREEMENT.   --------------------------------------------------------------------------------   (D)           CONTRIBUTION. IF, AND TO THE EXTENT, THE INDEMNIFICATION OF INDEMNITEE PROVIDED FOR IN SECTION 2(A) ABOVE FOR ANY REASON IS HELD BY A COURT OF COMPETENT JURISDICTION NOT TO BE PERMISSIBLE FOR LIABILITIES ARISING UNDER FEDERAL SECURITIES LAWS OR ERISA, THEN THE COMPANY, IN LIEU OF INDEMNIFYING INDEMNITEE UNDER THIS AGREEMENT, SHALL CONTRIBUTE TO THE AMOUNT PAID OR PAYABLE BY INDEMNITEE AS A RESULT OF SUCH LOSSES OR EXPENSES (I) IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT THE RELATIVE BENEFITS RECEIVED BY THE COVERED ENTITIES AND ALL OFFICERS, DIRECTORS OR EMPLOYEES OF THE COVERED ENTITIES OTHER THAN INDEMNITEE WHO ARE JOINTLY LIABLE WITH INDEMNITEE (OR WOULD BE IF JOINED IN SUCH PROCEEDING), ON THE ONE HAND, AND INDEMNITEE, ON THE OTHER HAND, OR (II) IF THE ALLOCATION PROVIDED BY CLAUSE (I) ABOVE IS NOT PERMITTED BY APPLICABLE LAW, IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT NOT ONLY THE RELATIVE BENEFITS REFERRED TO IN CLAUSE (I) ABOVE BUT ALSO THE RELATIVE FAULT OF THE COVERED ENTITIES AND ALL OFFICERS, DIRECTORS OR EMPLOYEES OF THE COVERED ENTITIES OTHER THAN INDEMNITEE WHO ARE JOINTLY LIABLE WITH INDEMNITEE (OR WOULD BE IF JOINED IN SUCH PROCEEDING), ON THE ONE HAND, AND THE INDEMNITEE, ON THE OTHER HAND, IN CONNECTION WITH THE ACTION OR INACTION THAT RESULTED IN SUCH LOSSES OR EXPENSES, AS WELL AS ANY OTHER RELEVANT EQUITABLE CONSIDERATIONS. THE RELATIVE FAULT OF THE COVERED ENTITIES AND ALL OFFICERS, DIRECTORS OR EMPLOYEES OF THE COVERED ENTITIES OTHER THAN INDEMNITEE WHO ARE JOINTLY LIABLE WITH INDEMNITEE (OR WOULD BE IF JOINED IN SUCH PROCEEDING), ON THE ONE HAND, AND INDEMNITEE, ON THE OTHER HAND, SHALL BE DETERMINED BY REFERENCE TO, AMONG OTHER THINGS, THE DEGREE TO WHICH THEIR ACTIONS WERE MOTIVATED BY INTENT TO GAIN PERSONAL PROFIT OR ADVANTAGE, THE DEGREE TO WHICH THEIR LIABILITY IS PRIMARY OR SECONDARY, AND THE DEGREE TO WHICH THEIR CONDUCT IS ACTIVE OR PASSIVE. NO PERSON FOUND GUILTY OF FRAUDULENT MISREPRESENTATION (WITHIN THE MEANING OF SECTION 11(F) OF THE SECURITIES ACT) SHALL BE ENTITLED TO CONTRIBUTION FROM ANY PERSON WHO WAS NOT FOUND GUILTY OF SUCH FRAUDULENT MISREPRESENTATION.   3.             INDEMNIFICATION PROCEDURES.   (A)           NOTICE OF INDEMNIFICATION EVENT. INDEMNITEE SHALL GIVE THE COMPANY NOTICE AS SOON AS PRACTICABLE OF ANY INDEMNIFICATION EVENT OF WHICH INDEMNITEE BECOMES AWARE AND OF ANY REQUEST FOR INDEMNIFICATION HEREUNDER, PROVIDED THAT ANY FAILURE TO SO NOTIFY THE COMPANY SHALL NOT RELIEVE THE COMPANY OF ANY OF ITS OBLIGATIONS UNDER THIS AGREEMENT, EXCEPT IF, AND THEN ONLY TO THE EXTENT THAT, SUCH FAILURE INCREASES THE LIABILITY OF THE COMPANY UNDER THIS AGREEMENT.   (B)           NOTICE TO INSURERS. IF, AT THE TIME THE COMPANY RECEIVES NOTICE OF AN INDEMNIFICATION EVENT PURSUANT TO SECTION 3(A) ABOVE, THE COMPANY HAS LIABILITY INSURANCE IN EFFECT WHICH MAY COVER SUCH INDEMNIFICATION EVENT, THE COMPANY SHALL GIVE PROMPT WRITTEN NOTICE OF SUCH INDEMNIFICATION EVENT TO THE INSURERS IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN EACH OF THE APPLICABLE POLICIES OF INSURANCE. THE COMPANY SHALL THEREAFTER TAKE ALL NECESSARY OR DESIRABLE ACTION TO CAUSE SUCH INSURERS TO PAY, ON BEHALF OF INDEMNITEE, ALL AMOUNTS PAYABLE AS A RESULT OF SUCH INDEMNIFICATION EVENT IN ACCORDANCE WITH THE TERMS OF SUCH POLICIES; PROVIDED THAT NOTHING IN THIS SECTION 3(B) SHALL AFFECT THE COMPANY’S OBLIGATIONS UNDER THIS AGREEMENT OR THE COMPANY’S OBLIGATIONS TO COMPLY WITH THE PROVISIONS OF THIS AGREEMENT IN A TIMELY MANNER AS PROVIDED.   (C)           SELECTION OF COUNSEL. IF THE COMPANY SHALL BE OBLIGATED HEREUNDER TO PAY OR ADVANCE EXPENSES OR INDEMNIFY INDEMNITEE WITH RESPECT TO ANY LOSSES, THE COMPANY SHALL BE ENTITLED TO ASSUME THE DEFENSE OF ANY RELATED CLAIMS, WITH COUNSEL SELECTED BY THE COMPANY. AFTER 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 DEFENSE OF SUCH CLAIMS; PROVIDED THAT:  (I) INDEMNITEE SHALL HAVE THE RIGHT TO EMPLOY COUNSEL IN CONNECTION WITH ANY SUCH CLAIM AT INDEMNITEE’S EXPENSE; AND (II) IF (A) THE EMPLOYMENT OF COUNSEL BY INDEMNITEE HAS BEEN PREVIOUSLY AUTHORIZED BY THE COMPANY, (B) COUNSEL FOR INDEMNITEE SHALL HAVE PROVIDED THE COMPANY WITH WRITTEN ADVICE THAT THERE IS A CONFLICT OF INTEREST BETWEEN THE COMPANY AND INDEMNITEE IN THE CONDUCT OF ANY SUCH DEFENSE, OR (C) THE COMPANY SHALL NOT CONTINUE TO RETAIN SUCH COUNSEL TO DEFEND SUCH CLAIM, THEN THE FEES AND EXPENSES OF INDEMNITEE’S COUNSEL SHALL BE AT THE EXPENSE OF THE COMPANY.   4.             DETERMINATION OF RIGHT TO INDEMNIFICATION.   (A)           SUCCESSFUL PROCEEDING. TO THE EXTENT INDEMNITEE HAS BEEN SUCCESSFUL, ON THE MERITS OR OTHERWISE, IN DEFENSE OF ANY PROCEEDING REFERRED TO IN SECTION 2(A) OR 2(B), THE COMPANY SHALL INDEMNIFY INDEMNITEE AGAINST LOSSES AND EXPENSES INCURRED BY HIM IN CONNECTION THEREWITH. IF INDEMNITEE IS NOT WHOLLY SUCCESSFUL IN SUCH PROCEEDING, BUT IS SUCCESSFUL, ON THE MERITS OR OTHERWISE, AS TO ONE OR MORE BUT LESS THAN ALL CLAIMS IN SUCH PROCEEDING, THE COMPANY SHALL INDEMNIFY INDEMNITEE AGAINST ALL LOSSES AND EXPENSES ACTUALLY OR REASONABLY INCURRED BY INDEMNITEE IN CONNECTION WITH EACH SUCCESSFULLY RESOLVED CLAIM.   (B)           OTHER PROCEEDINGS. IN THE EVENT THAT SECTION 4(A) IS INAPPLICABLE, THE COMPANY SHALL NEVERTHELESS INDEMNIFY INDEMNITEE, UNLESS, BUT THEN ONLY TO THE EXTENT THAT, A REVIEWING PARTY CHOSEN PURSUANT TO SECTION 4(C) DETERMINES THAT INDEMNITEE HAS NOT MET THE APPLICABLE STANDARD OF CONDUCT SET FORTH IN SECTION 2(A) OR 2(B), AS APPLICABLE, AS A CONDITION TO SUCH INDEMNIFICATION.   (C)           REVIEWING PARTY DETERMINATION. IF, AND TO THE EXTENT, ANY APPLICABLE LAW REQUIRES THE DETERMINATION THAT INDEMNITEE HAS MET THE APPLICABLE STANDARD OF CONDUCT SET FORTH IN SECTION 2(A) OR 2(B), AS APPLICABLE, AS A CONDITION TO ANY SUCH INDEMNIFICATION, A REVIEWING PARTY CHOSEN BY THE COMPANY’S BOARD OF DIRECTORS SHALL MAKE SUCH DETERMINATION, SUBJECT TO THE FOLLOWING:   (I)            A REVIEWING PARTY SO CHOSEN SHALL ACT IN THE UTMOST GOOD FAITH TO ASSURE INDEMNITEE A COMPLETE OPPORTUNITY TO PRESENT TO SUCH REVIEWING PARTY INDEMNITEE’S CASE THAT INDEMNITEE HAS MET THE APPLICABLE STANDARD OF CONDUCT.   (II)           INDEMNITEE SHALL BE DEEMED TO HAVE ACTED IN GOOD FAITH IF INDEMNITEE’S ACTION IS BASED ON THE RECORDS OR BOOKS OF ACCOUNT OF A COVERED ENTITY, INCLUDING, WITHOUT LIMITATION, ITS FINANCIAL STATEMENTS, OR ON INFORMATION SUPPLIED TO INDEMNITEE BY THE OFFICERS OR EMPLOYEES OF A COVERED ENTITY IN THE COURSE OF THEIR DUTIES, OR ON THE ADVICE OF LEGAL COUNSEL FOR A COVERED ENTITY OR ON INFORMATION OR RECORDS GIVEN, OR REPORTS MADE, TO A COVERED ENTITY BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT OR BY AN APPRAISER OR OTHER EXPERT SELECTED WITH REASONABLE CARE BY A COVERED ENTITY. IN ADDITION, THE KNOWLEDGE AND/OR ACTIONS, OR FAILURE TO ACT, OF ANY DIRECTOR, OFFICER, AGENT OR EMPLOYEE OF A COVERED ENTITY SHALL NOT BE IMPUTED TO INDEMNITEE FOR PURPOSES OF DETERMINING THE RIGHT TO INDEMNIFICATION UNDER THIS AGREEMENT. WHETHER OR NOT THE FOREGOING PROVISIONS OF THIS SECTION 4(C)(II) ARE SATISFIED, IT SHALL IN ANY EVENT BE PRESUMED THAT INDEMNITEE HAS AT ALL TIMES ACTED IN GOOD FAITH AND IN A MANNER INDEMNITEE REASONABLY BELIEVED TO BE IN OR NOT OPPOSED TO THE BEST INTERESTS OF THE COMPANY. ANY   --------------------------------------------------------------------------------   PERSON SEEKING TO OVERCOME THIS PRESUMPTION SHALL HAVE THE BURDEN OF PROOF AND THE BURDEN OF PERSUASION, BY CLEAR AND CONVINCING EVIDENCE.   (III)          IF A REVIEWING PARTY CHOSEN PURSUANT TO THIS SECTION 4(C) SHALL NOT HAVE MADE A DETERMINATION WHETHER INDEMNITEE IS ENTITLED TO INDEMNIFICATION WITHIN THIRTY (30) DAYS AFTER RECEIPT BY THE COMPANY OF THE REQUEST THEREFOR, THE REQUISITE DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION SHALL BE DEEMED TO HAVE BEEN MADE AND INDEMNITEE SHALL BE ENTITLED TO SUCH INDEMNIFICATION, ABSENT (A) A MISSTATEMENT BY INDEMNITEE OF A MATERIAL FACT, OR AN OMISSION OF A MATERIAL FACT NECESSARY TO MAKE INDEMNITEE’S STATEMENT NOT MATERIALLY MISLEADING, IN CONNECTION WITH THE REQUEST FOR INDEMNIFICATION, OR (B) A PROHIBITION OF SUCH INDEMNIFICATION UNDER APPLICABLE LAW; PROVIDED, HOWEVER, THAT SUCH 30 DAY PERIOD MAY BE EXTENDED FOR A REASONABLE TIME, NOT TO EXCEED AN ADDITIONAL FIFTEEN (15) DAYS, IF THE REVIEWING PARTY IN GOOD FAITH REQUIRES SUCH ADDITIONAL TIME FOR OBTAINING OR EVALUATING DOCUMENTATION AND/OR INFORMATION RELATING THERETO; AND PROVIDED, FURTHER, THAT THE FOREGOING PROVISIONS OF THIS SECTION 4(C)(III) SHALL NOT APPLY IF (I) THE DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION IS TO BE MADE BY THE STOCKHOLDERS OF THE COMPANY, (II) A SPECIAL MEETING OF STOCKHOLDERS IS CALLED BY THE BOARD OF DIRECTORS OF THE COMPANY FOR SUCH PURPOSE WITHIN THIRTY (30) DAYS AFTER THE STOCKHOLDERS ARE CHOSEN AS THE REVIEWING PARTY, (III) SUCH MEETING IS HELD FOR SUCH PURPOSE WITHIN SIXTY (60) DAYS AFTER HAVING BEEN SO CALLED, AND (IV) SUCH DETERMINATION IS MADE THEREAT.   (D)           APPEAL TO COURT. NOTWITHSTANDING A DETERMINATION BY A REVIEWING PARTY CHOSEN PURSUANT TO SECTION 4(C) THAT INDEMNITEE IS NOT ENTITLED TO INDEMNIFICATION WITH RESPECT TO A SPECIFIC CLAIM OR PROCEEDING (AN “ADVERSE DETERMINATION”), INDEMNITEE SHALL HAVE THE RIGHT TO APPLY TO THE COURT IN WHICH THAT CLAIM OR PROCEEDING IS OR WAS PENDING OR ANY OTHER COURT OF COMPETENT JURISDICTION FOR THE PURPOSE OF ENFORCING INDEMNITEE’S RIGHT TO INDEMNIFICATION PURSUANT TO THIS AGREEMENT, PROVIDED THAT INDEMNITEE SHALL COMMENCE ANY SUCH PROCEEDING SEEKING TO ENFORCE INDEMNITEE’S RIGHT TO INDEMNIFICATION WITHIN ONE (1) YEAR FOLLOWING THE DATE UPON WHICH INDEMNITEE IS NOTIFIED IN WRITING BY THE COMPANY OF THE ADVERSE DETERMINATION. IN THE EVENT OF ANY DISPUTE BETWEEN THE PARTIES CONCERNING THEIR RESPECTIVE RIGHTS AND OBLIGATIONS HEREUNDER, THE COMPANY SHALL HAVE THE BURDEN OF PROVING THAT THE COMPANY IS NOT OBLIGATED TO MAKE THE PAYMENT OR ADVANCE CLAIMED BY INDEMNITEE.   (E)           PRESUMPTION OF SUCCESS. THE COMPANY ACKNOWLEDGES THAT A SETTLEMENT OR OTHER DISPOSITION SHORT OF FINAL JUDGMENT SHALL BE DEEMED A SUCCESSFUL RESOLUTION FOR PURPOSES OF SECTION 4(A) IF IT PERMITS A PARTY TO AVOID EXPENSE, DELAY, DISTRACTION, DISRUPTION OR UNCERTAINTY. IN THE EVENT THAT ANY PROCEEDING TO WHICH INDEMNITEE IS A PARTY IS RESOLVED IN ANY MANNER OTHER THAN BY ADVERSE JUDGMENT AGAINST INDEMNITEE (INCLUDING, WITHOUT LIMITATION, SETTLEMENT OF SUCH PROCEEDING WITH OR WITHOUT PAYMENT OF MONEY OR OTHER CONSIDERATION), IT SHALL BE PRESUMED THAT INDEMNITEE HAS BEEN SUCCESSFUL ON THE MERITS OR OTHERWISE IN SUCH PROCEEDING. ANYONE SEEKING TO OVERCOME THIS PRESUMPTION SHALL HAVE THE BURDEN OF PROOF AND THE BURDEN OF PERSUASION, BY CLEAR AND CONVINCING EVIDENCE.   5.             ADDITIONAL INDEMNIFICATION RIGHTS; NON-EXCLUSIVITY.   (A)           SCOPE. THE COMPANY HEREBY AGREES TO INDEMNIFY INDEMNITEE TO THE FULLEST EXTENT PERMITTED BY LAW, EVEN IF SUCH INDEMNIFICATION IS NOT SPECIFICALLY AUTHORIZED BY THE   --------------------------------------------------------------------------------   OTHER PROVISIONS OF THIS AGREEMENT OR ANY OTHER AGREEMENT, THE ORGANIZATIONAL DOCUMENTS OF ANY COVERED ENTITY OR BY APPLICABLE LAW. IN THE EVENT OF ANY CHANGE AFTER THE DATE OF THIS AGREEMENT IN ANY APPLICABLE LAW, STATUTE OR RULE WHICH EXPANDS THE RIGHT OF AN ILLINOIS CORPORATION TO INDEMNIFY A MEMBER OF ITS BOARD OF DIRECTORS OR AN OFFICER, EMPLOYEE, CONTROLLING PERSON, AGENT OR FIDUCIARY, IT IS THE INTENT OF THE PARTIES HERETO THAT INDEMNITEE SHALL ENJOY BY THIS AGREEMENT THE GREATER BENEFITS AFFORDED BY SUCH CHANGE. IN THE EVENT OF ANY CHANGE IN ANY APPLICABLE LAW, STATUTE OR RULE WHICH NARROWS THE RIGHT OF AN ILLINOIS CORPORATION TO INDEMNIFY A MEMBER OF ITS BOARD OF DIRECTORS OR AN OFFICER, EMPLOYEE, CONTROLLING PERSON, AGENT OR FIDUCIARY, SUCH CHANGE, TO THE EXTENT NOT OTHERWISE REQUIRED BY SUCH LAW, STATUTE OR RULE TO BE APPLIED TO THIS AGREEMENT, SHALL HAVE NO EFFECT ON THIS AGREEMENT OR THE PARTIES RIGHTS AND OBLIGATIONS HEREUNDER EXCEPT AS SET FORTH IN SECTION 9(A) HEREOF.   (B)           NON-EXCLUSIVITY. THE RIGHTS TO INDEMNIFICATION, CONTRIBUTION AND ADVANCEMENT OF EXPENSES PROVIDED IN THIS AGREEMENT SHALL NOT BE DEEMED EXCLUSIVE OF, BUT SHALL BE IN ADDITION TO, ANY OTHER RIGHTS TO WHICH INDEMNITEE MAY AT ANY TIME BE ENTITLED UNDER THE ORGANIZATIONAL DOCUMENTS OF ANY COVERED ENTITY, ANY OTHER AGREEMENT, ANY VOTE OF STOCKHOLDERS OR DISINTERESTED DIRECTORS, THE LAWS OF THE STATE OF ILLINOIS OR OTHERWISE. FURTHERMORE, NO RIGHT OR REMEDY HEREIN CONFERRED IS INTENDED TO BE EXCLUSIVE OF ANY OTHER RIGHT OR REMEDY, AND EVERY OTHER RIGHT AND REMEDY SHALL BE CUMULATIVE AND IN ADDITION TO EVERY OTHER RIGHT AND REMEDY GIVEN HEREUNDER OR NOW OR HEREAFTER EXISTING AT LAW OR IN EQUITY OR OTHERWISE. THE ASSERTION OF ANY RIGHT OR REMEDY HEREUNDER OR OTHERWISE SHALL NOT PREVENT THE CONCURRENT ASSERTION OF ANY OTHER RIGHT OR REMEDY. THE RIGHTS TO INDEMNIFICATION, CONTRIBUTION AND ADVANCEMENT OF EXPENSES PROVIDED IN THIS AGREEMENT SHALL CONTINUE AS TO INDEMNITEE FOR ANY ACTION INDEMNITEE TOOK OR DID NOT TAKE WHILE SERVING IN AN INDEMNIFIED CAPACITY EVEN THOUGH INDEMNITEE MAY HAVE CEASED TO SERVE IN SUCH CAPACITY.   6.             NO DUPLICATION OF PAYMENTS. THE COMPANY SHALL NOT BE LIABLE UNDER THIS AGREEMENT TO MAKE ANY PAYMENT OF ANY AMOUNT OTHERWISE INDEMNIFIABLE HEREUNDER, OR FOR WHICH ADVANCEMENT IS PROVIDED HEREUNDER, IF AND TO THE EXTENT INDEMNITEE HAS OTHERWISE ACTUALLY RECEIVED SUCH PAYMENT, WHETHER PURSUANT TO ANY INSURANCE POLICY, THE ORGANIZATIONAL DOCUMENTS OF ANY COVERED ENTITY OR OTHERWISE.   7.             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 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. INDEMNITEE UNDERSTANDS AND ACKNOWLEDGES THAT THE COMPANY HAS UNDERTAKEN, OR MAY BE REQUIRED IN THE FUTURE TO UNDERTAKE, WITH THE SEC TO SUBMIT THE QUESTION OF INDEMNIFICATION TO A COURT IN CERTAIN CIRCUMSTANCES FOR A DETERMINATION OF THE COMPANY’S RIGHT UNDER PUBLIC POLICY TO INDEMNIFY INDEMNITEE, AND ANY RIGHT TO INDEMNIFICATION HEREUNDER SHALL BE SUBJECT TO, AND CONDITIONED UPON, ANY SUCH REQUIRED COURT DETERMINATION.   8.             LIABILITY INSURANCE. TO THE EXTENT THE COMPANY MAINTAINS LIABILITY INSURANCE APPLICABLE TO DIRECTORS, OFFICERS, EMPLOYEES, CONTROLLING PERSONS, AGENTS OR FIDUCIARIES OF ANY COVERED ENTITY, INDEMNITEE SHALL BE COVERED BY SUCH POLICY OR POLICIES IN SUCH A MANNER AS TO PROVIDE INDEMNITEE THE SAME RIGHTS AND BENEFITS AS ARE ACCORDED TO THE MOST FAVORABLY INSURED OF   --------------------------------------------------------------------------------   THE COVERED ENTITY’S DIRECTORS, IF INDEMNITEE IS A DIRECTOR OF SUCH COVERED ENTITY, OR OF THE COVERED ENTITY’S OFFICERS, IF INDEMNITEE IS NOT A DIRECTOR OF SUCH COVERED ENTITY BUT IS AN OFFICER OF SUCH COVERED ENTITY, OR OF THE COVERED ENTITY’S KEY EMPLOYEES, CONTROLLING PERSONS, AGENTS OR FIDUCIARIES, IF INDEMNITEE IS NOT AN OFFICER OR DIRECTOR BUT IS A KEY EMPLOYEE, CONTROLLING PERSON, AGENT OR FIDUCIARY OF SUCH COVERED ENTITY, AS THE CASE MAY BE. THE COMPANY SHALL ADVISE INDEMNITEE AS TO THE GENERAL TERMS OF, AND THE AMOUNTS OF COVERAGE PROVIDE BY, ANY LIABILITY INSURANCE POLICY DESCRIBED IN THIS SECTION 8 AND SHALL PROMPTLY NOTIFY INDEMNITEE IF, AT ANY TIME, ANY SUCH INSURANCE POLICY WILL NO LONGER BE MAINTAINED OR THE AMOUNT OF COVERAGE UNDER ANY SUCH INSURANCE POLICY WILL BE DECREASED.   9.             EXCEPTIONS. ANY OTHER PROVISION HEREIN TO THE CONTRARY NOTWITHSTANDING, THE COMPANY SHALL NOT BE OBLIGATED PURSUANT TO THE TERMS OF THIS AGREEMENT TO INDEMNIFY INDEMNITEE:   (A)           AGAINST ANY LOSSES OR EXPENSES, OR ADVANCE EXPENSES TO INDEMNITEE, WITH RESPECT TO CLAIMS INITIATED OR BROUGHT VOLUNTARILY BY INDEMNITEE, AND NOT BY WAY OF DEFENSE (INCLUDING, WITHOUT LIMITATION, AFFIRMATIVE DEFENSES AND COUNTER-CLAIMS), EXCEPT (I) CLAIMS TO ESTABLISH OR ENFORCE A RIGHT TO INDEMNIFICATION, CONTRIBUTION OR ADVANCEMENT WITH RESPECT TO AN INDEMNIFICATION EVENT, WHETHER UNDER THIS AGREEMENT, ANY OTHER AGREEMENT OR INSURANCE POLICY, THE COMPANY’S ORGANIZATIONAL DOCUMENTS OF ANY COVERED ENTITY, THE LAWS OF THE STATE OF ILLINOIS OR OTHERWISE, OR (II) IF THE COMPANY’S BOARD OF DIRECTORS HAS APPROVED SPECIFICALLY THE INITIATION OR BRINGING OF SUCH CLAIM;   (B)           AGAINST ANY LOSSES OR EXPENSES, OR ADVANCE EXPENSES TO INDEMNITEE, WITH RESPECT TO CLAIMS ARISING (I) WITH RESPECT TO AN ACCOUNTING OF PROFITS MADE FROM THE PURCHASE AND SALE (OR SALE AND PURCHASE) BY INDEMNITEE OF SECURITIES OF THE COMPANY WITHIN THE MEANING OF SECTION 16(B) OF THE EXCHANGE ACT OR (II) PURSUANT TO SECTION 304 OR 306 OF THE SARBANES-OXLEY ACT OF 2002, AS AMENDED, OR ANY RULE OR REGULATION PROMULGATED PURSUANT THERETO; OR   (C)           IF, AND TO THE EXTENT, THAT A COURT OF COMPETENT JURISDICTION RENDERS A FINAL, UNAPPEALABLE DECISION THAT SUCH INDEMNIFICATION IS NOT LAWFUL.   10.          MISCELLANEOUS.   (A)           COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN ONE OR MORE COUNTERPARTS, EACH OF WHICH SHALL CONSTITUTE AN ORIGINAL.   (B)           BINDING EFFECT; SUCCESSORS AND ASSIGNS. THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF AND BE ENFORCEABLE BY THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS (INCLUDING WITH RESPECT TO THE COMPANY, ANY DIRECT OR INDIRECT SUCCESSOR BY PURCHASE, MERGER, CONSOLIDATION OR OTHERWISE TO ALL OR SUBSTANTIALLY ALL OF THE BUSINESS AND/OR ASSETS OF THE COMPANY) AND WITH RESPECT TO INDEMNITEE, HIS OR HER SPOUSE, HEIRS, AND PERSONAL AND LEGAL REPRESENTATIVES. THE COMPANY SHALL REQUIRE AND CAUSE ANY SUCCESSOR OR ASSIGN (WHETHER DIRECT OR INDIRECT, BY PURCHASE, MERGER, CONSOLIDATION OR OTHERWISE) TO ALL, SUBSTANTIALLY ALL, OR A SUBSTANTIAL PART, OF THE BUSINESS AND/OR ASSETS OF THE COMPANY, 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 IF NO SUCH SUCCESSION OR ASSIGNMENT HAD TAKEN PLACE. THIS AGREEMENT SHALL CONTINUE   --------------------------------------------------------------------------------   IN EFFECT WITH RESPECT TO CLAIMS RELATING TO INDEMNIFICATION EVENTS REGARDLESS OF WHETHER INDEMNITEE CONTINUES TO SERVE AS A DIRECTOR, OFFICER, EMPLOYEE, CONTROLLING PERSON, AGENT OR FIDUCIARY OF ANY COVERED ENTITY.   (C)           NOTICE. ALL NOTICES AND OTHER COMMUNICATIONS REQUIRED OR PERMITTED HEREUNDER SHALL BE IN WRITING, SHALL BE EFFECTIVE WHEN GIVEN, AND SHALL IN ANY EVENT BE DEEMED TO BE GIVEN (A) FIVE (5) DAYS AFTER DEPOSIT WITH THE U.S. POSTAL SERVICE OR OTHER APPLICABLE POSTAL SERVICE, IF DELIVERED BY FIRST CLASS MAIL, POSTAGE PREPAID, (B) UPON DELIVERY, IF DELIVERED BY HAND, (C) ONE (1) BUSINESS DAY AFTER THE BUSINESS DAY OF DEPOSIT WITH FEDERAL EXPRESS OR SIMILAR, NATIONALLY RECOGNIZED OVERNIGHT COURIER, FREIGHT PREPAID, OR (D) ONE (1) BUSINESS DAY AFTER THE BUSINESS DAY OF DELIVERY BY CONFIRMED FACSIMILE TRANSMISSION, IF DELIVERABLE BY FACSIMILE TRANSMISSION, WITH COPY BY OTHER MEANS PERMITTED HEREUNDER, AND ADDRESSED, IF TO INDEMNITEE, TO THE INDEMNITEE’S ADDRESS OR FACSIMILE NUMBER (AS APPLICABLE) AS SET FORTH BENEATH THE INDEMNITEE’S SIGNATURE TO THIS AGREEMENT, OR, IF TO THE COMPANY, AT THE ADDRESS OR FACSIMILE NUMBER (AS APPLICABLE) OF ITS PRINCIPAL CORPORATE OFFICES (ATTENTION:  SECRETARY), OR AT SUCH OTHER ADDRESS OR FACSIMILE NUMBER (AS APPLICABLE) AS SUCH PARTY MAY DESIGNATE TO THE OTHER PARTIES HERETO.   (D)           ENFORCEABILITY. THIS AGREEMENT IS A LEGAL, VALID AND BINDING OBLIGATION OF THE COMPANY, ENFORCEABLE AGAINST THE COMPANY IN ACCORDANCE WITH ITS TERMS.   (E)           CONSENT TO JURISDICTION. THE COMPANY AND INDEMNITEE EACH HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF ILLINOIS FOR ALL PURPOSES IN CONNECTION WITH ANY PROCEEDING WHICH ARISES OUT OF OR RELATES TO THIS AGREEMENT AND AGREE THAT ANY PROCEEDING INSTITUTED UNDER THIS AGREEMENT SHALL BE COMMENCED, PROSECUTED AND CONTINUED ONLY IN THE COURTS OF THE STATE OF ILLINOIS.   (F)            SEVERABILITY. THE PROVISIONS OF THIS AGREEMENT SHALL BE SEVERABLE IN THE EVENT THAT ANY OF THE PROVISIONS HEREOF (INCLUDING ANY PROVISION WITHIN A SINGLE SECTION, PARAGRAPH OR SENTENCE) ARE HELD BY A COURT OF COMPETENT JURISDICTION TO BE INVALID, VOID OR OTHERWISE UNENFORCEABLE, AND THE REMAINING PROVISIONS SHALL REMAIN ENFORCEABLE TO THE FULLEST EXTENT PERMITTED BY LAW. FURTHERMORE, TO THE FULLEST EXTENT POSSIBLE, THE PROVISIONS OF THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, EACH PORTION OF THIS AGREEMENT CONTAINING ANY PROVISION HELD TO BE INVALID, VOID OR OTHERWISE UNENFORCEABLE THAT IS NOT ITSELF INVALID, VOID OR UNENFORCEABLE) SHALL BE CONSTRUED SO AS TO GIVE EFFECT TO THE EXTENT MANIFESTED BY THE PROVISION HELD INVALID, ILLEGAL OR UNENFORCEABLE.   (G)           CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND ITS PROVISIONS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.   (H)           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 EFFECTIVELY TO BRING SUIT TO ENFORCE SUCH RIGHTS.   (I)            AMENDMENT AND TERMINATION. NO AMENDMENT, MODIFICATION, TERMINATION OR CANCELLATION OF THIS AGREEMENT SHALL BE EFFECTIVE UNLESS IT IS IN A WRITING SIGNED BY THE PARTIES   --------------------------------------------------------------------------------   TO BE BOUND THEREBY. NOTICE OF SAME SHALL BE PROVIDED TO ALL PARTIES HERETO. NO WAIVER OF ANY OF THE PROVISIONS OF THIS AGREEMENT SHALL BE DEEMED OR SHALL CONSTITUTE A WAIVER OF ANY OTHER PROVISIONS HEREOF (WHETHER OR NOT SIMILAR) NOR SHALL SUCH WAIVER CONSTITUTE A CONTINUING WAIVER.   (J)            NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. NOTHING CONTAINED IN THIS AGREEMENT SHALL BE CONSTRUED AS GIVING INDEMNITEE ANY RIGHT TO BE RETAINED OR CONTINUE IN THE EMPLOY OR SERVICE OF ANY COVERED ENTITY.   [remainder of page intentionally left blank; signature page follows]   --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.     COMPANY:       RLI Corp.   an Illinois corporation       By:       Name:       Title:               INDEMNITEE:                 --------------------------------------------------------------------------------

  Exhibit 10 (2) EXECUTION VERSION LETTER AMENDMENT NO.3 TO MASTER SHELF AGREEMENT June 16, 2006 Prudential Investment Management, Inc. The Prudential Insurance Company of America Pruco Life Insurance Company Security Life of Denver Insurance Company American Skandia Life Assurance Corporation Prudential Retirement Insurance and Annuity Company Time Insurance Company (f/k/a Fortis Insurance Company) American Memorial Life Insurance Company Physicians Mutual Insurance Company c/o Prudential Capital Group 2200 Ross Avenue, Suite 4200E Dallas, Texas 75201 Ladies and Gentlemen:      We refer to the Master Shelf Agreement dated as of July 31, 2003 and amended by Letter Amendment No. 1 to Master Shelf Agreement dated May 15, 2004 and Amendment No. 2 to Master Shelf Agreement dated September 28, 2005 (as amended, the “Agreement”) among Layne Christensen Company (the “Company”), Prudential Investment Management, Inc., The Prudential Insurance Company of America, Pruco Life Insurance Company, Security Life of Denver Insurance Company, American Skandia Life Assurance Corporation, Prudential Retirement Insurance and Annuity Company, Time Insurance Company (f/k/a Fortis Insurance Company), American Memorial Life Insurance Company and Physicians Mutual Insurance Company. Unless otherwise defined herein, the terms defined in the Agreement shall be used herein as therein defined.      The Company desires to amend the Agreement as set forth below, and Prudential and the Purchasers are willing to agree to such amendments, upon and subject to the terms and conditions set forth herein.      Therefore, for good and valuable consideration, it is hereby agreed by you and us as follows:      1. Amendments to the Agreement. Subject to the accuracy of the representations and warranties set forth in paragraph 2 hereof and satisfaction of the conditions set forth   --------------------------------------------------------------------------------   in paragraph 3 hereof, the undersigned holders of the Notes hereby agree with the Company to amend, effective as of the date first above written, the Agreement as follows:      (a) Paragraph 6. NEGATIVE COVENANTS. Paragraph 6 of the Agreement is amended by:      (I) amending Paragraph 6A(4) in its entirety as follows: “6A(4). Priority Debt. The Company will not permit Priority Debt to exceed (i) for all periods prior to September 1, 2008, the greater of (a) 10% of Tangible Net Worth as calculated as of any date, and (b) $12,000,000, and (ii) for all periods from and after September 1, 2008, 10% of Tangible Net Worth as calculated as of any date.”      (II) in Paragraph 6B(1), (A) deleting “and” at the end of clause (x) thereof, (B) deleting the existing clause (xi), and (D) adding the following new clauses (xi) and (xii) thereto: “(xi) surety bonds listed on Exhibit A attached to the Third Amendment; and (xii) Liens other than those described in clauses (i) — (xi) above that secure Indebtedness (other than Indebtedness under the Bank Agreement); provided that after granting such Lien the Company is in compliance with paragraph 6(A).”      (b) Paragraph 10B. Other Terms. Paragraph 10B of the Agreement is amended to:      (I) add the following definition of “Third Amendment” in alphabetical order: “Third Amendment shall mean that certain Letter Amendment No. 3 to Master Shelf Agreement dated as of June 16, 2006.”      (II) amend the definition of “Indebtedness” by adding, at the end thereof, the following: “For purposes of calculating the financial covenants pursuant to paragraph 6, the surety bonds listed on Exhibit A to the Third Amendment shall not be considered Indebtedness.” -2- --------------------------------------------------------------------------------   2. Representations and Warranties. In order to induce Prudential and the Purchasers to enter into this Amendment, the Company hereby represents and warrants as follows:      (a) No Defaults. No Default or Event of Default exists under the Agreement, the Notes as amended by the Note Amendments, the Subsidiary Guaranty Agreement or any other agreement or instrument executed in connection therewith and no default or event of default exists under the Bank Agreement, any agreement or instrument executed in connection therewith or any other material contract or agreement to which the Company or any of the Subsidiary Guarantors is a party, and, to the Company’s knowledge, no such default or event of default is imminent.      (b) Representations and Warranties. The representations and warranties of the Company and the Subsidiary Guarantors set forth in the Agreement and the Subsidiary Guaranty Agreement are true and correct on and as of the date hereof, both before and after giving effect to the effectiveness of this Amendment (except to the extent such representations and warranties expressly are limited to an earlier date, in which such representations and warranties are true and correct on and as of such earlier date). 3. Effectiveness. The effectiveness of this Letter Amendment is contingent on Prudential and the Purchasers having received:   (i)   duly executed counterparts of this Letter Amendment from all parties hereto;     (ii)   satisfactory written evidence of the consent to the execution and delivery of this Letter Amendment by the Subsidiary Guarantors;     (iii)   satisfactory written evidence of the consent to the execution and delivery of this Letter Amendment by the Company’s senior lenders under the Bank Agreement;     (iv)   a Guarantor Supplement duly executed and delivered by Collector Wells International, Inc. and International Water Consultants, Inc.; and     (v)   all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the amendments to the Agreement herein contained. 4. Miscellaneous.      (a) Effect on Agreement. On and after the effective date of this Letter Amendment, each reference in the Agreement to “this Agreement”, “hereunder”, “hereof’, or words of like import referring to the Agreement, and each reference in the Notes to “the Agreement”, “thereunder”, “thereof’, or words of like import referring to the Agreement, shall mean the Agreement as amended by this Letter Amendment. The Agreement, as amended by this Letter Amendment, is and shall continue to be in full -3- --------------------------------------------------------------------------------   force and effect and is hereby in all respects ratified and confirmed. The execution, delivery and effectiveness of this Letter Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy under the Agreement nor constitute a waiver of any provision of the Agreement.      (b) Counterparts. 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.      If you agree to the terms and provisions hereof, please evidence your agreement by executing and returning at least a counterpart of this Letter Amendment to Layne Christensen Company, 1900 Shawnee Mission Parkway, Mission Woods, Kansas 66205, Attention: Vice President — Finance and Treasurer. 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 and the consent attached hereto shall have been executed by each of the Subsidiary Guarantors. (Remainder of Page Intentionally Left Blank; Signature Pages Follow) -4- --------------------------------------------------------------------------------               Very truly yours, LAYNE CHRISTENSEN COMPANY       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Senior Vice President      Agreed as of the date first above written:           PRUDENTIAL INVESTMENT MANAGEMENT, INC.               By:   /s/ BL       /s/ WHB           Vice President               THE PRUDENTIAL INSURANCE COMPANY OF AMERICA               By:   /s/ BL       /s/ WHB           Vice President               PRUCO LIFE INSURANCE COMPANY               By:   /s/ BL       /s/ WHB           Vice President               SECURITY LIFE OF DENVER INSURANCE COMPANY           By:   Prudential Private Placement Investors,     L.P. (as Investment Advisor)       By:   Prudential Private Placement Investors, Inc.     (as its General Partner)                   By:   /s/ BL       /s/ WHB               Vice President     Signature Page to Letter Amendment No. 3 to Master Shelf Agreement   --------------------------------------------------------------------------------                 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION                   By:   Prudential Investment Management, Inc.,         as investment manager                       By:   /s/ BL       /s/ WHB               Vice President                   PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY                   By:   Prudential Investment Management, Inc.,         as investment manager                       By:   /s/ BL       /s/ WHB               Vice President                   TIME INSURANCE COMPANY     (F/K/A FORTIS INSURANCE COMPANY)                   By:   Prudential Private Placement Investors,         LP. (as Investment Advisor)                   By:   Prudential Private Placement Investors, Inc.         (as its General Partner)                       By:   /s/ BL       /s/ WHB               Vice President                   AMERICAN MEMORIAL LIFE INSURANCE COMPANY)                   By:   Prudential Private Placement Investors,         LP. (as Investment Advisor)                   By:   Prudential Private Placement Investors, Inc.         (as its General Partner)                       By:   /s/ BL       /s/ WHB               Vice President     Signature Page to Letter Amendment No. 3 to Master Shelf Agreement   --------------------------------------------------------------------------------                 PHYSICIANS MUTUAL INSURANCE COMPANY     By:   Prudential Private Placement Investors,         LP. (as Investment Advisor)                   By:   Prudential Private Placement Investors, Inc.         (as its General Partner)                       By:   /s/ BL       /s/ WHB               Vice President     Signature Page to Letter Amendment No. 3 to Master Shelf Agreement   --------------------------------------------------------------------------------   CONSENT           The undersigned, as Guarantors under the Subsidiary Guaranty Agreement dated as of July 31, 2003 (the “Guaranty”) in favor of the holders from time to time of the Notes issued pursuant to the Agreement referred to in the foregoing Letter Amendment, hereby consent to said Letter Amendment and hereby confirm and agree that the Guaranty is, and shall continue to be, in full force and effect and is hereby confirmed and ratified in all respects except that, upon the effectiveness of, and on and after the date of, said Letter Amendment, all references in the Guaranty to the Agreement, “thereunder”, “thereof’, or words of like import referring to the Agreement shall mean the Agreement as amended by said Letter Amendment.             BOYLES BROS. DRILLING COMPANY, a Utah corporation       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  CHRISTENSEN BOYLES CORPORATION, a Delaware corporation       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  INTERNATIONAL DIRECTIONAL SERVICES, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE TEXAS, INCORPORATED, a Delaware corporation       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President        --------------------------------------------------------------------------------               MID-CONTINENT DRILLING COMPANY, a Delaware corporation       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  SHAWNEE OIL & GAS, L.L.C., a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  STAMM-SCHEELE INCORPORATED, a Louisiana corporation       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  TOLEDO OIL L& GAS SERVICES, INC., a Louisiana corporation       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  VIBRATION TECHNOLOGY, INC., a Delaware corporation       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE DRILLING PTY LTD, an Australian company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Director      --------------------------------------------------------------------------------                         LAYNE CHRISTENSEN AUSTRALIA PTY LTD, an Australian company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Director                  STANLEY MINING SERVICES PTY LTD, an Australian company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Director                  SMS HOLDINGS PTY LTD, an Australian company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Director                  WEST AFRICAN HOLDINGS PTY LTD, an Australian company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Director                  WEST AFRICAN DRILLING SERVICES PTY LTD, an Australian company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Director                  WEST AFRICAN DRILLING SERVICES PTY (NO. 2) LTD, an Australian company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Director        --------------------------------------------------------------------------------               LAYNE ENERGY, INC., a Delaware corporation       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE ENERGY CHERRYVALE, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE ENERGY CHERRYVALE PIPELINE, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE ENERGY DAWSON, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE ENERGY DAWSON PIPELINE, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE ENERGY ILLINOIS, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President      --------------------------------------------------------------------------------                         LAYNE ENERGY ILLINOIS PIPELINE, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE ENERGY MARKETING, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE ENERGY OPERATING, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE ENERGY OSAGE, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE ENERGY PIPELINE, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE ENERGY PRODUCTION, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President        --------------------------------------------------------------------------------               LAYNE ENERGY RESOURCES, INC., a Delaware corporation       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE ENERGY SYCAMORE, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE ENERGY SYCAMORE PIPELINE, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  LAYNE WATER DEVELOPMENT AND STORAGE, LLC, a Delaware limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President                  CHERRYVALE PIPELINE, LLC, a Kansas limited liability company       By:   /s/ Jerry W. Fanska         Name:   Jerry W. Fanska        Title:   Vice President       

Exhibit 10.3 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is made effective as of the 7th day of June, 2006 (the “Effective Date”). AMONG: NEW ENGLAND COMMUNICATIONS SYSTEMS, INC., a corporation formed pursuant to the laws of the State of Connecticut and having an office for business located at 15 Industrial Park Place, Middletown, CT 06457 ("Employer"), and wholly owned subsidiary of WPCS INTERNATIONAL INCORPORATED, a corporation formed pursuant to the laws of the State of Delaware (“Parent”); AND CAROLYN WINDESHEIM, an individual having an address at 15 Industrial Park Place, Middletown, CT 06457 (“Employee”) WHEREAS, Parent and Employer are parties to that certain Stock Purchase Agreement, executed on June 7, 2006 (the “Purchase Agreement”), pursuant to which Employee has agreed to continue to serve as an employee of Employer, and Employer has agreed to hire Employee as such, pursuant to the terms and conditions of this Employment Agreement (the “Agreement”). NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises and the mutual covenants, agreements, representations and warranties contained herein, the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Employee and Employer hereby agree as follows: ARTICLE 1 EMPLOYMENT Employer hereby affirms, renews and extends the employment of Employee, and Employee hereby affirms, renews and accepts such employment by Employer for the “Term” (as defined in Article 3 below), upon the terms and conditions set forth herein. ARTICLE 2 DUTIES During the Term, Employee shall serve Employer faithfully, diligently and to the best of her ability, under the direction and supervision of the President of the Employer and shall use her best efforts to promote the interests and goodwill of Employer and any affiliates, successors, assigns, parent corporations, subsidiaries, and/or future purchasers of Employer. Employee shall render such services during the Term at Employer’s principal place of business or at such other place of business as may be determined by the Board of Directors of Employer, as Employer may from time to time reasonably require of her, and shall devote all of her business time to the performance thereof.         --------------------------------------------------------------------------------   ARTICLE 3 TERM The “Term” of this Agreement shall commence on the Effective Date and continue thereafter for a term of two (2) years, as may be extended or earlier terminated pursuant to the terms and conditions of this Agreement. ARTICLE 4 COMPENSATION Salary 4.1  Employer shall pay to Employee an annual salary (the “Salary”) of One Hundred Twenty Thousand Dollars ($120,000.00), payable in equal installments at the end of such regular payroll accounting periods as are established by Employer, or in such other installments upon which the parties hereto shall mutually agree, and in accordance with Employer’s usual payroll procedures, but no less frequently than monthly. The Board of Directors of Employer shall review the Salary annually to consider any increase thereof. Benefits 4.2  During the Term, Employee shall be entitled to participate in all medical and other employee benefit plans, including vacation, sick leave, retirement accounts and other employee benefits provided by Employer to similarly situated employees on terms and conditions no less favorable than those offered to such employees. Such participation shall be subject to the terms of the applicable plan documents, Employer’s generally applicable policies, and the discretion of the Board of Directors or any administrative or other committee provided for in, or contemplated by, such plan. Expense Reimbursement 4.3  Employer shall reimburse Employee for reasonable and necessary expenses incurred by her on behalf of Employer in the performance of her duties hereunder during the Term, in accordance with Employer's then customary policies, provided that such expenses are adequately documented. Bonus 4.4  In addition to the Salary, Employee shall be eligible to receive bonuses based on the performance of the Company, at the discretion of the Board of Directors of the Employer.   2 --------------------------------------------------------------------------------   ARTICLE 5 OTHER EMPLOYMENT During the Term of this Agreement, Employee shall devote substantially all of her business and professional time and effort, attention, knowledge, and skill to the management, supervision and direction of Employer’s business and affairs as Employee’s highest professional priority. Except as provided below, Employer shall be entitled to all benefits, profits or other issues arising from or incidental to all work, services and advice performed or provided by Employee. Nothing in this Agreement shall preclude Employee from devoting reasonable periods required for:   (a) serving as a director or member of a committee of any organization or corporation involving no conflict of interest with the interests of Employer, provided that Employee must obtain the written consent of Employer not to be unreasonably withheld, delayed or conditioned;   (b) serving as a consultant in her area of expertise (in areas other than in connection with the business of Employer), to government, industrial, and academic panels where it does not conflict with the interests of Employer; and   (c) managing her personal investments or engaging in any other non-competing business; provided that such activities do not materially interfere with the regular performance of her duties and responsibilities under this Agreement. ARTICLE 6 CONFIDENTIAL INFORMATION/INVENTIONS Confidential Information 6.1 Employee shall not, in any manner, for any reasons, either directly or indirectly, divulge or communicate to any person, firm or corporation, any confidential information concerning any matters not generally known in the wireless communications industry or otherwise made public by Employer which affects or relates to Employer’s business, finances, marketing and/or operations, research, development, inventions, products, designs, plans, procedures, or other data (collectively, “Confidential Information”) except in the ordinary course of business or as required by applicable law. Without regard to whether any item of Confidential Information is deemed or considered confidential, material, or important, the parties hereto stipulate that as between them, to the extent such item is not generally known in the wireless communications industry, such item is important, material, and confidential and affects the successful conduct of Employer’s business and goodwill, and that any breach of the terms of this Section 6.1 shall be a material and incurable breach of this Agreement. Confidential Information shall not include: (i) information obtained or which became known to Employee other than through her employment by Employer; (ii) information in the public domain at the time of the disclosure of such information by Employee; (iii) information that Employee can document was independently developed by Employee; (iv) information that is disclosed by Employee with the prior written consent of Parent; and (v) information that is disclosed by Employee as required by law, governmental regulation or court order.   3 --------------------------------------------------------------------------------   Documents 6.2 Employee further agrees that all documents and materials furnished to Employee by Employer and relating to the Employer’s business or prospective business are and shall remain the exclusive property of Employer. Employee shall deliver all such documents and materials, uncopied, to Employer upon demand therefore and in any event upon expiration or earlier termination of this Agreement. Any payment of sums due and owing to Employee by Employer upon such expiration or earlier termination shall be conditioned upon returning all such documents and materials, and Employee expressly authorizes Employer to withhold any payments due and owing pending return of such documents and materials. Inventions 6.3 All ideas, inventions, and other developments or improvements conceived or reduced to practice by Employee, alone or with others, during the Term of this Agreement, whether or not during working hours, that are within the scope of the business of Employer or that relate to or result from any of Employer’s work or projects or the services provided by Employee to Employer pursuant to this Agreement, shall be the exclusive property of Employer. Employee agrees to assist Employer, at Employer’s expense, to obtain patents and copyrights on any such ideas, inventions, writings, and other developments, and agrees to execute all documents necessary to obtain such patents and copyrights in the name of Employer. Disclosure 6.4 During the Term, Employee will promptly disclose to the Board of Directors of Employer full information concerning any interest, direct or indirect, of Employee (as owner, shareholder, partner, lender or other investor, director, officer, employee, consultant or otherwise) or any member of her immediate family (as defined in Section 10.3) in any business that is reasonably known to Employee to purchase or otherwise obtain services or products from, or to sell or otherwise provide services or products to, Employer or to any of its suppliers or customers.       4 --------------------------------------------------------------------------------   ARTICLE 7 COVENANT NOT TO COMPETE Except as expressly permitted in Article 5 above, during the Term of this Agreement, Employee shall not engage in any of the following competitive activities: (a) engaging directly or indirectly in any business or activity substantially similar to any business or activity engaged in (or proposed to be engaged in) by Employer; (b) engaging directly or indirectly in any business or activity competitive with any business or activity engaged in (or proposed to be engaged in) by Employer; (c) soliciting or taking away any employee, agent, representative, contractor, supplier, vendor, customer, franchisee, lender or investor of Employer, or attempting to so solicit or take away; (d) interfering with any contractual or other relationship between Employer and any employee, agent, representative, contractor, supplier, vendor, customer, franchisee, lender or investor; or (e) using, for the benefit of any person or entity other than Employer, any Confidential Information of Employer. The foregoing covenant prohibiting competitive activities shall survive the termination of this Agreement and shall extend, and shall remain enforceable against Employee, for the period of two (2) years following the date this Agreement is terminated. In addition, during the two-year period following such expiration or earlier termination, neither Employee nor Employer shall make or permit the making of any negative statement of any kind concerning Employer or its affiliates, or their directors, officers or agents or Employee. ARTICLE 8 SURVIVAL Employee agrees that the provisions of Articles 6, 7 and 9 shall survive expiration or earlier termination of this Agreement for any reasons, whether voluntary or involuntary, with or without cause, and shall remain in full force and effect thereafter. ARTICLE 9 INJUNCTIVE RELIEF Employee acknowledges and agrees that the covenants and obligations of Employee set forth in Articles 6 and 7 with respect to non-competition, non-solicitation, confidentiality and Employer’s property relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants and obligations will cause Employer irreparable injury for which adequate remedies are not available at law. Therefore, Employee agrees that Employer shall be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) as a court of competent jurisdiction may deem necessary or appropriate to restrain Employee from committing any violation of the covenants and obligations referred to in this Article 9. These injunctive remedies are cumulative and in addition to any other rights and remedies Employer may have at law or in equity.   5 --------------------------------------------------------------------------------   ARTICLE 10 TERMINATION Termination by Employee 10.1 Employee may terminate this Agreement for Good Reasonor or for any reason (“Without Good Reason”), at any time upon 30 days’ written notice to Employer, provided the Good Reason has not been cured within such period of time. Good Reason 10.2 In this Agreement, “Good Reason” means, without Employee’s prior written consent, the occurrence of any of the following events, unless Employer shall have fully cured all grounds for such termination within thirty (30) days after Employee gives notice thereof: (i) any reduction in her then-current Salary; (ii) failure to pay or provide required compensation and benefits;   (iii) any relocation of Employee’s office as assigned to her by Employer, to a location more than 25 miles from Employer’s current office located in Windsor, Connecticut; or   (iv) Employer will have materially breached its obligations to Employee under this Agreement and such breach shall have continued for a period of at least thirty (30) days after the Company’s receipt of written notice from the Employee describing such breach. The written notice given hereunder by Employee to Employer shall specify in reasonable detail the cause for termination, and such termination notice shall not be effective until thirty (30) days after Employer’s receipt of such notice, during which time Employer shall have the right to respond to Employee’s notice and cure the breach or other event giving rise to the termination. Termination by Employer 10.3 Employer may terminate its employment of Employee under this Agreement for cause at any time by written notice to Employee. For purposes of this Agreement, the term “cause” for termination by Employer shall be (a) a conviction of or plea of guilty or nolo contendere by Employee to a felony, or any crime involving fraud or embezzlement; (b) the refusal by Employee to perform her material duties and obligations hereunder; (c) Employee’s willful and intentional misconduct in the performance of her material duties and obligations; or (d) if Employee or any member of her family makes any personal profit arising out of or in connection with a transaction to which Employer is a party or with which it is associated without making disclosure to and obtaining the prior written consent of Parent. The written notice given hereunder by Employer to Employee shall specify in reasonable detail the cause for termination. For purposes of this Agreement, “family” shall mean Employee’s spouse and/or children. In the case of a termination for the causes described in (a) and (d) above, such termination shall be effective upon receipt of the written notice. In the case of the causes described in (b) and (c) above, such termination notice shall not be effective until thirty (30) days after Employee’s receipt of such notice, during which time Employee shall have the right to respond to Employer’s notice and cure the breach or other event giving rise to the termination.   6 --------------------------------------------------------------------------------   Severance 10.4 Upon a termination of this Agreement Without Good Reason by Employee or with cause by Employer, Employer shall pay to Employee all accrued and unpaid compensation as of the date of such termination, subject to the provision of Section 6.2. Upon a termination of this Agreement with Good Reason by Employee or without cause by Employer, Employer shall pay to Employee all accrued and unpaid compensation and expense reimbursement as of the date of such termination and the “Severance Payment.” The Severance Payment shall be payable in a lump sum, subject to Employer’s statutory and customary withholdings. If the termination of Employee hereunder is by Employee with Good Reason, the Severance Payment shall be paid by Employer within fifteen (15) business days of the expiration of any applicable cure period. If the termination of Employee hereunder is by Employer without cause, the Severance Payment shall be paid by Employer within five (5) business days of termination. The “Severance Payment” shall equal the total amount of the Salary payable to Employee under Section 4.1 of this Agreement from the date of such termination until the end of the Term of this Agreement (prorated for any partial month, together with a prorated amount any bonus payable under Section 4.4. Termination Upon Death 10.5 If Employee dies during the Term of this Agreement, this Agreement shall terminate, except that Employee’s legal representatives shall be entitled to receive any earned but unpaid compensation or expense reimbursement due hereunder through the date of death. Termination Upon Disability 10.6  If, during the Term of this Agreement, Employee suffers and continues to suffer from a “Disability” (as defined below), then Employer may terminate this Agreement by delivering to Employee thirty (30) calendar days’ prior written notice of termination based on such Disability, setting forth with specificity the nature of such Disability and the determination of Disability by Employer. For the purposes of this Agreement, “Disability” means Employee’s inability, with reasonable accommodation, to substantially perform Employee’s duties, services and obligations under this Agreement due to physical or mental illness or other disability for a continuous, uninterrupted period of sixty (60) calendar days or ninety (90) days during any twelve month period. Upon any such termination for Disability, Employee shall be entitled to receive any earned but unpaid compensation or expense reimbursement due hereunder through the date of termination.       7 --------------------------------------------------------------------------------   ARTICLE 11 PERSONNEL POLICIES, CONDITIONS, AND BENEFITS Except as otherwise provided herein, Employee’s employment shall be subject to the personnel policies and benefit plans which apply generally to Employer’s employees as the same may be interpreted, adopted, revised or deleted from time to time, during the Term of this Agreement, by Parent in its sole discretion. During the Term hereof, Employee shall be entitled to vacation during each year of the Term at the rate of four (4) weeks per year. Within 30 days after the end of each year of the Term, Employer shall elect to (a) carry over and allow Employee the right to use any accrued and unused vacation of Employee, or (ii) pay Employee for such vacation in a lump sum in accordance with its standard payroll practices. Employee shall take such vacation at a time approved in advance by the Board of Directors of Employer, which approval will not be unreasonably withheld but will take into account the staffing requirements of Employer and the need for the timely performance of Employee's responsibilities. ARTICLE 12 BENEFICIARIES OF AGREEMENT This Agreement shall inure to the benefit of Employer and any affiliates, successors, assigns, parent corporations, subsidiaries, and/or purchasers of Employer or Parent as they now or shall exist while this Agreement is in effect. ARTICLE 13 GENERAL PROVISIONS No Waiver 13.1 No failure by either party to declare a default based on any breach by the other party of any obligation under this Agreement, nor failure of such party to act quickly with regard thereto, shall be considered to be a waiver of any such obligation, or of any future breach. Modification 13.2 No waiver or modification of this Agreement or of any covenant, condition, or limitation herein contained shall be valid unless in writing and duly executed by the parties to be charged therewith. Choice of Law/Jurisdiction 13.3 This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut, without regard to any conflict-of-laws principles. Employer and Employee hereby consent to personal jurisdiction before all courts in the State of Connecticut, and hereby acknowledge and agree that Connecticut is and shall be the most proper forum to bring a complaint before a court of law.   8 --------------------------------------------------------------------------------   Entire Agreement 13.4 This Agreement embodies the whole agreement between the parties hereto regarding the subject matter hereof and there are no inducements, promises, terms, conditions, or obligations made or entered into by Employer or Employee other than contained herein. Severability 13.5  All agreements and covenants contained herein are severable, and in the event any of them, with the exception of those contained in Articles 1 and 4 hereof, shall be held to be invalid by any competent court, this Agreement shall be interpreted as if such invalid agreements or covenants were not contained herein. Headings 13.6 The headings contained herein are for the convenience of reference and are not to be used in interpreting this Agreement. Independent Legal Advice 13.7 Employer has obtained legal advice concerning this Agreement and has requested that Employee obtain independent legal advice with respect to same before executing this Agreement. Employee, in executing this Agreement, represents and warranties to Employer that she has been so advised to obtain independent legal advice, and that prior to the execution of this Agreement she has so obtained independent legal advice, or has, in her discretion, knowingly and willingly elected not to do so. No Assignment 13.8  Employee may not assign, pledge or encumber her interest in this Agreement nor assign any of her rights or duties under this Agreement without the prior written consent of Parent.   9 --------------------------------------------------------------------------------   IN WITNESS WHEREOF the parties have executed this Agreement effective as of the day and year first above written.           NEW ENGLAND COMMUNICATIONS SYSTEMS, INC.               By:   /s/ MYRON POLULAK   -------------------------------------------------------------------------------- Name: Myron Polulak   Title: President                         By:   /s/ CAROLYN WINDSHEIM   -------------------------------------------------------------------------------- Carolyn Windesheim     10  

Exhibit 10.35 No. WSG0510-0871 Date: March 16, 2006 Page 1 of 2 FIRST AMENDMENT TO SPRINT MASTER SERVICE AGREEMENT   Customer Name:    Hawaiian Telcom Communications, Inc. Address:    1177 Bishop Street    Honolulu, HI 96813 This First Amendment (WSG0501-0871) is made to the Sprint Master Service Agreement (WSG0501-0023) between SPRINT COMMUNICATIONS COMPANY L.P. (“Sprint”) and Hawaiian Telcom Communications, Inc. (“Customer”), signed by Customer on November 23, 2005 and Sprint on December 5, 2005 (the “Agreement”), as amended by:   AMENDMENT NUMBER   WSG #   CUSTOMER SIGNATURE DATE   SPRINT SIGNATURE DATE N/A   N/A   N/A   N/A The term “Agreement” as referred to here includes all changes incorporated by previous amendments. The following modified and added terms and conditions are made a part of the Agreement effective March 1, 2006 (“First Amendment Commencement Date”). If during the First Amendment implementation process, a Service bills after the First Amendment Commencement Date at a rate other than the rate stated in this First Amendment, Sprint will adjust Customer’s invoice to apply the appropriate rate within 90 days after the date of the invoice containing the incorrect rate. Sprint and Customer agree as follows:   1. The Agreement is amended in Section 2.2 by adding a new Exhibit 5: Wholesale Operator Services (WOS), which is attached and incorporated by this reference.   2. The Agreement is amended by adding a new Exhibit 5: Attachment A, which is attached and incorporated by this reference.   3. The Agreement is amended by adding a new Exhibit 5: Attachment B, which is attached and incorporated by this reference.   4. The Agreement is amended by adding a new Exhibit 5: Attachment C, which is attached and incorporated by this reference.   5. The Agreement is amended by adding a new Exhibit 5: Attachment D, which is attached and incorporated by this reference.   6. The Agreement is amended by deleting Section 3.3 in its entirety and replacing it with the following:     3.3 Minimum Term Commitment (MTC): Customer’s MTC shall be as set forth in the table below.   Effective Date of Termination    Minimum Term Commitment During Contract Year 1    None During Contract Year 2 and 3    24 x 70% x A, where A equals the average recurring amounts paid by Customer to Sprint under Exhibits 1, 2, and 5 during the last three (3) months of Contract Year 1. There are no MMCs under this Exhibit. During Renewal Contract Years    None   7. The Agreement is amended by adding new Section 11 to Exhibit 1: Attachment A-1 as follows:     11. Customer Provided Access / Co-Located Access Promotional MRC and NRC Waivers. RESTRICTED SPRINT CONFIDENTIAL & PROPRIETARY INFORMATION -------------------------------------------------------------------------------- No. WSG0510-0871 Date: March 16, 2006 Page 2 of 2 FIRST AMENDMENT TO SPRINT MASTER SERVICE AGREEMENT   Customer Name:    Hawaiian Telcom Communications, Inc. Address:    1177 Bishop Street    Honolulu, HI 96813 Customer Provided Access to the Sprint POP (CPA to POP) Sprint will waive 100% of CPA to the POP Domestic COC MRC and NRC charges on OC12 and lower bandwidth Services local dedicated access CPA to the POP lines installed during the Term. Customer Provided Access to the Sprint Serving Wire Center (CPA to SWC) Sprint will waive 100% of CPA to the SWC Domestic COC MRC and NRC charges, 50% of CPA to the SWC Domestic EFC MRC charges, and 100% of the CPA to the SWC Domestic EFC NRC charges on OC12 and lower bandwidth Services local dedicated access CPA to the SWC lines installed during the Term. Co-Located Access (COLOC) Sprint will waive 100% of Domestic Co-Located Access COC MRC charges on OC12 and lower bandwidth Services local access COLOC lines installed during the Term.   8. The Agreement is amended in Exhibit 2 by deleting Exhibit 2: Attachment Frame Relay – 2 in its entirety and replacing it with Exhibit 2: Attachment Frame Relay - 2, which is attached and incorporated by this reference.   9. All other terms and conditions in the Agreement, not amended above, will remain in effect. This Amendment and any information concerning its terms and conditions are Sprint’s proprietary information and are governed by the parties’ nondisclosure agreement. Alterations to this Amendment will not be valid unless accepted in writing by a Sprint officer or authorized designee. To become effective, this Amendment must be:     9.1. Signed by a Customer representative;     9.2. Delivered to Sprint within 45 days after March 16, 2006; and     9.3. Signed by a Sprint officer or authorized designee.   HAWAIIAN TELCOM COMMUNICATIONS, INC.     SPRINT COMMUNICATIONS COMPANY L.P. By:   /s/ David A. Torline     By:   /s/ David A. Falter Name:   David A. Torline     Name:   David A. Falter Title:   SVP & Chief Information Officer     Title:   Managing Director/Vice President, Wholesale Services Group Date: March 22, 2006     Date: April 10, 2006 Address:   1177 Bishop Street     Address:   5020 Riverside Drive   Honolulu, HI 96813       Irving, TX 75039     Approved as to Legal Form     LKP                    3-16-06     Sprint Law Dept.   RESTRICTED SPRINT CONFIDENTIAL & PROPRIETARY INFORMATION

Exhibit 10.91   DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. DEFERRED COMPENSATION PLAN ACCOUNT WITH BANK OF OKLAHOMA EMPLOYEE ENROLLMENT FORM - 2006 SALARY   DTAG Deferred Comp Plan 000601   PARTICIPANT INFORMATION:     Participant Name (print or type): John J. Foley                                                                                                                 ELECTION OF DEFERRED COMPENSATION PLAN PARTICIPATION   1. x   I elect to participate in the Deferred Compensation Plan. I understand that my election to participate and my deferral percentage are irrevocable for the calendar year for which my election first became effective. Currently, tax law requires that any amount deferred into a Deferred Compensation account is subject to Social Security and Medicare taxes at the time of deferral but is not subject to these taxes at the time of withdrawal.   x   I elect to defer    0    % or $       of my regular compensation (excluding any overtime premiums or bonuses) paid each pay period in 2006.   2. x   I elect distribution to be made (  X   upon) / (____upon the earlier of)/ (____upon the later of) :     X (a) Separation of service     (i) to be paid in the form of    X   lump sum or    0    annual installments over       years (not to exceed 10)   ______   (b) In calendar year ________     (i) to be paid in the form of        lump sum or         annual installments over       years (not to exceed 10)   Note: For certain key employees, distribution of any benefit upon separation from service may not be made prior to six months after separation from service.   3. x  Upon a “Change of Control” with respect to the Employer, I hereby elect to have the balance of my Deferred Compensation Plan account distributed to me or my designated beneficiary(ies) in lump sum form, subject to and in accordance with the terms of the Plan.   Please consult with your tax advisor regarding the tax consequences of this Plan to you. Neither the sponsor of this Plan, nor any of the sponsor’s affiliates provide any assurances of the tax results of this Plan in the Participant’s particular situation or assume any responsibility in this regard.       AUTHORIZATION:   Participant Signature: /s/ John J. Foley                                                       Date: December 31, 2005   Accepted and agreed to by Employer’s Authorized Representative.   By: /s/ Brian K. Franklin                                                                           Date: December 31, 2005          

Exhibit 10.4 ENCORE CAPITAL GROUP, INC. RESTRICTED STOCK UNIT GRANT NOTICE (2005 STOCK INCENTIVE PLAN) Encore Capital Group, Inc. (the “Company”), pursuant to its 2005 Stock Incentive Plan (the “Plan”), hereby awards to Participant a Restricted Stock Unit award for the number of shares of the Company’s Stock set forth below (the “Award”). The Award is subject to all of the terms and conditions as set forth herein and in the Plan and the Restricted Stock Unit Agreement, both of which are attached hereto and incorporated herein in their entirety. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan or the Restricted Stock Unit Agreement. In the event of any conflict between the terms in the Award and the Plan, the terms of the Plan shall control.   Participant:          Date of Grant:          Vesting Commencement Date:          Number of Shares Subject to Award:          Consideration:    Participant’s Past Services    Fair Market Value per Share:    $                          Vesting Schedule:    ____________________________________________________________________________________. [In addition, the vesting of the shares shall accelerate upon the occurrence of the following events: ____________________________________.] Notwithstanding the foregoing, vesting shall terminate on upon the Participant’s termination of Continuous Service. Issuance Schedule:    The shares will be issued in accordance with the issuance schedule set forth in Section 6 of the Restricted Stock Unit Agreement. Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and agrees to, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Agreement and the Plan. Participant further acknowledges that as of the Date of Grant, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Agreement and the Plan set forth the entire understanding between Participant and the Company regarding the Award and supersedes all prior oral and written agreements on that subject.   ENCORE CAPITAL GROUP, INC.     PARTICIPANT: By:               Signature     Signature Title:          Date:      Date:            ATTACHMENTS: Restricted Stock Unit Agreement, 2005 Stock Incentive Plan   1 -------------------------------------------------------------------------------- ATTACHMENT I ENCORE CAPITAL GROUP, INC. 2005 STOCK INCENTIVE PLAN RESTRICTED STOCK UNIT AGREEMENT – EXECUTIVE Pursuant to the Restricted Stock Unit Grant Notice (“Grant Notice”) and this Restricted Stock Unit Agreement and in consideration of your past services, Encore Capital Group, Inc. (the “Company”) has awarded you a deferred issuance restricted stock award (the “Award”) under its 2005 Stock Incentive Plan (the “Plan”) for the number of shares of the Company’s Stock as indicated in the Grant Notice. Your Award is granted to you effective as of the Date of Grant set forth in the Grant Notice for this Award. Defined terms not explicitly defined in this Restricted Stock Unit Agreement shall have the same meanings given to them in the Plan. In the event of any conflict between the terms in this Restricted Stock Unit Agreement and the Plan, the terms of the Plan shall control. RECITALS WHEREAS, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) provides that deferred compensation arrangements (including, in this case, the Award) that do not comply with, among other things, the distribution requirements of Code Section 409A, are subject to an additional 20% tax, plus interest, on the distribution. WHEREAS, Code Section 409A provides that the payment of the deferred compensation must not occur prior to: (i) termination of Continuous Service (as defined below), but “key employees” of publicly traded companies must wait an additional six months, (ii) Disability (as defined below), (iii) death, (iv) a fixed date (or dates) specified at the time of deferral, (v) a change in control, or (vi) the occurrence of an unforeseeable emergency. WHEREAS, at the time the shares subject to your Award would otherwise be issued to you in connection with your termination of Continuous Service, you may be subject to the distribution limitations contained in Code Section 409A applicable to a “key employee” as defined in Code Section 416(i). NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto do hereby agree that the details of your Award are as follows: 1. VESTING.     (a) In General. Subject to the limitations contained herein, your Award will vest in accordance with the vesting schedule provided in the Grant Notice, provided that vesting will cease upon the termination of your Continuous Service. Notwithstanding the foregoing, if you elect to defer receipt of the shares pursuant to Section 6(a) of this Restricted Stock Unit Agreement, then any shares subject to this Award that would otherwise   2 --------------------------------------------------------------------------------   vest within the 12-month period following the Date of Grant indicated on your Grant Notice shall instead vest on the date that is 12 months following the date of your election to defer. For purposes of this Award, “Continuous Service” means that your service with the Company or an Affiliate, whether as an employee, director or consultant, is not interrupted or terminated. A change in the capacity in which you render service to the Company or an Affiliate as an employee, consultant or director or a change in the entity for which you render such service, provided that there is no interruption or termination of your service with the Company or an Affiliate, shall not terminate your Continuous Service. For example, a change in status from an employee of the Company to a consultant to an Affiliate or to a director shall not constitute an interruption of Continuous Service. To the extent permitted by law, the Board or its compensation committee or any officer designated by the Board or its compensation committee, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to you, or as otherwise required by law.     (b) Vesting Acceleration. Notwithstanding the foregoing, upon a Change of Control during your Continuous Service, or in the event that your Continuous Service is terminated due to your death or Disability, then your Award will immediately vest in full. 2. NUMBER OF SHARES. The number of shares subject to your Award may be adjusted from time to time for capitalization adjustments, as provided in the Plan. 3. SECURITIES LAW COMPLIANCE. You may not be issued any shares under your Award unless the shares are either: (i) then registered under the Securities Act; or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Your Award also must comply with other applicable laws and regulations governing the Award, and you will not receive such shares if the Company determines that such receipt would not be in material compliance with such laws and regulations. 4. LIMITATIONS ON TRANSFER. Your Award is not transferable, except by will or by the laws of descent and distribution. In addition to any other limitation on transfer created by applicable securities laws, you agree not to assign, hypothecate, donate, encumber or otherwise dispose of any interest in any of the shares of Stock held by you under the Award until the shares are issued to you in accordance with Section 6 of this Agreement. After the shares have been issued to you, you are free to assign, hypothecate, donate, encumber or otherwise dispose of any interest in such shares provided that any such actions are in compliance with the provisions herein and applicable securities laws.   3 -------------------------------------------------------------------------------- 5. DIVIDENDS. You shall be entitled to receive payments equal to any cash dividends and other distributions paid with respect to a corresponding number of shares covered by your Award, provided that if any such dividends or distributions are paid in shares, the Fair Market Value of such shares shall be converted into additional shares covered by the Award, and further provided that such additional shares shall be subject to the same forfeiture restrictions and restrictions on transferability as apply to the shares subject to the Award with respect to which they relate. 6. DATE OF ISSUANCE.     (a) The Company will deliver to you a number of shares of the Company’s Stock equal to the number of vested shares subject to your Award, including any additional shares received pursuant to Section 5 above that relate to those vested shares on the vesting date or dates provided in your Grant Notice; [provided, however, that if the first vesting date occurs no sooner than 12 months following the Date of Grant specified in your Grant Notice and if, within the 30-day period following the Date of Grant indicated on your Grant Notice, you elect to defer delivery of such shares of Common Stock beyond the vesting date, then the Company will deliver such shares to you on the date or dates that you so elect (the “Settlement Date”). Notwithstanding the foregoing, in the event of your termination of Continuous Service prior to the Settlement Date, such vested shares of Common Stock shall instead be delivered to you on the date of your termination of Continuous Service. If such deferral election is made, the Committee shall, in its sole discretion, establish the rules and procedures for such election which shall be evidenced by a Restricted Stock Unit Election Agreement.     (b) Notwithstanding anything to the contrary set forth herein, if at the time the shares would otherwise be issued to you as a result of your termination of Continuous Service, you are subject to the distribution limitations contained in Code Section 409A applicable to “key employees” as defined in Code Section 416(i), share issuances to you as a result of your termination of Continuous Service shall not be made before the date which is six (6) months following the date of your termination of Continuous Service, or, if earlier, the date of your death that occurs within such six (6) month period. 7. RESTRICTIVE LEGENDS. The shares issued under your Award shall be endorsed with appropriate legends determined by the Company. 8. AWARD NOT A SERVICE CONTRACT.     (a) Your Continuous Service with the Company or an Affiliate is not for any specified term and may be terminated by you or by the Company or an Affiliate at any time, for any reason, with or without cause and with or without notice. Nothing in this Restricted Stock Unit Agreement   4 --------------------------------------------------------------------------------   (including, but not limited to, the vesting of your Award pursuant to the schedule set forth in Section 2 herein), the Plan or any covenant of good faith and fair dealing that may be found implicit in this Restricted Stock Unit Agreement or the Plan shall: (i) confer upon you any right to continue in the employ of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment by the Company or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or affiliation; (iii) confer any right or benefit under this Restricted Stock Unit Agreement or the Plan unless such right or benefit has specifically accrued under the terms of this Agreement or Plan; or (iv) deprive the Company of the right to terminate you at will and without regard to any future vesting opportunity that you may have.     (b) By accepting this Award, you acknowledge and agree that the right to continue vesting in the Award pursuant to the schedule set forth in Section 2 is earned only by continuing as an employee, director or consultant at the will of the Company (not through the act of being hired, being granted this Award or any other award or benefit) and that the Company has the right to reorganize, sell, spin-out or otherwise restructure one or more of its businesses or Affiliates at any time or from time to time, as it deems appropriate (a “reorganization”). You further acknowledge and agree that such a reorganization could result in the termination of your Continuous Service, or the termination of Affiliate status of your employer and the loss of benefits available to you under this Restricted Stock Unit Agreement, including but not limited to, the termination of the right to continue vesting in the Award. You further acknowledge and agree that this Restricted Stock Unit Agreement, the Plan, the transactions contemplated hereunder and the vesting schedule set forth herein or any covenant of good faith and fair dealing that may be found implicit in any of them do not constitute an express or implied promise of continued engagement as an employee or consultant for the term of this Agreement, for any period, or at all, and shall not interfere in any way with your right or the Company’s right to terminate your Continuous Service at any time, with or without cause and with or without notice. 9. WITHHOLDING OBLIGATIONS.     (a) On or before the time you receive a distribution of shares pursuant to your Award, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and/or any other amounts payable to you, and otherwise agree to make adequate provision for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with your Award.   5 --------------------------------------------------------------------------------   (b) Unless the tax withholding obligations of the Company and/or any Affiliate are satisfied, the Company shall have no obligation to issue the shares of Stock subject to your Award. 10. UNSECURED OBLIGATION. Your Award is unfunded, and as a holder of a vested Award, you shall be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares pursuant to this Agreement. You shall not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this Agreement until such shares are issued to you pursuant to Section 6 of this Agreement. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person. 11. NOTICES. Any notices provided for in your Award or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company. 12. MISCELLANEOUS.     (a) The rights and obligations of the Company under your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns. Your rights and obligations under your Award may only be assigned with the prior written consent of the Company.     (b) You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.     (c) You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award, and fully understand all provisions of your Award. 13. GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control. 14. SEVERABILITY. If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid   6 -------------------------------------------------------------------------------- shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid. 15. EFFECT ON OTHER EMPLOYEE BENEFIT PLANS. The value of the Award subject to this Agreement shall not be included as compensation, earnings, salaries, or other similar terms used when calculating the Employee’s benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans. 16. AMENDMENT. This Agreement may not be modified, amended or terminated except by an instrument in writing, signed by you and by a duly authorized representative of the Company. Notwithstanding the foregoing, this Agreement may be amended solely by the Board by a writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to you, and provided that no such amendment adversely affecting your rights hereunder may be made without your written consent. Without limiting the foregoing, the Board reserves the right to change, by written notice to you, the provisions of this Agreement in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change shall be applicable only to rights relating to that portion of the Award which is then subject to restrictions as provided herein.   7

  Exhibit 10.14(a) EXECUTION COPY FIRST AMENDMENT Dated as of November 13, 2006 TO SERIES 2002-1 SUPPLEMENT TO TRENDWEST MASTER LOAN PURCHASE AGREEMENT As Amended and Restated as of July 7, 2006       THIS FIRST AMENDMENT (this “ Amendment”) is dated as of November 13, 2006 and amends that Series 2002-1 Supplement dated as of August 29, 2002 and amended and restated as of July 7, 2006 (the “ PA Supplement”) to the Master Loan Purchase Agreement under which TRENDWEST RESORTS, INC. is the Seller and is by and between TRENDWEST RESORTS, INC., an Oregon corporation and SIERRA DEPOSIT COMPANY, LLC, a Delaware limited liability company, as purchaser (hereinafter referred to as the “Purchaser” or the “Company”).       This Amendment reflects the new terms agreed between the Seller and the Purchaser regarding the eligibility of certain Loans sold by the Seller to the Purchaser.       The PA Supplement supplements the Master Loan Purchase Agreement dated as of August 29, 2002, as amended and restated as of July 7, 2006 and amended by the First Amendment thereto dated as of even date herewith. The Master Loan Purchase Agreement, as so amended, is the “ Agreement.” Terms used in this Amendment and not defined herein have the meaning assigned in the Agreement.      (u) with respect to which at least one Scheduled Payment has been made by the Obligor; except that this subsection (u) shall not be applicable with respect to Loans made for the purpose of or relating to the financing of a Timeshare Upgrade;           Section 2. Effect of Amendment to Definition of Eligible Loan. The amendment made to the definition of Eligible Loan contained in Section 1 of this Amendment shall be applicable only with respect to Loans sold by the Seller to the Purchaser on or after the date of this Amendment. Loans sold under the Agreement and the PA Supplement prior to the date of this Amendment were and are subject to the terms of such documents as such documents existed at the time of the sale.           Section 3. Ratification of PA Supplement. As amended and supplemented by this Amendment, the PA Supplement is in all respects ratified and confirmed and the PA Supplement   --------------------------------------------------------------------------------   as so amended and supplemented shall be read, taken and construed as one and the same instrument.           Section 4. Counterparts. This Amendment may be executed in two or more counterparts, and by different parties on separate counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument.           Section 5. GOVERNING LAW. THIS PA SUPPLEMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING §5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. 2 --------------------------------------------------------------------------------             IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written.             TRENDWEST VACATION RESORTS, INC.       By:   /s/ Michael A. Hug         Name:   Michael A. Hug        Title:   Executive Vice President and Chief Financial Officer        SIERRA DEPOSIT COMPANY, LLC       By:   /s/ Mark A. Johnson         Name:   Mark A. Johnson        Title:   President       

  Exhibit 10.1 EXECUTION COPY SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of October 13, 2006 among CHICAGO BRIDGE & IRON COMPANY N.V., the SUBSIDIARY BORROWERS, THE INSTITUTIONS FROM TIME TO TIME PARTIES HERETO AS LENDERS and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as Administrative Agent and BANK OF AMERICA, N.A., as Syndication Agent and BANK OF MONTREAL, WELLS FARGO BANK, N.A., BNP PARIBAS and THE ROYAL BANK OF SCOTLAND plc, as Documentation Agents   J.P. MORGAN SECURITIES INC. and BANC OF AMERICA SECURITIES LLC, as Joint Lead Arrangers and Joint Book Runners     --------------------------------------------------------------------------------   TABLE OF CONTENTS                           ARTICLE I: DEFINITIONS     1                                   1.1.     Certain Defined Terms     1         1.2.     Singular/Plural References; Accounting Terms     27         1.3.     References     27         1.4.     Supplemental Disclosure     27                             ARTICLE II: REVOLVING LOAN FACILITY     28                                   2.1.     Revolving Loans     28               (A)   Amount of Revolving Loans     28               (B)   Borrowing/Election Notice     28               (C)   Making of Revolving Loans     28         2.2.     Swing Line Loans     29               (A)   Amount of Swing Line Loans     29               (B)   Borrowing/Election Notice     29               (C)   Making of Swing Line Loans     29               (D)   Repayment of Swing Line Loans     29         2.3.     Rate Options for all Advances; Maximum Interest Periods     30         2.4.     Optional Payments; Mandatory Prepayments     30               (A)   Optional Payments     31               (B)   Determination of Dollar Amounts of Letters of Credit; Mandatory Prepayments of Revolving Loans and Cash Collateralization of Letters of Credit     31         2.5.     Changes in Commitments     32               (A)   Voluntary Commitment Reductions     32               (B)   Increase in Commitments     32         2.6.     Method of Borrowing     35         2.7.     Method of Selecting Types and Interest Periods for Advances     35         2.8.     Minimum Amount of Each Advance     36         2.9.     Method of Selecting Types and Interest Periods for Conversion and Continuation of Advances     36               (A)   Right to Convert     36               (B)   Automatic Conversion and Continuation     36               (C)   No Conversion Post-Default or Post-Unmatured Default     36               (D)   Borrowing/Election Notice     36         2.10.     Default Rate     36         2.11.     Method of Payment     37               (A)   Method of Payment     37               (B)   Market Disruption     37         2.12.     Evidence of Debt     38               (A)   Loan Account     38               (B)   Register     38               (C)   Entries in Loan Account and Register     38               (D)   Noteless Transaction; Notes Issued Upon Request     38   ii --------------------------------------------------------------------------------                                   2.13.     Telephonic Notices     39         2.14.     Promise to Pay; Interest and Commitment Fees; Interest Payment Dates; Interest and Fee Basis; Taxes; Loan and Control Accounts     39               (A)   Promise to Pay     39               (B)   Interest Payment Dates     39               (C)   Commitment Fees; Additional Fees     39               (D)   Interest and Fee Basis; Applicable Floating Rate Margins, Applicable Eurodollar Margin, Applicable L/C Fee Percentage and Applicable Commitment Fee Percentage     40               (E)   Taxes     42         2.15.     Notification of Advances, Interest Rates, Prepayments and Aggregate Commitment Reductions     45         2.16.     Lending Installations     45         2.17.     Non-Receipt of Funds by the Administrative Agent     46         2.18.     Termination Date     46         2.19.     Replacement of Certain Lenders     46         2.20.     Subsidiary Borrowers     47         2.21.     Judgment Currency     47                             ARTICLE III: THE LETTER OF CREDIT FACILITY     48                                   3.1.     Obligation to Issue Letters of Credit     48         3.2.     Transitional Provision     48         3.3.     Types and Amounts     48         3.4.     Conditions     49         3.5.     Procedure for Issuance of Letters of Credit     49               (A)   Issuance     49               (B)   Notice     50               (C)   No Amendment     50         3.6.     Letter of Credit Participation     50         3.7.     Reimbursement Obligation     50         3.8.     Letter of Credit Fees     51         3.9.     Borrower and Issuing Bank Reporting Requirements     52         3.10.     Indemnification; Exoneration     52               (A)   Indemnification     52               (B)   Risk Assumption     52               (C)   No Liability     53               (D)   Survival of Agreements and Obligations     53         3.11.     Market Disruption     53         3.12.     L/C Collateral Account     54                             ARTICLE IV: CHANGE IN CIRCUMSTANCES     54                                   4.1.     Yield Protection     54               (A)   Yield Protection     54               (B)   Non-U.S. Reserve Costs or Fees With Respect to Loans and Letters of Credit to Borrowers 55               4.2.     Changes in Capital Adequacy Regulations     56         4.3.     Availability of Types of Advances     56   iii --------------------------------------------------------------------------------                                   4.4.     Funding Indemnification     56         4.5.     Lender Statements; Survival of Indemnity     57                             ARTICLE V: CONDITIONS PRECEDENT     57                                   5.1.     Initial Advances and Letters of Credit     57         5.2.     Initial Advance to Each New Subsidiary Borrower     58         5.3.     Each Advance and Letter of Credit     59               (A)   No Defaults     59               (B)   Representations and Warranties     59               (C)   Maximum Amounts     59                             ARTICLE VI: REPRESENTATIONS AND WARRANTIES     60                                   6.1.     Organization; Corporate Powers; Dutch Banking Act     60         6.2.     Authority, Execution and Delivery; Loan Documents     60               (A)   Power and Authority     60               (B)   Execution and Delivery     60               (C)   Loan Documents     60         6.3.     No Conflict; Governmental Consents     61         6.4.     Financial Statements     61               (A)   Pro Forma Financials     61               (B)   Audited Financial Statements     61               (C)   Interim Financial Statements     62         6.5.     No Material Adverse Change     62         6.6.     Taxes     62               (A)   Tax Examinations     62               (B)   Payment of Taxes     62         6.7.     Litigation; Loss Contingencies and Violations     62         6.8.     Subsidiaries     63         6.9.     ERISA     63         6.10.     Accuracy of Information     64         6.11.     Securities Activities     64         6.12.     Material Agreements     64         6.13.     Compliance with Laws     65         6.14.     Assets and Properties     65         6.15.     Statutory Indebtedness Restrictions     65         6.16.     Insurance     65         6.17.     Environmental Matters     65               (A)   Environmental Representations     65               (B)   Materiality     66         6.18.     Representations and Warranties of each Subsidiary Borrower     66               (A)   Organization and Corporate Powers     66               (B)   Binding Effect     66               (C)   No Conflict; Government Consent     66               (D)   Filing     67               (E)   No Immunity     67               (F)   Application of Representations and Warranties     67         6.19.     Benefits     67   iv --------------------------------------------------------------------------------                                   6.20.     Solvency     68                             ARTICLE VII: COVENANTS     68                                   7.1.     Reporting     68               (A)   Financial Reporting     68               (B)   Notice of Default     69               (C)   Lawsuits     70               (D)   ERISA Notices     71               (E)   Other Indebtedness     71               (F)   Other Reports     72               (G)   Environmental Notices     72               (H)   Other Information     72         7.2.     Affirmative Covenants     72               (A)   Existence, Etc     72               (B)   Corporate Powers; Conduct of Business     72               (C)   Compliance with Laws, Etc     72               (D)   Payment of Taxes and Claims; Tax Consolidation     73               (E)   Insurance     73               (F)   Inspection of Property; Books and Records; Discussions     73               (G)   ERISA Compliance     73               (H)   Maintenance of Property     74               (I)   Environmental Compliance     74               (J)   Use of Proceeds     74               (K)   Subsidiary Guarantors     74               (L)   Foreign Employee Benefit Compliance     75         7.3.     Negative Covenants     75               (A)   Subsidiary Indebtedness     75               (B)   Sales of Assets     77               (C)   Liens     77               (D)   Investments     78               (E)   Contingent Obligations     78               (F)   Conduct of Business; Subsidiaries; Permitted Acquisitions     79               (G)   Transactions with Shareholders and Affiliates     80               (H)   Restriction on Fundamental Changes     80               (I)   Sales and Leasebacks     81               (J)   Margin Regulations     81               (K)   ERISA     81               (L)   Corporate Documents     81               (M)   Fiscal Year     81               (N)   Subsidiary Covenants     81               (O)   Hedging Obligations     82               (P)   Issuance of Disqualified Stock     82               (Q)   Non-Guarantor Subsidiaries     82               (R)   Intercompany Indebtedness     82               (S)   Restricted Payments     82               (T)   Changes to Note Purchase Agreement and Related Indebtedness     82         7.4.     Financial Covenants     83   v --------------------------------------------------------------------------------                                         (A)   Maximum Leverage Ratio     83               (B)   Minimum Fixed Charge Coverage Ratio     83               (C)   Minimum Consolidated Net Worth     84                             ARTICLE VIII: DEFAULTS     84                                   8.1.     Defaults     84               (A)   Failure to Make Payments When Due     84               (B)   Breach of Certain Covenants     84               (C)   Breach of Representation or Warranty     84               (D)   Other Defaults     85               (E)   Default as to Other Indebtedness     85               (F)   Involuntary Bankruptcy; Appointment of Receiver, Etc     85               (G)   Voluntary Bankruptcy; Appointment of Receiver, Etc     86               (H)   Judgments and Attachments     86               (I)   Dissolution     86               (J)   Loan Documents     86               (K)   Termination Event     86               (L)   Waiver of Minimum Funding Standard     86               (M)   Change of Control     86               (N)   Environmental Matters     87               (O)   Guarantor Revocation     87                             ARTICLE IX: ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES     87                                   9.1.     Termination of Commitments; Acceleration     87         9.2.     Amendments     88         9.3.     Preservation of Rights     89                             ARTICLE X: GUARANTY     89                                   10.1.     Guaranty     89         10.2.     Waivers; Subordination of Subrogation     90         10.3.     Guaranty Absolute     90         10.4.     Acceleration     91         10.5.     Marshaling; Reinstatement     92         10.6.     Termination Date     92                             ARTICLE XI: GENERAL PROVISIONS     92                                   11.1.     Survival of Representations     92         11.2.     Governmental Regulation     92         11.3.     Performance of Obligations     92         11.4.     Headings     93         11.5.     Entire Agreement     93         11.6.     Several Obligations; Benefits of this Agreement     93         11.7.     Expenses; Indemnification     93               (A)   Expenses     93               (B)   Indemnity     94               (C)   Waiver of Certain Claims; Settlement of Claims     95   vi --------------------------------------------------------------------------------                                         (D)   Survival of Agreements     95         11.8.     Numbers of Documents     95         11.9.     Accounting     95         11.10.     Severability of Provisions     96         11.11.     Nonliability of Lenders     96         11.12.     GOVERNING LAW     96         11.13.     CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL     96               (A)   EXCLUSIVE JURISDICTION     96               (B)   OTHER JURISDICTIONS     97               (C)   VENUE     97               (D)   SERVICE OF PROCESS     97               (E)   WAIVER OF JURY TRIAL     97               (F)   ADVICE OF COUNSEL     98         11.14.     Other Transactions     98         11.15.     Subordination of Intercompany Indebtedness     98         11.16.     Lenders Not Utilizing Plan Assets     99         11.17.     Collateral     99         11.18.     PMP     100         11.19.     USA PATRIOT Act     100                             ARTICLE XII: THE ADMINISTRATIVE AGENT     100                                   12.1.     Appointment; Nature of Relationship     100         12.2.     Powers     100         12.3.     General Immunity     100         12.4.     No Responsibility for Credit Extensions, Creditworthiness, Recitals, Etc     100         12.5.     Action on Instructions of Lenders     101         12.6.     Employment of Agents and Counsel     101         12.7.     Reliance on Documents; Counsel     101         12.8.     The Administrative Agent’s Reimbursement and Indemnification     101         12.9.     Rights as a Lender     102         12.10.     Lender Credit Decision     102         12.11.     Successor Administrative Agent     102         12.12.     Documentation Agents, Syndication Agent and Arrangers     103                             ARTICLE XIII: SETOFF; RATABLE PAYMENTS     103                                   13.1.     Setoff     103         13.2.     Ratable Payments     103         13.3.     Application of Payments     103         13.4.     Relations Among Lenders     104               (A)   No Action Without Consent     104               (B)   Not Partners; No Liability     104                             ARTICLE XIV: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS     105                                   14.1.     Successors and Assigns     105         14.2.     Participations     105   vii --------------------------------------------------------------------------------                                         (A)   Permitted Participants; Effect     105               (B)   Voting Rights     106               (C)   Benefit of Setoff     106         14.3.     Assignments     106               (A)   Permitted Assignments     106               (B)   Effect; Effective Date     107               (C)   The Register     107               (D)   Designated Lender     108         14.4.     Confidentiality     109         14.5.     Dissemination of Information     109                             ARTICLE XV: NOTICES     109                                   15.1.     Giving Notice     109         15.2.     Change of Address     110                             ARTICLE XVI: COUNTERPARTS     110   viii --------------------------------------------------------------------------------   EXHIBITS AND SCHEDULES           Exhibits           EXHIBIT A-1   —   Commitments (Definitions) EXHIBIT A-2       Issuing Banks EXHIBIT A-3       Mandatory Cost EXHIBIT B   —   Form of Borrowing/Election Notice (Section 2.2 and Section 2.7 and Section 2.9) EXHIBIT C   —   Form of Request for Letter of Credit (Section 3.4) EXHIBIT D   —   Form of Assignment and Acceptance Agreement (Sections 2.19 and 14.3) EXHIBIT E-1   —   Form of Company’s US Counsel’s Opinion (Section 5.1) EXHIBIT E-2   —   Form of Company’s Foreign Counsel’s Opinion (Section 5.1) EXHIBIT E-3   —   List of Closing Documents (Section 5.1) EXHIBIT E-4   —   Form of Counsel’s Opinion for Subsidiary Borrowers EXHIBIT F   —   Form of Officer’s Certificate (Sections 5.3 and 7.1(A)(iii)) EXHIBIT G   —   Form of Compliance Certificate (Sections 5.3 and 7.1(A)(iii)) EXHIBIT H   —   Form of Subsidiary Guaranty (Definitions) EXHIBIT I   —   Form of Revolving Loan Note EXHIBIT J   —   Form of Assumption Letter (Definitions) EXHIBIT K   —   Form of Designation Agreement (Section 14.3(D)) EXHIBIT L   —   Form of Commitment and Acceptance (Section 2.5(B)(i))           Schedules           Schedule 1.1.1   —   Permitted Existing Indebtedness (Definitions) Schedule 1.1.2   —   Permitted Existing Investments (Definitions) Schedule 1.1.3   —   Permitted Existing Liens (Definitions) Schedule 1.1.4   —   Permitted Existing Contingent Obligations (Definitions) Schedule 1.1.5   —   Material Subsidiaries and Foreign Subsidiaries that are not Excluded Foreign Subsidiaries Schedule 1.1.6   —   PMP (Definitions) Schedule 3.2   —   Transitional Letters of Credit (Section 3.2) Schedule 6.4   —   Pro Forma Financial Statements (Section 6.4(A)) Schedule 6.7   —   FTC Litigation (Section 6.7) Schedule 6.8   —   Subsidiaries (Section 6.8) Schedule 6.17   —   Environmental Matters (Section 6.17) Schedule 7.3(N)   —   Subsidiary Covenants (Section 7.3(N)) Schedule 7.3(S)   —   Permitted Restricted Payments (Section 7.3(S)) ix --------------------------------------------------------------------------------   SECOND AMENDED AND RESTATED CREDIT AGREEMENT           This Second Amended and Restated Credit Agreement dated as of October 13, 2006 is entered into among Chicago Bridge & Iron Company N.V., a corporation organized under the laws of The Kingdom of the Netherlands (the “Company”), and one or more Subsidiaries of the Company (whether now existing or hereafter formed collectively referred to herein as the “Subsidiary Borrowers”), the institutions from time to time parties hereto as Lenders, whether by execution of this Agreement or an Assignment Agreement pursuant to Section 14.3, and JPMorgan Chase Bank, National Association, in its capacity as contractual representative (the “Administrative Agent”) for itself and the other Lenders to amend and restate the Existing Credit Agreement and, from and after the Closing Date, the Existing Credit Agreement is hereby amended and restated in their entirety to read as set forth herein. The parties hereto agree as follows: ARTICLE I: DEFINITIONS           1.1. Certain Defined Terms. In addition to the terms defined above, the following terms used in this Agreement shall have the following meanings, applicable both to the singular and the plural forms of the terms defined as used in this Agreement:           “Accounting Change” is defined in Section 11.9.           “Acquisition” means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Company or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any Person, firm, corporation or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage of voting power) of the outstanding Equity Interests of another Person.           “Adjusted Aggregate Commitment” means, on any date of determination, the Aggregate Commitment minus an amount equal to three percent (3%) of the aggregate face amounts of all Letters of Credit denominated in Agreed Currencies other than Dollars.           “Adjusted Indebtedness” of a Person means, without duplication, such Person’s Indebtedness but excluding obligations with respect to (i) the undrawn portion of any Performance Letters of Credit, bank guarantees supporting obligations comparable to those supported by Performance Letters of Credit and all reimbursement agreements related thereto, (ii) liabilities of such Person or any of its Subsidiaries under any sale and leaseback transaction which do not create a liability on the consolidated balance sheet of such Person and (iii) payment or other obligations to Praxair or its Affiliates in respect of employee benefits under the Employee Benefits Disaffiliation Agreement dated January 1, 1997, between Chicago Bridge & Iron Company and Praxair, as amended from time to time. 1 --------------------------------------------------------------------------------             “Administrative Agent” means JPMorgan in its capacity as contractual representative for itself and the Lenders pursuant to Article XII hereof and any successor Administrative Agent appointed pursuant to Article XII hereof.           “Advance” means a borrowing hereunder consisting of the aggregate amount of the several Loans made by some or all of the Lenders to the applicable Borrower of the same Type and, in the case of Eurodollar Rate Advances for the same Interest Period.           “Affected Lender” is defined in Section 2.19.           “Affiliate” of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person is the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of greater than ten percent (10.0%) or more of any class of voting securities (or other voting interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of Capital Stock, by contract or otherwise.           “Aggregate Commitment” means the aggregate of the Commitments of all the Lenders, as may be adjusted from time to time pursuant to the terms hereof. The Aggregate Commitment as of the Closing Date is Eight Hundred Fifty Million Dollars ($850,000,000).           “Agreed Currencies” means (i) Dollars and (ii) any other Eligible Agreed Currency which the applicable Borrower requests the applicable Issuing Bank to include as an Agreed Currency hereunder and which is acceptable to such Issuing Bank and the Administrative Agent. For purposes of this definition, “Eligible Agreed Currency” means any currency other than Dollars (i) that is readily available, (ii) that is freely traded, (iii) in which deposits are customarily offered to banks in the London interbank market, (iv) which is convertible into Dollars in the international interbank market and (v) as to which an Equivalent Amount may be readily calculated.           “Agreement” means this Second Amended and Restated Credit Agreement, as it may be amended, restated or otherwise modified and in effect from time to time.           “Agreement Accounting Principles” means generally accepted accounting principles as in effect in the United States from time to time, applied in a manner consistent with that used in preparing the financial statements of the Company referred to in Section 6.4(B) hereof; provided, however, except as provided in Section 11.9, that with respect to the calculation of financial ratios and other financial tests required by this Agreement, “Agreement Accounting Principles” means generally accepted accounting principles as in effect in the United States as of the date of this Agreement, applied in a manner consistent with that used in preparing the financial statements of the Company referred to in Section 6.4(B) hereof.           “Alternate Base Rate” means, for any day, a fluctuating rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of (a) the Federal Funds Effective Rate for such day and (b) one-half of one percent (0.5%) per annum. 2 --------------------------------------------------------------------------------             “Applicable Commitment Fee Percentage” means, as at any date of determination, the rate per annum then applicable in the determination of the amount payable under Section 2.14(C)(i) hereof determined in accordance with the provisions of Section 2.14(D)(ii) hereof.           “Applicable Eurodollar Margin” means, as at any date of determination, the rate per annum then applicable to Eurodollar Rate Loans determined in accordance with the provisions of Section 2.14(D)(ii) hereof.           “Applicable Floating Rate Margins” means, as at any date of determination, the rate per annum then applicable to Floating Rate Loans, determined in accordance with the provisions of Section 2.14(D)(ii) hereof.           “Applicable L/C Fee Percentage” means, as at any date of determination, (x) with respect to Performance Letters of Credit, the rate per annum then applicable to Performance Letters of Credit, and (y) with respect to Financial Letters of Credit, the rate per annum then applicable to Financial Letters of Credit, in each case determined in accordance with the provisions of Section 2.14(D)(ii).           “Arrangers” means JPMSI and BAS, in their respective capacities as the arrangers for the credit transaction evidenced by this Agreement.           “Asset Sale” means, with respect to any Person, the sale, lease, conveyance, disposition or other transfer by such Person of any of its assets (including by way of a sale-leaseback transaction, and including the sale or other transfer of any of the Equity Interests of any Subsidiary of such Person, but not the Equity Interests of such Person) to any Person other than the Company or any of its wholly-owned Subsidiaries other than (i) the sale of inventory in the ordinary course of business and (ii) the sale or other disposition of any obsolete equipment disposed of in the ordinary course of business.           “Assignment Agreement” means an assignment and acceptance agreement entered into in connection with an assignment pursuant to Section 14.3 hereof in substantially the form of Exhibit D.           “Assumption Letter” means a letter of a Subsidiary of the Company addressed to the Lenders in substantially the form of Exhibit J hereto pursuant to which such Subsidiary agrees to become a “Subsidiary Borrower” and agrees to be bound by the terms and conditions hereof.           “Authorized Officer” means the Managing Director of the Company, or such other Person as authorized by the Managing Director, acting singly; provided, that the Administrative Agent shall have received a manually signed certificate of the Secretary of the Company as to the incumbency of, and bearing a manual specimen signature of, such duly authorized Person.           “Bank Undertaking” means an independent undertaking (within the meaning of, and complying with the requirements of, 12 C.F.R §§7.1016 or 7.1017) of an issuer thereof (including an Issuing Bank) as to which such issuer’s obligation to honor depends upon the 3 --------------------------------------------------------------------------------   presentation of specified documents and not upon nondocumentary conditions or any question or fact or law.           “BAS” means Banc of America Securities LLC, and its successors.           “Benefit Plan” means a defined benefit plan as defined in Section 3(35) of ERISA (other than a Multiemployer Plan or Foreign Pension Plan) in respect of which the Company or any other member of the Controlled Group is, or within the immediately preceding six (6) years was, an “employer” as defined in Section 3(5) of ERISA.           “Borrower” means, as applicable, any of the Company and the Subsidiary Borrowers, together with their permitted respective successors and assigns; and “Borrowers” shall mean, collectively, the Company and the Subsidiary Borrowers.           “Borrowing Date” means a date on which an Advance or Swing Line Loan is made hereunder.           “Borrowing/Election Notice” is defined in Section 2.7.           “Business Day” means (i) with respect to any borrowing, payment or rate selection of Loans bearing interest at the Eurodollar Rate, a day (other than a Saturday or Sunday) on which banks are open for business in Chicago, Illinois and New York, New York and on which dealings in Dollars and the other Agreed Currencies are carried on in the London interbank market (and, if the Letter of Credit which is the subject of such issuance or payment is denominated in euro, a day upon which such clearing system as is determined by the Administrative Agent to be suitable for clearing or settlement of the euro is open for business) and (ii) for all other purposes a day (other than a Saturday or Sunday) on which banks are open for business in Chicago, Illinois and New York, New York.           “Buying Lender” is defined in Section 2.5(B)(ii).           “Capital Stock” means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership, partnership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.           “Capitalized Lease” of a Person means any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.           “Capitalized Lease Obligations” of a Person means the amount of the obligations of such Person under Capitalized Leases which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.           “Cash Equivalents” means (i) marketable direct obligations issued or unconditionally guaranteed by the United States government and backed by the full faith and 4 --------------------------------------------------------------------------------   credit of the United States government; (ii) domestic and Eurodollar certificates of deposit and time deposits, bankers’ acceptances and floating rate certificates of deposit issued by any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, any foreign bank, or its branches or agencies, the long-term indebtedness of which institution at the time of acquisition is rated A- (or better) by S&P or A3 (or better) by Moody’s, and which certificates of deposit and time deposits are fully protected against currency fluctuations for any such deposits with a term of more than ninety (90) days; (iii) shares of money market, mutual or similar funds having assets in excess of $100,000,000 and the investments of which are limited to (x) investment grade securities (i.e., securities rated at least Baa by Moody’s or at least BBB by S&P) and (y) commercial paper of United States and foreign banks and bank holding companies and their subsidiaries and United States and foreign finance, commercial industrial or utility companies which, at the time of acquisition, are rated A-1 (or better) by S&P or P-1 (or better) by Moody’s (all such institutions being, “Qualified Institutions”); (iv) commercial paper of Qualified Institutions; provided that the maturities of such Cash Equivalents shall not exceed three hundred sixty-five (365) days from the date of acquisition thereof; and (v) auction rate securities (long-term, variable rate bonds tied to short-term interest rates) that are rated Aaa by Moody’s or AAA by S&P.           “Change” is defined in Section 4.2.           “Change of Control” means an event or series of events by which:      (i) any “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of twenty percent (20%) or more of the voting power of the then outstanding Capital Stock of the Company entitled to vote generally in the election of the directors of the Company; or      (ii) the majority of the board of directors of the Company fails to consist of Continuing Directors; or      (iii) except as expressly permitted under the terms of this Agreement, the Company or any Subsidiary Borrower consolidates with or merges into another Person or conveys, transfers or leases all or substantially all of its property to any Person, or any Person consolidates with or merges into the Company or any Subsidiary Borrower, in either event pursuant to a transaction in which the outstanding Capital Stock of the Company or such Subsidiary Borrower, as applicable, is reclassified or changed into or exchanged for cash, securities or other property; or      (iv) except as otherwise expressly permitted under the terms of this Agreement, the Company shall cease to own and control all of the economic and voting rights associated with all of the outstanding Capital Stock of each of the Subsidiary Guarantors or shall cease to have the power, directly or indirectly, to elect all of the members of the board of directors of each of the Subsidiary Guarantors. 5 --------------------------------------------------------------------------------             “Closing Date” means October 13, 2006.           “Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.           “Commission” means the Securities and Exchange Commission of the United States of America and any Person succeeding to the functions thereof.           “Commitment” means, for each Lender, the obligation of such Lender to make Revolving Loans and to purchase participations in Letters of Credit and to participate in Swing Line Loans not exceeding the amount set forth on Exhibit A-1 to this Agreement opposite its name thereon under the heading “Commitment” or in the Assignment Agreement by which it became a Lender, as such amount may be modified from time to time pursuant to the terms of this Agreement or to give effect to any applicable Assignment Agreement.           “Commitment Increase Notice” is defined in Section 2.5(B)(i).           “Company” means Chicago Bridge & Iron Company N.V., a corporation organized under the laws of The Kingdom of the Netherlands.           “Computation Date” is defined in Section 2.4(B).           “Consolidated Fixed Charges” means, for any period, the sum of (i) Consolidated Long-Term Lease Rentals for such period and (ii) consolidated interest expense of the Company and its Subsidiaries (including capitalized interest and the interest component of Capitalized Leases) for such period.           “Consolidated Long-Term Lease Rentals” means, for any period, the sum of the minimum amount of rental and other obligations of the Company and its Subsidiaries required to be paid during such period under all leases of real or personal property (other than Capital Leases) having a term (including any required renewals or extensions or any renewals or extensions at the option of the lessor or lessee) of one year or more after the commencement of the initial term, determined on a consolidated basis in accordance with GAAP.           “Consolidated Net Income” means, for any period, the net income (or deficit) of the Company and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, but excluding in any event (a) any extraordinary gain or loss (net of any tax effect) and (b) net earnings of any Person (other than a Subsidiary) in which the Company or any Subsidiary has an ownership interest unless such net earnings shall have actually been received by the Company or such Subsidiary in the form of cash distributions.           “Consolidated Net Income Available for Fixed Charges” means, for any period, Consolidated Net Income plus, to the extent deducted in determining such Consolidated Net Income, (i) provisions for income taxes and (ii) Consolidated Fixed Charges.           “Consolidated Net Worth” means, at a particular date, all amounts which would be included under shareholders’ or members’ equity on the consolidated balance sheet for the Company and its consolidated Subsidiaries plus any preferred stock of the Company to the extent 6 --------------------------------------------------------------------------------   that it has not been redeemed for indebtedness, as determined in accordance with Agreement Accounting Principles.           “Contaminant” means any waste, pollutant, hazardous substance, toxic substance, hazardous waste, special waste, petroleum or petroleum-derived substance or waste, asbestos, polychlorinated biphenyls (“PCBs”), or any constituent of any such substance or waste, and includes but is not limited to these terms as defined in Environmental, Health or Safety Requirements of Law.           “Contingent Obligation”, as applied to any Person, means any Contractual Obligation, contingent or otherwise, of that Person with respect to any Indebtedness of another or other obligation or liability of another, including, without limitation, any such Indebtedness, obligation or liability of another directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable, including Contractual Obligations (contingent or otherwise) arising through any agreement to purchase, repurchase, or otherwise acquire such Indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, or other financial condition, or to make payment other than for value received. The amount of any Contingent Obligation shall be equal to the present value of the portion of the obligation so guaranteed or otherwise supported, in the case of known recurring obligations, and the maximum reasonably anticipated liability in respect of the portion of the obligation so guaranteed or otherwise supported assuming such Person is required to perform thereunder, in all other cases.           “Continuing Director” means, with respect to any person as of any date of determination, any member of the board of directors of such Person who (a) was a member of such board of directors on the Closing Date, or (b) was nominated for election or elected to such board of directors with the approval of the required majority of the Continuing Directors who were members of such board at the time of such nomination or election; provided that an individual who is so elected or nominated in connection with a merger, consolidation, acquisition or similar transaction shall not be a Continuing Director unless such individual was a Continuing Director prior thereto.           “Contractual Obligation”, as applied to any Person, means any provision of any equity or debt securities issued by that Person or any indenture, mortgage, deed of trust, security agreement, pledge agreement, guaranty, contract, undertaking, agreement or instrument (including, without limitation, the Note Purchase Agreement), in any case in writing, to which that Person is a party or by which it or any of its properties is bound, or to which it or any of its properties is subject.           “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto. 7 --------------------------------------------------------------------------------             “Controlled Group” means the group consisting of (i) any corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as the Company; (ii) a partnership or other trade or business (whether or not incorporated) which is under common control (within the meaning of Section 414(c) of the Code) with the Company; and (iii) a member of the same affiliated service group (within the meaning of Section 414(m) of the Code) as the Company, any corporation described in clause (i) above or any partnership or trade or business described in clause (ii) above.           “Country Risk Event” means:      (i) any law, action or failure to act by any Governmental Authority in the applicable Borrower’s or Letter of Credit beneficiary’s country which has the effect of:      (a) changing the Obligations as originally agreed,      (b) changing the ownership or control by the applicable Borrower or Letter of Credit beneficiary of its business, or      (c) preventing or restricting the conversion into or transfer of the applicable Agreed Currency;      (ii) force majeure; and      (iii) any similar event which, in relation to (i), (ii) and (iii), directly or indirectly, prevents or restricts the payment or transfer of any amounts owing under the Obligations in the applicable Agreed Currency into an account designated by the Administrative Agent or applicable Issuing Bank and freely available to the Administrative Agent or such Issuing Bank.           “Customary Permitted Liens” means:      (i) Liens (other than Environmental Liens and Liens in favor of the IRS or the PBGC) with respect to the payment of taxes, assessments or governmental charges in all cases which are not yet due or (if foreclosure, distraint, sale or other similar proceedings shall not have been commenced or any such proceeding after being commenced is stayed) which are being contested in good faith by appropriate proceedings properly instituted and diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with Agreement Accounting Principles;      (ii) statutory Liens of landlords and Liens of suppliers, mechanics, carriers, materialmen, warehousemen, service providers or workmen and other similar Liens imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings properly instituted and diligently conducted and with respect to which adequate reserves or 8 --------------------------------------------------------------------------------   other appropriate provisions are being maintained in accordance with Agreement Accounting Principles;      (iii) Liens (other than Environmental Liens and Liens in favor of the IRS or the PBGC) incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other types of social security benefits or to secure the performance of bids, tenders, sales, contracts (other than for the repayment of borrowed money), surety, appeal and performance bonds; provided that (A) all such Liens do not in the aggregate materially detract from the value of the Company’s or its Subsidiary’s assets or property taken as a whole or materially impair the use thereof in the operation of the businesses taken as a whole, and (B) all Liens securing bonds to stay judgments or in connection with appeals do not secure at any time an aggregate amount exceeding $5,000,000;      (iv) Liens arising with respect to zoning restrictions, easements, encroachments, licenses, reservations, covenants, rights-of-way, utility easements, building restrictions and other similar charges, restrictions or encumbrances on the use of real property which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Company or any of its respective Subsidiaries;      (v) Liens of attachment or judgment with respect to judgments, writs or warrants of attachment, or similar process against the Company or any of its Subsidiaries which do not constitute a Default under Section 8.1(H) hereof; and      (vi) any interest or title of the lessor in the property subject to any operating lease entered into by the Company or any of its Subsidiaries in the ordinary course of business.           “Default” means an event described in Article VIII hereof.           “Designated Lender” means, with respect to each Designating Lender, each Eligible Designee designated by such Designating Lender pursuant to Section 14.3(D).           “Designating Lender” means, with respect to each Designated Lender, the Lender that designated such Designated Lender pursuant to Section 14.3(D).           “Designation Agreement” is defined in Section 14.3(D).           “Disclosed Litigation” is defined in Section 6.7.           “Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is ninety-one (91) days after the Termination Date. 9 --------------------------------------------------------------------------------             “DOL” means the United States Department of Labor and any Person succeeding to the functions thereof.           “Dollar” and “$” means dollars in the lawful currency of the United States of America.           “Dollar Amount” of any currency at any date shall mean (i) the amount of such currency if such currency is Dollars or (ii) the equivalent in such currency of such amount of Dollars if such currency is any currency other than Dollars, calculated on the basis of the arithmetical mean of the buy and sell spot rates of exchange of the Administrative Agent for such currency on the London market at 11:00 a.m., London time, on or as of the most recent Computation Date provided for in Section 2.4(B).           “Domestic Subsidiary” means a Subsidiary of the Company organized under the laws of a jurisdiction located in the United States of America and substantially all of the operations of which are conducted within the United States.           “Dutch Banking Act” means means the Dutch Act on the Supervision of Credit Institutions 1992 (Wet toezicht kredietwezen 1992), as amended or restated from time to time.           “Dutch Exemption Regulation” means the Exemption Regulation dated 26 June 2002 of the Ministry of Finance of the Netherlands, as promulgated in the Dutch Banking Act.           “EBIT” means, for any period, on a consolidated basis for the Company and its Subsidiaries, the sum of the amounts for such period, without duplication, calculated in each case in accordance with Agreement Accounting Principles, of (i) Net Income, plus (ii) Interest Expense to the extent deducted in computing Net Income, plus (iii) charges against income for foreign, federal, state and local taxes to the extent deducted in computing Net Income, plus (iv) any other non-recurring non-cash charges (excluding any such non-cash charges to the extent any such non-cash charge becomes, or is expected to become, a cash charge in a later period) to the extent deducted in computing Net Income, plus (v) extraordinary losses incurred other than in the ordinary course of business to the extent deducted in computing Net Income, minus (vi) any non-recurring non-cash credits to the extent added in computing Net Income, minus (vii) extraordinary gains realized other than in the ordinary course of business to the extent added in computing Net Income.           “EBITDA” means, for any period, on a consolidated basis for the Company and its Subsidiaries, the sum of the amounts for such period, without duplication, calculated in each case in accordance with Agreement Accounting Principles, of (i) EBIT plus (ii) depreciation expense to the extent deducted in computing Net Income, plus (iii) amortization expense, including, without limitation, amortization of goodwill and other intangible assets to the extent deducted in computing Net Income.           “Effective Commitment Amount” is defined in Section 2.5(B)(i).           “Eligible Assignee” means a Person that is primarily engaged in the business of commercial banking and that (A) is an affiliate of a Lender or (B) shall have senior unsecured 10 --------------------------------------------------------------------------------   long-term debt ratings which are rated at least BBB (or the equivalent) as publicly announced by S&P or Fitch Investors Services, Inc. or Baa2 (or the equivalent) as publicly announced by Moody’s, or shall otherwise be reasonably acceptable to the Administrative Agent and the Issuing Banks.           “Eligible Cash Equivalents” means Cash Equivalents consisting of (i) marketable direct obligations issued or unconditionally guaranteed by the United States government and backed by the full faith and credit of the United States government, (ii) domestic and Eurodollar certificates of deposit and time deposits, bankers’ acceptances and floating rate certificates of deposit issued by any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, any foreign bank, or its branches or agencies, the long-term indebtedness of which institution at the time of acquisition is rated A- (or better) by S&P or A3 (or better) by Moody’s, and which certificates of deposit and time deposits are fully protected against currency fluctuations for any such deposits with a term of more than ninety (90) days, (iii) commercial paper rated at least A-1 by Standard & Poor’s Ratings Services or P-1 by Moody’s Investors Service, Inc. and maturing not more than thirty (30) days from the date of issuance or (iv) debt securities other than commercial paper, the issuer of which shall have a senior unsecured long-term debt rating from Standard & Poor’s Ratings Services of at least A and which debt securities shall mature not more than thirty (30) days from the date of issuance.           “Eligible Designee” means a special purpose corporation, partnership, limited partnership or limited liability company that is administered by a Lender or an Affiliate of a Lender and (i) is organized under the laws of the United States of America or any state thereof, (ii) is engaged primarily in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business, (iii) issues (or the parent of which issues) commercial paper rated at least A-1 or the equivalent thereof by S&P or the equivalent thereof by Moody’s and (iv) to the extent required under the Dutch Banking Act and the Dutch Exemption Regulation, is a PMP.           “EMU” means Economic and Monetary Union as contemplated in the Treaty on European Union.           “Environmental, Health or Safety Requirements of Law” means all Requirements of Law derived from or relating to foreign, federal, state and local laws or regulations relating to or addressing pollution or protection of the environment, or protection of worker health or safety, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., the Occupational Safety and Health Act of 1970, 29 U.S.C. § 651 et seq., and the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq., in each case including any amendments thereto, any successor statutes, and any regulations or guidance promulgated thereunder, and any state or local equivalent thereof.           “Environmental Lien” means a lien in favor of any Governmental Authority for (a) any liability under Environmental, Health or Safety Requirements of Law, or (b) damages arising from, or costs incurred by such Governmental Authority in response to, a Release or threatened Release of a Contaminant into the environment. 11 --------------------------------------------------------------------------------             “Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). Equity Interests will not include any Incentive Arrangements or obligations or payments thereunder.           “Equivalent Amount” of any currency with respect to any amount of Dollars at any date shall mean the equivalent in such currency of such amount of Dollars, calculated on the basis of the arithmetical mean of the buy and sell spot rates of exchange of the Administrative Agent for such other currency at 11:00 a.m., London time, on the date on or as of which such amount is to be determined.           “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time including (unless the context otherwise requires) any rules or regulations promulgated thereunder.           “Escalating L/C” means each Letter of Credit which provides for an increasing face amount from time to time.           “euro” and/or “EUR” means the euro referred to in Council Regulation (EC) No. 1103/97 dated June 17, 1997 passed by the Council of the European Union, or, if different, the then lawful currency of the member states of the European Union that participate in the third stage of EMU.           “Eurodollar Base Rate” means, with respect to a Eurodollar Rate Advance for the relevant Interest Period, the applicable British Bankers’ Association Interest Settlement Rate for deposits in Dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, (i) if Reuters Screen FRBD is not available to the Administrative Agent for any reason, the applicable Eurodollar Reference Rate for the relevant Interest Period shall instead be the applicable British Bankers’ Association Interest Settlement Rate for deposits in Dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, and (ii) if no such British Bankers’ Association Interest Settlement Rate is available, the applicable Eurodollar Reference Rate for the relevant Interest Period shall instead be the rate determined by the Administrative Agent to be the rate at which JPMorgan offers to place deposits in Dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of JPMorgan’s relevant Eurodollar Loan and having a maturity equal to such Interest Period.           “Eurodollar Rate” means, with respect to a Eurodollar Rate Advance for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (ii) the then Applicable Eurodollar Margin, changing as and when the Applicable Eurodollar Margin changes, plus (iii) for Eurodollar Rate Advances by a Lender from its office or branch in the United Kingdom, the Mandatory Cost, plus (iv) any other mandatory costs imposed by any governmental or regulatory authority. 12 --------------------------------------------------------------------------------             “Eurodollar Rate Advance” means an Advance which bears interest at a Eurodollar Rate.           “Eurodollar Rate Loan” means a Loan made on a fully syndicated basis pursuant to Section 2.1, which bears interest at a Eurodollar Rate.           “Excluded Foreign Subsidiary” means any Foreign Subsidiary other than those listed as Foreign Subsidiaries on Schedule 1.1.5.           “Executive Equity Repurchase Payment” means the amount of the payment, if any, up to but not exceeding $36,500,000 made by the Company to fulfill its contractual obligation to honor the exercise by a former executive of the Company of a put to the Company of common shares of the Company on or before January 30, 2007 at a per share price equal to the average of the high and low share price on the date the put exercise notice is received by the Company.           “Existing Credit Agreement” means that certain Amended and Restated Credit Agreement dated as of May 12, 2005 by and among the Company and certain of the Subsidiary Borrowers parties thereto, the lenders party thereto and JPMorgan as administrative agent.           “Facility Termination Date” shall mean the date on which all of the Termination Conditions have been satisfied.           “Federal Funds Effective Rate” means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion.           “Financial Credit Obligations” means the sum of the outstanding principal amount of all Loans and all Financial L/C Obligations.           “Financial Credit Sublimit” means, at any time, an amount equal to 50% of the Aggregate Commitment at such time.           “Financial L/C Obligations” means, without duplication, an amount equal to the sum of (i) the aggregate of the Dollar Amount then available for drawing under each of the Financial Letters of Credit (provided that, with respect to any Escalating L/C which is a Financial Letter of Credit, such available amount shall equal the maximum Dollar Amount (after giving effect to all possible increases) available to be drawn under such Escalating L/C), (ii) the Dollar Amount equal to the stated amount of all outstanding L/C Drafts corresponding to the Financial Letters of Credit, which L/C Drafts have been accepted by the applicable Issuing Bank, (iii) the aggregate outstanding Dollar Amount of all Reimbursement Obligations under Financial Letters of Credit at such time and (iv) the aggregate Dollar Amount equal to the maximum stated amount of all Financial Letters of Credit requested by the Borrowers but not yet issued or, in the 13 --------------------------------------------------------------------------------   case of an Escalating L/C which is a Financial Letter of Credit, the portion of such maximum stated amount not yet issued (unless the request for an unissued Financial Letter of Credit has been denied).           “Financial Letter of Credit” means any letter of credit or Bank Undertaking other than a Performance Letter of Credit.           “Financial Officer” means any of the chief financial officer, principal accounting officer, treasurer or controller of the Company, acting singly.           “Fixed Charge Coverage Ratio” is defined in Section 7.4(B).           “Floating Rate” means, for any day for any Loan, a rate per annum equal to the Alternate Base Rate for such day, changing when and as the Alternate Base Rate changes, plus the then Applicable Floating Rate Margin.           “Floating Rate Advance” means an Advance which bears interest at the Floating Rate.           “Floating Rate Loan” means a Loan, or portion thereof, which bears interest at the Floating Rate.           “Foreign Employee Benefit Plan” means any employee benefit plan as defined in Section 3(3) of ERISA which is maintained or contributed to for the benefit of the employees of the Company, any of its respective Subsidiaries or any members of its Controlled Group and is not covered by ERISA pursuant to ERISA Section 4(b)(4).           “Foreign Pension Plan” means any employee benefit plan as described in Section 3(3) of ERISA for which the Company or any member of its Controlled Group is a sponsor or administrator and which (i) is maintained or contributed to for the benefit of employees of the Company, any of its respective Subsidiaries or any member of its Controlled Group, (ii) is not covered by ERISA pursuant to Section 4(b)(4) of ERISA, and (iii) under applicable local law, is required to be funded through a trust or other funding vehicle.           “Foreign Subsidiary” means a Subsidiary of the Company which is not a Domestic Subsidiary.           “Funded Issuing Bank” means, at any date of determination, each Issuing Bank which has issued a Letter of Credit and such Letter of Credit is outstanding as of such date.           “Governmental Acts” is defined in Section 3.10(A).           “Governmental Authority” means any nation or government, any federal, state, local or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government, including any authority or other quasi-governmental entity established to perform any of such functions. 14 --------------------------------------------------------------------------------             “Gross Negligence” means recklessness, or actions taken or omitted with conscious indifference to or the complete disregard of consequences or rights of others affected. Gross Negligence does not mean the absence of ordinary care or diligence, or an inadvertent act or inadvertent failure to act. If the term “gross negligence” is used with respect to the Administrative Agent or any Lender or any indemnitee in any of the other Loan Documents, it shall have the meaning set forth herein.           “Guaranteed Obligations” is defined in Section 10.1.           “Guarantor(s)” shall mean the Company and the Subsidiary Guarantors.           “Guaranty” means each of (i) the guaranty by the Company and each Subsidiary Borrower of all of the Obligations of Company and the Subsidiary Borrowers pursuant to this Agreement and (ii) the Subsidiary Guaranty, in each case, as amended, restated, supplemented or otherwise modified from time to time.           “Hedging Arrangements” is defined in the definition of Hedging Obligations below.           “Hedging Obligations” of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, commodity prices, exchange rates or forward rates applicable to such party’s assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts and warrants or any similar derivative transactions (“Hedging Arrangements”), and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any of the foregoing.           “Incentive Arrangements” means any stock ownership, restricted stock, stock option, stock appreciation rights, “phantom” stock plans, employment agreements, non-competition agreements, subscription and stockholders agreements and other incentive and bonus plans and similar arrangements made in connection with the retention of executives, officers or employees of the Company and its Subsidiaries.           “Indebtedness” of a Person means, without duplication, such Person’s (a) obligations for borrowed money, (b) obligations representing the deferred purchase price of property or services (other than (i) accounts payable arising in the ordinary course of such Person’s business payable on terms customary in the trade, and (ii) earnouts or other similar forms of contingent purchase prices), (c) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from property or assets now or hereafter owned or acquired by such Person, (d) obligations which are evidenced by notes, acceptances or other instruments, (e) Capitalized Lease Obligations, (f) Contingent Obligations, (g) obligations with respect to any letters of credit, bank guarantees and similar instruments, including, without 15 --------------------------------------------------------------------------------   limitation, Financial Letters of Credit and Performance Letters of Credit, and all reimbursement agreements related thereto, (h) Off-Balance Sheet Liabilities and (j) Disqualified Stock.           “Indemnified Matters” is defined in Section 11.7(B).           “Indemnitees” is defined in Section 11.7(B).           “Interest Expense” means, for any period, the total gross interest expense of the Company and its consolidated Subsidiaries, whether paid or accrued, including, without duplication, the interest component of Capitalized Leases, commitment and letter of credit fees, the discount or implied interest component of Off-Balance Sheet Liabilities, capitalized interest expense, pay-in-kind interest expense, amortization of debt documents and net payments (if any) pursuant to Hedging Arrangements relating to interest rate protection, all as determined in conformity with Agreement Accounting Principles.           “Interest Period” means with respect to a Eurodollar Rate Loan, a period of one (1), two (2), three (3) months or six (6) months, commencing on a Business Day selected by the applicable Borrower on which a Eurodollar Rate Advance is made to such Borrower pursuant to this Agreement. Such Interest Period shall end on (but exclude) the day which corresponds numerically to such date one, two, three or six months thereafter; provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day.           “Investment” means, with respect to any Person, (i) any purchase or other acquisition by that Person of any Indebtedness, Equity Interests or other securities, or of a beneficial interest in any Indebtedness, Equity Interests or other securities, issued by any other Person, (ii) any purchase by that Person of all or substantially all of the assets of a business (whether of a division, branch, unit operation, or otherwise) conducted by another Person; (iii) any loan, advance (other than deposits with financial institutions available for withdrawal on demand, prepaid expenses, accounts receivable, advances to employees and similar items made or incurred in the ordinary course of business) or capital contribution actually invested by that Person to any other Person (but excluding any subsequent passive increases or accretions to the value of such initial capital contribution), including all Indebtedness to such Person arising from a sale of property by such Person other than in the ordinary course of its business; and (iv) any non-arms length transaction by such Person with another Person or any other transfer of assets by such Person in another Person, with the amount of such Investment being an amount equal to the net benefit derived by such other Person resulting from any such transactions.           “IRS” means the Internal Revenue Service and any Person succeeding to the functions thereof.           “Issuing Banks” means JPMorgan or any of its Affiliates or any of the other Lenders identified on Exhibit A-2 hereto (as amended or supplemented from time to time) in its 16 --------------------------------------------------------------------------------   separate capacity as an issuer of Letters of Credit pursuant to Section 3.1. The designation of any Lender as an Issuing Bank after the Closing Date shall be subject to the prior written consent of such designee and the Administrative Agent.           “JPMorgan” means JPMorgan Chase Bank, National Association, in its individual capacity, and its successors.           “JPMSI” means J.P. Morgan Securities Inc, and its successors.           “L/C Collateral Account” is defined in Section 3.12.           “L/C Documents” is defined in Section 3.4.           “L/C Draft” means a draft drawn on an Issuing Bank pursuant to a Letter of Credit.           “L/C Interest” is defined in Section 3.6.           “L/C Obligations” means, without duplication, an amount equal to the sum of (i) the aggregate of the Dollar Amount then available for drawing under each of the Letters of Credit (provided that, with respect to any Escalating L/C, such available amount shall equal the maximum Dollar Amount (after giving effect to all possible increases) available to be drawn under such Escalating L/C), (ii) the Dollar Amount equal to the stated amount of all outstanding L/C Drafts corresponding to the Letters of Credit, which L/C Drafts have been accepted by the applicable Issuing Bank, (iii) the aggregate outstanding Dollar Amount of all Reimbursement Obligations at such time and (iv) the aggregate Dollar Amount equal to the maximum stated amount of all Letters of Credit requested by the Borrowers but not yet issued or, in the case of an Escalating L/C, the portion of such maximum stated amount not yet issued (unless the request for an unissued Letter of Credit has been denied).           “Lenders” means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns.           “Lender Increase Notice” is defined in Section 2.5(B)(i).           “Lending Installation” means, with respect to a Lender or the Administrative Agent, any office, branch, subsidiary or affiliate of such Lender or the Administrative Agent listed on the signature pages of this Agreement for such Lender, or on the administrative information sheets provided to the Administrative Agent in connection herewith or otherwise selected by such Lender or the Administrative Agent pursuant to Section 2.16.           “Letter of Credit” means the Performance Letters of Credit and Financial Letters of Credit to be (a) issued by the Issuing Banks pursuant to Section 3.1 hereof or (b) deemed issued by the Issuing Banks pursuant to Section 3.2 hereof.           “Letter of Credit Agreement” means that certain Letter of Credit and Term Loan Agreement among the Company and certain of its Subsidiaries as co-obligors, Bank of America, N.A. (“BofA”), as administrative agent, BofA and JPMorgan, as L/C issuers, and the lenders 17 --------------------------------------------------------------------------------   parties thereto, providing for a supplemental term letter of credit facility in an aggregate principal amount not to exceed $400,000,000 and on terms and conditions satisfactory to the Administrative Agent.           “Leverage Ratio” is defined in Section 7.4(A).           “Lien” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement).           “Loan Account” is defined in Section 2.12(A).           “Loan Documents” means this Agreement, each Assumption Letter executed hereunder, the Subsidiary Guaranty and all other documents, instruments, notes and agreements executed in connection therewith or contemplated thereby, as the same may be amended, restated or otherwise modified and in effect from time to time.           “Loan Parties” means, at any time, the Company, each Subsidiary Borrower that is a party hereto as of such time and each of the Guarantors.           “Loan(s)” means, with respect to a Lender, such Lender’s portion of any Advance made pursuant to Section 2.1 hereof, and in the case of the Swing Line Bank, any Swing Line Loan made pursuant to Section 2.2 hereof, and collectively all Revolving Loans and Swing Line Loans, whether made or continued as or converted to Floating Rate Loans or Eurodollar Rate Loans.           “Mandatory Cost” is described in Exhibit A-3 hereto.           “Margin Stock” shall have the meaning ascribed to such term in Regulation U.           “Market Disruption” is defined in Section 2.11.           “Material Adverse Effect” means a material adverse effect upon (a) the business, condition (financial or otherwise), operations, performance, properties, results of operations or prospects of the Company, any other Borrower, or the Company and its Subsidiaries, taken as a whole, (b) the collective ability of the Company or any of its Subsidiaries to perform their respective obligations under the Loan Documents, or (c) the ability of the Lenders or the Administrative Agent to enforce the Obligations; it being understood and agreed that the occurrence of a Product Liability Event shall not constitute an event which causes a “Material Adverse Effect” unless and until the aggregate amount of, or attributable to, Product Liability Events (to the extent not covered by third-party insurance as to which the insured does not dispute coverage) exceeds, during any period of twelve (12) consecutive months, the greater of (x) $20,000,000 and (y) 20% of EBITDA (for the then most recently completed period of four fiscal quarters of the Company).           “Material Indebtedness” is defined in Section 8.1(E). 18 --------------------------------------------------------------------------------             “Material Subsidiary” means, without duplication, (a) each Borrowing Subsidiary and (b) any Subsidiary that directly or indirectly owns or Controls any Borrowing Subsidiary or other Material Subsidiary and (c) any other Subsidiary (i) the consolidated net revenues of which for the most recent fiscal year of the Company for which audited financial statements have been delivered pursuant to Section 7.01(A)(ii) were greater than five percent (5%) of the Company’s consolidated net revenues for such fiscal year or (ii) the consolidated tangible assets of which as of the end of such fiscal year were greater than five percent (5%) of the Company’s consolidated tangible assets as of such date; provided that, if at any time the aggregate amount of the consolidated net revenues or consolidated tangible assets of all Subsidiaries that are not Material Subsidiaries exceeds twenty percent (20%) of the Company’s consolidated net revenues for any such fiscal year or twenty percent (20%) of the Company’s consolidated tangible assets as of the end of any such fiscal year, the Company (or, in the event the Company has failed to do so within 10 days, the Administrative Agent) shall designate sufficient Subsidiaries as “Material Subsidiaries” to eliminate such excess, and such designated Subsidiaries shall for all purposes of this Agreement constitute Material Subsidiaries. For purposes of making the determinations required by this definition, revenues and assets of Foreign Subsidiaries shall be converted into Dollars at the rates used in preparing the consolidated balance sheet of the Company included in the applicable financial statements. The Material Subsidiaries on the Closing Date are identified in Schedule 1.1.5 hereto.           “Moody’s” means Moody’s Investors Service, Inc.           “Multiemployer Plan” means a “Multiemployer Plan” as defined in Section 4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years was, contributed to by either the Company or any member of the Controlled Group.           “Net Cash Proceeds” means, with respect to any Asset Sale or Sale and Leaseback Transaction by any Person, (a) cash or Cash Equivalents (freely convertible into Dollars) received by such Person or any Subsidiary of such Person from such Asset Sale or Sale and Leaseback Transaction (including cash received as consideration for the assumption or incurrence of liabilities incurred in connection with or in anticipation of such Asset Sale or Sale and Leaseback Transaction), after (i) provision for all income or other taxes measured by or resulting from such Asset Sale or Sale and Leaseback Transaction, (ii) payment of all brokerage commissions and other fees and expenses and commissions related to such Asset Sale or Sale and Leaseback Transaction, and (iii) all amounts used to repay Indebtedness (and any premium or penalty thereon) secured by a Lien on any asset disposed of in such Asset Sale or Sale and Leaseback Transaction or which is or may be required (by the express terms of the instrument governing such Indebtedness or by applicable law) to be repaid in connection with such Asset Sale or Sale and Leaseback Transaction (including payments made to obtain or avoid the need for the consent of any holder of such Indebtedness); and (b) cash or Cash Equivalents payments in respect of any other consideration received by such Person or any Subsidiary of such Person from such Asset Sale or Sale and Leaseback Transaction upon receipt of such cash payments by such Person or such Subsidiary.           “Net Income” means, for any period, the net earnings (or loss) after taxes of the Company and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with Agreement Accounting Principles. 19 --------------------------------------------------------------------------------             “New Money Credit Event” means, with respect to any Issuing Bank, any increase (directly or indirectly) in such Issuing Bank’s exposure (whether by way of additional credit or banking facilities or otherwise, including as part of a restructuring) to the applicable Borrower, any Governmental Authority in such Borrower’s or any applicable Letter of Credit beneficiary’s country occurring by reason of (i) any law, action or requirement of any Governmental Authority in such Borrower’s or such Letter of Credit beneficiary’s country, or (ii) any request in respect of external indebtedness of borrowers in such Borrowers or such Letter of Credit beneficiary’s country applicable to banks generally which conduct business with such borrowers, or (iii) any agreement in relation to clause (i) or (ii), in each case to the extent calculated by reference to the Obligations outstanding prior to such increase.           “Note Purchase Agreement” means that certain Note Purchase Agreement dated as of July 1, 2001 among the Company and the purchasers parties thereto.           “Notice of Assignment” is defined in Section 14.3(B).           “Obligations” means all Loans, L/C Obligations, advances, debts, liabilities, obligations, covenants and duties owing, by the Borrowers or any of their Subsidiaries to the Administrative Agent, any Lender, the Swing Line Bank, the Arrangers, any Affiliate of the Administrative Agent or any Lender, any Issuing Bank, any Indemnitee, of any kind or nature, present or future, arising under this Agreement, the L/C Documents or any other Loan Document, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, foreign exchange risk, guaranty, indemnification, or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term includes, without limitation, all interest, charges, expenses, fees, attorneys’ fees and disbursements, paralegals’ fees (in each case whether or not allowed), and any other sum chargeable to the Company or any of its Subsidiaries under this Agreement or any other Loan Document.           “Off-Balance Sheet Liabilities” of a Person means (a) any repurchase obligation or liability of such Person or any of its Subsidiaries with respect to Receivables sold by such Person or any of its Subsidiaries, (b) any liability of such Person or any of its Subsidiaries under any sale and leaseback transactions which do not create a liability on the consolidated balance sheet of such Person, (c) any liability of such Person or any of its Subsidiaries under any financing lease or so-called “synthetic lease” or “tax ownership operating lease” transaction, or (d) any obligations of such Person or any of its Subsidiaries arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheets of such Person and its Subsidiaries.           “Other Taxes” is defined in Section 2.14(E)(ii).           “Participants” is defined in Section 14.2(A).           “Payment Date” means the last Business Day of each quarter, the Termination Date and the Facility Termination Date. 20 --------------------------------------------------------------------------------             “PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.           “Performance Letter of Credit” means a letter of credit or Bank Undertaking issued to secure ordinary course performance obligations of the Company or a Subsidiary in connection with active construction projects (including projects about to be commenced) or bids for prospective construction projects.           “Permitted Acquisition” is defined in Section 7.3(F).           “Permitted Existing Contingent Obligations” means the Contingent Obligations of the Company and its Subsidiaries identified as such on Schedule 1.1.4 to this Agreement.           “Permitted Existing Indebtedness” means the Indebtedness of the Company and its Subsidiaries identified as such on Schedule 1.1.1 to this Agreement.           “Permitted Existing Investments” means the Investments of the Company and its Subsidiaries identified as such on Schedule 1.1.2 to this Agreement.           “Permitted Existing Liens” means the Liens on assets of the Company and its Subsidiaries identified as such on Schedule 1.1.3 to this Agreement.           “Permitted Sale and Leaseback Transactions” means (a) (i) any Sale and Leaseback Transaction of the Company’s administrative headquarters facility in The Woodlands, Texas and (ii) any Sale and Leaseback Transaction of all or any portion of the Company’s other property, in each case on terms acceptable to the Administrative Agent and only to the extent that the aggregate amount of Net Cash Proceeds from all such Permitted Sale and Leaseback Transactions is less than or equal to $50,000,000 and (b) any Sale and Leaseback Transaction of the Company’s facility in Plainfield, Illinois.           “Person” means any individual, corporation, firm, enterprise, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company or other entity of any kind, or any government or political subdivision or any agency, department or instrumentality thereof.           “Plan” means an employee benefit plan defined in Section 3(3) of ERISA, other than a Multiemployer Plan, in respect of which the Company or any member of the Controlled Group is, or within the immediately preceding six (6) years was, an “employer” as defined in Section 3(5) of ERISA.           “PMP” shall have the meaning set forth in Schedule 1.1.6.           “Prime Rate” means the prime rate of interest announced by JPMorgan from time to time (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes.           “Proposed New Lender” is defined in Section 2.5(B)(i). 21 --------------------------------------------------------------------------------             “Pro Rata Share” means, with respect to any Lender, the percentage obtained by dividing (A) the Lender’s Commitment at such time (in each case, as adjusted from time to time in accordance with the provisions of this Agreement) by (B) the Aggregate Commitment at such time; provided, however, if the Commitments are terminated pursuant to the terms of this Agreement, then “Pro Rata Share” means the percentage obtained by dividing (x) the sum of (A) such Lender’s Revolving Loans, plus (B) such Lender’s share of the obligations to purchase participations in Swing Line Loans and Letters of Credit, by (y) the sum of (A) the aggregate outstanding amount of Revolving Loans, plus (B) the aggregate outstanding amount of all Swing Line Loans and the Dollar Amount of all Letters of Credit.           “Product Liability Event” means, solely in connection with asbestos-related claims and litigation, (i) the entry of one or more final judgments or orders against the Company or any Subsidiary, or (ii) the Company or any Subsidiary (a) enters into settlements for the payment of money or (b) pays any legal expenses associated with such judgment, orders or settlements and any and all other aspects of any claims and litigation associated therewith, and with respect to such judgments or orders, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 30 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect.           “Purchasers” is defined in Section 14.3(A)(i).           “Rate Option” means the Eurodollar Rate or the Floating Rate, as applicable.           “Receivable(s)” means and includes all of the Company’s and its consolidated Subsidiaries’ presently existing and hereafter arising or acquired accounts, accounts receivable, and all present and future rights of the Company or its Subsidiaries, as applicable, to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether or not they have been earned by performance, and all rights in any merchandise or goods which any of the same may represent, and all rights, title, security and guaranties with respect to each of the foregoing, including, without limitation, any right of stoppage in transit.           “Register” is defined in Section 14.3(C).           “Regulation T” means Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by and to brokers and dealers of securities for the purpose of purchasing or carrying margin stock (as defined therein).           “Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks, non-banks and non-broker lenders for the purpose of purchasing or carrying Margin Stock applicable to member banks of the Federal Reserve System.           “Regulation X” means Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official 22 --------------------------------------------------------------------------------   interpretation of said Board of Governors relating to the extension of credit by foreign lenders for the purpose of purchasing or carrying margin stock (as defined therein).           “Reimbursement Obligation” is defined in Section 3.7.           “Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including the movement of Contaminants through or in the air, soil, surface water or groundwater.           “Replacement Lender” is defined in Section 2.19.           “Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation or otherwise waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days after such event occurs, provided, however, that a failure to meet the minimum funding standards of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.           “Required Lenders” means Lenders whose Pro Rata Shares, in the aggregate, are greater than fifty percent (50%); provided, however, that, if any of the Lenders shall have failed to fund its Pro Rata Share of (i) any Revolving Loan requested by the applicable Borrower, (ii) any Revolving Loan required to be made in connection with reimbursement for any L/C Obligations, (iii) any participation in any Swing Line Loan as requested by the Administrative Agent, which such Lenders are obligated to fund under the terms of this Agreement and any such failure has not been cured, then for so long as such failure continues, “Required Lenders” means Lenders (excluding all Lenders whose failure to fund their respective Pro Rata Shares of such Revolving Loans or any participation in Swing Line Loans has not been so cured) whose Pro Rata Shares represent greater than fifty percent (50%) of the aggregate Pro Rata Shares of such Lenders; provided further, however, that, if the Commitments have been terminated pursuant to the terms of this Agreement, “Required Lenders” means Lenders (without regard to the Lenders’ performance of their respective obligations hereunder) whose aggregate ratable shares (stated as a percentage) of the aggregate outstanding principal balance of the sum of all Loans and L/C Obligations are greater than fifty percent (50%).           “Requirements of Law” means, as to any Person, the charter and by-laws or other organizational or governing documents of such Person, and any law, rule or regulation, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject including, without limitation, the Securities Act of 1933, the Securities Exchange Act of 1934, Regulations T, U and X, ERISA, the Fair Labor Standards Act, the Worker Adjustment and Retraining Notification Act, Americans with Disabilities Act of 1990, and any certificate of occupancy, zoning ordinance, building, environmental or land use requirement or permit or environmental, labor, employment, occupational safety or health law, rule or regulation, including Environmental, Health or Safety Requirements of Law. 23 --------------------------------------------------------------------------------             “Reserve Requirement” means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurodollar liabilities.           “Restricted Payment” means (i) any dividend or other distribution, direct or indirect, on account of any Equity Interests of the Company or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely in such Person’s Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to purchase such Capital Stock, (ii) any redemption, retirement, purchase or other acquisition for value, direct or indirect, of any Equity Interests of the Company or any of its Subsidiaries now or hereafter outstanding, other than in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary of the Company) of other Equity Interests of the Company or any of its Subsidiaries (other than Disqualified Stock), (iii) any payment or prepayment of principal of, or interest (whether in cash or as payment-in-kind), premium, if any, fees or other charges with respect to, any Indebtedness subordinated to the Obligations, or any redemption, purchase, retirement, defeasance, prepayment or other acquisition for value, direct or indirect, of any Indebtedness other than (a) the Obligations and (b) any scheduled payments of principal of or interest with respect to Company’s Indebtedness issued pursuant to the Note Purchase Agreement or the Letter of Credit Agreement, (iv) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any Indebtedness (other than the Obligations) or any Equity Interests of the Company or any of its Subsidiaries, or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission and (v) any payment in respect of a purchase price adjustment, earn-out or other similar form of contingent purchase price.           “Revolving Credit Availability” means, at any particular time, the amount by which the Adjusted Aggregate Commitment at such time exceeds the Revolving Credit Obligations outstanding at such time.           “Revolving Credit Obligations” means, at any particular time, the sum of (i) the outstanding principal amount of the Revolving Loans at such time, plus (ii) the outstanding principal amount of the Swing Line Loans at such time, plus (iii) the outstanding L/C Obligations at such time.           “Revolving Loan” is defined in Section 2.1.           “Risk-Based Capital Guidelines” is defined in Section 4.2.           “S&P” means Standard & Poor’s Ratings Group, a division of McGraw-Hill, Inc.           “Sale and Leaseback Transaction” means any lease, whether an operating lease or a Capitalized Lease, of any property (whether real or personal or mixed), (i) which the Company or one of its Subsidiaries sold or transferred or is to sell or transfer to any other Person, or (ii) which the Company or one of its Subsidiaries intends to use for substantially the same purposes as any other property which has been or is to be sold or transferred by the Company or one of its Subsidiaries to any other Person in connection with such lease.           “Securities Act” means the Securities Act of 1933, as amended from time to time. 24 --------------------------------------------------------------------------------             “Selling Lender” is defined in Section 2.5(B)(ii).           “Single Employer Plan” means a Plan maintained by the Company or any member of the Controlled Group for employees of the Company or any member of the Controlled Group.           “Solvent” means, when used with respect to any Person, that at the time of determination:      (i) the fair value of its assets (both at fair valuation and at present fair saleable value) is equal to or in excess of the total amount of its liabilities, including, without limitation, contingent liabilities; and      (ii) it is then able and expects to be able to pay its debts as they mature; and      (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. With respect to contingent liabilities (such as litigation, guarantees and pension plan liabilities), such liabilities shall be computed at the amount which, in light of all the facts and circumstances existing at the time, represent the amount which can be reasonably be expected to become an actual or matured liability.           “Subsidiary” means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership, limited liability company or joint venture if more than 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership, limited liability company or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Company           “Subsidiary Borrower” means any Subsidiaries of the Company duly designated by the Company pursuant to Section 2.20 to request Advances hereunder, which Subsidiary shall have delivered to the Administrative Agent an Assumption Letter in accordance with Section 2.20 and such other documents as may be required pursuant to this Agreement, in each case together with its respective successors and assigns, including a debtor-in-possession on behalf of such Subsidiary Borrower.           “Subsidiary Guarantor(s)” means (a) each Subsidiary Borrower, (b) all of the Company’s Material Subsidiaries (other than any Excluded Foreign Subsidiary); (c) all New Subsidiaries which are Material Subsidiaries and which have or are required to have satisfied the provisions of Section 7.2(K)(i); (d) all of the Company’s Subsidiaries which become Material Subsidiaries and which have satisfied or are required to have satisfied the provisions of Section 7.2(K)(ii); and (e) all other Subsidiaries which become Subsidiary Guarantors in satisfaction of 25 --------------------------------------------------------------------------------   the provisions of Section 7.2(K)(iii) or Section 7.3(Q), in each case with respect to clauses (a) through (e) above, and together with their respective successors and assigns.           “Subsidiary Guaranty” means that certain Subsidiary Guaranty, dated as of August 22, 2003 executed by each of Subsidiary Guarantors as of such date (and any and all supplements thereto executed from time to time by each additional Subsidiary Guarantor) in favor of the Administrative Agent in substantially the form of Exhibit H attached hereto, as the same may be amended, restated, supplemented or otherwise modified from time to time.           “Substantial Portion” means, with respect to the assets of the Company and its Subsidiaries, assets which (i) represent more than 10% of the consolidated assets of the Company and its Subsidiaries as would be shown in the consolidated financial statements of the Company and its Subsidiaries as at the beginning of the twelve-month period ending with the month in which such determination is made, or (ii) are responsible for more than 10% of the consolidated net sales or of the consolidated net income of the Company and its Subsidiaries as reflected in the financial statements referred to in clause (i) above.           “Swing Line Bank” means JPMorgan or any other Lender as a successor Swing Line Bank pursuant to the terms hereof.           “Swing Line Commitment” means the commitment of the Swing Line Bank to make Swing Line Loans up to a maximum principal amount of Twenty-Five Million and 00/100 Dollars ($25,000,000) at any one time outstanding.           “Swing Line Loan” means a Loan made available to the applicable Borrower by the Swing Line Bank pursuant to Section 2.2 hereof.           “Taxes” is defined in Section 2.14(E)(i).           “Termination Conditions” is defined in Section 2.18.           “Termination Date” means the earlier of (a) October 13, 2011, and (b) the date of termination in whole of the Aggregate Commitment pursuant to Section 2.5 hereof or the Commitments pursuant to Section 9.1 hereof.           “Termination Event” means (i) a Reportable Event with respect to any Benefit Plan; (ii) the withdrawal of the Company or any member of the Controlled Group from a Benefit Plan during a plan year in which the Company or such Controlled Group member was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or the cessation of operations which results in the termination of employment of twenty percent (20%) of Benefit Plan participants who are employees of the Company or any member of the Controlled Group; (iii) the imposition of an obligation on the Company or any member of the Controlled Group under Section 4041 of ERISA to provide affected parties written notice of intent to terminate a Benefit Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the institution by the PBGC or any similar foreign governmental authority of proceedings to terminate a Benefit Plan or Foreign Pension Plan; (v) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Benefit Plan; (vi) that a foreign governmental authority shall appoint or institute proceedings to appoint a 26 --------------------------------------------------------------------------------   trustee to administer any Foreign Pension Plan in place of the existing administrator, or (vii) the partial or complete withdrawal of the Company or any member of the Controlled Group from a Multiemployer Plan or Foreign Pension Plan.           “Transferee” is defined in Section 14.5.           “Treaty on European Union” means the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992 and came into force on November 1, 1993), as amended from time to time.           “Type” means, with respect to any Loan, its nature as a Floating Rate Loan or a Eurodollar Rate Loan.           “Unfunded Liabilities” means (i) in the case of Single Employer Plans, the amount (if any) by which the aggregate accumulated benefit obligations exceeds the aggregate fair market value of assets of present value of all vested nonforfeitable benefits under all Single Employer Plans as of the most recent measurement date, all as determined under FAS 87 using the methods and assumptions used by the Company for financial accounting purposes, and (ii) in the case of Multiemployer Plans, the withdrawal liability that would be incurred by the Controlled Group if all members of the Controlled Group completely withdrew from all Multiemployer Plans.           “Unmatured Default” means an event which, but for the lapse of time or the giving of notice, or both, would constitute a Default.           1.2. Singular/Plural References; Accounting Terms. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. Any accounting terms used in this Agreement which are not specifically defined herein shall have the meanings customarily given them in accordance with Agreement Accounting Principles.           1.3. References. Any references to the Company’s Subsidiaries shall not in any way be construed as consent by the Administrative Agent or any Lender to the establishment, maintenance or acquisition of any Subsidiary, except as may otherwise be permitted hereunder.           1.4. Supplemental Disclosure. At any time at the request of the Administrative Agent and at such additional times as the Company determines, the Company shall supplement each schedule or representation herein or in the other Loan Documents with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such schedule or as an exception to such representation or which is necessary to correct any information in such schedule or representation which has been rendered inaccurate thereby. Notwithstanding that any such supplement to such schedule or representation may disclose the existence or occurrence of events, facts or circumstances which are either prohibited by the terms of this Agreement or any other Loan Documents or which result in the breach of any representation or warranty, such supplement to such schedule or representation shall not be deemed either an amendment thereof or a waiver of such breach unless expressly consented to in writing by Administrative Agent and the Required Lenders, and 27 --------------------------------------------------------------------------------   no such amendments, except as the same may be consented to in a writing which expressly includes a waiver, shall be or be deemed a waiver by the Administrative Agent or any Lender of any Default disclosed therein. Any items disclosed in any such supplemental disclosures shall be included in the calculation of any limits, baskets or similar restrictions contained in this Agreement or any of the other Loan Documents. ARTICLE II: REVOLVING LOAN FACILITY           2.1. Revolving Loans.      (A) Amount of Revolving Loans. Upon the satisfaction of the conditions precedent set forth in Sections 5.1, 5.2 and 5.3, as applicable, from and including the Closing Date and prior to the Termination Date, each Lender severally and not jointly agrees, on the terms and conditions set forth in this Agreement, to make revolving loans to the Borrowers from time to time, in Dollars, in an amount not to exceed such Lender’s Pro Rata Share of Revolving Credit Availability at such time (each individually, a “Revolving Loan” and, collectively, the “Revolving Loans”); provided however, at no time shall (i) the amount of the Revolving Credit Obligations exceed the Adjusted Aggregate Commitment and (ii) the Financial Credit Obligations exceed the Financial Credit Sublimit. Subject to the terms of this Agreement, the Borrowers may borrow, repay and reborrow Revolving Loans at any time prior to the Termination Date. The Revolving Loans made on the Closing Date or on or before the third (3rd) Business Day thereafter shall initially be Floating Rate Loans and thereafter may be continued as Floating Rate Loans or converted into Eurodollar Rate Loans in the manner provided in Section 2.9 and subject to the other conditions and limitations therein set forth and set forth in this Article II and set forth in the definition of Interest Period. Revolving Loans made after the third (3rd) Business Day after the Closing Date shall be, at the option of the applicable Borrower, either Floating Rate Loans or Eurodollar Rate Loans selected in accordance with Section 2.9. On the Termination Date, each of the Borrowers shall repay in full the outstanding principal balance of the Revolving Loans made to it. Each Advance under this Section 2.1 shall consist of Revolving Loans made by each Lender ratably in proportion to such Lender’s respective Pro Rata Share.      (B) Borrowing/Election Notice. The applicable Borrower shall deliver to the Administrative Agent a Borrowing/Election Notice, signed by it, in accordance with the terms of Section 2.7.      (C) Making of Revolving Loans. Promptly after receipt of the Borrowing/Election Notice under Section 2.7 in respect of Revolving Loans, the Administrative Agent shall notify each Lender by telecopy, or other similar form of transmission, of the requested Revolving Loan. Each Lender shall make available its Revolving Loan in accordance with the terms of Section 2.6. The Administrative Agent will promptly make the funds so received from the Lenders available to the applicable Borrower at the Administrative Agent’s office in Chicago, Illinois on the applicable Borrowing Date and shall disburse such proceeds in accordance with the applicable Borrower’s disbursement instructions set forth in such Borrowing/Election Notice. The failure of any Lender to deposit the amount described above with the Administrative 28 --------------------------------------------------------------------------------   Agent on the applicable Borrowing Date shall not relieve any other Lender of its obligations hereunder to make its Revolving Loan on such Borrowing Date.           2.2. Swing Line Loans.      (A) Amount of Swing Line Loans. On the terms and conditions set forth in this Agreement and upon the satisfaction of the conditions precedent set forth in Section 5.1, 5.2 and 5.3, as applicable, from and including the Closing Date and prior to the Termination Date, the Swing Line Bank agrees to make swing line loans to the Borrowers from time to time, in Dollars, in an amount not to exceed the Swing Line Commitment (each, individually, a “Swing Line Loan” and collectively, the “Swing Line Loans”); provided, however, at no time shall (i) the amount of the Revolving Credit Obligations exceed the Adjusted Aggregate Commitment and (ii) the amount of the Financial Credit Obligations exceed the Financial Credit Sublimit; and provided, further, that at no time shall the sum of (a) the Swing Line Bank’s Pro Rata Share of the Swing Line Loans, plus (b) the outstanding amount of Revolving Loans made by the Swing Line Bank pursuant to Section 2.1, plus (c) the Swing Line Bank’s share of the obligations to purchase participations in Letters of Credit, exceed the Swing Line Bank’s Commitment at such time. Subject to the terms of this Agreement, the Borrowers may borrow, repay and reborrow Swing Line Loans at any time prior to the Termination Date.      (B) Borrowing/Election Notice. The applicable Borrower shall deliver to the Administrative Agent and the Swing Line Bank a Borrowing/Election Notice, signed by it, not later than 12:00 p.m. (Chicago time) on the Borrowing Date of each Swing Line Loan, specifying (i) the applicable Borrowing Date (which date shall be a Business Day and which may be the same date as the date the Borrowing/Election Notice is given), and (ii) the aggregate amount of the requested Swing Line Loan which shall be an amount not less than $100,000 (and increments of $100,000 if in excess thereof).      (C) Making of Swing Line Loans. Promptly after receipt of the Borrowing/Election Notice under Section 2.2(B) in respect of Swing Line Loans the Administrative Agent shall notify each Lender by telex or telecopy, or other similar form of transmission, of the requested Swing Line Loan. Not later than 4:00 p.m. (Chicago time) on the applicable Borrowing Date, the Swing Line Bank shall make available its Swing Line Loan, in funds immediately available in Chicago to the Administrative Agent at its address specified pursuant to Article XV. The Administrative Agent will promptly make the funds so received from the Swing Line Bank available to the applicable Borrower on the Borrowing Date at the Administrative Agent’s aforesaid address. The Swing Line Loans shall be Floating Rate Loans unless the applicable Borrower and the Swing Line Bank agree otherwise.      (D) Repayment of Swing Line Loans. Each Swing Line Loan shall be paid in full by the applicable Borrower on or before the fifth (5th) Business Day after the Borrowing Date for such Swing Line Loan. The applicable Borrower may at any time pay, without penalty or premium, all outstanding Swing Line Loans or, in a minimum amount of $100,000 and increments of $100,000 in excess thereof, any portion of the outstanding Swing Line Loans, upon notice to the Administrative Agent and the Swing 29 --------------------------------------------------------------------------------   Line Bank. In addition, the Administrative Agent (i) may at any time in the sole discretion of the Swing Line Bank with respect to any outstanding Swing Line Loan, or (ii) shall on the fifth (5th) Business Day after the Borrowing Date of any Swing Line Loan, require each Lender (including the Swing Line Bank) to make a Revolving Loan in the amount of such Lender’s Pro Rata Share of such Swing Line Loan, for the purpose of repaying such Swing Line Loan. Not later than 2:00 p.m. (Chicago time) on the date of any notice received pursuant to this Section 2.2(D), each Lender shall make available its required Revolving Loan or Revolving Loans, in funds immediately available in Chicago to the Administrative Agent at its address specified pursuant to Article XV. Revolving Loans made pursuant to this Section 2.2(D) shall initially be Floating Rate Loans and thereafter may be continued as Floating Rate Loans or converted into Eurodollar Rate Loans in the manner provided in Section 2.9 and subject to the other conditions and limitations therein set forth and set forth in this Article II. Unless a Lender shall have notified the Swing Line Bank, prior to its making any Swing Line Loan, that any applicable condition precedent set forth in Sections 5.1, 5.2 and 5.3, as applicable, had not then been satisfied, such Lender’s obligation to make Revolving Loans pursuant to this Section 2.2(D) to repay Swing Line Loans shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Administrative Agent, the Swing Line Bank or any other Person, (b) the occurrence or continuance of a Default or Unmatured Default, (c) any adverse change in the condition (financial or otherwise) of the Company, or (d) any other circumstances, happening or event whatsoever. In the event that any Lender fails to make payment to the Administrative Agent of any amount due under this Section 2.2(D), the Administrative Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Administrative Agent receives such payment from such Lender or such obligation is otherwise fully satisfied. In addition to the foregoing, if for any reason any Lender fails to make payment to the Administrative Agent of any amount due under this Section 2.2(D), such Lender shall be deemed, at the option of the Administrative Agent, to have unconditionally and irrevocably purchased from the Swing Line Bank, without recourse or warranty, an undivided interest and participation in the applicable Swing Line Loan in the amount of such Revolving Loan, and such interest and participation may be recovered from such Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of demand and ending on the date such amount is received. On the Termination Date, each of the Borrowers shall repay in full the outstanding principal balance of all Swing Line Loans made to it.           2.3. Rate Options for all Advances; Maximum Interest Periods. The Swing Line Loans shall be Floating Rate Loans unless the applicable Borrower and the Swing Line Bank agree otherwise. The Revolving Loans may be Floating Rate Advances or Eurodollar Rate Advances, or a combination thereof, selected by the applicable Borrowers in accordance with Section 2.9. The Borrowers may select, in accordance with Section 2.9, Rate Options and Interest Periods applicable to portions of the Revolving Loans; provided that there shall be no more than seven (7) Interest Periods in effect with respect to all of the Loans at any time.           2.4. Optional Payments; Mandatory Prepayments. 30 --------------------------------------------------------------------------------        (A) Optional Payments. The Borrowers may from time to time and at any time upon at least one (1) Business Day’s prior written notice repay or prepay, without penalty or premium all or any part of outstanding Floating Rate Advances in an aggregate minimum amount of One Million Dollars ($1,000,000) and in integral multiples of One Million Dollars ($1,000,000) in excess thereof. Eurodollar Rate Advances may be voluntarily repaid or prepaid prior to the last day of the applicable Interest Period, subject to the indemnification provisions contained in Section 4.4, in an aggregate minimum amount of Four Million and 00/100 Dollars ($4,000,000) and in integral multiples of One Million and 00/100 Dollars ($1,000,000) in excess thereof; provided, that the applicable Borrower may not so prepay Eurodollar Rate Advances unless it shall have provided at least three (3) Business Days’ prior written notice to the Administrative Agent of such prepayment and provided, further, all Eurodollar Loans constituting part of the same Eurodollar Rate Advance shall be repaid or prepaid at the same time.      (B) Determination of Dollar Amounts of Letters of Credit; Mandatory Prepayments of Revolving Loans and Cash Collateralization of Letters of Credit.      (i) The Administrative Agent will determine the Dollar Amount of:      (a) each Letter of Credit on the date three (3) Business Days prior to the issuance date, or, if applicable, renewal date of such Letter of Credit; and      (b) all outstanding L/C Obligations on and as of the last Business Day of each calendar month and on any other Business Day elected by the Administrative Agent in its discretion or upon instruction by the Required Lenders. Each day upon or as of which the Administrative Agent determines Dollar Amounts as described in the preceding clauses (a) and (b) is herein described as a “Computation Date” with respect to each Letter of Credit for which a Dollar Amount is determined on or as of such day.      (ii) If at any time and for any reason (other than as the result of fluctuations in currency exchange rates) the Dollar Amount of (a) the Revolving Credit Obligations (calculated, with respect to all L/C Obligations denominated in Agreed Currencies other than Dollars, as of the most recent Computation Date with respect to each such L/C Obligation) is greater than the Adjusted Aggregate Commitment or (b) the Financial Credit Obligations (calculated, with respect to all Financial L/C Obligations denominated in Agreed Currencies other than Dollars, as of the most recent Computation Date with respect to each such Financial L/C Obligations) is greater than the Financial Credit Sublimit, the Borrowers shall immediately make a mandatory prepayment of the Obligations in an amount equal to such excess.      (iii) If, on any Computation Date, as a result of fluctuations in currency exchange rates, the Dollar Amount of the Revolving Credit Obligations exceeds, by more than the Equivalent Amount of $500,000, the Adjusted Aggregate Commitment (such excess being the “Deficient Amount”), the Administrative Agent shall so notify 31 --------------------------------------------------------------------------------   the Company and the Lenders of such occurrence and the Borrowers shall immediately remit to the Administrative Agent a payment in an aggregate principal amount sufficient to eliminate the Deficient Amount, which funds shall be deposited in the L/C Collateral Account and shall be held as cash collateral for the benefit of the Revolving Credit Obligations; provided, however, if and to the extent the Deficient Amount is reduced from one Computation Date to the immediately succeeding Computation Date, the Administrative Agent shall (so long as no Default or Unmatured Default is then continuing) promptly remit to the Company all cash amounts in excess of the Deficient Amount then held in the L/C Collateral Account on such succeeding Computation Date.      (iv) All of the mandatory prepayments made under this Section 2.4(B) shall be applied first to Floating Rate Loans and to any Eurodollar Rate Loans maturing on such date and then to subsequently maturing Eurodollar Rate Loans.           2.5. Changes in Commitments.           (A) Voluntary Commitment Reductions. The Company may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders, in an aggregate minimum amount of Ten Million and 00/100 Dollars ($10,000,000) and integral multiples of One Million and 00/100 Dollars ($1,000,000) in excess of that amount (unless the Aggregate Commitment is reduced in whole), upon at least three (3) Business Day’s prior written notice to the Administrative Agent, which notice shall specify the amount of any such reduction; provided, however, that the amount of the Aggregate Commitment may not be reduced below the aggregate principal amount of the outstanding Revolving Credit Obligations. All accrued commitment fees shall be payable on the effective date of any termination of all or any part of the obligations of the Lenders to make Loans hereunder.           (B) Increase in Commitments.      (i) At any time, the Company (on behalf of itself and the other Borrowers) may request that the Aggregate Commitment be increased by an aggregate principal amount not in excess of $150,000,000; provided that, without the prior written consent of the Required Lenders, (a) the Aggregate Commitment shall at no time exceed $1,000,000,000 minus the aggregate amount of all reductions in the Aggregate Commitment previously made pursuant to Section 2.5(A); (b) the Company shall not make any such request during the six month period following any reduction in the Aggregate Commitment previously made pursuant to Section 2.5(A); (c) the Company shall not be entitled to make more than one such request during any calendar year; and (d) each such request shall be in a minimum amount of at least $50,000,000 and increments of $5,000,000 in excess thereof. Such request shall be made in a written notice given to the Administrative Agent and the Lenders by the Company not less than twenty (20) Business Days prior to the proposed effective date of such increase, which notice (a “Commitment Increase Notice”) shall specify the amount of the proposed increase in the Aggregate Commitment and the proposed effective date of such increase. In the event of such a Commitment Increase Notice, 32 --------------------------------------------------------------------------------   each of the Lenders shall be given the opportunity to participate in the requested increase ratably in proportions that their respective Commitments bear to the Aggregate Commitment. No Lender shall have any obligation to increase its Commitment pursuant to a Commitment Increase Notice. On or prior to the date that is fifteen (15) Business Days after receipt of the Commitment Increase Notice, each Lender shall submit to the Administrative Agent a notice indicating the maximum amount by which it is willing to increase its Commitment in connection with such Commitment Increase Notice (any such notice to the Administrative Agent being herein a “Lender Increase Notice”). Any Lender which does not submit a Lender Increase Notice to the Administrative Agent prior to the expiration of such fifteen (15) Business Day period shall be deemed to have denied any increase in its Commitment. In the event that the increases of Commitments set forth in the Lender Increase Notices exceed the amount requested by the Company in the Commitment Increase Notice, the Administrative Agent and each Arranger shall have the right, in consultation with the Company, to allocate the amount of increases necessary to meet the Company’s Commitment Increase Notice. In the event that the Lender Increase Notices are less than the amount requested by the Company, not later than three (3) Business Days prior to the proposed effective date the Company may notify the Administrative Agent of any financial institution that shall have agreed to become a “Lender” party hereto (a “Proposed New Lender”) in connection with the Commitment Increase Notice. Any Proposed New Lender shall be consented to by the Administrative Agent (which consent shall not be unreasonably withheld). If the Company shall not have arranged any Proposed New Lender(s) to commit to the shortfall from the Lender Increase Notices, then the Company shall be deemed to have reduced the amount of its Commitment Increase Notice to the aggregate amount set forth in the Lender Increase Notices. Based upon the Lender Increase Notices, any allocations made in connection therewith and any notice regarding any Proposed New Lender, if applicable, the Administrative Agent shall notify the Company and the Lenders on or before the Business Day immediately prior to the proposed effective date of the amount of each Lender’s and Proposed New Lenders’ Commitment (the “Effective Commitment Amount”) and the amount of the Aggregate Commitment, which amounts shall be effective on the following Business Day. Any increase in the Aggregate Commitment shall be subject to the following conditions precedent: (A) the Company shall have obtained the consent thereto of each Guarantor and its reaffirmation of the Loan Document(s) executed by it, which consent and reaffirmation shall be in writing and in form and substance reasonably satisfactory to the Administrative Agent, (B) as of the date of the Commitment Increase Notice and as of the proposed effective date of the increase in the Aggregate Commitment all representations and warranties shall be true and correct in all material respects as though made on such date and no event shall have occurred and then be continuing which constitutes a Default or Unmatured Default, (C) the Borrowers, the Administrative Agent and each Proposed New Lender or Lender that shall have agreed to provide a “Commitment” in support of such increase in the Aggregate Commitment shall have executed and delivered a “Commitment and Acceptance” substantially in the form of Exhibit L hereto, (D) counsel for the Company and for the Guarantors shall have provided to the Administrative Agent 33 --------------------------------------------------------------------------------   supplemental opinions in form and substance reasonably satisfactory to the Administrative Agent and (E) the Borrowers and the Proposed New Lender shall otherwise have executed and delivered such other instruments and documents as may be required under Article V or that the Administrative Agent shall have reasonably requested in connection with such increase. If any fee shall be charged by the Lenders in connection with any such increase, such fee shall be in accordance with then prevailing market conditions, which market conditions shall have been reasonably documented by the Administrative Agent to the Company. Upon satisfaction of the conditions precedent to any increase in the Aggregate Commitment, the Administrative Agent shall promptly advise the Company and each Lender of the effective date of such increase. Upon the effective date of any increase in the Aggregate Commitment that is supported by a Proposed New Lender, such Proposed New Lender shall be a party to this Agreement as a Lender and shall have the rights and obligations of a Lender hereunder and thereunder. Nothing contained herein shall constitute, or otherwise be deemed to be, a commitment on the part of any Lender to increase its Commitment hereunder at any time.      (ii) For purposes of this clause (ii), (A) the term “Buying Lender(s)” shall mean (1) each Lender the Effective Commitment Amount of which is greater than its Commitment prior to the effective date of any increase in the Aggregate Commitment and (2) each Proposed New Lender that is allocated an Effective Commitment Amount in connection with any Commitment Increase Notice and (b) the term “Selling Lender(s)” shall mean each Lender whose Commitment is not being increased from that in effect prior to such increase in the Aggregate Commitment. Effective on the effective date of any increase in the Aggregate Commitment pursuant to clause (i) above, each Selling Lender hereby sells, grants, assigns and conveys to each Buying Lender, without recourse, warranty, or representation of any kind, except as specifically provided herein, an undivided percentage in such Selling Lender’s right, title and interest in and to its outstanding Loans and L/C Obligations in the respective Dollar Amounts and percentages necessary so that, from and after such sale, each such Selling Lender’s outstanding Loans and L/C Obligations shall equal such Selling Lender’s Pro Rata Share (calculated based upon the Effective Commitment Amounts) of the outstanding Loans and L/C Obligations. Effective on the effective date of the increase in the Aggregate Commitment pursuant to clause (i) above, each Buying Lender hereby purchases and accepts such grant, assignment and conveyance from the Selling Lenders. Each Buying Lender hereby agrees that its respective purchase price for the portion of the outstanding Loans and L/C Obligations purchased hereby shall equal the respective Dollar Amount necessary so that, from and after such payments, each Buying Lender’s outstanding Loans and L/C Obligations shall equal such Buying Lender’s Pro Rata Share (calculated based upon the Effective Commitment Amounts) of the outstanding Loans and L/C Obligations. Such amount shall be payable on the effective date of the increase in the Aggregate Commitment by wire transfer of immediately available funds to the Administrative Agent. The Administrative Agent, in turn, shall wire transfer any such funds received to the Selling Lenders, in same day funds, for the sole account of the Selling Lenders. Each Selling Lender hereby represents and warrants to each Buying Lender that such Selling Lender owns the Loans and L/C Obligations being sold and assigned hereby 34 --------------------------------------------------------------------------------   for its own account and has not sold, transferred or encumbered any or all of its interest in such Loans and L/C Obligations, except for participations which will be extinguished upon payment to Selling Lender of an amount equal to the portion of the outstanding Loans and L/C Obligations being sold by such Selling Lender. Each Buying Lender hereby acknowledges and agrees that, except for each Selling Lender’s representations and warranties contained in the foregoing sentence, each such Buying Lender has entered into its Commitment and Acceptance with respect to such increase on the basis of its own independent investigation and has not relied upon, and will not rely upon, any explicit or implicit written or oral representation, warranty or other statement of the Lenders or the Administrative Agent concerning the authorization, execution, legality, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the other Loan Documents. The Company hereby agrees to compensate each Selling Lender for all losses, expenses and liabilities incurred by each Lender in connection with the sale and assignment of any Eurodollar Loan hereunder on the terms and in the manner as set forth in Section 4.4.           2.6. Method of Borrowing. On each Borrowing Date, each Lender shall make available its Revolving Loan or Revolving Loans, if any, not later than noon, Chicago time, in Federal or other funds immediately available to the Administrative Agent, in Chicago, Illinois at its address specified in or pursuant to Article XV. Unless the Administrative Agent determines that any applicable condition specified in Article V has not been satisfied, the Administrative Agent will make the funds so received from the Lenders available to the applicable Borrower at the Administrative Agent’s aforesaid address.           2.7. Method of Selecting Types and Interest Periods for Advances. The applicable Borrower shall select the Type of Advance and, in the case of each Eurodollar Rate Advance, the Interest Period applicable to each Advance from time to time. The applicable Borrower shall give the Administrative Agent irrevocable notice in substantially the form of Exhibit B hereto (a “Borrowing/Election Notice”) not later than 10:00 a.m. (Chicago time) (a) on or before the Borrowing Date of each Floating Rate Advance, (b) three (3) Business Days before the Borrowing Date for each Eurodollar Rate Advance. The Borrowers shall select Interest Periods so that, to the best of their knowledge, it will not be necessary to prepay all or any portion of any Eurodollar Rate Loan prior to the last day of the applicable Interest Period in order to make mandatory prepayments as required pursuant to the terms hereof. Each Floating Rate Advance and all Obligations other than Loans shall bear interest from and including the date of the making of such Advance, in the case of Loans, and the date such Obligation is due and owing in the case of such other Obligations, to (but not including) the date of repayment thereof at the Floating Rate changing when and as such Floating Rate changes. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Loan will take effect simultaneously with each change in the Alternate Base Rate. Each Eurodollar Rate Advance shall bear interest from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Eurodollar Rate Advance and shall change as and when the Applicable Eurodollar Margin changes. 35 --------------------------------------------------------------------------------             2.8. Minimum Amount of Each Advance. Each Advance (other than an Advance to repay Swing Line Loans or a Reimbursement Obligation) shall be in the minimum amount of Four Million Dollars ($4,000,000) and in multiples of One Million Dollars ($1,000,000) if in excess thereof, provided, however, that any Floating Rate Advance may be in the amount of the unused Adjusted Aggregate Commitment.           2.9. Method of Selecting Types and Interest Periods for Conversion and Continuation of Advances.      (A) Right to Convert. The applicable Borrower may elect from time to time, subject to the provisions of Section 2.3 and this Section 2.9, to convert all or any part of a Loan of any Type into any other Type or Types of Loans; provided that any conversion of any Eurodollar Rate Advance shall be made on, and only on, the last day of the Interest Period applicable thereto.      (B) Automatic Conversion and Continuation. Floating Rate Loans shall continue as Floating Rate Loans unless and until such Floating Rate Loans are converted into Eurodollar Rate Loans. Eurodollar Rate Loans shall continue as Eurodollar Rate Loans until the end of the then applicable Interest Period therefor, at which time such Eurodollar Rate Loans shall be automatically converted into Floating Rate Loans unless such Eurodollar Rate Loans shall have been repaid or the Company shall have given the Administrative Agent notice in accordance with Section 2.9 (D) requesting that, at the end of such Interest Period, such Eurodollar Rate Loans continue as a Eurodollar Rate Loan.      (C) No Conversion Post-Default or Post-Unmatured Default. Notwithstanding anything to the contrary contained in Section 2.9(A) or Section 2.9(B), no Loan may be converted into or continued as a Eurodollar Rate Loan (except with the consent of the Required Lenders) when any Default or Unmatured Default has occurred and is continuing.      (D) Borrowing/Election Notice. The Company shall give the Administrative Agent an irrevocable Borrowing/Election Notice of each conversion of a Floating Rate Loan into a Eurodollar Rate Loan or continuation of a Eurodollar Rate Loan not later than 10:00 a.m. (Chicago time) (x) one (1) Business Day prior to the date of the requested conversion or continuation, with respect to any Loan to be converted to or continued as a Floating Rate Advance, and (y) three (3) Business Days prior to the date of the requested conversion or continuation, with respect to any Loan to be converted or continued as a Eurodollar Rate Loan, specifying: (1) the requested date (which shall be a Business Day) of such conversion or continuation; (2) the amount and Type of the Loan to be converted or continued; and (3) if applicable, the amount of Eurodollar Rate Loan(s) into which such Loan is to be converted or continued and the duration of the Interest Period applicable thereto.           2.10. Default Rate. After the occurrence and during the continuance of a Default, at the option of the Administrative Agent or at the direction of the Required Lenders the interest rate(s) applicable to the Obligations and all other fees (including the fees payable under 36 --------------------------------------------------------------------------------   Section 3.8 with respect to Letters of Credit) shall be equal to (x) the interest rates and fees calculated based on the maximum Applicable Floating Rate Margins, Applicable Eurodollar Margin, Applicable L/C Fee Percentage and Applicable Commitment Fee Percentage, as applicable, as specified pursuant to Section 2.14(D)(ii) plus (y) two percent (2.00%) per annum for all such Obligations and fees; provided that during the continuation of a Default under Sections 8.1(F) or 8.1(G) such interest rate and fee increases shall be automatically applicable without any election of the Administrative Agent or action of the Required Lenders.           2.11. Method of Payment.      (A) Method of Payment. All payments of principal, interest, fees, reimbursements, commissions, L/C Obligations and other Obligations hereunder shall be made, without setoff, deduction or counterclaim (unless indicated otherwise in Section 2.14(E)), in immediately available funds to the Administrative Agent at the Administrative Agent’s address specified pursuant to Article XV, or at any other Lending Installation of the applicable Issuing Bank specified in writing by such Issuing Bank to the applicable Borrower in connection with any Letter of Credit issued in an Agreed Currency other than Dollars. Each Advance shall be repaid or prepaid in Dollars in the amount equal to the amount borrowed and interest payable thereon shall also be paid in Dollars. Each L/C Obligation denominated in an Agreed Currency other than Dollars shall be repaid, and all interest and fees to be paid in respect thereof shall be paid, in the currency in which the related Letter of Credit was issued or, where such currency has converted to euro, in euro. All payments to be made by any Borrower hereunder in any currency other than Dollars shall be made in such currency on the date due in such funds as may then be customary for the settlement of international transactions in such currency for the account of the Administrative Agent or applicable Issuing Bank, as applicable, at its designated Lending Installation for such currency. Each payment delivered to the Administrative Agent for the account of any Lender shall be delivered promptly by the Administrative Agent to such Lender in the same type of funds that the Administrative Agent received at its address specified pursuant to Article XV or at any Lending Installation specified in a notice received by the Administrative Agent from such Lender. The Administrative Agent is hereby authorized to charge any account of the applicable Borrower maintained with JPMorgan or any of its Affiliates for each payment of principal, interest and fees as it becomes due hereunder. Each reference to the Administrative Agent in this Section 2.11 shall also be deemed to refer, and shall apply equally, to each Issuing Bank, in the case of payments required to be made by any Borrower to any Issuing Bank pursuant to Article III.      (B) Market Disruption. If, after the designation by the applicable Issuing Bank and the Administrative Agent of any currency as an Agreed Currency, in the reasonable opinion of any Borrower, any Issuing Bank, the Required Lenders or the Administrative Agent, (x) there shall occur any change in national or international financial, political or economic conditions or currency exchange rates or currency control or other exchange regulations are imposed in the country which issues such currency with the result that it shall be impractical for any L/C Obligation to be denominated in such currency or different types of such currency are introduced, (y) such currency is no longer readily available or freely traded or (z) an Equivalent Amount of such currency is 37 --------------------------------------------------------------------------------   not readily calculable (any such event a “Market Disruption”), such Borrower, such Issuing Bank, the Required Lenders or the Administrative Agent, as applicable, shall promptly notify the Lenders, the Issuing Banks, the Administrative Agent and the Borrowers, and such currency shall no longer be an Agreed Currency until such time as the Administrative Agent and any applicable Issuing Bank agrees to reinstate such currency as an Agreed Currency, and all payments to be made by the applicable Borrower hereunder in such currency shall instead be made when due in Dollars in an amount equal to the Dollar Amount (as of the date of repayment) of such payment due, it being the intention of the parties hereto that the Borrowers take all risks of the imposition of any such currency control or exchange regulations. For purposes of this Section 2.11(B), the commencement of the third stage of the European Economic and Monetary Union shall not constitute the imposition of currency control or exchange regulations.           2.12. Evidence of Debt.      (A) Loan Account. Each Lender shall maintain in accordance with its usual practice an account or accounts (a “Loan Account”) on its books and records evidencing the indebtedness of the Borrowers to such Lender owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.      (B) Register. The Register maintained by the Administrative Agent pursuant to Section 14.3(C) shall include a control account, and a subsidiary account for each Lender and each Borrower, in which accounts (taken together) shall be recorded (i) the date and the amount of each Loan made hereunder, the Type thereof and the Interest Period, if any, applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each of the Borrowers to each Lender hereunder, (iii) the effective date and amount of each Assignment Agreement delivered to and accepted by it and the parties thereto pursuant to Section 14.3, (iv) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof, and (v) all other appropriate debits and credits as provided in this Agreement, including, without limitation, all fees, charges, expenses and interest.      (C) Entries in Loan Account and Register. The entries made in the Loan Account, the Register and the other accounts maintained pursuant to clauses (A) or (B) of this Section shall be prima facie evidence thereof for all purposes, absent manifest error, unless the applicable Borrower objects to information contained in the Loan Accounts, the Register or the other accounts within thirty (30) days of the applicable Borrower’s receipt of such information; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrowers to repay the Loans or other amounts in accordance with the terms of this Agreement.      (D) Noteless Transaction; Notes Issued Upon Request. Any Lender may request that the Revolving Loans made or to be made by it each be evidenced by a promissory note in substantially the form of Exhibit I to evidence such Lender’s Revolving Loans. In such event, the Borrowers shall prepare, execute and deliver to such 38 --------------------------------------------------------------------------------   Lender a promissory note for such Loans payable to the order of such Lender. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 14.3) be represented by one or more promissory notes in such form payable to the order of the payee named therein.           2.13. Telephonic Notices. The Borrowers authorize the Lenders and the Administrative Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Administrative Agent or any Lender in good faith believes to be acting on behalf of the applicable Borrower. Each of the Subsidiary Borrowers authorizes the Company to make requests and give notices hereunder on behalf of such Subsidiary Borrowers. The Borrowers agree to deliver promptly to the Administrative Agent a written confirmation, signed by an Authorized Officer, if such confirmation is requested by the Administrative Agent or any Lender, of each telephonic notice. If the written confirmation differs in any material respect from the action taken by the Administrative Agent and the Lenders, the records of the Administrative Agent and the Lenders shall govern absent manifest error. In case of disagreement concerning such notices, if the Administrative Agent has recorded telephonic borrowing notices, such recordings will be made available to the applicable Borrower upon its request therefor.           2.14. Promise to Pay; Interest and Commitment Fees; Interest Payment Dates; Interest and Fee Basis; Taxes; Loan and Control Accounts.      (A) Promise to Pay. All Advances shall be paid in full by the applicable Borrowers on the Termination Date. Each Borrower unconditionally promises to pay when due the principal amount of each Loan and all other Obligations incurred by it, and to pay all unpaid interest accrued thereon, in accordance with the terms of this Agreement and the other Loan Documents, and confirms that all Borrowers (other than Borrowers which are Foreign Subsidiaries) shall be jointly and severally liable for all of the Obligations.      (B) Interest Payment Dates. Interest accrued on each Floating Rate Loan shall be payable on each Payment Date, commencing with the first such date to occur after the Closing Date, upon any prepayment whether by acceleration or otherwise, and at maturity (whether by acceleration or otherwise). Interest accrued on each Eurodollar Rate Loan shall be payable on the last day of its applicable Interest Period, on any date on which the Eurodollar Rate Loan is prepaid, whether by acceleration or otherwise, and at maturity; provided, interest accrued on each Eurodollar Rate Loan having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest accrued on the principal balance of all other Obligations shall be payable in arrears (i) on the last day of each calendar quarter, commencing on the first such day following the incurrence of such Obligation, (ii) upon repayment thereof in full or in part, and (iii) if not theretofore paid in full, at the time such other Obligation becomes due and payable (whether by acceleration or otherwise).      (C) Commitment Fees; Additional Fees. 39 --------------------------------------------------------------------------------        (i) The Company shall pay to the Administrative Agent, for the account of the Lenders in accordance with their Pro Rata Shares, from and after the Closing Date until the date on which the Aggregate Commitment shall be terminated in whole, a commitment fee at the rate of the then Applicable Commitment Fee Percentage multiplied by the average amount by which (A) the Aggregate Commitment in effect from time to time exceeds (B) the Revolving Credit Obligations (excluding the outstanding principal amount of the Swing Line Loans) in effect from time to time during each fiscal quarter of the Company. All such commitment fees payable under this clause (C) shall be payable quarterly on the last day of each fiscal quarter of the Company occurring after the Closing Date (with the first such payment being calculated for the period from the Closing Date and ending on December 31, 2006), and, in addition, on any date on which the Aggregate Commitment shall be terminated in whole.      (ii) The Company agrees to pay or to cause the Borrowers to pay to (a) the Administrative Agent for the sole account of the Administrative Agent and JPMSI and (b) the Syndication Agent for the sole account of the Syndication Agent and BAS, in each case the applicable fees set forth in those certain fee letters identified and described in Section 5.1(viii), in each case payable at the times and in the amounts set forth therein.          (D) Interest and Fee Basis; Applicable Floating Rate Margins, Applicable Eurodollar Margin, Applicable L/C Fee Percentage and Applicable Commitment Fee Percentage.      (i) Interest on all fees, Eurodollar Rate Loans and Floating Rate Loans calculated by reference to the Federal Fund Effective Rate shall be calculated for actual days elapsed on the basis of a 360-day year; provided, that the Applicable L/C Fee Percentage applicable to Letters of Credit issued in British Pounds Sterling, if any, shall be calculated for actual days elapsed on the basis of a 365-day year. Interest on all Alternate Base Rate Loans calculated by reference to the Prime Rate shall be calculated for actual days elapsed on the basis of a 365/366-day year. Interest shall be payable for the day an Obligation is incurred but not for the day of any payment on the amount paid if payment is received prior to 2:00 p.m. (Chicago time or local time, as applicable) at the place of payment. If any payment of principal of or interest on a Loan or any payment of any other Obligations shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest, fees and commissions in connection with such payment.      (ii) (a) The Applicable Floating Rate Margins, Applicable Eurodollar Margin, Applicable L/C Fee Percentage and Applicable Commitment Fee Percentage shall, subject to the provisions of Section 2.14(D)(ii)(b) below, be determined from time to time by reference to the table set forth below, on the basis of the then applicable Leverage Ratio as described in this Section 2.14(D)(ii): 40 --------------------------------------------------------------------------------                                                 Greater than or   Greater than or                 equal to 1.00 to   equal to 1.50 to   Greater than or     Less than 1.00   1.00 and less   1.00 but less   equal to 2.00 to Leverage Ratio   to 1.00   than 1.50 to 1.00   than 2.00 to 1.00   1.00 Applicable Commitment Fee     0.175 %     0.20 %     0.25 %     0.30 % Applicable L/C Fee for Performance Letters of Credit     0.65 %     0.725 %     0.9125 %     1.10 % Applicable L/C Fee for Financial Letters of Credit     0.875 %     1.00 %     1.25 %     1.50 % Applicable Eurodollar Margin     0.875 %     1.00 %     1.25 %     1.50 % Applicable Floating Rate Margin     0.00 %     0.00 %     0.00 %     0.25 % (b) (1) Notwithstanding the foregoing or anything else contained in this Agreement to the contrary, for purposes of computing the Revolving Credit Obligations in connection with determining the applicable commitment fee, the parties hereto acknowledge and agree that to the extent any Escalating L/C is then issued and outstanding, the applicable commitment fee shall accrue at 200% of the commitment fee which would be applicable solely by reference to the foregoing table multiplied by the difference between (x) the Dollar Amount then available to be drawn under such Escalating L/C and (y) the maximum Dollar Amount (after giving effect to all possible increases) available to be drawn thereunder. (2) For purposes of this Section 2.14(D)(ii), the Leverage Ratio shall be calculated as provided in Section 7.4(A); provided, however, that until such time as the Company delivers the financial statements for the fiscal quarter ending September 30, 2006, the Leverage Ratio shall be deemed to be greater than or equal to 1.00 to 1.00 and less than 1.50 to 1.00. Upon receipt of the financial statements delivered pursuant to Sections 7.1(A)(i) and (ii), as applicable, the Applicable Floating Rate Margins, Applicable Eurodollar Margin, Applicable L/C Fee Percentage and Applicable Commitment Fee Percentage shall be adjusted, such adjustment being effective five (5) Business Days following the date such financial statements and the compliance certificate required to be delivered in connection therewith pursuant to Section 7.1(A)(iii) shall be due; provided, that if the Company shall not have timely delivered 41 --------------------------------------------------------------------------------   its financial statements in accordance with Section 7.1(A)(i) or (ii), as applicable, then commencing on the date upon which such financial statements should have been delivered and continuing until five (5) Business Days following the date such financial statements are actually delivered, the Applicable Floating Rate Margins, Applicable Eurodollar Margin, Applicable L/C Fee Percentage and Applicable Commitment Fee Percentage shall be the maximum Applicable Floating Rate Margins, Applicable Eurodollar Margin, Applicable L/C Fee Percentage and Applicable Commitment Fee Percentage, as applicable, as set forth in this Section 2.14(D)(ii).           (E) Taxes.      (i) Any and all payments by the Borrowers hereunder (whether in respect of principal, interest, fees or otherwise) shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings or any interest, penalties and liabilities with respect thereto including those arising after the Closing Date as a result of the adoption of or any change in any law, treaty, rule, regulation, guideline or determination of a Governmental Authority or any change in the interpretation or application thereof by a Governmental Authority but excluding, in the case of each Lender and the Administrative Agent, such taxes (including income taxes, franchise taxes and branch profit taxes) as are imposed on or measured by such Lender’s or the Administrative Agent’s, as the case may be, net income by the United States of America or any Governmental Authority of the jurisdiction under the laws of which such Lender or the Administrative Agent, as the case may be, is organized (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings, and liabilities which the Administrative Agent or a Lender determines to be applicable to this Agreement, the other Loan Documents, the Commitments, the Loans or the Letters of Credit being hereinafter referred to as “Taxes”). If any Borrower shall be required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder or under the other Loan Documents to any Lender or the Administrative Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions applicable to additional sums payable under this Section 2.14(E)) such Lender or Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) the applicable Borrower shall make such deductions or withholdings, and (iii) the applicable Borrower shall pay the full amount deducted or withheld to the relevant taxation authority or other authority in accordance with applicable law. If a withholding tax of the United States of America or any other Governmental Authority shall be or become applicable (y) after the date of this Agreement, to such payments by the applicable Borrower made to the Lending Installation or any other office that a Lender may claim as its Lending Installation, or (z) after such Lender’s selection and designation of any other Lending Installation, to such payments made to such other Lending Installation, such Lender shall use reasonable efforts to make, fund and maintain the affected Loans through another Lending Installation of such Lender in another jurisdiction so as to reduce the applicable Borrower’s liability hereunder, if the making, funding or maintenance of 42 --------------------------------------------------------------------------------   such Loans through such other Lending Installation of such Lender does not, in the judgment of such Lender, otherwise adversely affect such Loans, or obligations under the Commitment of such Lender.      (ii) In addition, the Borrowers agree to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, or similar levies which arise from any payment made hereunder, from the issuance of Letters of Credit hereunder, or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the other Loan Documents, the Commitments, the Loans or the Letters of Credit (hereinafter referred to as “Other Taxes”).      (iii) The Company and each Subsidiary Borrower shall indemnify each Lender and the Administrative Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any Governmental Authority on amounts payable under this Section 2.14(E)) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within thirty (30) days after the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor. If the Taxes or Other Taxes with respect to which the Company or any Subsidiary Borrower has made either a direct payment to the taxation or other authority or an indemnification payment hereunder are subsequently refunded to any Lender, such Lender will return to the applicable Borrower, if no Event of Default has occurred and is continuing, an amount equal to the lesser of the indemnification payment or the refunded amount. A certificate as to any additional amount payable to any Lender or the Administrative Agent under this Section 2.14(E) submitted to the applicable Borrower and the Administrative Agent (if a Lender is so submitting) by such Lender or the Administrative Agent shall show in reasonable detail the amount payable and the calculations used to determine such amount and shall, absent manifest error, be final, conclusive and binding upon all parties hereto. With respect to such deduction or withholding for or on account of any Taxes and to confirm that all such Taxes have been paid to the appropriate Governmental Authorities, the applicable Borrower shall promptly (and in any event not later than thirty (30) days after receipt) furnish to each Lender and the Administrative Agent such certificates, receipts and other documents as may be required (in the reasonable judgment of such Lender or the Administrative Agent) to establish any tax credit to which such Lender or the Administrative Agent may be entitled.      (iv) Within thirty (30) days after the date of any payment of Taxes or Other Taxes by the Company or any Subsidiary Borrower, the Company shall furnish to the Administrative Agent the original or a certified copy of a receipt evidencing payment thereof.      (v) Without prejudice to the survival of any other agreement of the Company and the Subsidiary Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 2.14(E) shall survive the payment in full of all 43 --------------------------------------------------------------------------------   Obligations, the termination of the Letters of Credit and the termination of this Agreement.      (vi) Each Lender (including any Replacement Lender or Purchaser) that is not created or organized under the laws of the United States of America or a political subdivision thereof (each a “Non-U.S. Lender”) shall deliver to the Company and the Administrative Agent on or before the Closing Date, or, if later, the date on which such Lender becomes a Lender pursuant to Section 14.3 hereof (and from time to time thereafter upon the request of the Company or the Administrative Agent, but only for so long as such Non-U.S. Lender is legally entitled to do so), either (1) two (2) duly completed copies of either (A) IRS Form W-8BEN, or (B) IRS Form W-8ECI, or in either case an applicable successor form; or (2) in the case of a Non-U.S. Lender that is not legally entitled to deliver the forms listed in clause (vi)(1), (x) a certificate of a duly authorized officer of such Non-U.S. Lender to the effect that such Non-U.S. Lender is not (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Company or any Subsidiary Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (C) a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code (such certificate, an “Exemption Certificate”) and (y) two (2) duly completed copies of IRS Form W-8BEN or applicable successor form. Each such Lender further agrees to deliver to the Company and the Administrative Agent from time to time a true and accurate certificate executed in duplicate by a duly authorized officer of such Lender in a form satisfactory to the Company and the Administrative Agent, before or promptly upon the occurrence of any event requiring a change in the most recent certificate previously delivered by it to the Company and the Administrative Agent pursuant to this Section 2.14(E)(vi). Further, each Lender which delivers a form or certificate pursuant to this clause (vi) covenants and agrees to deliver to the Company and the Administrative Agent within fifteen (15) days prior to the expiration of such form, for so long as this Agreement is still in effect, another such certificate and/or two (2) accurate and complete original newly-signed copies of the applicable form (or any successor form or forms required under the Code or the applicable regulations promulgated thereunder).      Each Lender shall promptly furnish to the Company and the Administrative Agent such additional documents as may be reasonably required by any Borrower or the Administrative Agent to establish any exemption from or reduction of any Taxes or Other Taxes required to be deducted or withheld and which may be obtained without undue expense to such Lender. Notwithstanding any other provision of this Section 2.14(E), no Borrower shall be obligated to gross up any payments to any Lender pursuant to Section 2.14(E)(i), or to indemnify any Lender pursuant to Section 2.14(E)(iii), in respect of United States federal withholding taxes to the extent imposed as a result of (x) the failure of such Lender to deliver to the Company the form or forms and/or an Exemption Certificate, as applicable to such Lender, pursuant to Section 2.14(E)(vi), (y) such form or forms and/or Exemption Certificate not establishing a complete exemption from U.S. federal withholding tax or the information or certifications made therein by the Lender being untrue or inaccurate on the date delivered in any material respect, or (z) the Lender designating a successor 44 --------------------------------------------------------------------------------   Lending Installation at which it maintains its Loans which has the effect of causing such Lender to become obligated for tax payments in excess of those in effect immediately prior to such designation; provided, however, that the applicable Borrower shall be obligated to gross up any payments to any such Lender pursuant to Section 2.14(E)(i), and to indemnify any such Lender pursuant to Section 2.14(E)(iii), in respect of United States federal withholding taxes if (i) any such failure to deliver a form or forms or an Exemption Certificate or the failure of such form or forms or exemption certificate to establish a complete exemption from U.S. federal withholding tax or inaccuracy or untruth contained therein resulted from a change in any applicable statute, treaty, regulation or other applicable law or any interpretation of any of the foregoing occurring after the Closing Date, which change rendered such Lender no longer legally entitled to deliver such form or forms or Exemption Certificate or otherwise ineligible for a complete exemption from U.S. federal withholding tax, or rendered the information or the certifications made in such form or forms or Exemption Certificate untrue or inaccurate in any material respect, (ii) the redesignation of the Lender’s Lending Installation was made at the request of the Company or (iii) the obligation to gross up payments to any such Lender pursuant to Section 2.14(E)(i), or to indemnify any such Lender pursuant to Section 2.14(E)(iii), is with respect to a Purchaser that becomes a Purchaser as a result of an assignment made at the request of the Company.      (vii) Upon the request, and at the expense of the Company, each Lender to which any Borrower is required to pay any additional amount pursuant to this Section 2.14(E), shall reasonably afford the applicable Borrower the opportunity to contest, and shall reasonably cooperate with the applicable Borrower in contesting, the imposition of any Tax giving rise to such payment; provided, that (i) such Lender shall not be required to afford the applicable Borrower the opportunity to so contest unless the applicable Borrower shall have confirmed in writing to such Lender its obligation to pay such amounts pursuant to this Agreement; and (ii) the Company shall reimburse such Lender for its reasonable attorneys’ and accountants’ fees and disbursements incurred in so cooperating with the applicable Borrower in contesting the imposition of such Tax.           2.15. Notification of Advances, Interest Rates, Prepayments and Aggregate Commitment Reductions. Promptly after receipt thereof, the Administrative Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Borrowing/Election Notice, and repayment notice received by it hereunder. The Administrative Agent will notify the applicable Borrower and each Lender of the interest rate applicable to each Eurodollar Rate Loan promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate.           2.16. Lending Installations. Each Lender will book its Loans or Letters of Credit at the appropriate Lending Installation listed on the administrative information sheets provided to the Administrative Agent in connection herewith or such other Lending Installation designated by such Lender in accordance with the final sentence of this Section 2.16. All terms of this Agreement shall apply to any such Lending Installation. Each Lender may, by written or facsimile notice to the Administrative Agent and the Company, designate a Lending Installation 45 --------------------------------------------------------------------------------   through which Loans will be made by it and for whose account Loan payments and/or payments of L/C Obligations are to be made.           2.17. Non-Receipt of Funds by the Administrative Agent. Unless a Borrower or a Lender, as the case may be, notifies the Administrative Agent prior to the date on which it is scheduled to make payment to the Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of any Borrower, a payment of principal, interest or fees to the Administrative Agent for the account of the Lenders, that it does not intend to make such payment, the Administrative Agent may assume that such payment has been made. The Administrative Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the applicable Borrower, as the case may be, has not in fact made such payment to the Administrative Agent, the recipient of such payment shall, on demand by the Administrative Agent, repay to the Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to (i) in the case of payment by a Lender, the Federal Funds Effective Rate for such day or (ii) in the case of payment by a Borrower, the interest rate applicable to the relevant Loan.           2.18. Termination Date. This Agreement shall be effective until the Termination Date. Notwithstanding the termination of this Agreement, until (A) all financing arrangements among the Borrowers and the Lenders shall have been terminated and (B) all of the Letters of Credit shall have expired, been cancelled or terminated, or cash collateralized pursuant to the terms of this Agreement or supported by a letter of credit acceptable to the Administrative Agent (collectively, the “Termination Conditions”), all of the rights and remedies under this Agreement and the other Loan Documents shall survive.           2.19. Replacement of Certain Lenders. In the event a Lender (“Affected Lender”) shall have: (i) failed to fund its Pro Rata Share of any Advance requested by the applicable Borrower, or to fund a Revolving Loan in order to repay Swing Line Loans pursuant to Section 2.2(D), which such Lender is obligated to fund under the terms of this Agreement and which failure has not been cured, (ii) requested compensation from any Borrower under Sections 2.14(E), 4.1 or 4.2 to recover Taxes, Other Taxes or other additional costs incurred by such Lender which are not being incurred generally by the other Lenders, (iii) delivered a notice pursuant to Section 4.3 claiming that such Lender is unable to extend Eurodollar Rate Loans to any Borrower for reasons not generally applicable to the other Lenders or (iv) has invoked Section 11.2; then, in any such case, after engagement of one or more “Replacement Lenders” (as defined below) by the Company and/or the Administrative Agent, the Company or the Administrative Agent may make written demand on such Affected Lender (with a copy to the Administrative Agent in the case of a demand by the Company and a copy to the Company in the case of a demand by the Administrative Agent) for the Affected Lender to assign, and such Affected Lender shall use commercially reasonable efforts to assign pursuant to one or more duly executed Assignment Agreements five (5) Business Days after the date of such demand, to one or more financial institutions that comply with the provisions of Section 14.3(A) which the Company or the Administrative Agent, as the case may be, shall have engaged for such purpose (“Replacement Lender”), all of such Affected Lender’s rights and obligations under this 46 --------------------------------------------------------------------------------   Agreement and the other Loan Documents (including, without limitation, its Commitment, all Loans owing to it, all of its participation interests in existing Letters of Credit, L/C Drafts and unreimbursed drawings under Letters of Credit, and its obligation to participate in additional Letters of Credit and Swing Line Loans hereunder) in accordance with Section 14.3. The Administrative Agent agrees, upon the occurrence of such events with respect to an Affected Lender and upon the written request of the Company, to use its reasonable efforts to obtain the commitments from one or more financial institutions to act as a Replacement Lender. The Administrative Agent is authorized to execute one or more of such assignment agreements as attorney-in-fact for any Affected Lender failing to execute and deliver the same within five (5) Business Days after the date of such demand. Further, with respect to such assignment the Affected Lender shall have concurrently received, in cash, all amounts due and owing to the Affected Lender hereunder or under any other Loan Document, including, without limitation, the aggregate outstanding principal amount of the Loans owed to such Lender, together with accrued interest thereon through the date of such assignment, amounts payable under Sections 2.14(E), 4.1, and 4.2 with respect to such Affected Lender and compensation payable under Section 2.14(C) in the event of any replacement of any Affected Lender under clause (ii) or clause (iii) of this Section 2.19; provided that upon such Affected Lender’s replacement, such Affected Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14(E), 4.1, 4.2, 4.4, and 11.7, as well as to any fees accrued for its account hereunder and not yet paid, and shall continue to be obligated under Section 12.8.           2.20. Subsidiary Borrowers. The Company may at any time or from time to time, with the consent of the Administrative Agent add as a party to this Agreement any Subsidiary to be a Subsidiary Borrower hereunder by the execution and delivery to the Administrative Agent and the Lenders of (a) a duly completed Assumption Letter by such Subsidiary, with the written consent of the Company at the foot thereof, (b) such guaranty and subordinated intercompany indebtedness documents as may be reasonably required by the Administrative Agent and such other opinions, documents, certificates or other items as may be required by Section 5.2, such documents with respect to any additional Subsidiaries to be substantially similar in form and substance to the Loan Documents executed on or about the Closing Date by the Subsidiaries parties hereto as of the Closing Date. Upon such execution, delivery and consent such Subsidiary shall for all purposes be a party hereto as a Subsidiary Borrower as fully as if it had executed and delivered this Agreement. So long as the principal of and interest on any Advances made to any Subsidiary Borrower under this Agreement shall have been repaid or paid in full, all Letters of Credit issued for the account of such Subsidiary Borrower have expired or been returned and terminated and all other obligations of such Subsidiary Borrower under this Agreement shall have been fully performed, the Company may, by not less than five (5) Business Days’ prior notice to the Administrative Agent (which shall promptly notify the Lenders thereof), terminate such Subsidiary Borrower’s status as a “Subsidiary Borrower”. The Administrative Agent shall give the Lenders written notice of the addition of any Subsidiary Borrowers to this Agreement.           2.21. Judgment Currency. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due from any Borrower hereunder in the currency expressed to be payable herein (the “specified currency”) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent 47 --------------------------------------------------------------------------------   could purchase the specified currency with such other currency at the Administrative Agent’s main office in Chicago, Illinois on the Business Day preceding that on which the final, non-appealable judgment is given. The obligations of each Borrower in respect of any sum due to any Lender, any Issuing Bank or the Administrative Agent hereunder shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender, such Issuing Bank or the Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency such Lender, such Issuing Bank or the Administrative Agent (as the case may be) may in accordance with normal, reasonable banking procedures purchase the specified currency with such other currency. If the amount of the specified currency so purchased is less than the sum originally due to such Lender, such Issuing Bank or the Administrative Agent, as the case may be, in the specified currency, each Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to reimburse such Lender, such Issuing Bank or the Administrative Agent, as the case may be, for any such loss; and if no Default or Unmatured Default shall have occurred and is continuing and the amount of the specified currency so purchased exceeds (a) the sum originally due to any Lender, any Issuing Bank or the Administrative Agent, as the case may be, in the specified currency and (b) any amounts shared with other Lenders as a result of allocations of such excess as a disproportionate payment to such Lender or Issuing Bank under Section 14.2, such Lender, such Issuing Bank or the Administrative Agent, as the case may be, agrees to remit such excess to such Borrower. ARTICLE III: THE LETTER OF CREDIT FACILITY           3.1. Obligation to Issue Letters of Credit. Subject to the terms and conditions of this Agreement and in reliance upon the representations, warranties and covenants of the Borrowers herein set forth, each Issuing Bank hereby agrees to issue for the account of the Company or any Subsidiary Borrower through such Issuing Bank’s branches as it and the Company may jointly agree, one or more Letters of Credit denominated in an Agreed Currency in accordance with this Article III, from time to time during the period, commencing on the Closing Date and ending on the fifth (5th) Business Day prior to the Termination Date; provided, however, if an Issuing Bank is requested to issue Letters of Credit with respect to a jurisdiction such Issuing Bank deems, in its sole discretion, may at any time subject it to a New Money Credit Event, the Company shall, at the request of such Issuing Bank, guaranty and indemnify such Issuing Bank against any and all costs, liabilities and losses resulting from any New Money Credit Event in a form and substance satisfactory to such Issuing Bank.           3.2. Transitional Provision. Subject to the satisfaction of the conditions contained in Sections 5.1, 5.2 and 5.3, from and after the Closing Date each of the letters of credit identified on Schedule 3.2 hereto and issued for the account of the Company and its Subsidiaries pursuant to the Existing Credit Agreement (or deemed to be issued under the Existing Credit Agreement) shall be deemed to be Letters of Credit issued pursuant to this Article III.           3.3. Types and Amounts. No Issuing Bank shall have any obligation to and no Issuing Bank shall: 48 --------------------------------------------------------------------------------        (i) issue (or amend) any Letter of Credit if on the date of issuance (or amendment), before or after giving effect to the Letter of Credit requested hereunder, (a) the Dollar Amount of the Revolving Credit Obligations at such time would exceed the Adjusted Aggregate Commitment at such time (as such amount may be increased from time to time as provided in Section 2.5(B)) calculated as of the date of issuance of any Letter of Credit or (b) the Dollar Amount of the Financial Credit Obligations at such time would exceed the Financial Credit Sublimit as of the date of issuance of any Letter of Credit; or      (ii) issue (or amend) any Letter of Credit which has an expiration date later than the date which is five (5) Business Days immediately preceding the Termination Date; provided, that any Letter of Credit may provide for the renewal thereof for additional periods (which in no event shall extend beyond the fifth (5th) Business Day prior to the Termination Date).           3.4. Conditions. In addition to being subject to the satisfaction of the conditions contained in Sections 5.1, 5.2 and 5.3, the obligation of an Issuing Bank to issue any Letter of Credit is subject to the satisfaction in full of the following conditions:      (i) the applicable Borrower shall have delivered to the applicable Issuing Bank (at such times and in such manner as such Issuing Bank may reasonably prescribe) and the Administrative Agent, a request for issuance of such Letter of Credit in substantially the form of Exhibit C hereto, duly executed applications for such Letter of Credit and such other documents, instructions and agreements as may be required pursuant to the terms thereof (all such applications, documents, instructions, and agreements being referred to herein as the “L/C Documents”), and the proposed Letter of Credit shall be reasonably satisfactory to such Issuing Bank as to form and content; and      (ii) as of the date of issuance no order, judgment or decree of any court, arbitrator or Governmental Authority shall purport by its terms to enjoin or restrain the applicable Issuing Bank from issuing such Letter of Credit and no law, rule or regulation applicable to such Issuing Bank and no request or directive (whether or not having the force of law) from a Governmental Authority with jurisdiction over such Issuing Bank shall prohibit or request that such Issuing Bank refrain from the issuance of Letters of Credit generally or the issuance of that Letter of Credit.           3.5. Procedure for Issuance of Letters of Credit.      (A) Issuance. Subject to the terms and conditions of this Article III and provided that the applicable conditions set forth in Sections 5.1, 5.2 and 5.3 hereof have been satisfied, the applicable Issuing Bank shall, on the requested date, issue a Letter of Credit for the account of the Company or a Subsidiary Borrower, as applicable in accordance with such Issuing Bank’s usual and customary business practices and, in this connection, such Issuing Bank may assume that the applicable conditions set forth in Section 5.3 hereof have been satisfied unless it shall have received notice to the contrary from the Administrative Agent or a Lender or has knowledge that the applicable 49 --------------------------------------------------------------------------------   conditions have not been met. To the extent that there shall be any conflict between the provisions of any L/C Document and the provisions of this Agreement, the provisions of this Agreement shall prevail.      (B) Notice. The applicable Issuing Bank shall give the Administrative Agent written or telex notice, or telephonic notice confirmed promptly thereafter in writing, of (i) the issuance of a Letter of Credit and (ii) its reasonable determination as to whether such Letter of Credit is a Financial Letter of Credit or a Performance Letter of Credit; provided, however, that the failure to provide such notice shall not result in any liability on the part of such Issuing Bank.      (C) No Amendment. No Issuing Bank shall extend or amend any Letter of Credit unless the requirements of this Section 3.5 are met as though a new Letter of Credit was being requested and issued.           3.6. Letter of Credit Participation. On the date of this Agreement, with respect to the Letters of Credit identified in Section 3.2, and immediately upon the issuance of each Letter of Credit hereunder, each Lender shall be deemed to have automatically, irrevocably and unconditionally purchased and received from the applicable Issuing Bank an undivided interest and participation in and to such Letter of Credit, the obligations of the applicable Borrower in respect thereof, and the liability of such Issuing Bank thereunder (collectively, an “L/C Interest”) in an amount equal to the Dollar Amount available for drawing under such Letter of Credit multiplied by such Lender’s Pro Rata Share. Each Issuing Bank will notify the Administrative Agent and each Lender promptly upon presentation to it of an L/C Draft or upon any other draw under a Letter of Credit, which notice shall also state the Agreed Currency and face amount of such L/C Draft or other draw. On the Business Day on which an Issuing Bank makes payment of each such L/C Draft or, in the case of any other draw on a Letter of Credit, on demand by the Administrative Agent or the applicable Issuing Bank, each Lender shall make payment to the Administrative Agent, for the account of the applicable Issuing Bank, in immediately available funds in Dollars in an amount (to the extent such amount has not been timely reimbursed by the Borrowers pursuant to Section 3.7) equal to such Lender’s Pro Rata Share of the Dollar Amount of such payment or draw. The obligation of each Lender to reimburse the Issuing Banks under this Section 3.6 shall be unconditional, continuing, irrevocable and absolute. In the event that any Lender fails to make payment to the Administrative Agent of any amount due under this Section 3.6, the Administrative Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Administrative Agent receives such payment from such Lender or such obligation is otherwise fully satisfied; provided, however, that nothing contained in this sentence shall relieve such Lender of its obligation to reimburse the applicable Issuing Bank for such amount in accordance with this Section 3.6.           3.7. Reimbursement Obligation. Each of the Borrowers agree unconditionally, irrevocably and absolutely to pay immediately to the Administrative Agent, for the account of the Lenders, the amount of each advance drawn under or pursuant to a Letter of Credit issued to it or an L/C Draft related thereto (such obligation of such Borrower to reimburse the Administrative Agent for an advance made under a Letter of Credit or L/C Draft being hereinafter referred to as a “Reimbursement Obligation” with respect to such Letter of Credit or 50 --------------------------------------------------------------------------------   L/C Draft), each such reimbursement to be made by the applicable Borrower no later than the Business Day on which the applicable Issuing Bank makes payment of each such L/C Draft or, if the applicable Borrower shall have received notice of a Reimbursement Obligation later than 12:00 p.m. (Chicago time), on any Business Day or on a day which is not a Business Day, no later than 12:00 p.m. (Chicago time), on the immediately following Business Day or, in the case of any other draw on a Letter of Credit, the date specified in the demand of such Issuing Bank. If any Borrower at any time fails to repay a Reimbursement Obligation at the time specified in the preceding sentence, such unpaid Reimbursement Obligation shall at that time be automatically converted into an obligation denominated in Dollars and such Borrower shall be deemed to have elected to borrow Revolving Loans from the Lenders, as of the date of the advance giving rise to the Reimbursement Obligation, equal in amount to the Dollar Amount of the unpaid Reimbursement Obligation. Such Revolving Loans shall be made as of the date of the payment giving rise to such Reimbursement Obligation, automatically, without notice and without any requirement to satisfy the conditions precedent otherwise applicable to an Advance of Revolving Loans. Such Revolving Loans shall constitute a Floating Rate Advance, the proceeds of which Advance shall be used to repay such Reimbursement Obligation. If, for any reason, any Borrower fails to repay a Reimbursement Obligation on the day such Reimbursement Obligation arises and, for any reason, the Lenders are unable to make or have no obligation to make Revolving Loans, then such Reimbursement Obligation shall become immediately due and payable and bear interest from and after such day, until paid in full, at the interest rate applicable to a Floating Rate Advance (or, in the case of a Reimbursement Obligation denominated in an Agreed Currency other than Dollars, at the rate determined by the applicable Issuing Bank in good faith to represent such Issuing Bank’s cost of overnight or short-term funds in the applicable Agreed Currency plus the then effective Applicable Eurodollar Margin). The Borrowers agree to indemnify each Issuing Bank against any loss or expense determined by such Issuing Bank in good faith to have resulted from any conversion pursuant to this Section 3.7 by reason of the inability of such Issuing Bank to convert the Dollar Amount received from the applicable Borrower or from the Lenders, as applicable, into an amount in the applicable Agreed Currency of such Letter of Credit equal to the amount of such Reimbursement Obligation.           3.8. Letter of Credit Fees. The Borrowers agree to pay:      (i) quarterly, in arrears, to the Administrative Agent for the ratable benefit of the Lenders, a letter of credit fee at a rate per annum equal to the Applicable L/C Fee Percentage for Performance Letters of Credit and Financial Letters of Credit, as applicable, on the average daily outstanding Dollar Amount available for drawing under all Performance Letters of Credit and Financial Letters of Credit, respectively;      (ii) quarterly, in arrears, to the applicable Issuing Bank, a letter of credit fronting fee equal to 0.125% per annum on the average daily outstanding stated amount available for drawing under all Letters of Credit issued by such Issuing Bank; and      (iii) to the applicable Issuing Bank, all customary fees and other issuance, amendment, cancellation, document examination, negotiation, transfer and presentment expenses and related charges in connection with the issuance, amendment, cancellation, presentation of L/C Drafts, negotiation, transfer and the like 51 --------------------------------------------------------------------------------   customarily charged by such Issuing Banks with respect to financial, performance and commercial letters of credit, including, without limitation, standard commissions with respect to Performance Letters of Credit, payable at the time of invoice of such amounts.           3.9. Borrower and Issuing Bank Reporting Requirements. The Company shall, at any time as requested by the Administrative Agent or the Required Lenders but in any event no later than the tenth Business Day following the last day of each month, provide to the Administrative Agent schedules, in form and substance reasonably satisfactory to the Administrative Agent, showing (i) the date of issue, account party, Agreed Currency and amount in such Agreed Currency, Issuing Bank, expiration date and the reference number of each Letter of Credit issued hereunder and outstanding at any time during such month and (ii) the comparable information and details for each other letter of credit issued for the account of the Company or any Subsidiary and outstanding at the end of such month. In addition to the notices required by Section 3.5(B), each Issuing Bank shall, at any time as requested by the Administrative Agent or the Required Lenders but in any event no later than the tenth Business Day following the last day of each month, provide to the Administrative Agent schedules, in form and substance reasonably satisfactory to the Administrative Agent, showing the date of issue, account party, Agreed Currency and amount in such Agreed Currency, expiration date and the reference number of each Letter of Credit issued by it outstanding at any time during such month and the aggregate amount payable by the applicable Borrower during such month. In addition, upon the request of the Administrative Agent, each Issuing Bank shall furnish to the Administrative Agent copies of any Letter of Credit and any application for or reimbursement agreement with respect to a Letter of Credit to which the Issuing Bank is party and such other documentation as may reasonably be requested by the Administrative Agent. Upon the request of any Lender, the Administrative Agent will provide to such Lender information concerning such Letters of Credit as the Administrative Agent has received from the Issuing Banks.           3.10. Indemnification; Exoneration.      (A) Indemnification. In addition to amounts payable as elsewhere provided in this Article III, each Borrower hereby agrees to protect, indemnify, pay and save harmless the Administrative Agent, each Issuing Bank and each Lender from and against any and all liabilities and costs which the Administrative Agent, such Issuing Bank or such Lender may incur or be subject to in any way directly connected with (i) the issuance of any Letter of Credit other than, in the case of the applicable Issuing Bank, as a result of its Gross Negligence or willful misconduct of such Issuing Bank, as determined by the final judgment of a court of competent jurisdiction, or (ii) the failure of the applicable Issuing Bank to honor a drawing under a Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Authority (all such acts or omissions herein called “Governmental Acts”).      (B) Risk Assumption. As among the Borrowers, the Lenders, the Administrative Agent and the Issuing Banks, the Borrowers assume all risks of the acts and omissions of, or misuse of such Letter of Credit by, the beneficiary of any Letters of Credit. In furtherance and not in limitation of the foregoing, subject to the provisions of the Letter of Credit applications and Letter of Credit reimbursement agreements executed 52 --------------------------------------------------------------------------------   by the Borrowers at the time of request for any Letter of Credit, neither the Administrative Agent, any Issuing Bank nor any Lender shall be responsible (in the absence of Gross Negligence or willful misconduct in connection therewith, as determined by the final judgment of a court of competent jurisdiction): (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of the Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of a Letter of Credit to comply duly with conditions required in order to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, or other similar form of teletransmission or otherwise; (v) for errors in interpretation of technical trade terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (vii) for the misapplication by the beneficiary of a Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of the Administrative Agent, the Issuing Banks and the Lenders, including, without limitation, any Governmental Acts. None of the above shall affect, impair, or prevent the vesting of any Issuing Bank’s rights or powers under this Section 3.10.      (C) No Liability. In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by any Issuing Bank under or in connection with the Letters of Credit or any related certificates shall not, in the absence of Gross Negligence or willful misconduct of such Issuing Bank, as determined by the final judgment of a court of competent jurisdiction, put the applicable Issuing Bank, the Administrative Agent or any Lender under any resulting liability to any Borrower or relieve any Borrower of any of its obligations hereunder to any such Person.      (D) Survival of Agreements and Obligations. Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 3.10 shall survive the payment in full of principal and interest hereunder, the termination of the Letters of Credit and the termination of this Agreement.           3.11. Market Disruption. Notwithstanding the satisfaction of all conditions referred to in Article II, Article III and Article V with respect to any Letter of Credit to be issued in any Agreed Currency other than Dollars, if there shall occur on or prior to the date of issuance of such Letter of Credit any Market Disruption, then the Administrative Agent shall forthwith give notice thereof to the Borrowers, the Issuing Bank and the Lenders, and such Letter of Credit shall not be denominated in such Agreed Currency but shall be made on the date of issuance of such Letter of Credit in Dollars, in a face amount equal to the Dollar Amount of the face amount specified in the related request or application for such Letter of Credit, unless the Borrower notifies the Administrative Agent at least one Business Day before such date that (i) it elects not to request the issuance of such Letter of Credit on such date or (ii) it elects to have such Letter of 53 --------------------------------------------------------------------------------   Credit issued on such date in a different Agreed Currency, as the case may be, in which the denomination of such Letter of Credit would in the opinion of the applicable Issuing Bank, the Administrative Agent and the Required Lenders be practicable and in a face amount equal to the Dollar Amount of the face amount specified in the related request or application for such Letter of Credit, as the case may be.           3.12. L/C Collateral Account. The Company agrees that it will, as required by Sections 2.4(B)(iii) or 9.1 and until the final expiration date of any Letter of Credit and thereafter as long as any amount is payable to the Issuing Banks or the Lenders in respect of any Letter of Credit, maintain a special collateral account pursuant to arrangements satisfactory to the Administrative Agent (the “L/C Collateral Account”) at the Administrative Agent’s office at the address specified pursuant to Article XV, in the name of the Company but under the sole dominion and control of the Administrative Agent, for the benefit of the Administrative Agent, the Issuing Banks and the Lenders and in which the Company shall have no interest other than as set forth in Sections 2.4(B)(iii) or 9.1. The Company hereby pledges, assigns and grants to the Administrative Agent, on behalf of and for the ratable benefit of the Administrative Agent, the Issuing Banks and the Lenders, a security interest in all of the Company’s right, title and interest in and to all funds which may from time to time be on deposit in the L/C Collateral Account to secure the prompt and complete payment and performance of the Obligations. The Administrative Agent will invest any funds on deposit from time to time in the L/C Collateral Account in certificates of deposit of JPMorgan having a maturity not exceeding thirty (30) days. Nothing in this Section 3.12 shall either obligate the Administrative Agent to require the Company to deposit any funds in the L/C Collateral Account or limit the right of the Administrative Agent to release any funds held in the L/C Collateral Account in each case other than as required by Sections 2.4(B)(iii) or 9.1. ARTICLE IV: CHANGE IN CIRCUMSTANCES           4.1. Yield Protection.      (A) Yield Protection. If any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) adopted after the date of this Agreement and having general applicability to all banks within the jurisdiction in which such Lender operates (excluding, for the avoidance of doubt, the effect of and phasing in of capital requirements or other regulations or guidelines passed prior to the date of this Agreement), or any interpretation or application thereof by any Governmental Authority charged with the interpretation or application thereof, or the compliance of any Lender therewith,      (i) subjects any Lender or any applicable Lending Installation to any tax, duty, charge or withholding on or from payments due from any Borrower (excluding taxation of the overall net income of any Lender or taxation of a similar basis, which are governed by Section 2.14(E)), or changes the basis of taxation of payments to any Lender in respect of its Commitment, Loans, its L/C Interests, the Letters of Credit or other amounts due it hereunder, or 54 --------------------------------------------------------------------------------        (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Rate Loans) with respect to its Commitment, Loans, L/C Interests or the Letters of Credit, or      (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining its Commitment, the Loans, the L/C Interests or the Letters of Credit or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with its Commitment, Loans or Letters of Credit, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of Commitment, Loans or L/C Interests held or interest received by it or by reference to the Letters of Credit, by an amount deemed material by such Lender; and the result of any of the foregoing is to increase the cost to that Lender of making, renewing or maintaining its Commitment, Loans, L/C Interests, or Letters of Credit or to reduce any amount received under this Agreement, then, within fifteen (15) days after receipt by the Company or any other Borrower of written demand by such Lender pursuant to Section 4.5, the applicable Borrowers shall pay such Lender that portion of such increased expense incurred or reduction in an amount received which such Lender determines is attributable to making, funding and maintaining its Loans, L/C Interests, Letters of Credit and its Commitment.      (B) Non-U.S. Reserve Costs or Fees With Respect to Loans and Letters of Credit to Borrowers. If any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive of any jurisdiction outside of the United States of America or any subdivision thereof (whether or not having the force of law), imposes or deems applicable any reserve requirement against or fee with respect to assets of, deposits with or for the account of, or credit extended by, any Lender, any Issuing Bank or any applicable Lending Installation, and the result of the foregoing is to increase the cost to such Lender, such Issuing Bank or applicable Lending Installation of making or maintaining its Eurodollar Loans to, or issuing a Letter of Credit in an Agreed Currency other than Dollars for the benefit of, any Borrower or its Commitment to any Borrower or to reduce the return received by such Lender, such Issuing Bank or applicable Lending Installation in connection with such Eurodollar Loans or Letters of Credit to or for the benefit of any Borrower or Commitment to any Borrower, then, within 15 days of demand by such Lender or such Issuing Bank, such Borrower shall pay such Lender or such Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or such Issuing Bank for such increased cost or reduction in amount received, provided that such Borrower shall not be required to compensate any Lender for such non-U.S. reserve costs or fees to the extent that an amount equal to such reserve costs or fees is received by such Lender as a result of the calculation of the interest rate applicable to Eurodollar Rate Advances pursuant to clause (i)(b) of the definition of “Eurodollar Rate.” 55 --------------------------------------------------------------------------------             4.2. Changes in Capital Adequacy Regulations. If a Lender determines (i) the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a “Change” (as defined below), and (ii) such increase in capital will result in an increase in the cost to such Lender of maintaining its Commitment, Loans, L/C Interests, the Letters of Credit or its obligation to make Loans hereunder, then, within fifteen (15) days after receipt by the Company or any other Borrower of written demand by such Lender pursuant to Section 4.5, the applicable Borrowers shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender determines is attributable to this Agreement, its Commitment, its Loans, its L/C Interests, the Letters of Credit or its obligation to make Loans hereunder (after taking into account such Lender’s policies as to capital adequacy). “Change” means (i) any change after the date of this Agreement in the “Risk-Based Capital Guidelines” (as defined below) excluding, for the avoidance of doubt, the effect of any phasing in of such Risk-Based Capital Guidelines or any other capital requirements passed prior to the Closing Date, or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. “Risk-Based Capital Guidelines” means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled “International Convergence of Capital Measurements and Capital Standards,” including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement.           4.3. Availability of Types of Advances. If (i) any Lender determines that maintenance of its Eurodollar Rate Loans at a suitable Lending Installation would violate any applicable law, rule, regulation or directive, whether or not having the force of law, or (ii) the Required Lenders determine that (x) deposits of a type or maturity appropriate to match fund Eurodollar Rate Loans are not available or (y) the interest rate applicable to a Eurodollar Rate Loan does not accurately reflect the cost of making or maintaining such an Advance, then the Administrative Agent shall suspend the availability of the affected Type of Advance and, in the case of any occurrence set forth in clause (i), require any Advances of the affected Type to be repaid or converted into another Type.           4.4. Funding Indemnification. If any payment of a Eurodollar Rate Loan occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment (whether voluntary or mandatory, including, without limitation, as required pursuant to Section 2.4(B)), or otherwise (including, without limitation, as a result of the provisions of Section 2.5(B)), or a Eurodollar Rate Loan is not made on the date specified by the applicable Borrower for any reason other than default by the Lenders, or a Eurodollar Rate Loan is not prepaid on the date specified by the applicable Borrower for any reason, the Borrowers indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain the Eurodollar Rate Loan. 56 --------------------------------------------------------------------------------             4.5. Lender Statements; Survival of Indemnity. If reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Rate Loan to reduce any liability of any Borrower to such Lender under Sections 4.1 and 4.2 or to avoid the unavailability of a Type of Advance under Section 4.3, so long as such designation is not, in the judgment of the Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Company (with a copy to the Administrative Agent) as to the amount due, if any, under Sections 2.14(E), 4.1, 4.2 or 4.4 and shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be prima facie evidence thereof and binding on the Borrowers in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurodollar Rate Loan shall be calculated as though each Lender funded its Eurodollar Rate Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the applicable Borrower of such statement. The obligations of the Company and the other Borrowers under Sections 2.14(E), 4.1, 4.2 and 4.4 shall survive payment of the Obligations and termination of this Agreement. ARTICLE V: CONDITIONS PRECEDENT           5.1. Initial Advances and Letters of Credit. The Lenders shall not be required to make the initial Loans or issue any Letters of Credit unless, on or prior to the Closing Date, the Borrowers have furnished to the Administrative Agent each of the following, with sufficient copies (if applicable) for the Lenders, all in form and substance satisfactory to the Administrative Agent and the Lenders:      (i) Copies of the Certificate of Incorporation or comparable charter documents of each of the Borrowers as of the Closing Date, together with all amendments and a certificate of good standing, both certified as of a recent date by the appropriate governmental officer in its jurisdiction of incorporation;      (ii) Copies, certified by the Secretary or Assistant Secretary of each of the Borrowers of their respective By-Laws or comparable governance documents and of their respective Board of Directors’ resolutions authorizing the execution of the Loan Documents entered into by it;      (iii) An incumbency certificate, executed by the Secretary or Assistant Secretary of each of the Borrowers, which shall identify by name and title and bear the signature of the officers of the applicable Borrower authorized to sign the Loan Documents and, of the applicable Borrower to make borrowings hereunder, upon which certificate the Lenders shall be entitled to rely until informed of any change in writing by the Company;      (iv) A certificate, in form and substance satisfactory to the Administrative Agent, signed by an Authorized Officer of the Company, certifying that on the date of this Agreement (a) all the representations in this Agreement are true and correct (unless such representation and warranty is made as of a specific date, in which case, 57 --------------------------------------------------------------------------------   such representation and warranty shall be true and correct as of such date), (b) no Default or Unmatured Default has occurred and is continuing and (c) there exists no injunction or temporary restraining order which would prohibit the making of the Loans, the issuance of the Letters of Credit or the consummation of the other transactions contemplated by the Loan Documents or any litigation seeking such an injunction or restraining order;      (v) The written opinions of the Borrowers’ and Guarantors’ Assistant General Counsel, and of the Company’s Dutch counsel, addressed to the Administrative Agent and the Lenders, in substantially the forms attached hereto as Exhibit E-1 and Exhibit E-2, respectively;      (vi) Such other documents as the Administrative Agent or its counsel may have reasonably requested, including, without limitation, all of the documents reflected on the List of Closing Documents attached as Exhibit E-3 to this Agreement;      (vii) Evidence satisfactory to the Administrative Agent of the payment, prior to or simultaneously with the initial Advance hereunder, of all principal, interest, fees and premiums, if any, on all loans and other extensions of credit outstanding under the Existing Credit Agreement; and      (viii) Evidence satisfactory to (a) the Administrative Agent that the Company has paid or caused to be paid to the Administrative Agent and JPMSI the fees (including, without limitation, the upfront fees payable to the Lenders) agreed to in the fee letter dated September 14, 2006, among the Administrative Agent, JPMSI and the Company and (b) the Syndication Agent that the Company has paid or caused to be paid to the Syndication Agent and BAS the fees agreed to in the fee letter dated September 14, 2006 among the Syndication Agent, BAS and the Company.           5.2. Initial Advance to Each New Subsidiary Borrower. No Lender shall be required to make an Advance hereunder or purchase participations in Letters of Credit, no Issuing Bank shall be required to issue a Letter of Credit hereunder, in each case, to a new Subsidiary Borrower added after the Closing Date unless the Company has furnished or caused to be furnished to the Administrative Agent with sufficient copies for the Lenders:      (i) The Assumption Letter executed and delivered by such Subsidiary Borrower and containing the written consent of the Company at the foot thereof, as contemplated by Section 2.20;      (ii) Copies, certified by the Secretary, Assistant Secretary, Director or Officer of the Subsidiary Borrower, of its Board of Directors’ resolutions (and/or resolutions of other bodies, if any are deemed necessary by the Administrative Agent) approving the Assumption Letter;      (iii) An incumbency certificate, executed by the Secretary, Assistant Secretary, Director or Officer of the Subsidiary Borrower, which shall identify by name and title and bear the signature of the officers of such Subsidiary Borrower authorized to sign 58 --------------------------------------------------------------------------------   the Assumption Letter and the other documents to be executed and delivered by such Subsidiary Borrower hereunder, upon which certificate the Administrative Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Company;      (iv) An opinion of counsel to such Subsidiary Borrower, substantially in the form of Exhibit E-4 hereto or, in the case of a new non-domestic Subsidiary Borrower, in a form reasonably acceptable to the Administrative Agent;      (v) Guaranty documentation, if applicable, from such Subsidiary Borrower in form and substance acceptable to the Administrative Agent as required pursuant to Section 7.2(K);      (vi) With respect to the initial Advance or any Swing Line Loan made to, or Letter of Credit issued for the account of, any Subsidiary Borrower organized under the laws of England and Wales (or any other jurisdiction where filings are required in order for amounts payable under this Agreement to be exempt from applicable withholding or other taxes), the Administrative Agent shall have received originals and/or copies, as applicable, of all filings required to be made and such other evidence as the Administrative Agent may require establishing to the Administrative Agent’s satisfaction that each Lender, Swing Line Bank and Issuing Bank is entitled to receive payments under the Loan Documents without deduction or withholding of any English (or other applicable jurisdictions) taxes or with such deductions and withholding of English (or other applicable jurisdictions) taxes as may be acceptable to the Administrative Agent.           5.3. Each Advance and Letter of Credit. The Lenders shall not be required to make any Advance, or convert or continue any Advance, or issue or amend any Letter of Credit and no Swing Line Bank shall be required to make any Swing Line Loans hereunder, unless on the applicable Borrowing Date, or in the case of a Letter of Credit, the date on which the Letter of Credit is to be issued or amended:      (A) No Defaults. There exists no Default or Unmatured Default;      (B) Representations and Warranties. All of the representations and warranties contained in Article VI are true and correct as of such Borrowing Date (unless such representation and warranty is made as of a specific date, in which case, such representation and warranty shall be true and correct as of such date) except for changes in the Schedules to this Agreement reflecting transactions permitted by or not in violation of this Agreement; and      (C) Maximum Amounts. The Revolving Credit Obligations do not, and after making such proposed Advance or issuing or amending such Letter of Credit would not, exceed the Adjusted Aggregate Commitment and the Financial Credit Obligations do not, and after making such proposed Advance or issuing or amending such Letter of Credit would not, exceed the Financial Credit Sublimit. 59 --------------------------------------------------------------------------------        Each Borrowing/Election Notice with respect to each such Advance and the letter of credit application with respect to each Letter of Credit shall constitute a representation and warranty by the Borrowers that the conditions contained in Sections 5.3(A), (B) and (C) have been satisfied. ARTICLE VI: REPRESENTATIONS AND WARRANTIES           In order to induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and the other financial accommodations to the Borrowers and to issue the Letters of Credit described herein, the Company represents and warrants as follows to each Lender and the Administrative Agent as of the Closing Date, giving effect to the consummation of the transactions contemplated by the Loan Documents on the Closing Date, and thereafter on each date as required by Section 5.1, 5.2 and 5.3:           6.1. Organization; Corporate Powers; Dutch Banking Act. The Company and each of its Subsidiaries (i) is a corporation, limited liability company or partnership that is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified to do business as a foreign entity and is in good standing under the laws of each jurisdiction in which failure to be so qualified and in good standing could not reasonably be expected to have a Material Adverse Effect, and (iii) has all requisite power and authority to own, operate and encumber its property and to conduct its business as presently conducted and as proposed to be conducted. Furthermore, each Borrower organized under the laws of the Netherlands represents and warrants to the Lenders that it is in compliance with the applicable provisions of the Dutch Banking Act and any implementing regulation including but not limited to the Dutch Exemption Regulation.           6.2. Authority, Execution and Delivery; Loan Documents.      (A) Power and Authority. Each of the Loan Parties has the requisite power and authority to execute, deliver and perform each of the Loan Documents which are to be executed by it as required by this Agreement and the other Loan Documents and (ii) to file the Loan Documents which must be filed by it as required by this Agreement, the other Loan Documents or otherwise with any Governmental Authority.      (B) Execution and Delivery. The execution, delivery, performance and filing, as the case may be, of each of the Loan Documents as required by this Agreement or otherwise and to which any Loan Party is party, and the consummation of the transactions contemplated thereby, have been duly approved by the respective boards of directors and, if necessary, the shareholders of the applicable Loan Parties, and such approvals have not been rescinded.      (C) Loan Documents. Each of the Loan Documents to which the Company or any of its Subsidiaries is a party has been duly executed, delivered or filed, as the case may be, by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (except as enforceability may be limited by bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally), is in full force and effect and no material term or condition thereof has been amended, modified or waived from the terms and conditions contained in the Loan Documents 60 --------------------------------------------------------------------------------   delivered to the Administrative Agent pursuant to Section 5.1 without the prior written consent of the Administrative Agent, and the Company and its Subsidiaries have, and, to the best of the Company’s and its Subsidiaries’ knowledge, all other parties thereto have, performed and complied with all the terms, provisions, agreements and conditions set forth therein and required to be performed or complied with by such parties, and no unmatured default, default or breach of any covenant by any such party exists thereunder.           6.3. No Conflict; Governmental Consents. The execution, delivery and performance of each of the Loan Documents to which each of the Loan Parties is a party do not and will not (i) conflict with the certificate or articles of incorporation or by-laws of such Loan Party, (ii) constitute a tortious interference with any Contractual Obligation of any Person or conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under any Requirement of Law or Contractual Obligation of any such Loan Party, or require termination of any Contractual Obligation, (iii) result in or require the creation or imposition of any Lien whatsoever upon any of the property or assets of the Company or any of its Subsidiaries, other than Liens permitted or created by the Loan Documents, or (iv) require any approval of any Loan Party’s Board of Directors or shareholders except such as have been obtained. The execution, delivery and performance of each of the Loan Documents to which the Company or any of its Subsidiaries is a party do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by any Governmental Authority, except filings, consents or notices which have been made, obtained or given, or which, if not made, obtained or given, individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect.           6.4. Financial Statements.      (A) Pro Forma Financials. The combined pro forma balance sheet, income statements and statements of cash flow of the Company and its Subsidiaries, copies of which are attached hereto as Schedule 6.4 to this Agreement, present on a pro forma basis the financial condition of the Company and such Subsidiaries as of such date, and demonstrate that the Company and its Subsidiaries can repay their debts and satisfy their other obligations as and when due, and can comply with the requirements of this Agreement. The projections and assumptions expressed in the pro forma financials referenced in this Section 6.4(A) were prepared in good faith and represent management’s opinion based on the information available to the Company at the time so furnished and, since the preparation thereof and up to the Closing Date, there has occurred no change in the business, financial condition, operations, or prospects of the Company or any of its Subsidiaries, or the Company and its Subsidiaries taken as a whole, which has had or could reasonably be expected to have a Material Adverse Effect.      (B) Audited Financial Statements. Complete and accurate copies of the audited financial statements and the audit reports related thereto of the Company and its consolidated Subsidiaries as at December 31, 2005 have been delivered to the Administrative Agent and such financial statements were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the 61 --------------------------------------------------------------------------------   Company and its Subsidiaries at such date and the consolidated results of their operations for the period then ended.      (C) Interim Financial Statements. Complete and accurate copies of the unaudited financial statements of the Company and its consolidated Subsidiaries as at June 30, 2006 have been delivered to the Administrative Agent and such financial statements were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Company and its Subsidiaries at such date and the consolidated results of their operations for the period then ended, subject to normal year-end audit adjustments.           6.5. No Material Adverse Change. Since December 31, 2005, there has occurred no change in the business, properties, condition (financial or otherwise), performance, results of operations or prospects of the Company, any other Borrower or the Company and its Subsidiaries taken as a whole, or any other event which has had or could reasonably be expected to have a Material Adverse Effect.           6.6. Taxes.      (A) Tax Examinations. All deficiencies which have been asserted against the Company or any of the Company’s Subsidiaries as a result of any federal, state, local or foreign tax examination for each taxable year in respect of which an examination has been conducted have been fully paid or finally settled or are being contested in good faith, and no issue has been raised by any taxing authority in any such examination which, by application of similar principles, could reasonably be expected to result in assertion by such taxing authority of a material deficiency for any other year not so examined which has not been reserved for in the Company’s consolidated financial statements to the extent, if any, required by Agreement Accounting Principles. Except as permitted pursuant to Section 7.2(D), neither the Company nor any of the Company’s Subsidiaries anticipates any tax liability with respect to the years which have not been closed pursuant to applicable law.      (B) Payment of Taxes. All material tax returns and reports of the Company and its Subsidiaries required to be filed have been timely filed, and all taxes, assessments, fees and other governmental charges thereupon and upon their respective property, assets, income and franchises which are shown in such returns or reports to be due and payable have been paid except those items which are being contested in good faith and have been reserved for in accordance with Agreement Accounting Principles. The Company has no knowledge of any proposed tax assessment against it or any of its Subsidiaries that will have or could reasonably be expected to have a Material Adverse Effect.           6.7. Litigation; Loss Contingencies and Violations. Other than as identified on Schedule 6.7, there is no action, suit, proceeding, arbitration or, to the Company’s knowledge, investigation before or by any Governmental Authority or private arbitrator pending or, to the Company’s knowledge, threatened against or affecting the Company or any of its Subsidiaries or any property of any of them, including, without limitation, any such actions, suits, proceedings, 62 --------------------------------------------------------------------------------   arbitrations and investigations disclosed in the Company’s SEC Forms 10-K and 10-Q (the “Disclosed Litigation”), which (i) challenges the validity or the enforceability of any material provision of the Loan Documents or (ii) has or could reasonably be expected to have a Material Adverse Effect. There is no material loss contingency within the meaning of Agreement Accounting Principles which has not been reflected in the consolidated financial statements of the Company prepared and delivered pursuant to Section 7.1(A) for the fiscal period during which such material loss contingency was incurred. Neither the Company nor any of its Subsidiaries is (A) in violation of any applicable Requirements of Law which violation could reasonably be expected to have a Material Adverse Effect, or (B) subject to or in default with respect to any final judgment, writ, injunction, restraining order or order of any nature, decree, rule or regulation of any court or Governmental Authority which could reasonably be expected to have a Material Adverse Effect.           6.8. Subsidiaries. Schedule 6.8 to this Agreement (i) contains a description of the corporate structure of the Company, its Subsidiaries and any other Person in which the Company or any of its Subsidiaries holds an Equity Interest; and (ii) accurately sets forth (A) the correct legal name, the jurisdiction of incorporation and the jurisdictions in which each of the Company and the direct and indirect Subsidiaries of the Company are qualified to transact business as a foreign corporation, (B) the authorized, issued and outstanding shares of each class of Capital Stock of each of the Company’s Foreign Subsidiaries and the owners of such shares (both as of the Closing Date and on a fully-diluted basis), and (C) a summary of the direct and indirect partnership, joint venture, or other Equity Interests, if any, of the Company and each of its Subsidiaries in any Person. Except as disclosed on Schedule 6.8, none of the issued and outstanding Capital Stock of the Company’s Foreign Subsidiaries is subject to any vesting, redemption, or repurchase agreement, and there are no warrants or options outstanding with respect to such Capital Stock. The outstanding Capital Stock of each of the Company’s Subsidiaries is duly authorized, validly issued, fully paid and nonassessable and is not Margin Stock.           6.9. ERISA. No Benefit Plan has incurred any material accumulated funding deficiency (as defined in Sections 302(a)(2) of ERISA and 412(a) of the Code) whether or not waived. Neither the Company nor any member of the Controlled Group has incurred any material liability to the PBGC which remains outstanding other than the payment of premiums. As of the last day of the most recent prior plan year, the market value of assets under each Benefit Plan, other than any Multiemployer Plan, was not by a material amount less than the present value of benefit liabilities thereunder (determined in accordance with the actuarial valuation assumptions described therein). Neither the Company nor any member of the Controlled Group has (i) failed to make a required contribution or payment to a Multiemployer Plan of a material amount or (ii) incurred a material complete or partial withdrawal under Section 4203 or Section 4205 of ERISA from a Multiemployer Plan. Neither the Company nor any member of the Controlled Group has failed to make an installment or any other payment of a material amount required under Section 412 of the Code on or before the due date for such installment or other payment. Each Plan, Foreign Employee Benefit Plan and Non-ERISA Commitment complies in all material respects in form, and has been administered in all material respects in accordance with its terms and in accordance with all applicable laws and regulations, including but not limited to ERISA and the Code. There have been no and there is no prohibited transaction described in Sections 406 of ERISA or 4975 of the Code with respect to any Plan for 63 --------------------------------------------------------------------------------   which a statutory or administrative exemption does not exist which could reasonably be expected to subject the Company or any of is Subsidiaries to material liability. Neither the Company nor any member of the Controlled Group has taken or failed to take any action which would constitute or result in a Termination Event, which action or inaction could reasonably be expected to subject the Company or any of its Subsidiaries to material liability. Neither the Company nor any member of the Controlled Group is subject to any material liability under, or has any potential material liability under, Section 4063, 4064, 4069, 4204 or 4212(c) of ERISA. The present value of the aggregate liabilities to provide all of the accrued benefits under any Foreign Pension Plan do not exceed the current fair market value of the assets held in trust or other funding vehicle for such plan by a material amount. With respect to any Foreign Employee Benefit Plan other than a Foreign Pension Plan, reasonable reserves have been established in accordance with prudent business practice or where required by ordinary accounting practices in the jurisdiction in which such plan is maintained. Neither the Company nor any other member of the Controlled Group has taken or failed to take any action, nor has any event occurred, with respect to any “employee benefit plan” (as defined in Section 3(3) of ERISA) which action, inaction or event could reasonably be expected to subject the Company or any of its Subsidiaries to material liability. For purposes of this Section 6.9, “material” means any amount, noncompliance or other basis for liability which could reasonably be expected to subject the Company or any of its Subsidiaries to liability, individually or in the aggregate with each other basis for liability under this Section 6.9, in excess of $2,000,000.           6.10. Accuracy of Information. The information, exhibits and reports furnished by or on behalf of the Company and any of its Subsidiaries to the Administrative Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents, the representations and warranties of the Company and its Subsidiaries contained in the Loan Documents, and all certificates and documents delivered to the Administrative Agent and the Lenders pursuant to the terms thereof, taken as a whole, do not contain as of the date furnished any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.           6.11. Securities Activities. Neither the Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. Margin Stock constitutes less than 25% of the value of those assets of the Company and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder.           6.12. Material Agreements. Neither the Company nor any of its Subsidiaries is a party to any Contractual Obligation or subject to any charter or other corporate restriction which individually or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received notice or has knowledge that (i) it is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation applicable to it, or (ii) any condition exists which, with the giving of notice or the lapse of time or both, would constitute a default with respect to any such Contractual Obligation, in each case, except where such default or defaults, if any, individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. 64 --------------------------------------------------------------------------------             6.13. Compliance with Laws. The Company and its Subsidiaries are in compliance with all Requirements of Law applicable to them and their respective businesses, in each case where the failure to so comply individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.           6.14. Assets and Properties. The Company and each of its Subsidiaries has good and marketable title to all of its material assets and properties (tangible and intangible, real or personal) owned by it or a valid leasehold interest in all of its material leased assets (except insofar as marketability may be limited by any laws or regulations of any Governmental Authority affecting such assets), and all such assets and property are free and clear of all Liens, except Liens permitted under Section 7.3(C). Substantially all of the assets and properties owned by, leased to or used by the Company and/or each such Subsidiary of the Company are in adequate operating condition and repair, ordinary wear and tear excepted. Neither this Agreement nor any other Loan Document, nor any transaction contemplated under any such agreement, will affect any right, title or interest of the Company or such Subsidiary in and to any of such assets in a manner that could reasonably be expected to have a Material Adverse Effect.           6.15. Statutory Indebtedness Restrictions. Neither the Company nor any of its Subsidiaries is subject to regulation under the Federal Power Act, the Investment Company Act of 1940, or any other foreign, federal or state statute or regulation which limits its ability to incur indebtedness or its ability to consummate the transactions contemplated hereby.           6.16. Insurance. The insurance policies and programs in effect with respect to the respective properties, assets, liabilities and business of the Company and its Subsidiaries reflect coverage that is reasonably consistent with prudent industry practice.           6.17. Environmental Matters.      (A) Environmental Representations. Except as disclosed on Schedule 6.17 to this Agreement:      (i) the operations of the Company and its Subsidiaries comply in all material respects with Environmental, Health or Safety Requirements of Law;      (ii) the Company and its Subsidiaries have all material permits, licenses or other authorizations required under Environmental, Health or Safety Requirements of Law and are in material compliance with such permits;      (iii) neither the Company, any of its Subsidiaries nor any of their respective present property or operations, or, to the Company’s or any of its Subsidiaries’ knowledge, any of their respective past property or operations, are subject to or the subject of, any investigation known to the Company or any of its Subsidiaries, any judicial or administrative proceeding, order, judgment, decree, settlement or other agreement respecting: (A) any material violation of Environmental, Health or Safety Requirements of Law; (B) any remedial action; or (C) any material claims or liabilities arising from the Release or threatened Release of a Contaminant into the environment; 65 --------------------------------------------------------------------------------        (iv) there is not now, nor to the Company’s or any of its Subsidiaries’ knowledge has there ever been, on or in the property of the Company or any of its Subsidiaries any landfill, waste pile, underground storage tanks, aboveground storage tanks, surface impoundment or hazardous waste storage facility of any kind, any polychlorinated biphenyls (PCBs) used in hydraulic oils, electric transformers or other equipment, or any asbestos containing material; and      (v) neither the Company nor any of its Subsidiaries has any material Contingent Obligation in connection with any Release or threatened Release of a Contaminant into the environment.      (B) Materiality. For purposes of this Section 6.17 “material” means any noncompliance or basis for liability which could reasonably be likely to subject the Company or any of its Subsidiaries to liability, individually or in the aggregate, in excess of $5,000,000.           6.18. Representations and Warranties of each Subsidiary Borrower. Each Subsidiary Borrower represents and warrants to the Lenders that:      (A) Organization and Corporate Powers. Such Subsidiary Borrower (i) is a company duly formed and validly existing and in good standing under the laws of the state or country of its organization (such jurisdiction being hereinafter referred to as the “Home Country”) and (ii) has the requisite power and authority to own its property and assets and to carry on its business substantially as now conducted except where the failure to have such requisite authority would not reasonably be expected to have a Material Adverse Effect.      (B) Binding Effect. Each Loan Document executed by such Subsidiary Borrower is the legal, valid and binding obligation of such Subsidiary Borrower enforceable in accordance with its respective terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles.      (C) No Conflict; Government Consent. Neither the execution and delivery by such Subsidiary Borrower of the Loan Documents to which it is a party, nor the consummation by it of the transactions therein contemplated to be consummated by it, nor compliance by such Subsidiary Borrower with the provisions thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on such Subsidiary Borrower or any of its Subsidiaries or such Subsidiary Borrower’s or any of its Subsidiaries’ memoranda or articles of association or the provisions of any indenture, instrument or agreement to which such Subsidiary Borrower or any of its 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 the creation or imposition of any lien in, of or on the property of such Subsidiary Borrower or any of its Subsidiaries pursuant to the terms of any such indenture, instrument or agreement in any such case which violation, conflict, default, creation or imposition would not reasonably be expected to have a Material Adverse Effect. No order, consent, approval, license, authorization, or validation of, or 66 --------------------------------------------------------------------------------   filing, recording or registration with, or exemption by, any Governmental Authority is required to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, any of the Loan Documents, except for such as have been obtained or made.      (D) Filing. To ensure the enforceability or admissibility in evidence of this Agreement and each Loan Document to which such Subsidiary Borrower is a party in its Home Country, it is not necessary that this Agreement or any other Loan Document to which such Subsidiary Borrower is a party or any other document be filed or recorded with any court or other authority in its Home Country or that any stamp or similar tax be paid to or in respect of this Agreement or any other Loan Document of such Subsidiary Borrower. The qualification by any Lender or the Administrative Agent for admission to do business under the laws of such Subsidiary Borrower’s Home Country does not constitute a condition to, and the failure to so qualify does not affect, the exercise by any Lender or the Administrative Agent of any right, privilege, or remedy afforded to any Lender or the Administrative Agent in connection with the Loan Documents to which such Subsidiary Borrower is a party or the enforcement of any such right, privilege, or remedy against Subsidiary Borrower. The performance by any Lender or the Administrative Agent of any action required or permitted under the Loan Documents will not (i) violate any law or regulation of such Subsidiary Borrower’s Home Country or any political subdivision thereof, (ii) result in any tax or other monetary liability to such party pursuant to the laws of such Subsidiary Borrower’s Home Country or political subdivision or taxing authority thereof (provided that, should any such action result in any such tax or other monetary liability to the Lender or the Administrative Agent, the Borrowers hereby agree to indemnify such Lender or the Administrative Agent, as the case may be, against (x) any such tax or other monetary liability and (y) any increase in any tax or other monetary liability which results from such action by such Lender or the Administrative Agent and, to the extent the Borrowers make such indemnification, the incurrence of such liability by the Administrative Agent or any Lender will not constitute a Default) or (iii) violate any rule or regulation of any federation or organization or similar entity of which the such Subsidiary Borrower’s Home Country is a member.      (E) No Immunity. Neither such Subsidiary Borrower nor any of its assets is entitled to immunity from suit, execution, attachment or other legal process. Such Subsidiary Borrower’s execution and delivery of the Loan Documents to which it is a party constitute, and the exercise of its rights and performance of and compliance with its obligations under such Loan Documents will constitute, private and commercial acts done and performed for private and commercial purposes.      (F) Application of Representations and Warranties. It is understood and agreed by the parties hereto that the representations and warranties of each Subsidiary Borrower in this Section 6.18 shall only be applicable to such Subsidiary Borrower on and after the date of its execution of an Assumption Letter.           6.19. Benefits. Each of the Company and its Subsidiaries will benefit from the financing arrangement established by this Agreement. The Administrative Agent and the Lenders have stated and the Company acknowledges that, but for the agreement by each of the 67 --------------------------------------------------------------------------------   Subsidiary Guarantors to execute and deliver the Subsidiary Guaranty, the Administrative Agent and the Lenders would not have made available the credit facilities established hereby on the terms set forth herein.           6.20. Solvency. After giving effect to (i) the Loans to be made, and the Letters of Credit to be issued, on the Closing Date or such other date as Loans or Letters of Credit requested hereunder are made or issued (as applicable), (ii) the other transactions contemplated by this Agreement and the other Loan Documents and (iii) the payment and accrual of all transaction costs with respect to the foregoing, the Company and its Subsidiaries taken as a whole are Solvent. ARTICLE VII: COVENANTS           The Company covenants and agrees that so long as any Commitments are outstanding and thereafter until all of the Termination Conditions have been satisfied, unless the Required Lenders shall otherwise give prior written consent:           7.1. Reporting. The Company shall:      (A) Financial Reporting. Furnish to the Administrative Agent (for delivery to each of the Lenders):      (i) Quarterly Reports. As soon as practicable and in any event within forty-five (45) days after the end of each of (a) the first three quarterly periods of each of its fiscal years, the consolidated balance sheet of the Company and its Subsidiaries as at the end of such period and the related consolidated statements of income and cash flows of the Company and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, certified by a Financial Officer of the Company on behalf of the Company and its Subsidiaries as fairly presenting the consolidated financial position of the Company and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated in accordance with Agreement Accounting Principles, subject to normal year-end audit adjustments and the absence of footnotes and (b) each quarterly period of its fiscal year, (1) schedules, in form and substance reasonably satisfactory to the Administrative Agent, showing (aa) the date of issue, account party, Agreed Currency and amount (both drawn and undrawn) in such Agreed Currency, Issuing Bank, expiration date and the reference number of each Letter of Credit issued hereunder and (bb) the comparable information and details for each other letter of credit issued for the account of the Company or any Subsidiary, in each case outstanding at the end of such quarterly period and (2) a report relating to the asbestos litigation described in Schedule 6.17, and any other Product Liability Events, for such quarter, such report being in form and substance satisfactory to the Administrative Agent and in any event describing (aa) any final judgments or orders (whether monetary or non-monetary) entered against the Company or any Subsidiary and (bb) any settlements for the payment of money entered into by the Company or any Subsidiary. 68 --------------------------------------------------------------------------------        (ii) Annual Reports. As soon as practicable, and in any event within ninety (90) days after the end of each fiscal year, (a) the consolidated balance sheet of the Company and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income, stockholders’ equity and cash flows of the Company and its Subsidiaries for such fiscal year, and in comparative form the corresponding figures for the previous fiscal year along with consolidating schedules in form and substance sufficient to calculate the financial covenants set forth in Section 7.4 and (b) an audit report on the consolidated financial statements (but not the consolidating financial statements or schedules) listed in clause (a) hereof of independent certified public accountants of recognized national standing, which audit report shall be unqualified and shall state that such financial statements fairly present the consolidated financial position of the Company and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated in conformity with Agreement Accounting Principles and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards. The deliveries made pursuant to this clause (ii) shall be accompanied by (x) any management letter prepared by the above-referenced accountants, and (y) a certificate of such accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof.      (iii) Officer’s Certificate. Together with each delivery of any financial statement (a) pursuant to clauses (i) or (ii) of this Section 7.1(A), an Officer’s Certificate of the Company, substantially in the form of Exhibit F attached hereto and made a part hereof, stating that as of the date of such Officer’s Certificate no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof and (b) pursuant to clauses (i) and (ii) of this Section 7.1(A), a compliance certificate, substantially in the form of Exhibit G attached hereto and made a part hereof, signed by an Authorized Officer, which demonstrates compliance with the tests contained in Section 7.3 and Section 7.4, and which calculates the Leverage Ratio for purposes of determining the then Applicable Floating Rate Margin, Applicable Eurodollar Margin, Applicable L/C Fee Percentage and Applicable Commitment Fee Percentage.      (iv) Budgets; Business Plans; Financial Projections. As soon as practicable and in any event not later than one hundred twenty (120) days after the beginning of each fiscal year commencing with the fiscal year beginning January 1, 2007, a copy of the plan and forecast (including a projected balance sheet, income statement and a statement of cash flow) of the Company and its Subsidiaries for the upcoming three (3) fiscal years prepared in such detail as shall be reasonably satisfactory to the Administrative Agent.      (B) Notice of Default. Promptly upon any of the chief executive officer, chief operating officer, chief financial officer, treasurer, controller, chief legal officer or general counsel of the Company obtaining knowledge (i) of any condition or event which 69 --------------------------------------------------------------------------------   constitutes a Default or Unmatured Default, or becoming aware that any Lender or Administrative Agent has given any written notice with respect to a claimed Default or Unmatured Default under this Agreement, or (ii) that any Person has given any written notice to the Company or any Subsidiary of the Company or taken any other action with respect to a claimed default or event or condition of the type referred to in Section 8.1(E), or (iii) that any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect has occurred, the Company shall deliver to the Administrative Agent and the Lenders an Officer’s Certificate specifying (a) the nature and period of existence of any such claimed default, Default, Unmatured Default, condition or event, (b) the notice given or action taken by such Person in connection therewith, and (c) what action the Company has taken, is taking and proposes to take with respect thereto.      (C) Lawsuits.      (i) Promptly upon the Company obtaining knowledge of the institution of, or written threat of, any action, suit, proceeding, governmental investigation or arbitration, by or before any Governmental Authority, against or affecting the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries not previously disclosed pursuant to Section 6.7, which action, suit, proceeding, governmental investigation or arbitration exposes, or in the case of multiple actions, suits, proceedings, governmental investigations or arbitrations arising out of the same general allegations or circumstances which expose, in the Company’s reasonable judgment, the Company and/or any of its Subsidiaries to liability in an amount aggregating $20,000,000 or more, give written notice thereof to the Administrative Agent and the Lenders and provide such other information as may be reasonably available to enable each Lender and the Administrative Agent and its counsel to evaluate such matters; and      (ii) Promptly upon the Company or any of its Subsidiaries obtaining knowledge of any material adverse developments with respect to any of the Disclosed Litigation, which Disclosed Litigation exposes, in the Company’s reasonable judgment, the Company and/or any of its Subsidiaries to liability in an amount aggregating $5,000,000 or more, give written notice thereof to the Administrative Agent and the Lenders and provide such other information as may be reasonably available to enable each Lender and the Administrative Agent and its counsel to evaluate such matters; and      (iii) In addition to the requirements set forth in clauses (i) and (ii) of this Section 7.1(C), upon request of the Administrative Agent or the Required Lenders, promptly give written notice of the status of any Disclosed Litigation or any action, suit, proceeding, governmental investigation or arbitration covered by a report delivered pursuant to clause (i) above and provide such other information as may be reasonably available to it that would not jeopardize any attorney-client privilege by disclosure to the Lenders to enable each Lender and the Administrative Agent and its counsel to evaluate such matters. 70 --------------------------------------------------------------------------------        (D) ERISA Notices. Deliver or cause to be delivered to the Administrative Agent and the Lenders, at the Company’s expense, the following information and notices as soon as reasonably possible, and in any event:      (i) (a) within ten (10) Business Days after the Company obtains knowledge that a Termination Event has occurred, a written statement of a Financial Officer of the Company describing such Termination Event and the action, if any, which the Company has taken, is taking or proposes to take with respect thereto, and when known, any action taken or threatened by the IRS, DOL or PBGC with respect thereto and (b) within ten (10) Business Days after any member of the Controlled Group obtains knowledge that a Termination Event has occurred which could reasonably be expected to subject the Company or any of its Subsidiaries to liability in excess of $5,000,000, a written statement of a Financial Officer or designee of the Company describing such Termination Event and the action, if any, which the member of the Controlled Group has taken, is taking or proposes to take with respect thereto, and when known, any action taken or threatened by the IRS, DOL or PBGC with respect thereto;      (ii) within ten (10) Business Days after the filing of any funding waiver request with the IRS, a copy of such funding waiver request and thereafter all communications received by the Company or a member of the Controlled Group with respect to such request within ten (10) Business Days such communication is received; and      (iii) within ten (10) Business Days after the Company or any member of the Controlled Group knows or has reason to know that (a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan, a notice describing such matter. For purposes of this Section 7.1(D), the Company, any of its Subsidiaries and any member of the Controlled Group shall be deemed to know all facts known by the administrator of any Plan of which the Company or any member of the Controlled Group or such Subsidiary is the plan sponsor.      (E) Other Indebtedness. Deliver to the Administrative Agent (i) a copy of each regular report, notice or communication regarding potential or actual defaults or amortization events (including any accompanying officer’s certificate) delivered by or on behalf of the Company to the holders of Material Indebtedness pursuant to the terms of the agreements governing such Material Indebtedness, such delivery to be made at the same time and by the same means as such notice of default is delivered to such holders, and (ii) a copy of each notice or other communication received by the Company from the holders of Material Indebtedness regarding potential or actual defaults pursuant to the terms of such Material Indebtedness, such delivery to be made promptly after such notice or other communication is received by the Company or any of its Subsidiaries. 71 --------------------------------------------------------------------------------        (F) Other Reports. Deliver or cause to be delivered to the Administrative Agent and the Lenders copies of (i) all financial statements, reports and notices, if any, sent or made available generally by the Company to their securities holders or filed with the Commission by the Company, (ii) all press releases made available generally by the Company or any of the Company’s Subsidiaries to the public concerning material developments in the business of the Company or any such Subsidiary and (iii) all notifications received from the Commission by the Company or its Subsidiaries pursuant to the Securities Exchange Act of 1934 and the rules promulgated thereunder.      (G) Environmental Notices. As soon as possible and in any event within ten (10) days after receipt by the Company, deliver to the Administrative Agent and the Lenders a copy of (i) any notice or claim to the effect that the Company or any of its Subsidiaries is or may be liable to any Person as a result of the Release by the Company, any of its Subsidiaries, or any other Person of any Contaminant into the environment, and (ii) any notice alleging any violation of any Environmental, Health or Safety Requirements of Law by the Company or any of its Subsidiaries if, in either case, such notice or claim relates to an event which could reasonably be expected to subject the Company and its Subsidiaries to liability individually or in the aggregate in excess of $5,000,000.      (H) Other Information. Promptly upon receiving a request therefor from the Administrative Agent, prepare and deliver to the Administrative Agent and the Lenders such other information with respect to the Company, any of its Subsidiaries, as from time to time may be reasonably requested by the Administrative Agent.           7.2. Affirmative Covenants.      (A) Existence, Etc. The Company shall and, except as permitted pursuant to Section 7.3(H), shall cause each of its Subsidiaries to, at all times maintain its existence and preserve and keep, or cause to be preserved and kept, in full force and effect its rights and franchises material to its businesses.      (B) Corporate Powers; Conduct of Business. The Company shall, and shall cause each of its Subsidiaries to, qualify and remain qualified to do business in each jurisdiction in which the nature of its business requires it to be so qualified and where the failure to be so qualified will have or could reasonably be expected to have a Material Adverse Effect. The Company will, and will cause each Subsidiary to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted.      (C) Compliance with Laws, Etc. The Company shall, and shall cause its Subsidiaries to, (a) comply with all Requirements of Law and all restrictive covenants affecting such Person or the business, properties, assets or operations of such Person, and (b) obtain as needed all permits necessary for its operations and maintain such permits in good standing unless failure to comply or obtain such permits could not reasonably be expected to have a Material Adverse Effect. Furthermore, each Borrower organized under the laws of the Netherlands shall at all times remain in compliance with the 72 --------------------------------------------------------------------------------   applicable provisions of the Dutch Banking Act and any implementing regulation including but not limited to the Dutch Exemption Regulation.      (D) Payment of Taxes and Claims; Tax Consolidation. The Company shall pay, and cause each of its Subsidiaries to pay, (i) all taxes, assessments and other governmental charges imposed upon it or on any of its properties or assets or in respect of any of its franchises, business, income or property before any penalty or interest accrues thereon, and (ii) all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien (other than a Lien permitted by Section 7.3(C)) upon any of the Company’s or such Subsidiary’s property or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided, however, that no such taxes, assessments and governmental charges referred to in clause (i) above or claims referred to in clause (ii) above (and interest, penalties or fines relating thereto) need be paid if being contested in good faith by appropriate proceedings diligently instituted and conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with Agreement Accounting Principles shall have been made therefor.      (E) Insurance. The Company shall maintain for itself and its Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force and effect, insurance policies and programs, with such deductibles or self-insurance amounts as reflect coverage that is reasonably consistent with prudent industry practice as determined by the Company.      (F) Inspection of Property; Books and Records; Discussions. The Company shall permit and cause each of its Subsidiaries to permit, any authorized representative(s) designated by either the Administrative Agent or any Lender to visit and inspect any of the properties of the Company or any of its Subsidiaries, to examine their respective financial and accounting records and other material data relating to their respective businesses or the transactions contemplated hereby (including, without limitation, in connection with environmental compliance, hazard or liability), and to discuss their affairs, finances and accounts with their officers and independent certified public accountants, all upon reasonable notice and at such reasonable times during normal business hours, as often as may be reasonably requested (provided that an officer of the Company or any of its Subsidiaries may, if it so desires, be present at and participate in any such discussion). The Company shall keep and maintain, and cause each of its Subsidiaries to keep and maintain, in all material respects, proper books of record and account in which entries in conformity with Agreement Accounting Principles shall be made of all dealings and transactions in relation to their respective businesses and activities. If a Default has occurred and is continuing, the Company, upon the Administrative Agent’s request, shall turn over copies of any such records to the Administrative Agent or its representatives.      (G) ERISA Compliance. The Company shall, and shall cause each of its Subsidiaries to, establish, maintain and operate all Plans to comply in all material respects with the provisions of ERISA and shall operate all Plans to comply in all material respects with the applicable provisions of the Code, all other applicable laws, and the regulations and interpretations thereunder and the respective requirements of the 73 --------------------------------------------------------------------------------   governing documents for such Plans, except for any noncompliance which, individually or in the aggregate, could not reasonably be expected to subject the Company or any of its Subsidiaries to liability, individually or in the aggregate, in excess of $20,000,000.      (H) Maintenance of Property. The Company shall cause all property used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 7.2(H) shall prevent the Company or any of its Subsidiaries from discontinuing the operation or maintenance of any of such property if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Administrative Agent or the Lenders.      (I) Environmental Compliance. The Company and its Subsidiaries shall comply with all Environmental, Health or Safety Requirements of Law, except where noncompliance will not have or is not reasonably likely to subject the Company or any of its Subsidiaries to liability, individually or in the aggregate, in excess of $20,000,000.      (J) Use of Proceeds. The Borrowers shall use the proceeds of the Revolving Loans to provide funds for general corporate purposes of the Company and its Subsidiaries, including, without limitation, to refinance certain existing debt, for working capital purposes and to finance Permitted Acquisitions. The Company will not, nor will they permit any Subsidiary to, use any of the proceeds of the Loans to purchase or carry any Margin Stock in violation of any applicable legal and regulatory requirements including, without limitation, Regulations T, U, and X, the Securities Act of 1933 and the Securities Exchange Act of 1934 and the regulations promulgated thereunder, or to make any Acquisition, other than a Permitted Acquisition pursuant to Section 7.3(F).      (K) Subsidiary Guarantors.      (i) New Subsidiaries. The Company shall cause each New Subsidiary that is, at any time, a Material Subsidiary (other than any Excluded Foreign Subsidiary) and each other Subsidiary as is necessary to remain in compliance with the terms of Section 7.3(Q), to deliver to the Administrative Agent an executed supplement to the Subsidiary Guaranty in the form of the supplement attached thereto (a “Supplement”) to become a Subsidiary Guarantor and appropriate corporate resolutions, opinions and other documentation in form and substance reasonably satisfactory to the Administrative Agent, such Supplement and other documentation to be delivered to the Administrative Agent as promptly as possible upon the creation, acquisition of or capitalization thereof or if otherwise necessary to remain in compliance with Section 7.3(Q), but in any event within thirty (30) days of such creation, acquisition or capitalization. 74 --------------------------------------------------------------------------------        (ii) Additional Material Subsidiaries. If any consolidated Subsidiary of the Company (other than a New Subsidiary to the extent addressed in Section 7.2(K)(i)) becomes a Material Subsidiary (other than an Excluded Foreign Subsidiary), the Company shall cause any such Material Subsidiary to deliver to the Administrative Agent an executed Supplement to become a Subsidiary Guarantor and appropriate corporate resolutions, opinions and other documentation in form and substance reasonably satisfactory to the Administrative Agent in connection therewith, such Supplement and other documentation to be delivered to the Administrative Agent as promptly as possible but in any event within thirty (30) days following the date on which such consolidated Subsidiary became a Material Subsidiary.      (iii) Other Required Guarantors. If at any time any Subsidiary of the Company which is not a Subsidiary Guarantor guaranties any Indebtedness of the Company (including, without limitation, Indebtedness incurred pursuant to the Note Purchase Agreement and all replacements, substitutions, extensions or renewals thereof) other than the Indebtedness hereunder, the Company shall cause such Subsidiary to deliver to the Administrative Agent an executed Supplement to become a Subsidiary Guarantor and appropriate corporate resolutions, opinions and other documentation in form and substance reasonably satisfactory to the Administrative Agent in connection therewith, such Supplement and other documentation to be delivered to the Administrative Agent concurrently with the delivery of the guaranty of such other Indebtedness.      (iv) Additional Excluded Foreign Subsidiaries. In the event any Subsidiary otherwise required to become a Guarantor under paragraphs (ii) or (iii) above would cause the Company adverse tax consequences if it were to become a Guarantor or is restricted from becoming a Guarantor as a result of domestic laws or otherwise, the Administrative Agent may, in its discretion, permit such Subsidiary to be treated as an Excluded Foreign Subsidiary, and, accordingly, such Subsidiary would not be required to become a Guarantor.      (L) Foreign Employee Benefit Compliance. The Company shall, and shall cause each of its Subsidiaries and each member of its Controlled Group to, establish, maintain and operate all Foreign Employee Benefit Plans to comply in all material respects with all laws, regulations and rules applicable thereto and the respective requirements of the governing documents for such Plans, except for failures to comply which, in the aggregate, would not be reasonably likely to subject the Company or any of its Subsidiaries to liability, individually or in the aggregate, in excess of $20,000,000.           7.3. Negative Covenants.      (A) Subsidiary Indebtedness. The Company shall not permit any of its Subsidiaries directly or indirectly to create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except:      (i) Indebtedness of the Subsidiaries under the Subsidiary Guaranty; 75 --------------------------------------------------------------------------------        (ii) Indebtedness in respect of guaranties executed by any Subsidiary Guarantor with respect to any Indebtedness of the Company, provided such Indebtedness is not incurred by the Company in violation of this Agreement;      (iii) Indebtedness in respect of obligations secured by Customary Permitted Liens;      (iv) Indebtedness constituting Contingent Obligations permitted by Section 7.3(E);      (v) Unsecured Indebtedness arising from loans from (a) any Subsidiary to any wholly-owned Subsidiary, (b) the Company to any wholly-owned Subsidiary, (c) Lealand Finance Company B.V. to any Subsidiary (other than any Subsidiary Guarantor) in an aggregate outstanding principal amount not to exceed $50,000,000 at any time and (d) any one or more Subsidiary Guarantors to Horton CBI, Limited in an aggregate outstanding principal amount not to exceed $100,000,000; provided, that if either the Company or any Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness may only be due either the Company or a Subsidiary Guarantor and shall be expressly subordinate to the payment in full in cash of the Obligations on terms satisfactory to the Administrative Agent;      (vi) Indebtedness in respect of Hedging Obligations which are not prohibited under Section 7.3(O);      (vii) Indebtedness (a) with respect to surety, appeal and performance bonds and Performance Letters of Credit obtained by any of the Company’s Subsidiaries in the ordinary course of business, and (b) incurred or maintained by any of the Company’s Subsidiaries under the Letter of Credit Agreement;      (viii) Indebtedness (a) evidenced by letters of credit, bank guarantees or other similar instruments in an aggregate face amount not to exceed at any time $50,000,000 issued in the ordinary course of business to secure obligations of the Company and its Subsidiaries under workers’ compensation and other social security programs, and Contingent Obligations with respect to any such permitted letters of credit, bank guarantees or other similar instruments, and (b) constituting payment or other obligations to Praxair or its Affiliates in respect of employee benefits under the Employee Benefits Disaffiliation Agreement dated January 1, 1997, between Chicago Bridge & Iron Company and Praxair, as amended from time to time; and      (ix) (a) Permitted Existing Indebtedness and (b) other Indebtedness, in addition to that referred to elsewhere in this Section 7.3(A), incurred by the Company’s Subsidiaries, provided that no Default or Unmatured Default shall have occurred and be continuing at the date of such incurrence or would result therefrom, and provided further that the aggregate outstanding amount of all Indebtedness incurred by the Company’s Subsidiaries under this clause (ix)(b) shall not at any time exceed $20,000,000. 76 --------------------------------------------------------------------------------        (B) Sales of Assets. Neither the Company nor any of its Subsidiaries shall consummate any Asset Sale, except:      (i) sales of inventory in the ordinary course of business;      (ii) the disposition in the ordinary course of business of equipment that is obsolete, excess or no longer used or useful in the Company’s or its Subsidiaries’ businesses;      (iii) transfers of assets between the Company and any wholly-owned Subsidiary of the Company, or between wholly-owned Subsidiaries of the Company not otherwise prohibited by this Agreement;      (iv) the Permitted Sale and Leaseback Transactions;      (v) the sale or other disposition of (a) all of the assets comprising the UltraPure System business operations of the Company and (b) those certain assets acquired from Pitt-Des Moines Inc. and identified in a ruling dated as of July 12, 2003 by the Federal Trade Commission requiring the divestiture of such assets so long as the aggregate book value of such assets described in this clause (b) does not exceed $15,000,000 and the sale of such assets is on terms ordered by the Federal Trade Commission or otherwise reasonably acceptable to the Administrative Agent; and      (vi) other leases, sales or other dispositions of assets if such transaction (a) is for consideration consisting at least eighty percent (80%) of cash, (b) is for not less than fair market value (as determined in good faith by the Company’s board of directors), and (c) involves assets that, together with all other assets of the Company and its Subsidiaries previously leased, sold or disposed of (other than pursuant to clauses (i) through (v) above) as permitted by this Section (x) during the twelve-month period ending with the month in which any such lease, sale or other disposition occurs, do not constitute a Substantial Portion of the assets of the Company and its Subsidiaries and (y) since the Closing Date do not exceed $40,000,000, in each case when combined with all such other transactions during such period (each such transaction being valued at book value).      (C) Liens. Neither the Company nor any of its Subsidiaries shall directly or indirectly create, incur, assume or permit to exist any Lien on or with respect to any of their respective property or assets except:      (i) Liens, if any, created by the Loan Documents or otherwise securing the Obligations;      (ii) Customary Permitted Liens; and      (iii) other Liens, including Permitted Existing Liens, (a) securing Indebtedness of the Company (other than Indebtedness of the Company owed to any Subsidiary) and/or (b) securing Indebtedness of the Company’s Subsidiaries as permitted pursuant 77 --------------------------------------------------------------------------------   to Section 7.3(A) and in an aggregate outstanding amount not to exceed ten percent (10%) of consolidated assets of the Company and its Subsidiaries at any time. In addition, neither the Company nor any of its Subsidiaries shall become a party to any agreement, note, indenture or other instrument, or take any other action, which would prohibit the creation of a Lien on any of its properties or other assets in favor of the Administrative Agent as collateral for the Obligations; provided that any agreement, note, indenture or other instrument in connection with purchase money Indebtedness (including Capitalized Leases) incurred in compliance with the terms of this Agreement may prohibit the creation of a Lien in favor of the Administrative Agent and the Lenders on the items of property obtained with the proceeds of such Indebtedness.      (D) Investments. Except to the extent permitted pursuant to Section 7.3(F), neither the Company nor any of its Subsidiaries shall directly or indirectly make or own any Investment except:      (i) Investments in cash and Cash Equivalents;      (ii) Permitted Existing Investments in an amount not greater than the amount thereof on the Closing Date;      (iii) Investments in trade receivables or received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;      (iv) Investments consisting of deposit accounts maintained by the Company and its Subsidiaries;      (v) Investments consisting of non-cash consideration from a sale, assignment, transfer, lease, conveyance or other disposition of property permitted by Section 7.3(B);      (vi) Investments in any consolidated Subsidiaries;      (vii) Investments in joint ventures (other than Subsidiaries) and nonconsolidated Subsidiaries in an aggregate amount not to exceed $20,000,000;      (viii) Investments constituting Permitted Acquisitions;      (ix) Investments constituting Indebtedness permitted by Section 7.3(A) or Contingent Obligations permitted by Section 7.3(E);      (x) Investments in addition to those referred to elsewhere in this Section 7.3(D) in an aggregate amount not to exceed $20,000,000.      (E) Contingent Obligations. None of the Company’s Subsidiaries shall directly or indirectly create or become or be liable with respect to any Contingent 78 --------------------------------------------------------------------------------   Obligation, except: (i) recourse obligations resulting from endorsement of negotiable instruments for collection in the ordinary course of business; (ii) Permitted Existing Contingent Obligations; (iii) Contingent Obligations (x) incurred by any Subsidiary of the Company to support the performance of bids, tenders, sales, contracts (other than for the repayment of borrowed money) of any other Subsidiary of the Company in the ordinary course of business, (y) incurred by any Subsidiary of the Company under the Letter of Credit Agreement, and (z) with respect to surety, appeal and performance bonds obtained by the Company or any Subsidiary in the ordinary course of business provided that the Indebtedness with respect thereto is permitted pursuant to Section 7.3(A); and (iv) Contingent Obligations of the Subsidiary Guarantors under the Subsidiary Guaranty.      (F) Conduct of Business; Subsidiaries; Permitted Acquisitions. Neither the Company nor any of its Subsidiaries shall engage in any business other than the businesses engaged in by the Company and its Subsidiaries on the Closing Date and any business or activities which are substantially similar, related or incidental thereto or logical extensions thereof. The Company shall not create, acquire or capitalize any Subsidiary after the Closing Date unless (i) no Default or Unmatured Default shall have occurred and be continuing or would result therefrom; (ii) after such creation, acquisition or capitalization, all of the representations and warranties contained herein shall be true and correct (unless such representation and warranty is made as of a specific date, in which case, such representation or warranty shall be true and correct as of such date); and (iii) after such creation, acquisition or capitalization the Company and such Subsidiary shall be in compliance with the terms of Sections 7.2(K) and 7.3(R). Neither the Company nor its Subsidiaries shall make any Acquisitions, other than Acquisitions meeting the following requirements or otherwise approved by the Required Lenders each such Acquisition constituting a “Permitted Acquisition”):           (a) as of the date of consummation of such Acquisition (before and after taking into account such Acquisition), all representations and warranties set forth in this Agreement and the other Loan Documents shall be true and correct in all material respects as though made on such date (unless such representation and warranty is made as of a specific date, in which case, such representation and warranty shall be true and correct as of such date) and no event shall have occurred and then be continuing which constitutes a Default or Unmatured Default under this Agreement;           (b) prior to the consummation of any such Permitted Acquisition, the Company shall provide written notification to the Administrative Agent of all pro forma adjustments to EBITDA to be made in connection with such Acquisition;           (c) the purchase is consummated pursuant to a negotiated acquisition agreement on a non-hostile basis and approved by the target company’s board of directors (and shareholders, if necessary) prior to the consummation of the Acquisition; 79 --------------------------------------------------------------------------------             (d) the businesses being acquired shall be substantially similar, related or incidental to the businesses or activities engaged in by the Company and its Subsidiaries on the Closing Date;           (e) prior to such Acquisition and the incurrence of any Indebtedness permitted by Section 7.3(A) in connection therewith, the Company shall deliver to the Administrative Agent and the Lenders a certificate from one of the Authorized Officers, demonstrating, on a pro forma basis using unadjusted historical audited or reviewed unaudited financial statements obtained from the seller(s) in respect of each such Acquisition as if the Acquisition and such incurrence of Indebtedness had occurred on the first day of the twelve-month period ending on the last day of the Company’s most recently completed fiscal quarter, the Company would have been in compliance with the financial covenants in Section 7.4 and not otherwise in Default; and           (f) without the prior written consent of the Required Lenders, (i) the purchase price for the Acquisition (including, without limitation or duplication, cash, Capital Stock, Restricted Payments and Indebtedness assumed) shall not exceed 10% of Consolidated Net Worth as of the Company’s most recently ended fiscal year prior to such Acquisition and (ii) the aggregate of the purchase price for all Acquisitions (including, without limitation or duplication, cash, Capital Stock, Restricted Payments and Indebtedness assumed) otherwise permitted hereunder shall not exceed $200,000,000 during the term of this Agreement.      (G) Transactions with Shareholders and Affiliates. Other than (i) Investments permitted by Section 7.3(D), neither the Company nor any of its Subsidiaries shall directly or indirectly (a) enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or make loans or advances to any holder or holders of any of the Equity Interests of the Company, or with any Affiliate of the Company which is not its Subsidiary of the Company, on terms that are less favorable to the Company or any of its Subsidiaries, as applicable, than those that could reasonably be obtained in an arm’s length transaction at the time from Persons who are not such a holder or Affiliate.      (H) Restriction on Fundamental Changes. Neither the Company nor any of its Subsidiaries shall enter into any merger or consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), or convey, lease, sell, transfer or otherwise dispose of, in one transaction or series of transactions, all or substantially all of the Company’s consolidated business or property (each such transaction a “Fundamental Change”), whether now or hereafter acquired, except (i) Fundamental Changes permitted under Sections 7.3(B), 7.3(D) or 7.3(G), (ii) a Subsidiary of the Company may be merged into or consolidated with the Company (in which case the Company shall be the surviving corporation) or any wholly-owned Subsidiary of the Company provided the Company owns, directly or indirectly, a percentage of the equity of the merged entity not less than the percentage it owned of the Subsidiary prior to such Fundamental Change and if the predecessor Subsidiary was a Guarantor, the surviving Subsidiary shall be a 80 --------------------------------------------------------------------------------   Guarantor hereunder, and (iii) any liquidation of any Subsidiary of the Company, into the Company or another Subsidiary of the Company, as applicable.      (I) Sales and Leasebacks. Neither the Company nor any of its Subsidiaries shall become liable, directly, by assumption or by Contingent Obligation, with respect to any Sale and Leaseback Transaction (other than the Permitted Sale and Leaseback Transactions), unless the sale involved is not prohibited under Section 7.3(B), the lease involved is not prohibited under Section 7.3(A) and any related Investment is not prohibited under Section 7.3(D).      (J) Margin Regulations. Neither the Company nor any of its Subsidiaries, shall use all or any portion of the proceeds of any credit extended under this Agreement to purchase or carry Margin Stock in violation of any applicable legal and regulatory requirements including, without limitation, Regulations T, U and X, the Securities Act of 1933, and the Securities Exchange Act of 1934 and the regulations promulgated thereunder.      (K) ERISA. The Company shall not      (i) permit to exist any accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of the Code), with respect to any Benefit Plan, whether or not waived;      (ii) terminate, or permit any Controlled Group member to terminate, any Benefit Plan which would result in liability of the Company or any Controlled Group member under Title IV of ERISA;      (iii) fail, or permit any Controlled Group member to fail, to pay any required installment or any other payment required under Section 412 of the Code on or before the due date for such installment or other payment; or      (iv) permit any unfunded liabilities with respect to any Foreign Pension Plan; except where such transactions, events, circumstances, or failures are not, individually or in the aggregate, reasonably expected to result in liability individually or in the aggregate in excess of $20,000,000.      (L) Corporate Documents. Neither the Company nor any of its Subsidiaries shall amend, modify or otherwise change any of the terms or provisions in any of their respective constituent documents as in effect on the Closing Date in any manner adverse to the interests of the Lenders, without the prior written consent of the Required Lenders.      (M) Fiscal Year. Neither the Company nor any of its consolidated Subsidiaries shall change its fiscal year for accounting or tax purposes from a period consisting of the 12-month period ending on the last day of December of each year.      (N) Subsidiary Covenants. Except as set forth on Schedule 7.3(N), the Company will not, and will not permit any Subsidiary to, create or otherwise cause to 81 --------------------------------------------------------------------------------   become effective or suffer to exist any consensual encumbrance or restriction of any kind on the ability of any Subsidiary to pay dividends or make any other distribution on its stock or redemption of its stock, or make any other Restricted Payment, pay any Indebtedness or other Obligation owed to Company or any other Subsidiary, make loans or advances or other Investments in the Company or any other Subsidiary, or sell, transfer or otherwise convey any of its property to the Company or any other Subsidiary, or merge, consolidate with or liquidate into the Company or any other Subsidiary.      (O) Hedging Obligations. The Company shall not and shall not permit any of its Subsidiaries to enter into any Hedging Arrangements evidencing Hedging Obligations, other than Hedging Arrangements entered into by the Company or its Subsidiaries pursuant to which the Company or such Subsidiary has hedged its reasonably estimated interest rate, foreign currency or commodity exposure, and which are non-speculative in nature.      (P) Issuance of Disqualified Stock. From and after the Closing Date, neither the Company, nor any of its Subsidiaries shall issue any Disqualified Stock. All issued and outstanding Disqualified Stock shall be treated as Indebtedness for all purposes of this Agreement, and the amount of such deemed Indebtedness shall be the aggregate amount of the liquidation preference of such Disqualified Stock.      (Q) Non-Guarantor Subsidiaries. The Company will not at any time permit the sum of the aggregate assets of all of the Company’s Subsidiaries which are not Subsidiary Guarantors (the non-guarantor Subsidiaries being referred to collectively as the “Non-Obligor Subsidiaries”) to exceed twenty percent (20%) of the Company’s and its Subsidiaries consolidated assets.      (R) Intercompany Indebtedness. The Company shall not create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness arising from loans from any Subsidiary to the Company unless (a) such Indebtedness is unsecured and (ii) such Indebtedness shall be expressly subordinate to the payment in full in cash of the Obligations on terms satisfactory to the Administrative Agent.      (S) Restricted Payments. The Company shall not, nor shall it permit any Subsidiary to, declare, make or pay any Restricted Payments (other than permitted Restricted Payments listed on Schedule 7.3(S)) in excess of $100,000,000 in the aggregate during any period of twelve (12) consecutive months.      (T) Changes to Note Purchase Agreement and Related Indebtedness. The Company shall not amend, modify or supplement, or permit any Subsidiary to amend, modify or supplement (or consent to any amendment, modification or supplement of), the Note Purchase Agreement or any document, agreement or instrument evidencing any Indebtedness incurred pursuant to the Note Purchase Agreement (or any replacements, substitutions, extensions or renewals thereof) or pursuant to which such Indebtedness is issued where such amendment, modification or supplement provides for the following or which has any of the following effects: 82 --------------------------------------------------------------------------------        (i) increases the overall principal amount of any such Indebtedness or increases the amount of any single scheduled installment of principal or interest;      (ii) shortens or accelerates the date upon which any installment of principal or interest becomes due or adds any additional mandatory redemption provisions;      (iii) shortens the final maturity date of such Indebtedness or otherwise accelerates the amortization schedule with respect to such Indebtedness;      (iv) increases the rate of interest accruing on such Indebtedness;      (v) provides for the payment of additional fees or increases existing fees;      (vi) amends or modifies any financial or negative covenant (or covenant which prohibits or restricts the Company or any of its Subsidiaries from taking certain actions) in a manner which is more onerous or more restrictive in any material respect to the Company or such Subsidiary or which is otherwise materially adverse to the Company, its Subsidiaries and/or the Lenders or, in the case of any such covenant, which places material additional restrictions on the Company or such Subsidiary or which requires the Company or such Subsidiary to comply with more restrictive financial ratios or which requires the Company to better its financial performance, in each case from that set forth in the existing applicable covenants in the Note Purchase Agreement or the applicable covenants in this Agreement; or      (vii) amends, modifies or adds any affirmative covenant in a manner which (a) when taken as a whole, is materially adverse to the Company, its Subsidiaries and/or the Lenders or (b) is more onerous than the existing applicable covenant in the Note Purchase Agreement or the applicable covenant in this Agreement.           7.4. Financial Covenants. The Company shall comply with the following:      (A) Maximum Leverage Ratio. As of the last day of each fiscal quarter, the Company shall not permit the ratio (the “Leverage Ratio”) of (i) all Adjusted Indebtedness of the Company and its Subsidiaries to (ii) EBITDA to be greater than 2.50 to 1.00 for the four-quarter period ending on such date.      The Leverage Ratio shall be calculated, in each case, determined as of the last day of each fiscal quarter based upon (a) for Adjusted Indebtedness, Adjusted Indebtedness as of the last day of each such fiscal quarter; and (b) for EBITDA, the actual amount for the four-quarter period ending on such day, calculated, with respect to Permitted Acquisitions, on a pro forma basis using historical audited and reviewed unaudited financial statements obtained from the seller(s) in such Permitted Acquisition, broken down by fiscal quarter in the Company’s reasonable judgment and satisfactory to the Administrative Agent and as reported to the Administrative Agent pursuant to the provisions of Section 7.3(F)(b).      (B) Minimum Fixed Charge Coverage Ratio. The Company and its consolidated Subsidiaries shall maintain a ratio (“Fixed Charge Coverage Ratio”), 83 --------------------------------------------------------------------------------   without duplication, of Consolidated Net Income Available for Fixed Charges to Consolidated Fixed Charges for the period of four fiscal quarters ending on the last day of each fiscal quarter, of at least 1.75 to 1.00 as of the end of such fiscal quarter for the period commencing with the fiscal quarter ending on June 30, 2006 through the Termination Date.      If, during the period for which Consolidated Net Income Available for Fixed Charges and Consolidated Fixed Charges are being calculated, the Company or any Subsidiary has acquired any Person (or the assets thereof) resulting in such Person becoming or otherwise resulting in a Subsidiary, compliance with this Section 7.4(B) shall be determined by calculating Consolidated Net Income Available for Fixed Charges and Consolidated Fixed Charges on a pro forma basis as if such Subsidiary had become such a Subsidiary on the first day of such period and any Indebtedness incurred in connection therewith was incurred on such date.      (C) Minimum Consolidated Net Worth. The Company shall not permit its Consolidated Net Worth at any time to be less than (i) the sum of (a) $395,419,000, plus (b) fifty percent (50%) of the sum of Net Income (if positive) earned in each fiscal quarter, commencing with the fiscal quarter ending on September 30, 2006, plus (c) 75% of the amount, if any, by which stockholders’ equity of the Company is, in accordance with Agreement Accounting Principles, adjusted from time to time as a result of the issuance of any Equity Interests after September 30, 2006 minus (ii) the Executive Equity Repurchase Payment. ARTICLE VIII: DEFAULTS           8.1. Defaults. Each of the following occurrences shall constitute a Default under this Agreement:      (A) Failure to Make Payments When Due. The Company or any Subsidiary Borrower shall (i) fail to pay when due any of the Obligations consisting of principal with respect to the Loans or Reimbursement Obligations or (ii) shall fail to pay within five (5) days of the date when due any of the other Obligations under this Agreement or the other Loan Documents.      (B) Breach of Certain Covenants. The Company shall fail duly and punctually to perform or observe any agreement, covenant or obligation binding on the Company under Sections 7.1(A), 7.2(A), 7.2(F), 7.2(K), 7.3 or 7.4.      (C) Breach of Representation or Warranty. Any representation or warranty made or deemed made by the Company or any Subsidiary Borrower to the Administrative Agent or any Lender herein or by the Company or any Subsidiary Borrower or any of its Subsidiaries in any of the other Loan Documents or in any statement or certificate or information at any time given by any such Person pursuant to any of the Loan Documents shall be false or misleading in any material respect on the date as of which made (or deemed made). 84 --------------------------------------------------------------------------------        (D) Other Defaults. The Company or any Subsidiary Borrower shall default in the performance of or compliance with any term contained in this Agreement (other than as covered by paragraphs (A) or (B) or (C) of this Section 8.1), or the Company or any Subsidiary Borrower or any of its Subsidiaries shall default in the performance of or compliance with any term contained in any of the other Loan Documents, and such default shall continue for thirty (30) days after the occurrence thereof.      (E) Default as to Other Indebtedness. The Company or any of its Subsidiaries shall fail to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) with respect to any Indebtedness (other than Indebtedness hereunder), beyond any period of grace provided with respect thereto, which individually or together with other such Indebtedness as to which any such failure or other Default under this clause (E) exists has an aggregate outstanding principal amount equal to or in excess of Twenty Million and 00/100 Dollars ($20,000,000) (such Indebtedness being “Material Indebtedness”); or any breach, default or event of default (including any termination event, amortization event, liquidation event or event of like import arising under any agreement or instrument giving rise to any Off-Balance Sheet Liabilities) shall occur, or any other condition shall exist under any instrument, agreement or indenture pertaining to any such Material Indebtedness, beyond any period of grace, if any, provided with respect thereto, if the effect thereof is to cause an acceleration, mandatory redemption, a requirement that the Company offer to purchase such Indebtedness or other required repurchase or early amortization of such Indebtedness, or permit the holder(s) of such Indebtedness to accelerate the maturity of any such Indebtedness or require a redemption, early amortization or repurchase of such Indebtedness; or any such Indebtedness shall be otherwise declared to be due and payable (by acceleration or otherwise) or required to be prepaid, redeemed, amortized or otherwise repurchased by the Company or any of its Subsidiaries (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof.      (F) Involuntary Bankruptcy; Appointment of Receiver, Etc.      (i) An involuntary case shall be commenced against the Company or any of the Company’s Subsidiaries and the petition shall not be dismissed, stayed, bonded or discharged within forty-five (45) days after commencement of the case; or a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company or any of the Company’s Subsidiaries in an involuntary case, under any applicable bankruptcy, insolvency or other similar law now or hereinafter in effect; or any other similar relief shall be granted under any applicable federal, state, local or foreign law.      (ii) A decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over the Company or any of the Company’s Subsidiaries or over all or a substantial part of the property of the Company or any of the Company’s Subsidiaries shall be entered; or an interim receiver, trustee or other custodian of the Company or any of the Company’s Subsidiaries or of all or a substantial part of the property of the Company or any of the Company’s Subsidiaries shall be appointed or 85 --------------------------------------------------------------------------------   a warrant of attachment, execution or similar process against any substantial part of the property of the Company or any of the Company’s Subsidiaries shall be issued and any such event shall not be stayed, dismissed, bonded or discharged within forty-five (45) days after entry, appointment or issuance.      (G) Voluntary Bankruptcy; Appointment of Receiver, Etc. The Company or any of the Company’s Subsidiaries shall (i) commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, (iii) consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property, (iv) make any assignment for the benefit of creditors or (v) take any corporate action to authorize any of the foregoing.      (H) Judgments and Attachments. Any money judgment(s), writ or warrant of attachment, or similar process against the Company or any of its Subsidiaries or any of their respective assets involving in any single case or in the aggregate an amount in excess of Twenty Million and 00/100 Dollars ($20,000,000) (to the extent not covered by independent third party insurance as to which the insurer does not dispute coverage) is or are entered and shall remain undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days or in any event later than fifteen (15) days prior to the date of any proposed sale thereunder.      (I) Dissolution. Any order, judgment or decree shall be entered against the Company or any Subsidiary decreeing its involuntary dissolution or split up and such order shall remain undischarged and unstayed for a period in excess of forty-five (45) days; or the Company or any Subsidiary shall otherwise dissolve or cease to exist except as specifically permitted by this Agreement.      (J) Loan Documents. At any time, for any reason, any Loan Document as a whole that materially affects the ability of the Administrative Agent, or any of the Lenders to enforce the Obligations ceases to be in full force and effect or the Company or any of the Company’s Subsidiaries party thereto seeks to repudiate its obligations thereunder.      (K) Termination Event. Any Termination Event occurs which the Required Lenders believe is reasonably likely to subject the Company to liability in excess of $20,000,000.      (L) Waiver of Minimum Funding Standard. If the plan administrator of any Plan applies under Section 412(d) of the Code for a waiver of the minimum funding standards of Section 412(a) of the Code and any Lender believes the substantial business hardship upon which the application for the waiver is based could reasonably be expected to subject either the Company or any Controlled Group member to liability in excess of $20,000,000.      (M) Change of Control. A Change of Control shall occur. 86 --------------------------------------------------------------------------------        (N) Environmental Matters. The Company or any of its Subsidiaries shall be the subject of any proceeding or investigation (other than in connection with a Product Liability Event) pertaining to (i) the Release by the Company or any of its Subsidiaries of any Contaminant into the environment, (ii) the liability of the Company or any of its Subsidiaries arising from the Release by any other Person of any Contaminant into the environment, or (iii) any violation of any Environmental, Health or Safety Requirements of Law which by the Company or any of its Subsidiaries, which, in any case, has or is reasonably likely to subject the Company to liability individually or in the aggregate in excess of $20,000,000 (to the extent not covered by independent third party insurance as to which the insurer does not dispute coverage).      (O) Guarantor Revocation. Any Guarantor of the Obligations shall terminate or revoke any of its obligations under the applicable Guaranty or breach any of the material terms of such Guaranty. A Default shall be deemed “continuing” until cured or until waived in writing in accordance with Section 9.2. ARTICLE IX: ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES           9.1. Termination of Commitments; Acceleration. (i) If any Default described in Section 8.1(F) or 8.1(G) occurs with respect to the Company, any Subsidiary Borrower or any Subsidiary Guarantor, the obligations of the Lenders to make Loans hereunder and the obligation of any Issuing Banks to issue Letters of Credit hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election, action, presentment, demand, protest or notice of any kind on the part of the Administrative Agent or any Lender, all of which the Borrowers expressly waive. If any other Default occurs, the Required Lenders may terminate or suspend the obligations of the Lenders to make Loans hereunder and the obligation of the Issuing Banks to issue Letters of Credit hereunder, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrowers expressly waive. In either case, upon the Obligations becoming so due and payable, each Borrower will be and become thereby unconditionally obligated, without any further notice, act or demand, to pay to the Administrative Agent an amount in immediately available funds, which funds shall be held in the L/C Collateral Account, equal to the difference of (x) the amount of L/C Obligations at such time plus the aggregate amount of all fees and expenses that may accrue or arise until all Letters of Credit have expired or been terminated, less (y) the amount on deposit in the L/C Collateral Account at such time which is free and clear of all rights and claims of third parties and has not been applied against the Obligations (such difference, the “Collateral Shortfall Amount”).      (ii) If at any time while any Default is continuing, the Administrative Agent determines that the Collateral Shortfall Amount at such time is greater than zero, the Administrative Agent may make demand on the Borrowers to pay, and the Borrowers will, forthwith upon such demand and without any further notice or act, pay to the Administrative Agent the Collateral Shortfall Amount, which funds shall be deposited in the L/C Collateral Account. 87 --------------------------------------------------------------------------------        (iii) The Administrative Agent may at any time while any Default is continuing and funds are deposited in the L/C Collateral Account, apply such funds to the payment of the Obligations and any other amounts as shall from time to time have become due and payable by any Borrower to the Administrative Agent, the Lenders or the Issuing Banks under the Loan Documents.      (iv) At any time while any Default is continuing, neither any Borrower nor any Person claiming on behalf of or through any Borrower shall have any right to withdraw any of the funds held in the L/C Collateral Account. After all of the Obligations have been indefeasibly paid in full and the Aggregate Commitment has been terminated, any funds remaining in the L/C Collateral Account shall be returned by the Administrative Agent to the Company or paid to whomever may be legally entitled thereto at such time.           9.2. Amendments. Subject to the provisions of this Article IX, the Required Lenders (or the Administrative Agent with the consent in writing of the Required Lenders) and the Borrowers may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrowers hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of each Lender affected thereby:      (i) Postpone or extend the Termination Date, the expiry date of any Letter of Credit beyond the Termination Date or any other date fixed for any payment of principal of, or interest on, the Loans, the Reimbursement Obligations or any fees or other amounts payable to such Lender (except with respect to (a) any modifications of the provisions relating to amounts, timing or application of optional prepayments of Loans and other Obligations, which modification shall require only the approval of the Required Lenders and (b) a waiver of the application of the default rate of interest pursuant to Section 2.10 hereof which waiver shall require only the approval of the Required Lenders) or amend any provision of Section 2.4(B).      (ii) Reduce the principal Dollar Amount of any Loans or L/C Obligations, or reduce the rate or extend the time of payment of interest or fees thereon (other than a waiver of the application of the default rate of interest pursuant to Section 2.10 hereof).      (iii) Reduce the percentage specified in the definition of Required Lenders or any other percentage of Lenders specified to be the applicable percentage in this Agreement to act on specified matters or amend the definitions of “Required Lenders”, “Pro Rata Share” or “Combined Pro Rata Share”.      (iv) Increase the amount of the Commitment of any Lender hereunder, increase any Lender’s Pro Rata Share or modify the obligation of any Lender to make a disbursement in its Pro Rata Share thereof, in each case without the consent of such Lender. 88 --------------------------------------------------------------------------------        (v) Permit the Company or, other than pursuant to a transaction permitted under the terms of this Agreement, any Subsidiary Borrower to assign its rights under this Agreement.      (vi) Other than pursuant to a transaction permitted by the terms of this Agreement, release any Guarantor from its obligations under the Guaranty.      (vii) Amend Section 7.2(K), Section 13.2, Section 13.3 or this Section 9.2.      No amendment of any provision of this Agreement relating to (a) the Administrative Agent shall be effective without the written consent of the Administrative Agent, (b) Swing Line Loans shall be effective without the written consent of the Swing Line Bank and (c) any Issuing Bank shall be effective without the written consent of such Issuing Bank. The Administrative Agent may waive payment of the fee required under Section 14.3(B) without obtaining the consent of any of the Lenders. Notwithstanding anything herein to the contrary, the Administrative Agent may amend the provisions of Exhibits A-1 and A-2 from time to time to take into account the effectiveness of assignments made pursuant to Section 14.3 or changes in the Commitments pursuant to Section 2.5 or changes in the identities of the Issuing Banks, provided the failure to do so shall not otherwise affect the rights or obligations of the Lenders or the Borrowers hereunder.      The Administrative Agent may notify the other parties to this Agreement of any amendments to this Agreement which the Administrative Agent reasonably determines to be necessary as a result of the commencement of the third stage of the European Economic and Monetary Union. Notwithstanding anything to the contrary contained herein, any amendments so notified shall take effect in accordance with the terms of the relevant notification.           9.3. Preservation of Rights. No delay or omission of the Lenders or the Administrative Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Loan or the issuance of a Letter of Credit notwithstanding the existence of a Default or the inability of the Company or any other Borrower to satisfy the conditions precedent to such Loan or issuance of such Letter of Credit shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the requisite number of Lenders required pursuant to Section 9.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Administrative Agent and the Lenders until all of the Termination Conditions shall have been satisfied. ARTICLE X: GUARANTY           10.1. Guaranty. For valuable consideration, the receipt of which is hereby acknowledged, and to induce the Lenders to make advances to each Borrower and to issue and participate in Letters of Credit and Swing Line Loans, the Company and each Subsidiary 89 --------------------------------------------------------------------------------   Borrower (collectively, the “Borrower Guarantors”) hereby absolutely and unconditionally guarantees prompt payment when due, whether at stated maturity, upon acceleration or otherwise, and at all times thereafter, of any and all existing and future Obligations of each Borrower to the Administrative Agent, the Lenders, the Swing Line Bank, the Issuing Banks, or any of them, under or with respect to the Loan Documents, whether for principal, interest, fees, expenses or otherwise (collectively, the “Guaranteed Obligations”).           10.2. Waivers; Subordination of Subrogation.      (A) Each Borrower Guarantor waives notice of the acceptance of this guaranty and of the extension or continuation of the Guaranteed Obligations or any part thereof. Each Borrower Guarantor further waives presentment, protest, notice of notices delivered or demand made on any Borrower or action or delinquency in respect of the Guaranteed Obligations or any part thereof, including any right to require the Administrative Agent and the Lenders to sue any Borrower, any other guarantor or any other Person obligated with respect to the Guaranteed Obligations or any part thereof; provided, that if at any time any payment of any portion of the Guaranteed Obligations is rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy or reorganization of any of the Borrowers or otherwise, the Borrower Guarantor’s obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had not been made and whether or not the Administrative Agent or the Lenders are in possession of this guaranty. The Administrative Agent and the Lenders shall have no obligation to disclose or discuss with the Company their assessments of the financial condition of the Borrowers.      (B) Until the Guaranteed Obligations have been indefeasibly paid in full in cash, each Borrower Guarantor (i) shall have no right of subrogation with respect to such Guaranteed Obligations and (ii) waives any right to enforce any remedy which the Administrative Agent now has or may hereafter have against any Borrower, any other Guarantor, any endorser or any guarantor of all or any part of the Guaranteed Obligations or any other Person. Should any Borrower Guarantor have the right, notwithstanding the foregoing, to exercise its subrogation rights, each Borrower Guarantor hereby expressly and irrevocably (a) subordinates any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off that such Borrower Guarantor may have to the indefeasible payment in full in cash of the Guaranteed Obligations and (b) waives any and all defenses available to a surety, guarantor or accommodation co-obligor until the Guaranteed Obligations are indefeasibly paid in full in cash. Each Borrower Guarantor acknowledges and agrees that this subordination is intended to benefit the Administrative Agent and shall not limit or otherwise affect any Borrower Guarantor liability hereunder or the enforceability of this Guaranty, and that the Administrative Agent, the Lenders and their successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section 10.2.           10.3. Guaranty Absolute. This guaranty is a guaranty of payment and not of collection, is a primary obligation of each Borrower Guarantor and not one of surety, and the validity and enforceability of this guaranty shall be absolute and unconditional irrespective of, and shall not be impaired or affected by any of the following: (a) any extension, modification or 90 --------------------------------------------------------------------------------   renewal of, or indulgence with respect to, or substitutions for, the Guaranteed Obligations or any part thereof or any agreement relating thereto at any time; (b) any failure or omission to enforce any right, power or remedy with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto; (c) any waiver of any right, power or remedy with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto; (d) any release, surrender, compromise, settlement, waiver, subordination or modification, with or without consideration, any other guaranties with respect to the Guaranteed Obligations or any part thereof, or any other obligation of any Person with respect to the Guaranteed Obligations or any part thereof; (e) the enforceability or validity of the Guaranteed Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto, including, without limitation, as a result of a Country Risk Event; (f) the application of payments received from any source to the payment of obligations other than the Guaranteed Obligations, any part thereof or amounts which are not covered by this guaranty even though the Administrative Agent and the Lenders might lawfully have elected to apply such payments to any part or all of the Guaranteed Obligations or to amounts which are not covered by this guaranty; (g) any change in the ownership of any Borrower or the insolvency, bankruptcy or any other change in the legal status of any Borrower; (h) the change in or the imposition of any law, decree, regulation or other governmental act which does or might impair, delay or in any way affect the validity, enforceability or the payment when due of the Guaranteed Obligations; (i) the failure of the Company or any other Borrower to maintain in full force, validity or effect or to obtain or renew when required all governmental and other approvals, licenses or consents required in connection with the Guaranteed Obligations or this guaranty, or to take any other action required in connection with the performance of all obligations pursuant to the Guaranteed Obligations or this guaranty; (j) the existence of any claim, setoff or other rights which the Company may have at any time against any Borrower, or any other Person in connection herewith or an unrelated transaction; or (k) any other circumstances, whether or not similar to any of the foregoing, which could constitute a defense to a guarantor; all whether or not such Borrower Guarantor shall have had notice or knowledge of any act or omission referred to in the foregoing clauses (a) through (k) of this paragraph. It is agreed that each Borrower Guarantor’s liability hereunder is several and independent of any other guaranties or other obligations at any time in effect with respect to the Guaranteed Obligations or any part thereof and that each Borrower Guarantor’s liability hereunder may be enforced regardless of the existence, validity, enforcement or non-enforcement of any such other guaranties or other obligations or any provision of any applicable law or regulation purporting to prohibit payment by any Borrower of the Guaranteed Obligations in the manner agreed upon between the Borrower and the Administrative Agent and the Lenders.           10.4. Acceleration. Each Borrower Guarantor agrees that, as between such Borrower Guarantor on the one hand, and the Lenders and the Administrative Agent, on the other hand, the obligations of each Borrower guaranteed under this Article X may be declared to be forthwith due and payable, or may be deemed automatically to have been accelerated, as provided in Section 9.1 hereof for purposes of this Article X, notwithstanding any stay, injunction or other prohibition (whether in a bankruptcy proceeding affecting such Borrower or otherwise) preventing such declaration as against such Borrower and that, in the event of such declaration or automatic acceleration, such obligations (whether or not due and payable by such Borrower) shall forthwith become due and payable by each Borrower Guarantor for purposes of this Article X. 91 --------------------------------------------------------------------------------             10.5. Marshaling; Reinstatement. None of the Lenders nor the Administrative Agent nor any Person acting for or on behalf of the Lenders or the Administrative Agent shall have any obligation to marshal any assets in favor of any Borrower Guarantor or against or in payment of any or all of the Guaranteed Obligations. If any Borrower Guarantor or any other guarantor of all or any part of the Guaranteed Obligations makes a payment or payments to any Lender or the Administrative Agent, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to any Borrower Guarantor or any other guarantor or any other Person, or their respective estates, trustees, receivers or any other party, including, without limitation, each Borrower Guarantor, under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, the part of the Guaranteed Obligations which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately preceding such initial payment, reduction or satisfaction.           10.6. Termination Date. This guaranty shall continue in effect until the later of (a) the Facility Termination Date, and (b) the date on which all of the Guaranteed Obligations have been paid in full in cash, subject to the proviso in Section 10.2(A). ARTICLE XI: GENERAL PROVISIONS           11.1. Survival of Representations. All representations and warranties of the Borrowers contained in this Agreement shall survive delivery of this Agreement, the making of the Loans and the issuance of the Letters of Credit herein contemplated so long as any principal, accrued interest, fees, or any other amount due and payable under any Loan Document is outstanding and unpaid (other than contingent reimbursement and indemnification obligations) and so long as the Commitments have not been terminated.           11.2. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Company or any other Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation.           11.3. Performance of Obligations. The Borrowers agree that the Administrative Agent may, but shall have no obligation to (i) at any time, pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against any property of any Borrower to the extent any such Borrower is required by the terms hereof to pay any such amount, but has not done so and (ii) after the occurrence and during the continuance of a Default, to make any other payment or perform any act required of the Company or any other Borrower under any Loan Document or take any other action which the Administrative Agent in its discretion deems necessary or desirable to protect or preserve such property of the Company. The Administrative Agent shall use its reasonable efforts to give the applicable Borrower notice of any action taken under this Section 11.3 prior to the taking of such action or promptly thereafter provided the failure to give such notice shall not affect the applicable Borrower’s obligations in respect thereof. The Borrowers agree to pay the Administrative Agent, upon demand, the principal amount of all funds advanced by the Administrative Agent under this Section 11.3, together with interest thereon at the rate from time to time applicable to Floating Rate Loans from the date of such advance until the outstanding principal balance thereof is paid 92 --------------------------------------------------------------------------------   in full. If any Borrower fails to make payment in respect of any such advance under this Section 11.3 within one (1) Business Day after the date the applicable Borrower receives written demand therefor from the Administrative Agent, the Administrative Agent shall promptly notify each Lender and each Lender agrees that it shall thereupon make available to the Administrative Agent, in Dollars in immediately available funds, the amount equal to such Lender’s Pro Rata Share of such advance. If such funds are not made available to the Administrative Agent by such Lender within one (1) Business Day after the Administrative Agent’s demand therefor, the Administrative Agent will be entitled to recover any such amount from such Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of such demand and ending on the date such amount is received. The failure of any Lender to make available to the Administrative Agent its Pro Rata Share of any such unreimbursed advance under this Section 11.3 shall neither relieve any other Lender of its obligation hereunder to make available to the Administrative Agent such other Lender’s Pro Rata Share of such advance on the date such payment is to be made nor increase the obligation of any other Lender to make such payment to the Administrative Agent.           11.4. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents.           11.5. Entire Agreement. The Loan Documents and the fee letters described in Section 5.1(viii) hereof embody the entire agreement and understanding among the Borrowers, the Administrative Agent, the Syndication Agent and the Lenders and supersede all prior agreements and understandings among the Borrowers, the Administrative Agent, the Syndication Agent and the Lenders relating to the subject matter thereof.           11.6. Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other Lender (except to the extent to which the Administrative Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns.           11.7. Expenses; Indemnification.      (A) Expenses. The Borrowers shall reimburse the Administrative Agent and each Arranger for any reasonable costs, internal charges and out-of-pocket expenses (including reasonable attorneys’ and paralegals’ fees and time charges of attorneys and paralegals for the Administrative Agent or such Arranger, which attorneys and paralegals may be employees of the Administrative Agent or such Arranger) paid or incurred by the Administrative Agent or such Arranger in connection with the preparation, negotiation, execution, delivery, syndication, distribution (including via the internet), review, amendment, modification, and administration of the Loan Documents. The Borrowers also agree to reimburse the Administrative Agent and each Arranger and the Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys’ and paralegals’ fees and time charges of attorneys and paralegals for the Administrative 93 --------------------------------------------------------------------------------   Agent and such Arranger and the Lenders, which attorneys and paralegals may be employees of the Administrative Agent or such Arranger or the Lenders) paid or incurred by the Administrative Agent or such Arranger or any Lender in connection with the collection of the Obligations and enforcement of the Loan Documents. In addition to expenses set forth above, the Borrowers agree to reimburse the Administrative Agent, promptly after the Administrative Agent’s request therefor, for each audit, or other business analysis performed by or for the benefit of the Lenders in connection with this Agreement or the other Loan Documents in an amount equal to the Administrative Agent’s then customary charges for each person employed to perform such audit or analysis, plus all costs and expenses (including, without limitation, travel expenses) incurred by the Administrative Agent in the performance of such audit or analysis. Administrative Agent shall provide the Borrowers with a detailed statement of all reimbursements requested under this Section 11.7(A).      (B) Indemnity. The Borrowers further agree to defend, protect, indemnify, and hold harmless the Administrative Agent, each Arranger and each and all of the Lenders and each of their respective Affiliates, and each of such Administrative Agent’s, Arranger’s, Lender’s, or Affiliate’s respective officers, directors, trustees, investment advisors, employees, attorneys and agents (including, without limitation, those retained in connection with the satisfaction or attempted satisfaction of any of the conditions set forth in Article V) (collectively, the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses of any kind or nature whatsoever (including, without limitation, the fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, whether or not any of such Indemnitees shall be designated a party thereto), imposed on, incurred by, or asserted against such Indemnitees in any manner relating to or arising out of:      (i) this Agreement or any of the other Loan Documents, or any act, event or transaction related or attendant thereto or to the making of the Loans, and the issuance of and participation in Letters of Credit hereunder, the management of such Loans or Letters of Credit, the use or intended use of the proceeds of the Loans or Letters of Credit hereunder, or any of the other transactions contemplated by the Loan Documents; or      (ii) any liabilities, obligations, responsibilities, losses, damages, personal injury, death, punitive damages, economic damages, consequential damages, treble damages, intentional, willful or wanton injury, damage or threat to the environment, natural resources or public health or welfare, costs and expenses (including, without limitation, attorney, expert and consulting fees and costs of investigation, feasibility or remedial action studies), fines, penalties and monetary sanctions, interest, direct or indirect, known or unknown, absolute or contingent, past, present or future relating to violation of any Environmental, Health or Safety Requirements of Law arising from or in connection with the past, present or future operations of the Company, its Subsidiaries or any of their respective predecessors in interest, or, the past, present or future environmental, health or safety condition of any respective property of the Company or its Subsidiaries, the presence of asbestos-containing materials at any 94 --------------------------------------------------------------------------------   respective property of the Company or its Subsidiaries or the Release or threatened Release of any Contaminant into the environment (collectively, the “Indemnified Matters”); provided, however, no Borrower shall have any obligation to an Indemnitee hereunder with respect to Indemnified Matters caused solely by or resulting solely from the willful misconduct or Gross Negligence of such Indemnitee with respect to the Loan Documents, as determined by the final non-appealed judgment of a court of competent jurisdiction. If the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the applicable Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees.      (C) Waiver of Certain Claims; Settlement of Claims. Neither the Administrative Agent, either Arranger, any Lender nor the Company or any other Borrower shall be liable under this Agreement or any Loan Document or in respect of any act, omission or event relating to the transaction contemplated hereby or thereby, on any theory of liability seeking consequential, special, indirect, exemplary or punitive damages. No settlement shall be entered into by the Company or any of its Subsidiaries with respect to any claim, litigation, arbitration or other proceeding relating to or arising out of the transactions evidenced by this Agreement or the other Loan Documents (whether or not the Administrative Agent or any Lender or any Indemnitee is a party thereto) unless such settlement releases all Indemnitees from any and all liability with respect thereto.      (D) Survival of Agreements. The obligations and agreements of the Borrowers under this Section 11.7 shall survive the termination of this Agreement.      (E) All amounts due under the preceding clauses (A) and (B) of this Section 11.7 shall be payable promptly after written demand therefor.           11.8. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Administrative Agent with sufficient counterparts so that the Administrative Agent may furnish one to each of the Lenders.           11.9. Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles. If any changes in generally accepted accounting principles are hereafter required or permitted and are adopted by the Company or any of its Subsidiaries with the agreement of its independent certified public accountants and such changes result in a change in the method of calculation of any of the financial covenants, tests, restrictions or standards herein or in the related definitions or terms used therein (“Accounting Changes”), the parties hereto agree, at the Company’s request, to enter into negotiations, in good faith, in order to amend such provisions in a credit neutral manner so as to reflect equitably such changes with the desired result that the criteria for evaluating the Company’s and its Subsidiaries’ financial condition shall be the same after such changes as if such changes had not 95 --------------------------------------------------------------------------------   been made; provided, however, until such provisions are amended in a manner reasonably satisfactory to the Administrative Agent and the Required Lenders, no Accounting Change shall be given effect in such calculations and all financial statements and reports required to be delivered hereunder shall be prepared in accordance with Agreement Accounting Principles without taking into account such Accounting Changes. In the event such amendment is entered into, all references in this Agreement to Agreement Accounting Principles shall mean generally accepted accounting principles as of the date of such amendment.           11.10. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable.           11.11. Nonliability of Lenders. The relationship between the Borrowers and the Lenders and the Administrative Agent shall be solely that of borrower and lender. Neither the Administrative Agent nor any Lender shall have any fiduciary responsibilities to the Borrowers. Neither the Administrative Agent nor any Lender undertakes any responsibility to any Borrower to review or inform any Borrower of any matter in connection with any phase of the Borrowers’ business or operations.           11.12. GOVERNING LAW. THE ADMINISTRATIVE AGENT ACCEPTS THIS AGREEMENT, ON BEHALF OF ITSELF AND THE LENDERS, AT CHICAGO, ILLINOIS BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE BETWEEN ANY BORROWER AND THE ADMINISTRATIVE AGENT, ANY LENDER ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING §735 ILCS 105/5-1 ET SEQ. BUT OTHERWISE WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS.           11.13. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.      (A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN CLAUSE (B), EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS CLAUSE (A) ANY 96 --------------------------------------------------------------------------------   OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.      (B) OTHER JURISDICTIONS. EACH BORROWER AGREES THAT THE ADMINISTRATIVE AGENT AND ANY LENDER SHALL HAVE THE RIGHT TO PROCEED AGAINST EACH BORROWER OR ITS RESPECTIVE PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION OVER ANY BORROWER OR (2) IN ORDER TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. EACH BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. EACH BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS CLAUSE (B).      (C) VENUE. EACH BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE.      (D) SERVICE OF PROCESS. EACH BORROWER IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN ARTICLE XV, AND THE COMPANY AND EACH BORROWER OR GUARANTOR LOCATED OR ORGANIZED OUTSIDE OF THE STATE OF ILLINOIS HEREBY IRREVOCABLY APPOINTS THE COMPANY AT THE ADDRESS PROVIDED IN SECTION 15.1, AS ITS AGENT FOR SERVICE OF PROCESS OUT OF ANY OF THE COURTS REFERRED TO IN PARAGRAPHS (A) AND (B) ABOVE AND THE COMPANY HEREBY ACCEPTS SUCH APPOINTMENT. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.      (E) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY 97 --------------------------------------------------------------------------------   HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.      (F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE PROVISIONS OF SECTION 11.7 AND THIS SECTION 11.13, WITH ITS COUNSEL.           11.14. Other Transactions. Each of the Administrative Agent, the Arrangers, the Lenders, the Swing Line Bank, the Issuing Banks and the Borrowers acknowledge that the Lenders (or Affiliates of the Lenders) may, from time to time, effect transactions for their own accounts or the accounts of customers, and hold positions in loans or options on loans of the Company, the Company’s Subsidiaries and other companies that may be the subject of this credit arrangement and nothing in this Agreement shall impair the right of any such Person to enter into any such transaction (to the extent it is not expressly prohibited by the terms of this Agreement) or give any other Person any claim or right of action hereunder as a result of the existence of the credit arrangements hereunder, all of which are hereby waived. In addition, certain Affiliates of one or more of the Lenders are or may be securities firms and as such may effect, from time to time, transactions for their own accounts or for the accounts of customers and hold positions in securities or options on securities of the Company, the Company’s Subsidiaries and other companies that may be the subject of this credit arrangement and nothing in this Agreement shall impair the right of any such Person to enter into any such transaction (to the extent it is not expressly prohibited by the terms of this Agreement) or give any other Person any claim or right of action hereunder as a result of the existence of the credit arrangements hereunder, all of which are hereby waived. Each of the Administrative Agent, the Arrangers, the Lenders, the Swing Line Bank, the Issuing Banks and the Borrowers acknowledges and consents to these multiple roles, and further acknowledges that the fact that any such unit or Affiliate is providing another service or product or proposal therefor to the Company or any of its Subsidiaries does not mean that such service, product, or proposal is or will be acceptable to any of the Administrative Agent, the Arrangers, the Lenders, the Swing Line Bank or the Issuing Banks.           11.15. Subordination of Intercompany Indebtedness. Each Borrower agrees that any and all claims of such Borrower against a Guarantor with respect to any “Intercompany Indebtedness” (as hereinafter defined) shall be subordinate and subject in right of payment to the prior payment, in full and in cash, of all Obligations and Hedging Obligations under Hedging Arrangements entered into with the Lenders or any of their Affiliates (“Designated Hedging Agreements”); provided that, and not in contravention of the foregoing, so long as no Default has occurred and is continuing each Borrower may make loans to and receive payments in the ordinary course with respect to such Intercompany Indebtedness from each such Guarantor to the extent not prohibited by the terms of this Agreement and the other Loan Documents. Notwithstanding any right of any Borrower to ask, demand, sue for, take or receive any payment from any Guarantor, all rights, liens and security interests of any Borrower, whether now or hereafter arising and howsoever existing, in any assets of any Guarantor shall be and are subordinated to the rights of the holders of the Obligations and the Administrative Agent in those assets. No Borrower shall have any right to possession of any such asset or to foreclose upon 98 --------------------------------------------------------------------------------   any such asset, whether by judicial action or otherwise, unless and until all of the Obligations (other than contingent indemnity obligations) and the Hedging Obligations under Designated Hedging Agreements shall have been fully paid and satisfied (in cash) and all financing arrangements pursuant to any Loan Document or Designated Hedging Agreement have been terminated. If all or any part of the assets of any Guarantor, or the proceeds thereof, are subject to any distribution, division or application to the creditors of such Guarantor, whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any such Guarantor is dissolved or if substantially all of the assets of any such Guarantor are sold, then, and in any such event (such events being herein referred to as an “Insolvency Event”), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable upon or with respect to any indebtedness of any Guarantor to any Borrower (“Intercompany Indebtedness”) shall be paid or delivered directly to the Administrative Agent for application on any of the Obligations and Hedging Obligations under Designated Hedging Agreements, due or to become due, until such Obligations and Hedging Obligations (other than contingent indemnity obligations) shall have first been fully paid and satisfied (in cash). Should any payment, distribution, security or instrument or proceeds thereof be received by any Borrower upon or with respect to the Intercompany Indebtedness after an Insolvency Event prior to the satisfaction of all of the Obligations (other than contingent indemnity obligations) and Hedging Obligations under Designated Hedging Agreements and the termination of all financing arrangements pursuant to any Loan Document and or Designated Hedging Agreements, such Borrower shall receive and hold the same in trust, as trustee, for the benefit of the holders of the Obligations and such Hedging Obligations and shall forthwith deliver the same to the Administrative Agent, for the benefit of such Persons, in precisely the form received (except for the endorsement or assignment of such Borrower where necessary), for application to any of the Obligations and such Hedging Obligations, due or not due, and, until so delivered, the same shall be held in trust by such Borrower as the property of the holders of the Obligations and such Hedging Obligations. If any Borrower fails to make any such endorsement or assignment to the Administrative Agent, the Administrative Agent or any of its officers or employees are irrevocably authorized to make the same. Each Borrower agrees that until the Obligations (other than the contingent indemnity obligations) and such Hedging Obligations have been paid in full (in cash) and satisfied and all financing arrangements pursuant to any Loan Document or any Designated Hedging Agreement have been terminated, no Borrower will assign or transfer to any Person (other than the Administrative Agent) any claim such Borrower has or may have against any Guarantor.           11.16. Lenders Not Utilizing Plan Assets. None of the consideration used by any of the Lenders or Designated Lenders to make its Loans constitutes for any purpose of ERISA or Section 4975 of the Code assets of any “plan” as defined in Section 3(3) of ERISA or Section 4975 of the Code and the rights and interests of each of the Lenders and Designated Lenders in and under the Loan Documents shall not constitute such “plan assets” under ERISA.           11.17. Collateral. Each of the Lenders and the Issuing Banks represents to the Administrative Agent, each of the other Lenders and each of the other Issuing Banks that it in good faith is not relying upon any “margin stock” (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. 99 --------------------------------------------------------------------------------             11.18. PMP. Each Lender which is a party to this Agreement on the date hereof represents and warrants on the date hereof to each Borrower organized under the laws of the Netherlands that (i) it is a PMP, (ii) it is aware that it does not benefit, with respect to the credit facility evidenced by this Agreement, from the protection offered by the Dutch Banking Act to Lenders which are not PMPs, and (iii) it has made its own independent appraisal of risks arising under or in connection with any Loan Documents.           11.19. USA PATRIOT Act. Each Lender that is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies each Borrower that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of each Borrower and other information that will allow such Lender to identify each Borrower in accordance with the Act ARTICLE XII: THE ADMINISTRATIVE AGENT           12.1. Appointment; Nature of Relationship. JPMorgan is appointed by the Lenders as the Administrative Agent hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Administrative Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Administrative Agent agrees to act as such contractual representative upon the express conditions contained in this Article XII. In its capacity as the Lenders’ contractual representative, the Administrative Agent is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders agrees to assert no claim against the Administrative Agent on any agency theory or any other theory of liability for breach of fiduciary duty.           12.2. Powers. The Administrative Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Administrative Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Administrative Agent shall have no implied duties or fiduciary duties to the Lenders, or any obligation to the Lenders to take any action hereunder or under any of the other Loan Documents except any action specifically provided by the Loan Documents required to be taken by the Administrative Agent.           12.3. General Immunity. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable to the Borrowers, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is found in a final judgment by a court of competent jurisdiction to have arisen solely from the Gross Negligence or willful misconduct of such Person.           12.4. No Responsibility for Credit Extensions, Creditworthiness, Recitals, Etc. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (i) any statement, warranty or representation made in connection with any Loan Document or any credit extension hereunder; 100 --------------------------------------------------------------------------------   (ii) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document; (iii) the satisfaction of any condition specified in Article V, except receipt of items required to be delivered solely to the Administrative Agent; (iv) the existence or possible existence of any Default or (v) the validity, effectiveness or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith. The Administrative Agent shall not be responsible to any Lender for any recitals, statements, representations or warranties herein or in any of the other Loan Documents or for the execution, effectiveness, genuineness, validity, legality, enforceability, collectibility, or sufficiency of this Agreement or any of the other Loan Documents or the transactions contemplated thereby, or for the financial condition of any guarantor of any or all of the Obligations, the Company or any of its Subsidiaries.           12.5. Action on Instructions of Lenders. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders (or all of the Lenders in the event that and to the extent that this Agreement expressly requires such), and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders and on all owners of Loans. The Administrative Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.           12.6. Employment of Agents and Counsel. The Administrative Agent may execute any of its duties as the Administrative Agent hereunder and under any other Loan Document by or through employees, agents, and attorney-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agent, for the default or misconduct of any such agent or attorneys-in-fact selected by it with reasonable care. The Administrative Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Administrative Agent and the Lenders and all matters pertaining to the Administrative Agent’s duties hereunder and under any other Loan Document.           12.7. Reliance on Documents; Counsel. The Administrative Agent shall be entitled to rely upon any notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Administrative Agent, which counsel may be employees of the Administrative Agent.           12.8. The Administrative Agent’s Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Administrative Agent (i) for any amounts not reimbursed by any Borrower for which the Administrative Agent is entitled to reimbursement by any Borrower under the Loan Documents, (ii) for any other expenses incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby, or the enforcement of any of the 101 --------------------------------------------------------------------------------   terms thereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have arisen solely from the Gross Negligence or willful misconduct of the Administrative Agent.           12.9. Rights as a Lender. With respect to its Commitment, Loans made by it, and Letters of Credit issued by it, the Administrative Agent shall have the same rights and powers hereunder and under any other Loan Document as any Lender or Issuing Bank and may exercise the same as though it were not the Administrative Agent, and the term “Lender” or “Lenders”, “Issuing Bank” or “Issuing Banks” shall, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Company or any of its Subsidiaries in which such Person is not prohibited hereby from engaging with any other Person.           12.10. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, either Arranger or any other Lender and based on the financial statements prepared by the Company and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, either Arranger or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents.           12.11. Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Company. Upon any such resignation, the Required Lenders shall have the right to appoint, on behalf of the Borrowers and the Lenders, a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty days after the retiring Administrative Agent’s giving notice of resignation, then the retiring Administrative Agent may appoint, on behalf of the Borrowers and the Lenders, a successor Administrative Agent. Notwithstanding anything herein to the contrary, so long as no Default has occurred and is continuing, each such successor Administrative Agent shall be subject to approval by the Company, which approval shall not be unreasonably withheld or delayed. Such successor Administrative Agent shall be a commercial bank having capital and retained earnings of at least $500,000,000. Upon the acceptance of any appointment as the Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article XII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder and under the other Loan Documents. 102 --------------------------------------------------------------------------------             12.12. Documentation Agents, Syndication Agent and Arrangers. Neither the Documentation Agents, the Syndication Agent nor the Arrangers shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than, except for the Arrangers, those applicable to all Lenders as such. Without limiting the foregoing, none of such Lenders shall have or be deemed to have a fiduciary relationship with any Lender. Each Lender hereby makes the same acknowledgments with respect to such Lenders as it makes with respect to the Administrative Agent in Section 12.10. ARTICLE XIII: SETOFF; RATABLE PAYMENTS           13.1. Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if any Default occurs and is continuing, any Indebtedness from any Lender to the Company or any other Borrower (including all account balances, whether provisional or final and whether or not collected or available) may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part hereof, shall then be due.           13.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Obligations (other than payments received pursuant to Sections 4.1, 4.2 or 4.4) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Obligations held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made.           13.3. Application of Payments. The Administrative Agent shall, unless otherwise specified at the direction of the Required Lenders which direction shall be consistent with the last two sentences of this Section 13.3, apply all payments and prepayments in respect of any Obligations in the following order:      (i) first, to pay interest on and then principal of any portion of the Loans which the Administrative Agent may have advanced on behalf of any Lender for which the Administrative Agent has not then been reimbursed by such Lender or the applicable Borrower;      (ii) second, to pay interest on and then principal of any advance made under Section 11.3 for which the Administrative Agent has not then been paid by the applicable Borrower or reimbursed by the Lenders;      (iii) third, to the ratable payment of the Obligations in respect of any fees, expenses, reimbursements or indemnities then due to the Administrative Agent or either Arranger;      (iv) fourth, to pay Obligations in respect of any fees, expenses, reimbursements or indemnities then due to the Lenders and the issuer(s) of Letters of Credit;      (v) fifth, to pay interest due in respect of Swing Line Loans; 103 --------------------------------------------------------------------------------        (vi) sixth, to pay interest due in respect of Loans (other than Swing Line Loans) and L/C Obligations;      (vii) seventh, to the ratable payment or prepayment of principal outstanding on Swing Line Loans;      (viii) eighth, to the ratable payment or prepayment of principal outstanding on Loans (other than Swing Line Loans) and Reimbursement Obligations;      (ix) ninth, to provide cash collateral for all other L/C Obligations; and      (x) tenth, to the ratable payment of all other Obligations. Unless otherwise designated (which designation shall only be applicable prior to the occurrence of a Default) by the Company, all principal payments in respect of Loans (other than Swing Line Loans) shall be applied first, to repay outstanding Floating Rate Loans, and then to repay outstanding Eurodollar Rate Loans with those Eurodollar Rate Loans which have earlier expiring Interest Periods being repaid prior to those which have later expiring Interest Periods. The order of priority set forth in this Section 13.3 and the related provisions of this Agreement are set forth solely to determine the rights and priorities of the Administrative Agent, the Lenders, the Swing Line Bank and the issuer(s) of Letters of Credit as among themselves. The order of priority set forth in clauses (iv) through (x) of this Section 13.3 may at any time and from time to time be changed by the Required Lenders without necessity of notice to or consent of or approval by any Borrower, or any other Person; provided, that the order of priority of payments in respect of Swing Line Loans may be changed only with the prior written consent of the Swing Line Bank. The order of priority set forth in clauses (i) through (iii) of this Section 13.3 may be changed only with the prior written consent of the Administrative Agent, and, in the case of clause (iii), with the prior written consent of each Arranger.      13.4. Relations Among Lenders.      (A) No Action Without Consent. Except with respect to the exercise of set-off rights of any Lender in accordance with Section 12.1, the proceeds of which are applied in accordance with this Agreement, and each Lender agrees that it will not take any action, nor institute any actions or proceedings, against the Borrowers or any other obligor hereunder or with respect to any Loan Document, without the prior written consent of the Required Lenders or, as may be provided in this Agreement or the other Loan Documents, at the direction of the Administrative Agent.      (B) Not Partners; No Liability. The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Administrative Agent) authorized to act for, any other Lender. The Administrative Agent shall have the exclusive right on behalf of the Lenders to enforce the payment of the principal of and interest on any Loan after the date such principal or interest has become due and payable pursuant to the terms of this Agreement. 104 --------------------------------------------------------------------------------   ARTICLE XIV: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS           14.1. Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrowers and the Lenders and their respective successors and assigns, except that (A) other than in connection with a transaction involving a Subsidiary Borrower which is permitted pursuant to the terms of this Agreement, no Borrower shall have any right to assign its rights or obligations under the Loan Documents without the consent of all of the Lenders, and any such assignment in violation of this Section 14.1(A) shall be null and void, and (B) any assignment by any Lender must be made in compliance with Section 14.3 hereof. The parties to this Agreement acknowledge that clause (B) of this Section 14.1 relates only to absolute assignments and does not prohibit assignments creating security interests, including, without limitation, (x) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender which is a fund, any pledge or assignment of all or any portion of its rights under this Agreement and any Note to its trustee in support of its obligations to its trustee; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 14.3. The Administrative Agent may treat each Lender as the owner of the Loans made by such Lender hereunder for all purposes hereof unless and until such Lender complies with Section 14.3 hereof in the case of an assignment thereof or, in the case of any other transfer, a written notice of the transfer is filed with the Administrative Agent. Any assignee or transferee of a Loan, Commitment, L/C Interest or any other interest of a Lender under the Loan Documents agrees by acceptance thereof to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of any Loan, shall be conclusive and binding on any subsequent owner, transferee or assignee of such Loan.           14.2. Participations.      (A) Permitted Participants; Effect. Subject to the terms set forth in this Section 14.2, any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities which are, to the extent required by the Dutch Banking Act and the Dutch Exemption Regulation, PMPs (“Participants”) participating interests in any Loan owing to such Lender, the Commitment of such Lender, any L/C Interest of such Lender or any other interest of such Lender under the Loan Documents on a pro rata or non-pro rata basis. Notice of such participation to the Company and the Administrative Agent shall be required prior to any participation becoming effective with respect to a Participant which is not a Lender, Designated Lender or an Affiliate thereof. Upon receiving said notice, the Administrative Agent shall record the participation in the Register it maintains. Moreover, notwithstanding such recordation, such participation shall not be considered an assignment under Section 14.3 of this Agreement and such Participant shall not be considered a Lender. In the event of any such sale by a Lender of participating interests to a Participant, such Lender’s obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of all Loans made 105 --------------------------------------------------------------------------------   by it for all purposes under the Loan Documents, all amounts payable by the applicable Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the applicable Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under the Loan Documents except that, for purposes of Article IV hereof, the Participants shall be entitled to the same rights as if they were Lenders.      (B) Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver which, if the Participant were a Lender hereunder, would require the consent of such Participant pursuant to the terms of Section 9.2.      (C) Benefit of Setoff. The Borrowers agree that each Participant shall be deemed to have the right of setoff provided in Section 13.1 hereof in respect to its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 13.1 hereof with respect to the amount of participating interests sold to each Participant except to the extent such Participant exercises its right of setoff. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 13.1 hereof, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 13.2 as if each Participant were a Lender.      14.3. Assignments.      (A) Permitted Assignments. Any Lender (each such assigning Lender under this Section 14.3 being a “Seller”) may, in accordance with applicable law, at any time assign to one or more banks or other entities that are Eligible Assignees (“Purchasers”) all or a portion of its rights and obligations under this Agreement (including, without limitation, its Commitment, Loans owing to it, its participation interests in existing Letters of Credit and Swing Line Loans, and its obligation to participate in additional Letters of Credit and Swing Line Loans) in accordance with the provisions of this Section 14.3. Each assignment shall be of a constant, and not a varying, ratable percentage of all of the Seller’s rights and obligations under this Agreement. Such assignment shall be substantially in the form of Exhibit D hereto and shall not be permitted hereunder unless such assignment is either for all of such Seller’s rights and obligations under the Loan Documents or, without the prior written consent of the Administrative Agent, involves loans and commitments in an aggregate amount of at least Five Million and 00/100 Dollars ($5,000,000) (which minimum amount shall not apply to any assignment between Lenders, or to an Affiliate of any Lender). The written consent of the Funded Issuing Banks and the Company (which consent, in each such case, shall not be unreasonably withheld or delayed), shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate of such assigning Lender; provided that no such consent of the Company shall be required to the extent a Default has occurred and is then continuing or if such assignment is in connection with the 106 --------------------------------------------------------------------------------   physical settlement of one or more credit derivative transactions. The written consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed) shall be required prior to each assignment becoming effective.      (B) Effect; Effective Date. Upon (i) delivery to the Administrative Agent of a notice of assignment, substantially in the form attached as Appendix I to Exhibit D hereto (a “Notice of Assignment”), together with any consent required by Section 14.3(A) hereof, (ii) payment of a Four Thousand and 00/100 Dollar ($4,000) fee by the assignor to the Administrative Agent for processing such assignment, which fee shall not apply to any assignment from a Lender to an Affiliate of such Lender, and (iii) the completion of the recording requirements in Section 14.3(C), such assignment shall become effective on the later of such date when the requirements in clauses (i), (ii), and (iii) are met or the effective date specified in such Notice of Assignment. The Notice of Assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment, Loans and L/C Obligations under the applicable assignment agreement are “plan assets” as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be “plan assets” under ERISA. On and after the effective date of such assignment, such Purchaser, if not already a Lender, shall for all purposes be a Lender party to this Agreement and any other Loan Documents executed by the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by any Borrower, the Lenders or the Administrative Agent shall be required to release the Seller with respect to the percentage of the Aggregate Commitment, Loans and Letter of Credit and Swing Line Loan participations assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this Section 14.3(B), the Seller, the Administrative Agent and the Borrowers shall make appropriate arrangements so that, to the extent notes have been issued to evidence any of the transferred Loans, replacement notes are issued to such Seller and new notes or, as appropriate, replacement notes, are issued to such Purchaser, in each case in principal amounts reflecting their Commitments, as adjusted pursuant to such assignment. Notwithstanding anything to the contrary herein, no Borrower shall, at any time, be obligated to pay under Section 2.14(E) to any Lender that is a Purchaser, assignee or transferee any sum in excess of the sum which such Borrower would have been obligated to pay in respect of such transferred Loan to the Lender that was the Seller, assignor or transferor had such assignment or transfer not been effected.      (C) The Register. Notwithstanding anything to the contrary in this Agreement, each Borrower hereby designates the Administrative Agent, and the Administrative Agent, hereby accepts such designation, to serve as such Borrower’s contractual representative solely for purposes of this Section 14.3(C). In this connection, the Administrative Agent shall maintain at its address referred to in Section 15.1 a copy of each assignment delivered to and accepted by it pursuant to this Section 14.3 and a register (the “Register”) for the recordation of the names and addresses of the Lenders and the Commitment of, principal amount of and interest on the Loans owing to, each Lender from time to time and whether such Lender is an original Lender or the assignee of another Lender pursuant to an assignment under this Section 14.3. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the 107 --------------------------------------------------------------------------------   Company and each of its Subsidiaries, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.      (D) Designated Lender.      (i) Subject to the terms and conditions set forth in this Section 14.3(D), any Lender may from time to time elect to designate an Eligible Designee to provide all or any part of the Loans to be made by such Lender pursuant to this Agreement; provided that the designation of an Eligible Designee by any Lender for purposes of this Section 14.3(D) shall be subject to the approval of the Administrative Agent (which consent shall not be unreasonably withheld or delayed). Upon the execution by the parties to each such designation of an agreement in the form of Exhibit K hereto (a “Designation Agreement”) and the acceptance thereof by the Administrative Agent, the Eligible Designee shall become a Designated Lender for purposes of this Agreement. The Designating Lender shall thereafter have the right to permit the Designated Lender to provide all or a portion of the Loans to be made by the Designating Lender pursuant to the terms of this Agreement and the making of the Loans or portion thereof shall satisfy the obligations of the Designating Lender to the same extent, and as if, such Loan was made by the Designating Lender. As to any Loan made by it, each Designated Lender shall have all the rights a Lender making such Loan would have under this Agreement and otherwise; provided, (x) that all voting rights under this Agreement shall be exercised solely by the Designating Lender, (y) each Designating Lender shall remain solely responsible to the other parties hereto for its obligations under this Agreement, including the obligations of a Lender in respect of Loans made by its Designated Lender and (z) no Designated Lender shall be entitled to reimbursement under Article IV hereof for any amount which would exceed the amount that would have been payable by the Borrowers to the Lender from which the Designated Lender obtained any interests hereunder. No additional Notes shall be required with respect to Loans provided by a Designated Lender; provided, however, to the extent any Designated Lender shall advance funds, the Designating Lender shall be deemed to hold the Notes in its possession as an agent for such Designated Lender to the extent of the Loan funded by such Designated Lender. Such Designating Lender shall act as administrative agent for its Designated Lender and give and receive notices and communications hereunder. Any payments for the account of any Designated Lender shall be paid to its Designating Lender as administrative agent for such Designated Lender and neither the Borrowers nor the Administrative Agent shall be responsible for any Designating Lender’s application of such payments. In addition, any Designated Lender may (1) with notice to, but without the consent of the Borrowers or the Administrative Agent, assign all or portions of its interests in any Loans to its Designating Lender or to any financial institution consented to by the Administrative Agent providing liquidity and/or credit facilities to or for the account of such Designated Lender and (2) subject to advising any such Person that such information is to be treated as confidential in accordance with such Person’s customary practices for dealing with confidential, 108 --------------------------------------------------------------------------------   non-public information, disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any guarantee, surety or credit or liquidity enhancement to such Designated Lender.      (ii) Each party to this Agreement hereby agrees that it shall not institute against, or join any other Person in instituting against any Designated Lender any bankruptcy, reorganization, arrangements, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law for one year and a day after the payment in full of all outstanding senior indebtedness of any Designated Lender; provided that the Designating Lender for each Designated Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage and expense arising out of their inability to institute any such proceeding against such Designated Lender. This Section 14.3(D)(ii) shall survive the termination of this Agreement.           14.4. Confidentiality. Subject to Section 14.5, the Administrative Agent and the Lenders and their respective representatives, consultants and advisors shall hold all nonpublic information obtained pursuant to the requirements of this Agreement and identified as such by the Company or any other Borrower in accordance with such Person’s customary procedures for handling confidential information of this nature and in accordance with safe and sound commercial lending or investment practices and in any event may make disclosure reasonably required by a prospective Transferee in connection with the contemplated participation or assignment or as required or requested by any Governmental Authority or any securities exchange or similar self-regulatory organization or representative thereof or pursuant to a regulatory examination or legal process, or to any direct or indirect contractual counterparty in swap agreements or such contractual counterparty’s professional advisor, and shall (x) use its commercially reasonable efforts to give prior notice of any such disclosure to the extent permitted by applicable law, and (y) require any such Transferee to agree (and require any of its Transferees to agree) to comply with this Section 14.4. In no event shall the Administrative Agent or any Lender be obligated or required to return any materials furnished by the Company; provided, however, each prospective Transferee shall be required to agree that if it does not become a participant or assignee it shall return all materials furnished to it by or on behalf of the Company in connection with this Agreement.           14.5. Dissemination of Information. Each Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a “Transferee”) and any prospective Transferee any and all information in such Lender’s possession concerning the Borrowers and its Subsidiaries; provided that prior to any such disclosure, such prospective Transferee shall agree to preserve in accordance with Section 14.4 the confidentiality of any confidential information described therein. ARTICLE XV: NOTICES           15.1. Giving Notice. Except as otherwise permitted by Section 2.13 with respect to Borrowing/Election Notices, all notices and other communications provided to any party hereto under this Agreement or any other Loan Documents shall be in writing or by telex 109 --------------------------------------------------------------------------------   or by facsimile and addressed or delivered to such party at its address set forth below its signature hereto or at such other address as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid, shall be deemed given three (3) Business Days after mailed; any notice, if transmitted by telex or facsimile, shall be deemed given when transmitted (answerback confirmed in the case of telexes); or any notice, if transmitted by courier, one (1) Business Day after deposit with a reputable overnight carrier service, with all charges paid.           15.2. Change of Address. The Borrowers, the Administrative Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. ARTICLE XVI: COUNTERPARTS           This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Company, the Administrative Agent and the Lenders and each party has notified the Administrative Agent by facsimile or telephone, that it has taken such action; it being understood and agreed that the initial extensions of credit hereunder shall be subject to the satisfaction of the conditions precedent set forth in Section 5.1 hereof. [Remainder of This Page Intentionally Blank] 110 --------------------------------------------------------------------------------             IN WITNESS WHEREOF, the Borrowers, the Lenders and the Administrative Agent have executed this Agreement as of the date first above written.           CHICAGO BRIDGE & IRON COMPANY N.V.,     as the Company     By: CHICAGO BRIDGE & IRON COMPANY B.V.     Its: Managing Director                   By:   /s/ Philip K. Asherman         Name:   Philip K. Asherman        Title:   Managing Director                Address:     c/o Chicago Bridge & Iron Company (Delaware)     One CB&I Plaza     2103 Research Forest Drive     The Woodlands, TX 77380     Attention: Ronald Ballschmiede, Managing     Director & Chief Financial Officer     Telephone No.: (832) 513-1000     Facsimile No.: (832) 513-1092 Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     CB&I CONSTRUCTORS, INC., as a Subsidiary Borrower                       By: Name:   /s/ Luciano Reyes   Luciano Reyes         Title:   Vice President and Treasurer                       Address: c/o Chicago Bridge & Iron Company (Delaware) One CB&I Plaza 2103 Research Forest Drive The Woodlands, TX 77380 Attention: Ronald Ballschmiede, Managing Director & Chief Financial Officer Telephone No.: (832) 513-1000 Facsimile No.: (832) 513-1092     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     CBI SERVICES, INC., as a Subsidiary Borrower                       By: Name:   /s/ Terrence G. Browne   Terrence G. Browne         Title:   Treasurer                       Address: c/o Chicago Bridge & Iron Company (Delaware) One CB&I Plaza 2103 Research Forest Drive The Woodlands, TX 77380 Attention: Ronald Ballschmiede, Managing Director & Chief Financial Officer Telephone No.: (832) 513-1000 Facsimile No.: (832) 513-1092     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     CHICAGO BRIDGE & IRON COMPANY (DELAWARE), as a Subsidiary Borrower                       By: Name:   /s/ Luciano Reyes   Luciano Reyes         Title:   Vice President and Treasurer                       Address: c/o Chicago Bridge & Iron Company (Delaware) One CB&I Plaza 2103 Research Forest Drive The Woodlands, TX 77380 Attention: Ronald Ballschmiede, Managing Director & Chief Financial Officer Telephone No.: (832) 513-1000 Facsimile No.: (832) 513-1092     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     CB&I TYLER COMPANY, as a Subsidiary Borrower                       By: Name:   /s/ Luciano Reyes   Luciano Reyes         Title:   Treasurer                       Address: c/o Chicago Bridge & Iron Company (Delaware) One CB&I Plaza 2103 Research Forest Drive The Woodlands, TX 77380 Attention: Ronald Ballschmiede, Managing Director & Chief Financial Officer Telephone No.: (832) 513-1000 Facsimile No.: (832) 513-1092     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     CHICAGO BRIDGE & IRON COMPANY B.V., as a Subsidiary Borrower                       By: Name:   /s/ Philip K. Asherman   Philip K. Asherman         Title:   Managing Director                       Address: c/o Chicago Bridge & Iron Company (Delaware) One CB&I Plaza 2103 Research Forest Drive The Woodlands, TX 77380 Attention: Ronald Ballschmiede, Managing Director & Chief Financial Officer Telephone No.: (832) 513-1000 Facsimile No.: (832) 513-1092     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as Administrative Agent and as a Lender                       By: Name:   /s/ H. David Jones   H. David Jones         Title:   Vice President                       Notice Address: 707 Travis St. 8-CBBN-78 Houston, TX 77002 Attention: H. David Jones Telephone: (713)216-4940 Facsimile: (713)216-6710     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     BANK OF AMERICA, N.A., as Syndication Agent and as a Lender                       By: Name:   /s/ Robert W. Troutman   Robert W. Troutman         Title:   Managing Director                       Notice Address: Bank of America, N.A. 2001 Clayton Road CA4-702-02-05 Concord, CA 94520-2405 Attention: Tina Obcena Telephone: (925)675-8768 Facsimile: (888)969-9246                       Lending Installation Address: Bank of America, N.A. Building B 2001 Clayton Road Concord, CA 94520-2405     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     BANK OF MONTREAL, as a Documentation Agent and as a Lender                       By: Name:   /s/ John Armstrong   John Armstrong         Title:   Vice President                       Notice Address: 111 W. Monroe Street 10th Floor West Chicago, Illinois 60603 Attention: Shahrokh Z. Shah Telephone: (312) 293-8353 Facsimile: (312) 293-5852                       Lending Installation Address: 111 W. Monroe Street 10th Floor West Chicago, Illinois 60603     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     WELLS FARGO BANK, N.A., as a Documentation Agent and as a Lender                       By: Name:   /s/ Thomas F. Caver, III   Thomas F. Caver, III         Title:   Vice President                       Notice Address: North Houston Commercial Banking Group 21 Waterway Ave, Suite 600 The Woodlands, TX 77380 Attention: Thomas F. Caver, III Telephone: (281)362-6640 Facsimile: (281) 362-6611                       Lending Installation Address: North Houston Commercial Banking Group 21 Waterway Ave., Suite 600 The Woodlands, TX 77380     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     BNP PARIBAS, as a Documentation Agent and as a Lender                       By: Name:   /s/ Pierre-Nicholas Rogers   Pierre-Nicholas Rogers          Title:   Managing Director                       By:   /s/ Jamie Dillon                       Name:   Jamie Dillon         Title:   Managing Director                       Notice Address: BNP Paribas 919 3rd Avenue New York, NY 10022 Attention: Thomas Kunz Telephone: (212)471-6626 Facsimile: (212)841-2682                       Lending Installation Address: BNP Paribas 919 3rd Avenue New York, NY 10022 Attention: Thomas Kunz Telephone: (212)471-6626 Facsimile: (212)841-2682     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     THE ROYAL BANK OF SCOTLAND plc, as a Documentation Agent and as a Lender                       By: Name:   /s/ John Preece   John Preece         Title:   Vice President                       Notice Address: 101 Park Avenue, 6th Floor New York, NY 10178 Attention: Julie Strelchenko Telephone: (212)401-1404 Facsimile: (212)401-1494                       Lending Installation Address: Same As Above     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     FORTIS BANK – CAYMAN ISLAND BRANCH, as a Lender                       By: Name:   /s/ Catherine Gilbert   Catherine Gilbert          Title:   Vice President                       By:   /s/ Gary O’Brien                       Name:   Gary O’Brien         Title:   Asst. Mgr. Trade Services                       Notice Address: 301 Tresser Blvd., 9th Floor Stamford, CT 06902 Attention: Steven B. Boyd Telephone: (212)340-5322 Facsimile: (212)340-5320     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     FIFTH THIRD BANK, as a Lender                       By: Name:   /s/ Christopher C. Motley   Christopher C. Motley         Title:   Vice President                       Notice Address: 38 Fountain Square Plaza MD 109055 Cincinnati, OH 45202 Attention: Megan Schloss Telephone: (513)534-6293 Facsimile: (513)534-5947                       Lending Installation Address: Same As Above     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     CALYON NEW YORK BRANCH, as a Lender                       By: Name:   /s/ Darrell Stanley   Darrell Stanley         Title:   Managing Director                       By:   /s/ Michael Willis                       Name:   Michael Willis         Title:   Director                       Notice Address: Calyon New York Branch 1301 Avenue of the Americas New York, NY 10019 Attn: David Gener, Client Banking Services Telephone: (212)261-7741 Facsimile: (917)849-5440                       Lending Installation Address: Calyon New York Branch 1301 Avenue of the Americas New York, NY 10019     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     UBS LOAN FINANCE LLC, as a Lender                       By:   /s/ Richard L. Tavrow       Name:   Richard L. Tavrow         Title:   Director                           By:   /s/ Irja R. Otsa                       Name:   Irja R. Otsa         Title:   Associate Director                       Notice Address: UBS Loan Finance LLC 677 Washington Boulevard Stamford, Connecticut 06901 Attention: Marie Haddad Telephone: (203)719-5609 Facsimile: (203)719-3888                       Lending Installation Address: UBS Loan Finance LLC 677 Washington Boulevard Stamford, Connecticut 06901     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     PNC BANK, NATIONAL ASSOCIATION, as a Lender                       By: Name:   /s/ W. J. Browne   W. J. Browne         Title:   Managing Director                       Notice Address: Same As Below                       Attention: Marc Van Horn Telephone: (412)762-6361 Facsimile: (412)705-3232                       Lending Installation Address: PNC Bank, National Association One PNC Plaza 249 Fifth Avenue Pittsburgh, PA 15212     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     CREDIT SUISSE, Cayman Islands Branch (f.k.a. CREDIT SUISSE FIRST BOSTON, Cayman Islands Branch), as a Lender                       By: Name:   /s/ Thomas Cantello   Thomas Cantello         Title:   Vice President                       By:   /s/ Laurence Lapeyre                       Name:   Laurence Lapeyre         Title:   Associate                       Notice Address: One Madison Avenue New York, NY 10010 Attention: Ed Markowski Telephone: (212)538-3380 Facsimile: (212)538-6851                       Lending Installation Address: Credit Suisse Eleven Madison Avenue New York, NY 10010     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     REGIONS BANK, as a Lender                       By: Name:   /s/ Keith Page   Keith Page         Title:   Sr. Vice President                       Notice Address: Regions Bank 417 20th Street North Birmingham, Alabama 35203 Attention: Robin Woodard Telephone: (205)326-7413 Facsimile: (205)801-5250                       Lending Installation Address: 5005 Woodway, Suite 110 Houston, Texas 77056 Keith Page (713)426-7158     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     ALLIED IRISH BANK, PLC, as a Lender                       By: Name:   /s/ Margaret Brennan   Margaret Brennan         Title:   Senior Vice President                       By:   /s/ Gregory J. Wiske                       Name:   Gregory J. Wiske         Title:   Vice President                       Notice Address: 405 Park Avenue New York, NY 10022 Attention: Mags Brennan Telephone: (212)515-6761 Facsimile: (212)339-8325     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     THE NORTHERN TRUST COMPANY, as a Lender                       By: Name:   /s/ Cory Schuster   Cory Schuster         Title:   Second Vice President                       Notice Address: The Northern Trust 801 S. Canal St. Chicago, Illinois 60607 Attention: Joy Johnson Telephone: (312)557-8248 Facsimile: (312)630-1566     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     STANDARD CHARTERED BANK, as a Lender                       By:   /s/ Robert Reddington           Name:   Robert Reddington         Title:   Associate                       By:   /s/ Richard Van de Berghe                       Name:   Richard Van de Berghe         Title:   Director                       Notice Address: One Madison Avenue New York, NY 10010-3603 Attention: Vicky Faltine Telecopier: (212)667-0568 Electronic Mail: [email protected]                       Lending Installation Address: Standard Chartered Bank – NY Branch One Madison Avenue New York, NY 10010-3603     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     ABU DHABI INTERNATIONAL BANK INC. as a Lender                       By: Name:   /s/ David J. Young   David J. Young         Title:   Vice President                       By:   /s/ Nagy S. Kolta                       Name:   Nagy S. Kolta         Title:   Executive Vice President                       Notice Address: 1020 19th Street, NW Suite 500 Washington, DC 20036 Attention: David Young Telephone: (202)842-7956 Facsimile: (202)842-7955                       Lending Installation Address: Abu Dhabi International Bank 1020 19th Street, NW Suite 500 Washington, DC 20036     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     AMEGY BANK NATIONAL ASSOCIATION as a Lender                       By: Name:   /s/ Jill S. Vaughan   Jill S. Vaughan         Title:   Senior Vice President                       Notice Address: 10101 Grogans Mill Road The Woodlands, TX 77380 Attention: Jill Vaughan Telephone: (281)320-6909 Facsimile: (281)320-6918                       Lending Installation Address: 1801 Main Street Houston, TX 77002 Attn: Dana Chargois     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     BANK OF NEW YORK, as a Lender                       By: Name:   /s/ Burke Kennedy   Burke Kennedy         Title:   Vice President                       Notice Address: The Bank of New York One Wall Street; 21 Floor New York, NY 10286 Attention: Kevin Higgins, VP Telephone: (212)635-7878 Facsimile: (212)635-7978                       Lending Installation Address: The Bank of New York One Wall Street, 21 Floor New York, NY 10286     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     CAPITAL ONE, NATIONAL ASSOCIATION, as a Lender                       By: Name:   /s/ Debra Halling   Debra Halling         Title:   Senior Vice President                       Notice Address: 5718 Westheimer, Suite 600 Houston, TX 77057 Attention: Debra Halling Telephone: (713)435-5024 Facsimile: (713)706-5499                       Lending Installation Address: 5718 Westheimer, Suite 600 Houston, TX 77057     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     WOODFOREST NATIONAL BANK, as a Lender                       By: Name:   /s/ Dan Hauser   Dan Hauser         Title:   President                       Notice Address: [email protected] Attention: Dan Hauser Telephone: (832)375-2509 Facsimile: (832)375-3509                       Lending Installation Address: Woodforest National Bank 1330 Lake Robbins Dr., Suite 100 The Woodlands, Texas 77380     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     ARAB BANKING CORPORATION, as a Lender                       By: Name:   /s/ Robert Ivosevich   Robert Ivosevich         Title:   General Manager                       By:   /s/ Rami El-Ritai                       Name:   Rami El-Ritai         Title:   Vice President                       Notice Address: Arab Banking Corporation 600 3rd Avenue NY, NY 10016 Attention: Sunil Naik Telephone: (212)583-4745 Facsimile: (212)583-0932     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     BANK OF TEXAS, N.A., as a Lender                       By:   /s/ Marian Livingston                       Name:   Marian Livingston         Title:   Vice President                       Notice Address: 5 Houston Center 1401 McKinney, Suite 1650 Houston, Texas 77010 Attention: Marian Livingston Telephone: (713)289-5843 Facsimile: (713)289-5825                       Lending Installation Address: 5 Houston Center 1401 McKinney, Suite 1650 Houston, Texas 77010     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006   --------------------------------------------------------------------------------                     COMPASS BANK, as a Lender                       By: Name:   /s/ Tom Brosig   Tom Brosig         Title:   Senior Vice President Corporate Banking                       Notice Address: Compass Bank 24 Greenway Plaza, Suite 1403 Houston, TX 77046 Attention: Tom Brosig Telephone: (713)968-8264 Facsimile: (713)968-8211                       Lending Installation Address: Compass Bank 24 Greenway Plaza, Suite 1403 Houston, TX 77046     Signature Page to Second Amended and Restated Credit Agreement Dated October, 2006  

EXHIBIT 10.2   THE PEOPLES BANCTRUST COMPANY, INC. 1999 STOCK OPTION PLAN   --------------------------------------------------------------------------------   Agreement for Non-Incentive Stock Options   --------------------------------------------------------------------------------   THIS STOCK OPTION (the “Option”) grants                      (the “Optionee”) the right to purchase a total of 300 shares of Common Stock, par value $.10 per share, of The Peoples BancTrust Company, Inc. (the “Company”) at the price set forth herein, in all respects subject to the terms, definitions and provisions of The Peoples BancTrust Company, Inc. 1999 Stock Option Plan (the “Plan”) which is incorporated by reference herein. This Option is intended not to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The Optionee acknowledges, through signing below, the receipt of the prospectus associated with the Plan.   1. Option Price. The Option price is $18.50 for each share, being 100% of the fair market value, as determined by the Committee, of the Common Stock on the date of grant of this Option.   2. Vesting and Exercise of Option. This Option shall be exercisable in accordance with the Plan as follows:   Schedule of rights to exercise:   Years of Continuous Service After Date of Grant of Option --------------------------------------------------------------------------------    Percentage of Total Shares Subject to Option Which May Be Exercised -------------------------------------------------------------------------------- Upon Grant    0% 1 year    100%   3. Method of Exercise. This Option shall be exercisable by a written notice by the Optionee which shall:   (a) state the election to exercise the Option, the number of shares with respect to which it is being exercised, the person in whose name the stock certificate or certificates for such shares of Common Stock is to be registered, his address and Social Security Number (or if more than one, the names, addresses and Social Security Numbers of such persons);   (b) contain such representations and agreements as to the holder’s investment intent with respect to such shares of Common Stock as may be satisfactory to the Company’s counsel; -------------------------------------------------------------------------------- (c) be signed by the person or persons entitled to exercise the Option and, if the Option is being exercised by any person or persons other than the Optionee, be accompanied by proof, satisfactory to counsel for the Company, of the right of such person or persons to exercise the Option; and   (d) be in writing and delivered in person or by certified mail to the Treasurer of the Company.   Payment of the purchase price of any shares with respect to which the Option is being exercised shall be by cash, Common Stock, or such combination of cash and Common Stock as the Optionee elects. In addition, the Optionee may elect to pay for all or part of the exercise price of the shares by having the Company withhold a number of shares that are both subject to this Option and have a fair market value equal to the exercise price. The certificate or certificates for shares of Common Stock as to which the Option shall be exercised shall be registered in the name of the person or persons exercising the Option.   4. Restrictions on exercise. This Option may not be exercised if the issuance of the shares upon such exercise would constitute a violation of any applicable federal or state securities or other law or valid regulation. As a condition to the Optionee’s exercise of this Option, the Company may require the person exercising this Option to make any representation and warranty to the Company as may be required by any applicable law or regulation.   5. Withholding. The Optionee hereby agrees that the exercise of the Option or any installment thereof will not be effective, and no shares will become transferable to the Optionee, until the Optionee makes appropriate arrangements with the Company for such tax withholding as may be required of the Company under federal, state, or local law on account of such exercise.   6. Non-transferability of Option. This Option may not be transferred in any manner otherwise than by will or the laws of descent or distribution. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. Nothwithstanding any other terms of this agreement, the Optionee may transfer this Option to the Optionee’s spouse, lineal ascendants, lineal descendants, or to a duly established trust for their benefit, provided that such transferee shall be permitted to exercise this Option subject to the same terms and conditions applicable to the Optionee.   7. Term of Option. This Option may not be exercisable for more than ten years from the date of grant of this Option, as stated below, and may be exercised during such term only in accordance with the Plan and the terms of this Option.   January 31, 2006   THE PEOPLES BANCTRUST COMPANY, INC. Date of Grant   1999 STOCK OPTION PLAN COMMITTEE     By     --------------------------------------------------------------------------------         An Authorized Member of the Committee     Witness: --------------------------------------------------------------------------------

AGREEMENT OF A ASSET ACQUISITION AGREEMENT Between INFORMATION ARCHITECTS CORPORATION And SAILOR PRODUCTIONS INC., THEME PARK DEVELOPMENT, BIG INTERNATIONAL GROUP OF ENTERTAINMENT INC., MAINSTREAM PUBLISHING INC., BIG RECORDS INC., MAINSTREAM MUSIC MAG INC.,(“CORPS”) Dated May 10, 2006 AGREEMENT  THIS AGREEMENT (hereinafter referred to as this "Agreement") is entered into as of this 10th day of May, 2006 by and between INFORMATION ARCHITECTS CORPORATION (IACH as to this agreement) a North Carolina Corporation (hereinafter referred to as “IACH”) and SAILOR PRODUCTIONS INC., THEME PARK DEVELOPMENT INC, BIG INTERNATIONAL GROUP OF ENTERTAINMENT INC., MAINSTREAM PUBLISHING INC., BIG RECORDS INC., MAINSTREAM MUSIC MAG INC.,(“CORPS”)  (CORPS as to this agreement)) All Nevada Corporations  (hereinafter referred to as "CORPS  "), upon the following premises: Premises WHEREAS, INFORMATION ARCHITECTS CORPORATION is a publicly held corporation organized under the laws of North Carolina;           WHEREAS, Management of the constituent corporations have determined that it is in the best interest of the parties that IACH acquire ownership of CORPS , as defined in the attached schedules, in exchange for the issuance of certain shares of IACH (the "Exchange). INTENDED NOW THEREFORE, on the stated premises and for and in consideration of the mutual covenants and agreements hereinafter set forth and the mutual benefits to the parties to be derived here from, it is hereby agreed as follows: ARTICLE I REPRESENTATIONS, COVENANTS, AND WARRANTIES OF CORPS As an inducement to, and to obtain the reliance of IACH, except as set forth on the CORPS  Schedules (as hereinafter defined), CORPS represents and warrants as follows: Section 1.01 Organization.  CORPS  is a Corporation duly organized, validly existing, and in good standing under the laws of Nevada and has the corporate power and is duly authorized, qualified, franchised, and licensed under all applicable laws, regulations, ordinances, and orders of public authorities to own all of its properties and assets and to carry on its business in all material respects as it is now being conducted, including qualification to do business as a foreign corporation in the states or countries in which the character and location of the assets owned by it or the nature of the business transacted by it requires qualification, except where failure to be so qualified would not have a material adverse effect on its business. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of CORPS’S Corporation documents, or otherwise to authorize the execution and delivery of this Agreement. CORPS has full power, authority, and legal right and has taken all action required by law and otherwise to consummate the transactions herein contemplated. Section 1.01 Title and Related Matters.  CORPS has good and marketable title to all of the assets free and clear of all liens, pledges, charges, or encumbrances. CORPS owns, free and clear of any liens, claims, encumbrances, royalty interests, or other restrictions or limitations of any nature whatsoever, any and all products it is currently manufacturing, including the underlying technology and data, and all procedures, techniques, marketing plans, business plans, methods of management, or other information utilized in connection with CORPS  and CORPS  has not received any notice of infringement of or conflict with asserted rights of others with respect to any product, technology, data, trade secrets, know-how, propriety techniques, trademarks, service marks, trade names, or copyrights which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a materially adverse effect on the business, operations, financial condition, income, or business prospects of CORPS  or any material portion of its properties, assets, or rights. Section 1.02 Contracts.  There are no "material" contracts, agreements, franchises, license agreements, debt instruments or other commitments to which CORPS is a party or by which it or any of its patents, assets, products, technology, or properties are bound other than those incurred in the ordinary course of business (as used in this Agreement, a "material" contract, agreement, franchise, license agreement, debt instrument or commitment is one which (i) will remain in effect for more than six (6) months after the date of this Agreement or (ii) involves aggregate obligations of at least twenty five thousand dollars ($25,000); a) All contracts, agreements, franchises, license agreements, and other commitments to which CORPS is a party or by which its properties are bound and which are material to the operations of CORPS taken as a whole are valid and enforceable by CORPS   in all respects, except as limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally; b) CORPS is not a party to or bound by, and the properties of CORPS are not subject to any contract, agreement, other commitment or instrument; any charter or other corporate restriction; or any judgment, order, writ, injunction, decree, or award which materially and adversely affects, the business operations, properties, assets, or condition of CORPS ; and c) CORPS is not a party to any agreement, contract, or indenture relating to the borrowing of money, guaranty of any obligation, other than one on which CORPS is a primary obligor, for the borrowing of money or otherwise, excluding endorsements made for collection and other guaranties of obligations which, in the aggregate do not exceed more than one year or providing for payments in excess of $25,000 in the aggregate; (vi) collective bargaining agreement; or  agreement with any present or former officer or director of CORPS. Section 1.03 No Conflict With Other Instruments.  The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in the breach of any term or provision of, constitute an event of default under, or terminate, accelerate or modify the terms of any material indenture, mortgage, deed of trust, or other material contract, agreement, or instrument to which CORPS   is a party or to which any of its properties or operations are subject. Section 1.04 Governmental Authorizations.  Except as set forth in the CORPS  Schedules, CORPS  has all licenses, franchises, permits, and other governmental authorizations that are legally required to enable it to conduct its business in all material respects as conducted on the date hereof.  Except for compliance with federal and state securities and corporation laws, as hereinafter provided, no authorization, approval, consent, or order of, or registration, declaration, or filing with, any court or other governmental body is required in connection with the execution and delivery by CORPS of this Agreement and the consummation by CORPS of the transactions contemplated hereby. Section 1.05 Valid Obligation.  This Agreement and all agreements and other documents executed by CORPS in connection herewith constitute the valid and binding obligation of CORPS, enforceable in accordance with its or their terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought. ARTICLE II REPRESENTATIONS, COVENANTS, AND WARRANTIES OF IACH As an inducement to, and to obtain the reliance of CORPS and the CORPS  Shareholders, IACH represents and warrants as follows: Section 2.01 Organization.  IACH is a corporation duly organized, validly existing, and in good standing under the laws of the North Carolina and has the corporate power and is duly authorized, qualified, franchised, and licensed under all applicable laws, regulations, ordinances, and orders of public authorities to own all of its properties and assets, to carry on its business in all material respects as it is now being conducted, and except where failure to be so qualified would not have a material adverse effect on its business, there is no jurisdiction in which it is not qualified in which the character and location of the assets owned by it or the nature of the business transacted by it requires qualification The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of IACH's certificate of incorporation or bylaws.  IACH has taken all action required by law, its certificate of incorporation, its bylaws, or otherwise to authorize the execution and delivery of this Agreement, and IACH has full power, authority, and legal right and has taken all action required by law, its certificate of incorporation, bylaws, or otherwise to consummate the transactions herein contemplated. Section 2.03 Securities Filings; Financial Statements. (a) IACH is required to file forms or reports with the Securities and Exchange Commission and is in compliance with all such requirements. Section 2.04 Information.  The information concerning IACH set forth in this Agreement and the IACH SEC filings are complete and accurate in all material respects and do not contain any untrue statements of a material fact or omit to state a material fact required to make the statements made, in light of the circumstances under which they were made, not misleading.  In addition, IACH has fully disclosed in its filings to CORPS (through this Agreement or the IACH Schedules) all information relating to matters involving IACH or its assets or its present or past operations or activities which (i) indicated or may indicate, in the aggregate, the existence of a greater than $25,000 liability or diminution in value, (ii) have led or may lead to a competitive disadvantage on the part of IACH or (iii) either alone or in aggregation with other information covered by this Section, otherwise have led or may lead to a material adverse effect on the transactions contemplated herein or on IACH, its assets, or its operations or activities as presently conducted or as contemplated to be conducted after the Closing Date, including, but not limited to, information relating to governmental, employee, environmental, litigation and securities matters and transactions with affiliates.   Section 2.05 Absence of Certain Changes or Events.  Except as disclosed in its filings or permitted in writing by CORPS , since the date of the most recent IACH filings: (a) There has not been (i) any material adverse change in the business, operations, properties, assets or condition of IACH or (ii) any damage, destruction or loss to IACH (whether or not covered by insurance) materially and adversely affecting the business, operations, properties, assets or condition of IACH; (b) IACH has not (i) amended its certificate of incorporation or bylaws; (ii) declared or made, or agreed to declare or make any payment of dividends or distributions of any assets of any kind whatsoever to stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its capital stock; (iii) waived any rights of value which in the aggregate are outside of the ordinary course of business or material considering the business of IACH; (iv) made any material change in its method of management, operation, or accounting; (v) entered into any transactions or agreements other than in the ordinary course of business; (vi) made any accrual or arrangement for or payment of bonuses or special compensation of any kind or any severance or  termination pay to any present or former officer or employee; (vii) increased the rate of compensation payable or to become payable by it to any of its officers or directors or any of its salaried employees whose monthly compensation exceed $1,000; or  (viii) made any increase in any profit sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment or arrangement, made to, for or with its officers, directors, or employees; (c) IACH has not (i) granted or agreed to grant any options, warrants, or other rights for its stock, bonds, or other corporate securities calling for the issuance thereof; (ii) borrowed or agreed to borrow any funds or incurred, or become subject to, any material obligation or liability (absolute or contingent) except liabilities incurred in the ordinary course of business; (iii) paid or agreed to pay any material obligations or liabilities (absolute or contingent) other than current liabilities reflected in or shown on the most recent IACH balance sheet and current liabilities incurred since that date in the ordinary course of business and professional and other fees and expenses in connection with the preparation of this Agreement and the consummation of the transaction contemplated hereby; (iv) sold or transferred, or agreed to sell or transfer, any of its assets, properties, or rights (except assets, properties, or rights not used or useful in its business which, in the aggregate have a value of less than $1000), or canceled, or agreed to cancel, any debts or claims (except debts or claims which in the aggregate are of a value less than $1000); (v) made or permitted any amendment or termination of any contract, agreement, or license to which it is a party if such amendment or termination is material, considering the business of IACH.. (d) To the best knowledge of IACH, it has not become subject to any law or regulation which materially and adversely affects, or in the future, may adversely affect, the business, operations, properties, assets or condition of IACH. Section 2.06 Title and Related Matters.  IACH has good and marketable title to all of its properties, inventory, interest in properties, and assets, real and personal, which are reflected in the most recent IACH balance sheet or acquired after that date (except properties, inventory, interest in properties, and assets sold or otherwise disposed of since such date in the ordinary course of business), free and clear of all liens, pledges, charges, or encumbrances except (a) statutory liens or claims not yet delinquent; (b) such imperfections of title and easements as do not and will not materially detract from or interfere with the present or proposed use of the properties subject thereto or affected thereby or otherwise materially impair present business operations on such properties; and (c) as described in the IACH Schedules.  Except as set forth in the IACH Schedules, IACH owns, free and clear of any liens, claims, encumbrances, royalty interests, or other restrictions or limitations of any nature whatsoever, any and all products it is currently manufacturing, including the underlying technology and data, and all procedures, techniques, marketing plans, business plans, methods of management, or other information utilized in connection with IACH'S business.  Except as set forth in the IACH Schedules, no third party has any right to, and IACH has not received any notice of infringement of or conflict with asserted rights of others with respect to any product, technology, data, trade secrets, know-how, propriety techniques, trademarks, service marks, trade names, or copyrights which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a materially adverse effect on the business, operations, financial condition, income, or business prospects of IACH or any material portion of its properties, assets, or rights. Section 2.07 Litigation and Proceedings.  There are no actions, suits, proceedings or investigations pending or, to the knowledge IACH after reasonable investigation, threatened by or against IACH or affecting IACH or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind except as disclosed in it’s filings.  IACH has no knowledge of any default on its part with respect to any judgment, order, writ, injunction, decree, award, rule or regulation of any court, arbitrator, or governmental agency or instrumentality or any circumstance which after reasonable investigation would result in the discovery of such default. Section 2.09 Material Contract Defaults.  IACH is not in default in any material respect under the terms of any outstanding contract, agreement, lease, or other commitment which is material to the business, operations, properties, assets or condition of IACH and there is no event of default in any material respect under any such contract, agreement, lease, or other commitment in respect of which IACH has not taken adequate steps to prevent such a default from occurring except as disclosed in it’s filings. Section 2.10 No Conflict With Other Instruments.  The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of, any indenture, mortgage, deed of trust, or other material agreement or instrument to which IACH is a party or to which any of its assets or operations are subject. Section 2.11 Governmental Authorizations.  IACH has all licenses, franchises, permits, and other governmental authorizations, that are legally required to enable it to conduct its business operations in all material respects as conducted on the date hereof.  Except for compliance with federal and state securities or corporation laws, as hereinafter provided, no authorization, approval, consent or order of, of registration, declaration or filing with, any court or other governmental body is required in connection with the execution and delivery by IACH of this Agreement and the consummation by IACH of the transactions contemplated hereby. Section 2.12 Compliance With Laws and Regulations.  To the best of its knowledge, IACH has complied with all applicable statutes and regulations of any federal, state, or other applicable governmental entity or agency thereof, except to the extent that noncompliance would not materially and adversely affect the business, operations, properties, assets or condition of IACH or except to the extent that noncompliance would not result in the occurrence of any material liability.  This compliance includes, but is not limited to, the filing of all reports to date with federal and state securities authorities. Section 2.13 Insurance.  All of the properties of IACH are not insured for their replacement cost. Section 2.14 Approval of Agreement.  The board of directors of IACH has authorized the execution and delivery of this Agreement by IACH Section 2.15 Material Transactions or Affiliations.  Except as disclosed herein and in the IACH Schedules, there exists no contract, agreement or arrangement between IACH and any predecessor and any person who was at the time of such contract, agreement or arrangement an officer or director. IACH has no commitment, whether written or oral, to lend any funds to, borrow any money from, or enter into any other transaction with, any such affiliated person. Section 2.16 Valid Obligation.  This Agreement and all agreements and other documents executed by IACH in connection herewith constitute the valid and binding obligation of IACH, enforceable in accordance with its or their terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought. ARTICLE III PLAN OF EXCHANGE Section 3.01 The Exchange CORPS shall assign, transfer and deliver, free and clear of all liens, pledges, encumbrances, charges, restrictions or known claims of any kind, nature, or description, 100% of all shares of CORPS. In exchange for the transfer of SAID Assets the CORPS  Shareholders, IACH shall issue to CORPS: 60,000,000 IACH Common Shares for purposes of this Agreement, all accounting terms such as "assets", "tangible", "liabilities", "net income", etc. shall be determined by reference to U.S. generally accepted accounting principles, consistently applied, as interpreted or modified by Regulation S-X promulgated under the Securities Exchange Act of 1934, and shall not include the cumulative effect of accounting changes, changes or additional resulting from the transactions contemplated hereby, changes in accounting principles. All shares of this agreement shall be issued under the security laws of 1934 as and shall carry a restricted legend. Parties agree that a capital raise will be necessary in the amount of $7,000,000.00 as a part of this agreement and must be met within 45 days of the closing of this agreement. It is also herein understood that this financing has been met.                    Dennis Peterson shall be Chief Executive Officer of this Division and will be given an employment agreement as to his position and will remain Artistic Director of Unicorn Movie projects.            Contracts with Coca Cola (exhibit A) and Hasbro Toys (exhibit B) will be a part of this agreement. Section 3.02 Closing.  The closing ("Closing") of the transactions contemplated by this Agreement, the closing documents, and any other changes or amendments as agreed, shall be on a date and at such time as the parties may agree ("Closing Date") but not later than May 10, 2006 (Closing date), Such Closing shall take place at a mutually agreeable time and place with IACH, but must be after current audit has been completed. Section 3.03 Closing Events.  At the Closing IACH and CORPS shall execute, acknowledge, and deliver (or shall ensure to be executed, acknowledged, and delivered) any and all certificates, opinions, financial statements, schedules, agreements, rulings or other instruments required by this Agreement to be so delivered at or prior to the Closing, together with such other items as may be reasonably requested by the parties hereto and their respective legal counsel in order to effectuate or evidence the transactions contemplated hereby Section 3.04 Termination. This Agreement may be terminated by the board of directors of either IACH or CORPS  at any time prior to the Closing Date or any funds changing hands. If this Agreement is terminated, this Agreement shall be of no further force or effect, and no obligation, right or liability shall arise hereunder and each respective party shall bear its own costs. ARTICLE IV SPECIAL COVENANTS Section 4.01 Access to Properties and Records.  IACH and CORPS will each afford to the officers and authorized representatives of the other full access to the properties, books and records of IACH or CORPS , as the case may be, in order that each may have a full opportunity to make such reasonable investigation as it shall desire to make of the affairs of the other, and each will furnish the other with such additional financial and operating data and other information as to the business and properties of IACH or CORPS , as the case may be, as the other shall from time to time reasonably request.  Without limiting the foregoing, as soon as practicable after the end of each fiscal quarter (and in any event through the last fiscal quarter prior to the Closing Date), each party shall provide the other with quarterly internally prepared and un-audited financial statements. Section 4.02 Delivery of Books and Records.  CORPS shall deliver all paperwork as to the closing. Section 4.03 Third Party Consents and Certificates.  IACH and CORPS agree to cooperate with each other in order to obtain any required third party consents to this Agreement and the transactions herein contemplated. Section 4.04 Indemnification. (a) CORPS hereby agrees to indemnify IACH and each of the officers, agents and directors of IACH as of the date of execution of this Agreement against any loss, liability, claim, damage, or expense (including, but not limited to, any and all expense whatsoever reasonably incurred in investigating, preparing, or defending against any litigation, commenced or threatened, or any claim whatsoever), to which it or they may become subject arising out of or based on any inaccuracy appearing in or misrepresentations made under Article I of this Agreement.  The indemnification provided for in this paragraph shall survive the Closing and consummation of the transactions contemplated hereby and termination of this Agreement. (b) IACH hereby agrees to indemnify CORPS and each of the officers, agents, and directors of CORPS  and each of the CORPS Shareholders as of the date of execution of this Agreement against any loss, liability, claim, damage, or expense (including, but not limited to, any and all expense whatsoever reasonably incurred in investigating, preparing, or defending against any litigation, commenced or threatened, or any claim whatsoever), to which it or they may become subject arising out of or based on any inaccuracy appearing in or misrepresentation made under Article II of this Agreement.  The indemnification provided for in this paragraph shall survive the Closing and consummation of the transactions contemplated hereby and termination of this Agreement.        MISCELLANEOUS Section 5.01 Broker.  IACH and CORPS agree that, except for William Craig there were no finders or brokers involved in bringing the parties together or who were instrumental in the negotiation, execution or consummation of this Agreement. The consultant herein shall be vested and consulting fees due upon the signing of this agreement not as to the closing and all fees shall be issued as requested by said consultant under an S-8 and due and payable as per contracts. IACH and CORPS  each agree to indemnify the other against any claim by any third person other than those described above for any commission, brokerage, or finder's fee arising from the transactions contemplated hereby based on any alleged agreement or understanding between the indemnifying party and such third person, whether express or implied from the actions of the indemnifying party. Section 5.02 Governing Law.  This Agreement shall be governed by, enforced, and construed under and in accordance with the laws of the United States of America and, with respect to the matters of state law, with the laws of the State of Florida without giving effect to principles of conflicts of law thereunder.  Each of the parties (a) irrevocably consents and agrees that any legal or equitable action or proceedings arising under or in connection with this Agreement shall be brought exclusively in the federal courts of the United States, (b) by execution and delivery of this Agreement, irrevocably submits to and accepts, with respect to any such action or proceeding, generally and unconditionally, the jurisdiction of the aforesaid court, and irrevocably waives any and all rights such party may now or hereafter have to object to such jurisdiction. Section 5.03 Notices.  Any notice or other communications required or permitted hereunder shall  be in writing and shall be sufficiently given if personally delivered to it or sent by telecopy, overnight courier or registered mail or certified mail, postage prepaid, addressed as follows: If to IACH, to:                           INFORMATION ARCHITECTS CORPORATION If to CORPS , to                                          DENNIS PETERSON    with copies to:                         WILLIAM CRAIG                                                                             4960 Rothschild Drive                                                                             Coral Springs Fl, 33067                                                                                                                                                                      or such other addresses as shall be furnished in writing by any party in the manner for giving notices hereunder, and any such notice or communication shall be deemed to have been given (i) upon receipt, if personally delivered, (ii) on the day after dispatch, if sent by overnight courier, (iii) upon dispatch, if transmitted by telecopy and receipt is confirmed by telephone and (iv) three (3) days after mailing, if sent by registered or certified mail. Section 5.04 Attorney's Fees.  In the event that either party institutes any action or suit to enforce this Agreement or to secure relief from any default hereunder or breach hereof, the prevailing party shall be reimbursed by the losing party for all costs, including reasonable attorney's fees, incurred in connection therewith and in enforcing or collecting any judgment rendered therein. Section 5.05 Confidentiality.  Each party hereto agrees with the other that, unless and until the transactions contemplated by this Agreement have been consummated, it and its representatives will hold in strict confidence all data and information obtained with respect to another party or any subsidiary thereof from any representative, officer, director or employee, or from any books or records or from personal inspection, of such other party, and shall not use such data or information or disclose the same to others, except (i) to the extent such data or information is published, is a matter of public knowledge, or is required by law to be published; or (ii) to the extent that such data or information must be used or disclosed in order to consummate the transactions contemplated by this Agreement.  In the event of the termination of this Agreement, each party shall return to the other party all documents and other materials obtained by it or on its behalf and shall destroy all copies, digests, work papers, abstracts or other materials relating thereto, and each party will continue to comply with the confidentiality provisions set forth herein. Section 5.06 Third Party Beneficiaries.  This contract is strictly between IACH and CORPS, and, except as specifically provided, no director, officer, stockholder (other than the CORPS  Shareholders), employee, agent, independent contractor or any other person or entity shall be deemed to be a third party beneficiary of this Agreement. Section 5.07 Expenses.  Each of IACH and CORPS will bear their own respective expenses, including legal, accounting and professional fees, incurred in connection with the Exchange or any of the other transactions contemplated hereby. Section 5.08 Entire Agreement.  This Agreement represents the entire agreement between the parties relating to the subject matter thereof and supersedes all prior agreements, understandings and negotiations, written or oral, with respect to such subject matter. Section 5.09 Survival; Termination.  The representations, warranties, and covenants of the respective parties shall survive the Closing Date and the consummation of the transactions herein contemplated for a period of two years. Section 5.10 Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall be but a single instrument. Section 5.11 Amendment or Waiver.  Every right and remedy provided herein shall be cumulative with every other right and remedy, whether conferred herein, at law, or in equity, and may be enforced concurrently herewith, and no waiver by any party of the performance of any obligation by the other shall be construed as a waiver of the same or any other default then, theretofore, or thereafter occurring or existing.  At any time prior to the Closing Date, this Agreement may by amended by a writing signed by all parties hereto, with respect to any of the terms contained herein, and any term or condition of this Agreement may be waived or the time for performance may be extended by a writing signed by the party or parties for whose benefit the provision is intended. Section 5.12 Best Efforts.  Subject to the terms and conditions herein provided, each party shall use its best efforts to perform or fulfill all conditions and obligations to be performed or fulfilled by it under this Agreement so that the transactions contemplated hereby shall be consummated as soon as practicable.  Each party also agrees that it shall use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective this Agreement and the transactions contemplated herein. SIGNATURE PAGE IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to be executed by their respective officers, hereunto duly authorized, as of the date first-above written. May 10, 2006 Information Architects Corporation                                                                             BY: /S/ William Craig —————————————— William Craig                                                                                                  Acting CEO Sailor Productions Inc., Theme Park Development Inc. Big International Group of Entertainment Inc. Mainstream Publishing Inc. Big Records Inc. Mainstream Music Magazine Inc. BY: /S/ Dennis W. Peterson —————————————— Dennis W. Peterson                                                                                                  CEO/Chairman                                                                                                                                                                                                                                                                                                                                      

Exhibit 10.1 Restricted Stock Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan THIS AGREEMENT, entered into as of the Grant Date (as defined in paragraph 1), by and between the Director and Assured Guaranty Ltd. (the “Company”): WITNESSETH THAT: WHEREAS, the Company maintains the Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (the “Plan”), and the Director has been selected by the committee administering the Plan (the “Committee”) to receive a Restricted Stock Award under the Plan; and NOW, THEREFORE, IT IS AGREED, by and between the Company and the Director, as follows: 1.  Terms of Award.  The following words and phrases used in this Agreement shall have the meanings set forth in this paragraph 1: o                                    The “Director” is                                . o                                    The “Grant Date” is                                                                           . o                                    The number of “Covered Shares” shall be                          shares of Stock. Other words and phrases used in this Agreement are defined pursuant to paragraph 15 or elsewhere in this Agreement. 2.  Restricted Stock Award.  This Agreement specifies the terms of the “Restricted Stock Award” granted to the Director. 3.  Restricted Period.  Subject to the limitations of this Agreement, the “Restricted Period” for the Covered Shares of the Restricted Stock Award shall begin on the Grant Date and end on the day immediately prior to the [    ] annual shareholders meeting during which elections for directors are held following the Grant Date. The Restricted Period shall end prior to the date specified above to the extent set forth below: (a)           The Restricted Period shall end on the date the Director ceases to be a director of the Company (and is not otherwise employed by the Company or its Subsidiaries), if the Director ceases to be a director by reason of his Disability or death.  The Director shall be considered to have a “Disability” if the Nominating and Governance Committee of the Board of Directors determines that he is unable to serve as a Director as a result of a medically determinable physical or mental impairment. -------------------------------------------------------------------------------- (b)           The Restricted Period shall end upon a Change in Control (as defined in the Plan), provided that such Change in Control occurs on or before the date the Director ceases to be a director of the Company. 4.  Transfer and Forfeiture of Shares.  If the Restricted Period with respect to the Covered Shares ends on or before the date the Director ceases to be a director of the Company, then at the end of such Restricted Period, the Covered Shares shall be transferred to the Director free of all restrictions.  If the Restricted Period with respect to the Covered Shares does not end on or before the date the Director ceases to be a director of the Company, then as of the date the Director ceases to be a director of the Company, the Director shall forfeit all Covered Shares.(1) 5.  Transferability.  Except as otherwise provided by the Committee, the Restricted Stock Award may not be sold, assigned, transferred, pledged or otherwise encumbered during the Restricted Period. 6.  Dividends.  The Director shall be entitled to receive any dividends paid with respect to the Covered Shares that become payable during the Restricted Period.  Any dividends shall be payable to the Director in cash.  The Director shall not be prevented from receiving dividends and distributions paid on the Covered Shares of Restricted Stock merely because those shares are subject to the restrictions imposed by this Agreement and the Plan; provided, however that no dividends or distributions shall be payable to or for the benefit of the Director with respect to record dates for such dividends or distributions for any Covered Shares occurring on or after the date, if any, on which the Director has forfeited those shares. 7.  Voting.  The Director shall not be prevented from voting the Restricted Stock Award merely because those shares are subject to the restrictions imposed by this Agreement and the Plan; provided, however, that the Director shall not be entitled to vote Covered Shares with respect to record dates for any Covered Shares occurring on or after the date, if any, on which the Director has forfeited those shares. 8.  Registration of Restricted Stock Award.  Each certificate issued in respect of the Covered Shares awarded under this Agreement shall be registered in the name of the Director. 9.  Heirs and Successors.  This Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business.  If any benefits deliverable to the Director under this Agreement have not been delivered at the time of the Director’s death, such benefits shall be delivered to the Designated Beneficiary, in accordance with the provisions of this Agreement and the Plan.  The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Director in a writing filed with the Committee in such form and at such time as the Committee shall require.  If a deceased Director fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Director, any rights that would have been exercisable by the Director and any benefits distributable to the Director shall be distributed to the legal representative of the estate -------------------------------------------------------------------------------- (1)   The award will not continue to vest if a person ceases to be a Director of the Company but continues to be an employee of the Company. 2 -------------------------------------------------------------------------------- of the Director.  If a deceased Director designates a beneficiary and the Designated Beneficiary survives the Director but dies before the complete distribution of benefits to the Designated Beneficiary under this Agreement, then any benefits distributable to the Designated Beneficiary shall be distributed to the legal representative of the estate of the Designated Beneficiary. 10.  Administration.  The authority to manage and control the operation and administration of this Agreement shall be vested in the Committee, and the Committee shall have all powers with respect to this Agreement as it has with respect to the Plan.  Any interpretation of this Agreement by the Committee and any decision made by it with respect to this Agreement is final and binding on all persons. 11.  Plan Governs.  Notwithstanding anything in this Agreement to the contrary, this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Director from the office of the Secretary of the Company; and this Agreement is subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan. 12.  Notices.  Any written notices provided for in this Agreement or the Plan shall be in writing and shall be deemed sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail.  Notices sent by mail shall be deemed received three business days after mailing but in no event later than the date of actual receipt.  Notices shall be directed, if to the Director, at the Director’s address indicated by the Company’s records, or if to the Company, at the Company’s principal executive office. 13.  Fractional Shares.  In lieu of issuing a fraction of a share, resulting from an adjustment of the Restricted Stock Award pursuant to the Plan or otherwise, the Company will be entitled to pay to the Director an amount equal to the fair market value of such fractional share. 14.  Amendment.  This Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Director and the Company without the consent of any other person. 15.  Plan Definitions.  Except where the context clearly implies or indicates the contrary, a word, term, or phrase used in the Plan is similarly used in this Agreement. IN WITNESS WHEREOF, the Director has executed the Agreement, and the Company has caused these presents to be executed in its name and on its behalf, all as of the Grant Date. Assured Guaranty Ltd.     By:     Its:               Director         3 --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- AGENCY AGREEMENT THIS AGREEMENT effective as of the 10th day of April, 2006 although executed thereafter. BETWEEN: SOLAR ENERTECH CORP., a company having an office at 1600 Adams Drive, Menlo Park, California, USA, 94025 (the “Company”) AND: INFOTECH (SHANGHAI) NEW ENTERTECH LTD., a company having an office at 360 South Pudong Road, 20th Floor, Shanghai, China (the “Agent”) A. The Company wished to immediately engage in business in China beginning in April of 2006;     B. The Company, because of delays which would have been associated with incorporating a subsidiary, new corporation or business entity in China and obtaining a business license therein, decided to use the Agent, a company which had been incorporated in China, as its Agent to do business in China;     C. In contemplation of this, the Company has advanced funds to the Agent and the Agent has held, or holds, or has expended the funds on the Company’s behalf, in furtherance of the Company’s business purpose of building a solar technology related business in China;     D. The Company has been advised by legal counsel that the agency relationship between the Agent and the Company should be in writing. THE PARTIES HAVE ENTERED INTO THIS AGREEMENT AND THIS AGREEMENT WITNESSES that in consideration of the mutual covenants and agreements hereinafter contained, the parties agree as follows: ARTICLE 1 APPOINTMENT AND AUTHORITY OF AGENT 1.01      APPOINTMENT OF AGENT The Company hereby appoints InfoTech (Shanghai) New EnerTech, Ltd. as its Agent to perform certain services, including securing factory space, employees, inventory, equipment and other goods or services, for the benefit of the Company and the Agent hereby accepts such appointment and authority on the terms and conditions herein set forth. 1.02      AUTHORITY OF AGENT The Agent shall have no right or authority, express or implied, to commit or otherwise obligate the Company in any material manner whatsoever except to the extent specifically provided herein or specifically authorized by the Company. -------------------------------------------------------------------------------- 2 1.03      AGENT’S WARRANTIES The Agent represents and warrants that it will act only as directed by the Board of Directors of the Company or the Company’s President, Leo Young (the “President”) and that any services will be performed in a competent and efficient manner. ARTICLE 2 AGENT’S AGREEMENTS 2.01      The Agent will undertake all activities which will further and enhance the business and affairs of the Company as it is directed by the Board of Directors of the Company or the President. For purposes of this Agreement, “Company” means the Company and all of its subsidiaries and affiliates. The Agent acknowledges that the Company initially has limited personnel and resources, and that the Agent will be requested to undertake activities which will be outside the general nature of work ordinarily performed by the Agent of a corporation operating in a foreign country. The Agent, at the expense of and on behalf of the Company, shall:   (a) make and implement or cause to be implemented all lawful decisions of the Board of Directors of the Company (the “Board”) in accordance with and as limited by this Agreement; and         (b) at all times be subject to the direction of the Board and shall keep the Board informed as to all material matters concerning the Agent’s activities. 2.02      AGENT’S COMPENSATION The Agent acknowledges that, while it will be compensated for any and all expenses incurred on behalf of the Company and that the Company will pay all debts it incurs to the Agent and will advance such funds as the Agent may require in acting as the Company’s Agent in developing the Company’s solar business in China, the Agent WILL NOT be compensated in any way for acting as the Agent of the Company. The Agent further acknowledges that its appointment as Agent is effected for the purpose of expediency and to allow the Company to immediately do business in China rather than wait to incorporate and obtain a business license and / or registration for another company. 2.03      ACTIVITIES In carrying out its obligations under this Agreement, the Agent shall provide to the Company, when the Company requires it, any and all financial and other records necessary for the Company to complete audits of its financial affairs or for the Company to assess the progress of its business in China or the status thereof. -------------------------------------------------------------------------------- 3 2.03      AUTHORITY OF AGENT The Company hereby authorizes the Agent, subject to the other provisions of this Agreement, to do all acts and things as the Agent may in its discretion deem necessary or desirable to enable the Agent to carry out its duties hereunder, and hereby grants the Agent the inherent authority to undertake all such activities as a business Agent would reasonably have. 2.04      LIMITATION OF AGENT’S OBLIGATIONS Notwithstanding anything in this Agreement, the Agent shall not be required to expend its own money or to incur any liabilities, obligations, costs, dues or debts and all money required by the Agent to carry out his duties under this Agreement shall be provided by the Company to the Agent forthwith upon the Agent’s request. ARTICLE 3 COMPANY’S AGREEMENTS 3.01      REIMBURSEMENT OF EXPENSES The Company shall be obligated to pay or reimburse the Agent for the normal and usual expenses of managing the Company’s affairs as provided herein, including, without any limitation, any other expenses as set out herein. In the event of a dispute between the Agent and the Company regarding the amount set out in any statement of expenses the Company will nevertheless be obligated to pay the amount set out herein to the Agent. 3.03      ACCESS TO COMPANY INFORMATION The Company shall make available to the Agent such information and data and shall permit the Agent and its agents to have access to such documents or premises as are reasonably necessary to enable it to perform the services provided for under this Agreement. 3.04      INDEMNITY BY COMPANY The Company agrees to indemnify, defend and hold harmless the Agent, from and against any and all claims, demands, losses, actions, lawsuits and other proceedings, judgements and awards, and costs and expenses (including reasonable legal fees), arising directly, in whole or in part, out of any matter related to any action taken by the Agent within the scope of its duties or authority hereunder, excluding only such of the foregoing as arise from the fraudulent, negligent, or wilful act or omission of the Agent, and the provisions hereof shall survive termination of this Agreement. -------------------------------------------------------------------------------- 4 ARTICLE 4 DURATION, TERMINATION AND DEFAULT 4.01      EFFECTIVE DATE This Agreement shall become effective as of April 10, 2006 although later executed and shall remain in force, subject to the earlier termination as provided herein, for a period of two years. Thereafter this Agreement will continue on a monthly basis until terminated. This Agreement replaces and supersedes any oral agreement regarding the Agent’s appointment. 4.02      TERMINATION This Agreement may be terminated by the Company at anytime. 4.03      DUTIES UPON TERMINATION Upon termination of this Agreement for any reason, the Agent shall promptly deliver the following in accordance with the directions of the Company:   (a) a final accounting, reflecting the balance of expenses incurred on behalf of the Company as of the date of termination;   (b) all documents pertaining to the Company or this Agreement, including but not limited to all books of account, financial records, correspondence and contracts provided that the Agent shall be entitled thereafter to inspect, examine and copy all of the documents which it delivers in accordance with this provision at all reasonable times upon three days notice to the Company. Upon termination, the Company will pay to the Agent any amounts outstanding to the Agent and the Agent will return any funds advanced by the Company to it for future expenses. ARTICLE 5 MISCELLANEOUS 5.01      WAIVER; CONSENTS No consent, approval or waiver, express or implied, by either party to or of any breach or default by the other party in the performance by the other party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such other party of the same or any other obligations of such other party or to declare the other party in default, irrespective of how long such failure continues, shall not constitute a general waiver by such party of its rights under this Agreement, and the granting of any consent or approval in any one instance by or on behalf of the Company shall not be construed to waiver or limit the need for such consent in any other or subsequent instance. -------------------------------------------------------------------------------- 5 5.02      GOVERNING LAW This Agreement shall be governed by the laws of the State of Nevada and any dispute under the terms of this Agreement shall enure to the courts thereof. 5.03      NO ASSIGNMENT PERMITTED All of the rights, benefits, duties, liabilities and obligations of the parties hereto shall enure to the benefit of and be binding upon the respective successors of the parties provided that in no circumstances is this Agreement assignable by either party save and except where approved in writing by both parties. 5.04      MODIFICATION OF AGREEMENT This Agreement constitutes the entire agreement between the Agent and the Company and to be effective any modification of this Agreement must be in writing and signed by the party to be charged thereby. 5.05      COUNTERPARTS This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which will together constitute one and the same instrument. A faxed signature shall be accepted as an original. 5.06      RELATIONSHIP OF THE PARTIES The Company and the Agent acknowledge that the Agent is a wholly owned subisidiary of a Hong Kong company which the President of the Company, Leo Young, wholly owns. This relationship will be disclosed to the Board of Directors in the any resolution of the Board of Directors of the Company approving this Agreement. 5.06      INDEPENDENT LEGAL ADVICE The Agent hereby acknowledges that it has acted for itself in the preparation and negotiation of this Agreement and acknowledges that it has been advised to seek independent legal counsel and review of this Agreement prior to its execution. CD Farber Law Corporation has acted for the Company only in the preparation of this Agreement. -------------------------------------------------------------------------------- 6 IN WITNESS WHEREOF the parties have executed this Agreement effective April 10, 2006 although executed thereafter on July 18, 2006 SOLAR ENERTECH CORP. by its authorized signatory: “Fang Xie” ________________________________________ “Leo Shi Young” ________________________________________ InfoTech (Shanghai) New EnerTech, Ltd. --------------------------------------------------------------------------------

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-------------------------------------------------------------------------------- EMPLOYMENT AGREEMENT This Agreement, dated as of November 15, 2006 by andbetween Daniel Hamburger ("Executive"), and DeVry Inc., aDelaware corporation and DeVry University, Inc., anIllinois corporation (collectively, the "Company"); W I T N E S S E T H: WHEREAS, the Company wishes to continue to obtain the services of the Executive for the Company; and WHEREAS, the Executive is willing, upon the terms and conditions herein set forth, to provide services hereunder; and NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:   1. Nature of Employment Beginning on November 15, 2006 (“Effective Date”) the Company hereby employs Executive, and Executive agrees to accept such employment, during the Term of Employment (as defined in Section 3(a)), as President and Chief Executive Officer to undertake such duties and responsibilities, consistent with the authority, duties and obligations in respect of such executive positions (i)as set forth in the By-laws of the Company, and (ii) as are assigned to him from time to time by the Board of Directors of the Company. Executive will be accorded such authority, duties and obligations, and the prerogatives generally associated with such executive position, during the Term of Employment. Such duties will be performed at a location within 20 miles of Oakbrook Terrace, Illinois.   2. Extent of Employment (a)   During the Term of Employment, the Executive shall perform his obligations hereunder faithfully and to the best of his ability, under the direction of the Board of Directors of the Company, and shall abide by the rules, customs and usages from time to time established by the Company.     --------------------------------------------------------------------------------   (b)   During the Term of Employment, the Executive shall devote substantially all of his business time, energy and skill as may be reasonably necessary for the performance of his duties, responsibilities and obligations hereunder (except for vacation periods and reasonable periods of illness or other incapacity), consistent with past practices. (c)   Nothing contained herein shall require Executive to follow any directive or to perform any act which would violate any laws, ordinances, regulations or rules of any governmental, regulatory or administrative body, agent or authority, any court or judicial authority, or any public, private or industry regulatory authority.   3. Term of Employment; Termination (a)   Executive’s employment is at will and may be terminated by either party subject to the terms set forth herein. The "Term of Employment" shall commence on the Effective Date and shall continue until such time as either the Executive or the Company provides at least 180 days notice to the other of its decision not to continue such term, in which case, the Term of Employment will be terminated 180 days after the date of delivery of such notice. However, should the Executive's employment by the Company be earlier terminated pursuant to Sections 3(b) or 3(d), the Term of Employment shall end as of the date of such earlier termination. (b)   The Term of Employment may be terminated at any time by the Company; (i) upon the death of Executive; (ii) in the event that because of physical or mental disability the Executive is unable to perform, and does not perform, his duties here under for a continuous period of 180 days; (iii) for Cause (as defined in Section 3(c); or (iv) for any reason, subject to 3(e). (c)   For the purposes of this Section 3, "Cause" shall mean any of the following: (i) Executive's conviction of any crime or criminal offense involving monies or other property or involving any felony, or (ii) Executive's conviction of fraud or embezzlement.     --------------------------------------------------------------------------------   (d)   The Term of Employment may be terminated at any time by the Executive in the event: (i) Executive is not accorded the authority, duties, obligations and prerogatives set forth in Section 1, (ii) the authority, duties, obligation and prerogatives of Executive are materially or substantially reduced, (iii) the Executive is not paid or reimbursed the amounts owed to Executive under this agreement after 10 days' notice thereof to the Company, or (iv) the Company otherwise does not observe its obligations under this Agreement. (e)   In the event that the Term of Employment is terminated by the Company for any reason or no reason, other than pursuant to Section 3(b)(iii) or as a result of retirement at 65 or more years of age, or (ii) is terminated by the Executive for any reason pursuant to Section 3(d), then the Company, effective immediately upon such termination or scheduled expiration date, will pay Executive an amount equal to the 12 times the Executive's monthly base salary at the time of termination. Such payment will be in addition to any other amounts otherwise owed by the Company to Executive. In the event of a "change of control" of the company, defined as a sale of substantially all of the company's assets or the acquisition by another entity of a majority of the company's common stock, and the Executive is subsequently terminated by the successor company, then any unvested stock options held by the Executive shall immediately vest, and the payment to the Executive on termination will be 24 times the Executive's monthly base salary, plus pro rated bonus, calculated based on the average of the previous 2 years' bonus payments.   4. Compensation   During the Term of Employment, the Company shall pay to Executive: (a)   As base compensation for his services hereunder, in monthly installments, a base salary at a rate of $675,000 per annum. Such amounts shall be increased (but not decreased) annually as determined by the Board of Directors in its sole discretion. (b)   An annual bonus opportunity of up to 100% of base salary as determined under the Executive's senior management incentive cash compensation program and approved by the Compensation Committee of the DeVry Inc. Board of Directors.     --------------------------------------------------------------------------------   (c)   At the next meeting of the Compensation Committee of DeVry Inc., Executive will receive a one-time award of options on 50,000 shares of DeVry Inc. common stock vesting in 20% increments on each of the first five anniversaries of this Agreement, subject to the same terms and conditions as contained in the DeVry Inc. October 3, 2006 award of stock options.   5. Reimbursement of Expenses During the Term of Employment, the Company shall reimburse Executive for documented travel, entertainment and other expenses reasonably incurred by Executive in connection with the performance of his duties hereunder and in accordance with the rules, customs and usages of the Company from time to time in effect.   6. Benefits During the term of Employment, the Executive shall be entitled to perquisites and benefits (including automobile, health, disability, pension and life insurance benefits consistent with past practice, or as increased from time to time) established from time to time, by the Board of Directors for senior managers of the Company.   7. Notice Any notice, request, demand or other communication required or permitted to be given under this Agreement shall be given in writing and if delivered personally, or sent by certified or registered mail, return receipt requested, as follows or to such other addressee or address as shall be set forth in a notice given in the same manner): If to Executive: Daniel Hamburger [at his home address as listed in the records of the Company] If to Company: DeVry Inc. Attn: General Counsel Suite 1000, One Tower Lane, Oakbrook Terrace, IL 60181 Any such notices shall be deemed to be given on the date personally delivered or such return receipt is issued.     --------------------------------------------------------------------------------     8. Executive's Representation Executive hereby warrants and represents to the Company that Executive is not subject to any covenants, agreements or restrictions, including without limitation any covenants, agreements or restrictions arising out of Executive's prior employment, which would be breached or violated by Executive's execution of this Agreement or by Executive's performance of his duties hereunder.   9. Validity If, for any reason, any provision hereof shall be determined to be invalid or unenforceable, the validity and effect of the other provisions hereof shall not be affected thereby.   10. Severability Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. If any court determines that any provision hereof is unenforceable because of being overly broad in scope or duration than the court shall have the power to reduce the scope or duration of such provision, as the case may be and, in its reduced form, such provision shall then be enforceable.   11. Waiver of Breach; Specific Performance The waiver by the Company or Executive of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other breach by such other party. Each of the parties (and third party beneficiaries) to this Agreement will be entitled to enforce its rights under this breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party (and third party beneficiaries) may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.     --------------------------------------------------------------------------------     12. Indemnity The Company shall indemnify and hold harmless Executive, and promptly reimburse Executive for any liabilities, damages, losses and expenses during and after the Term of Employment, arising from the services performed by the Executive for the Company, to the fullest amount provided by the Certificates of Incorporation and Bylaws of the Company.   13. Mitigation and Set-Off The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking employment or otherwise. The Company shall not be entitled to any set-off against the amounts payable by Company to Executive for any claims or other reason.   14. Assignment Neither the Executive nor the Company may assign, transfer, pledge, encumber or otherwise dispose of this Agreement or any of his or its respective rights or obligations hereunder, without the prior written consent of the other. Nothing in this Section 14 will limit, however, Executive's rights or power to dispose of his property by will or limit the power or rights of any executor or any administrator, nor will it prevent the successor company in a "change of control" from being bound by and benefiting from the rights and duties of this agreement.   15. Amendment; Entire Agreement This Agreement may not be changed orally but only by an agreement in writing agreed to by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter of this Agreement, and supersedes and replaces all prior agreements, understandings and commitments with respect to such subject matter, including but not limited to the Employment Agreement dated as of November 1, 2002 between Executive and Company.     --------------------------------------------------------------------------------     16. Litigation THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, EXCEPT THAT NO DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF ILLINOIS, AND NO DEFENSE, COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR ALLOWED BY THE LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE ENACTMENT, MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE OF ANY FOREIGN JURISDICTION, SHALL BE INTERPOSED IN ANY ACTION HEREON. EXECUTIVE AND THE COMPANY AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS AGREEMENT MAY BE COMMENCED IN THE STATE COURTS, OR IN THE UNITED STATES DISTRICT COURTS IN CHICAGO, ILLINOIS. EXECUTIVE AND THE COMPANY CONSENT TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH COURTS AND WAIVE ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 16 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER JURISDICTION. IN WITNESS WHEREOF, the parties hereto have set their hands as of the day and year first above written. EXECUTIVE:   COMPANY:     DeVry Inc.     DeVry University, Inc.           By:         Print name:     Its:       --------------------------------------------------------------------------------

  Exhibit 10.1 INVESTMENT AGREEMENT INVESTMENT AGREEMENT (this “AGREEMENT”), dated as of September 15, 2006 by and between Save the World Air, Inc. a Nevada corporation (the “Company”), and Dutchess Private Equities Fund, LP, a Delaware limited partnership (the “Investor”). WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Investor shall invest up to Ten Million dollars ($10,000,000) to purchase the Company’s Common Stock, $.001 par value per share (the “Common Stock”); WHEREAS, such investments will be made in reliance upon the provisions of Section 4(2) under the Securities Act of 1933, as amended (the “1933 Act”), Rule 506 of Regulation D, and the rules and regulations promulgated thereunder, and/or upon such other exemption from the registration requirements of the 1933 Act as may be available with respect to any or all of the investments in Common Stock to be made hereunder; and WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form attached hereto (the “Registration Rights Agreement”) pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act, and the rules and regulations promulgated thereunder, and applicable state securities laws. NOW THEREFORE, in consideration of the foregoing recitals, which shall be considered an integral part of this Agreement, the covenants and agreements set forth hereafter, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Investor hereby agree as follows: SECTION 1. DEFINITIONS.      As used in this Agreement, the following terms shall have the following meanings specified or indicated below, and such meanings shall be equally applicable to the singular and plural forms of such defined terms.      “1933 Act” shall have the meaning set forth in the preamble of this agreement.      “1934 Act” shall mean the Securities Exchange Act of 1934, as it may be amended.      “Affiliate” shall have the meaning specified in Section 5(H), below.      “Agreement” shall mean this Investment Agreement. 1 --------------------------------------------------------------------------------        “Best Bid” shall mean the highest posted bid price of the Common Stock during a given period of time.      “By-laws” shall have the meaning specified in Section 4(C).      “Certificate of Incorporation” shall have the meaning specified in Section 4(C).      “Closing” shall have the meaning specified in Section 2(G).      “Closing Date” shall mean no more than seven (7) Trading Days following the Put Notice Date.      “Common Stock” shall have the meaning set forth in the preamble of this Agreement.      “Control” or “Controls” shall have the meaning specified in Section 5(H).      “Effective Date” shall mean the date the SEC declares effective under the 1933 Act the Registration Statement covering the Securities.      “Environmental Laws” shall have the meaning specified in Section 4(M).      “Equity Line Transaction Documents” shall mean this Agreement, the Registration Rights Agreement.      “Execution Date” shall mean the date indicated in the preamble to this Agreement.      “Indemnities” shall have the meaning specified in Section 11.      “Indemnified Liabilities” shall have the meaning specified in Section 11.      “Ineffective Period” shall mean any period of time that the Registration Statement or any Supplemental Registration Statement (as defined in the Registration Rights Agreement between the parties) becomes ineffective or unavailable for use for the sale or resale, as applicable, of any or all of the Registrable Securities (as defined in the Registration Rights Agreement) for any reason (or in the event the prospectus under either of the above is not current and deliverable) during any time period required under the Registration Rights Agreement.      “Investor” shall have the meaning indicated in the preamble of this Agreement.      “Material Adverse Effect” shall have the meaning specified in Section 4(A). 2 --------------------------------------------------------------------------------        “Maximum Common Stock Issuance” shall have the meaning specified in Section 2(H).      “Minimum Acceptable Price” with respect to any Put Notice Date shall mean seventy-five percent (75%) of the lowest closing bid prices for the ten (10) Trading Day period immediately preceding each Put Notice Date.      “Open Market Adjustment Amount” shall have the meaning specified in Section 2(I).      “Open Market Purchase” shall have the meaning specified in Section 2(I)      “Open Market Share Purchase” shall have the meaning specified in Section 2(I).      “Open Period” shall mean the period beginning on and including the Trading Day immediately following the Effective Date and ending on the earlier to occur of (i) the date which is thirty-six (36) months from the Effective Date; or (ii) termination of the Agreement in accordance with Section 9, below.      “Pricing Period” shall mean the period beginning on the Put Notice Date and ending on and including the date that is five (5) Trading Days after such Put Notice Date.      “Principal Market” shall mean the American Stock Exchange, Inc., the National Association of Securities Dealers, Inc. Over-the-Counter Bulletin Board, the NASDAQ National Market System or the NASDAQ SmallCap Market, whichever is the principal market on which the Common Stock is listed or quoted.      “Prospectus” shall mean the prospectus, preliminary prospectus and supplemental prospectus used in connection with the Registration Statement.      “Purchase Amount” shall mean the total amount being paid by the Investor on a particular Closing Date to purchase the Securities.      “Purchase Price” shall mean ninety-seven percent (97%) of the lowest closing Best Bid price of the Common Stock during the Pricing Period.      “Put” shall have the meaning set forth in Section 2(B)(1) hereof.      “Put Amount” shall have the meaning set forth in Section 2(B)(1) hereof.      “Put Notice” shall mean a written notice sent to the Investor by the Company stating the Put Amount in U.S. dollars the Company intends to sell to the Investor pursuant to the terms of the Agreement and stating the current number of Shares issued and outstanding on such date. 3 --------------------------------------------------------------------------------        “Put Notice Date” shall mean the Trading Day, as set forth below, immediately following the day on which the Investor receives a Put Notice, however a Put Notice shall be deemed delivered on (a) the Trading Day it is received by facsimile or otherwise by the Investor if such notice is received prior to 9:00 am Eastern Time, or (b) the immediately succeeding Trading Day if it is received by facsimile or otherwise after 9:00 am Eastern Time on a Trading Day. No Put Notice may be deemed delivered on a day that is not a Trading Day.      “Put Restriction” shall mean the days between the beginning of the Pricing Period and Closing Date. During this time, the Company shall not be entitled to deliver another Put Notice.      “Put Shares Due” shall have the meaning specified in Section 2(I).      “Registration Period” shall have the meaning specified in Section 5(C), below.      “Registration Rights Agreement” shall have the meaning set forth in the recitals, above.      “Registration Statement” means the registration statement of the Company filed under the 1933 Act covering the Common Stock issuable hereunder.      “Related Party” shall have the meaning specified in Section 5(H).      “Resolution” shall have the meaning specified in Section 8(E).      “SEC” shall mean the U.S. Securities & Exchange Commission.      “SEC Documents” shall have the meaning specified in Section 4(F).      “Securities” shall mean the shares of Common Stock issued pursuant to the terms of the Agreement.      “Shares” shall mean the shares of the Company’s Common Stock.      “Subsidiaries” shall have the meaning specified in Section 4(A).      “Trading Day” shall mean any day on which the Principal Market for the Common Stock is open for trading, from the hours of 9:30 am until 4:00 pm. SECTION 2. PURCHASE AND SALE OF COMMON STOCK. (A) PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and conditions set forth herein, the Company shall issue and sell to the Investor, and 4 --------------------------------------------------------------------------------   the Investor shall purchase from the Company, up to that number of Shares having an aggregate Purchase Price of Ten Million dollars ($10,000,000). (B) DELIVERY OF PUT NOTICES. (I) Subject to the terms and conditions of the Transaction Documents, and from time to time during the Open Period, the Company may, in its sole discretion, deliver a Put Notice to the Investor which states the dollar amount (designated in U.S. Dollars) (the “Put Amount”), which the Company intends to sell to the Investor on a Closing Date (the “Put”). The Put Notice shall be in the form attached hereto as Exhibit C and incorporated herein by reference. The amount that the Company shall be entitled to Put to the Investor (the “Put Amount”) shall be equal to, at the Company’s sole election, either: (A) Two Hundred percent (200%) of the average daily volume (U.S. market only) of the Common Stock for the Ten (10) Trading Days prior to the applicable Put Notice Date, multiplied by the average of the three (3) daily closing bid prices immediately preceding the Put Date, or (B) two hundred fifty thousand dollars ($250,000). During the Open Period, the Company shall not be entitled to submit a Put Notice until after the previous Closing has been completed. The Purchase Price for the Common Stock identified in the Put Notice shall be equal to ninety-seven percent (97%) of the lowest closing Best Bid price of the Common Stock during the Pricing Period. (C) COMPANY’S RIGHT TO WITHRDRAWL. The Company shall reserve the right, but not the obligation, to withdraw that portion of the Put that is below the Minimal Acceptable Price, by submitting to the Investor, in writing, a notice to cancel that portion of the Put. Any shares above the Minimal Acceptable price due to the Investor shall be carried out by the Company under the terms of this Agreement. (D) INTENTIONALLY OMITTED (E) CONDITIONS TO INVESTOR’S OBLIGATION TO PURCHASE SHARES. Notwithstanding anything to the contrary in this Agreement, the Company shall not be entitled to deliver a Put Notice and the Investor shall not be obligated to purchase any Shares at a Closing (as defined in Section 2(G)) unless each of the following conditions are satisfied:      (I) a Registration Statement shall have been declared effective and shall remain effective and available for the resale of all the Registrable Securities (as defined in the Registration Rights Agreement) at all times until the Closing with respect to the subject Put Notice;      (II) at all times during the period beginning on the related Put Notice Date and ending on and including the related Closing Date, the Common Stock shall have been listed on the Principal Market and shall not have been suspended from trading thereon for a period of two (2) consecutive Trading Days during the Open Period and the Company shall not have been notified of any pending or 5 --------------------------------------------------------------------------------   threatened proceeding or other action to suspend the trading of the Common Stock;      (III) the Company has complied with its obligations and is otherwise not in breach of or in default under, a material provision of this Agreement, the Registration Rights Agreement or any other agreement executed in connection herewith which has not been cured prior to delivery of the Investor’s Put Notice Date;      (IV) no injunction shall have been issued and remain in force, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the Securities; and      (V) the issuance of the Securities will not violate any shareholder approval requirements of the Principal Market. If any of the events described in clauses (I) through (V) above occurs during a Pricing Period, then the Investor shall have no obligation to purchase the Put Amount of Common Stock set forth in the applicable Put Notice. (F) RESERVED (G) MECHANICS OF PURCHASE OF SHARES BY INVESTOR. Subject to the satisfaction of the conditions set forth in Sections 2(E), 7 and 8, the closing of the purchase by the Investor of Shares (a “Closing”) shall occur on the date which is no later than seven (7) Trading Days following the applicable Put Notice Date (each a “Closing Date”). Prior to each Closing Date, (I) the Company shall deliver to the Investor pursuant to this Agreement, certificates representing the Shares to be issued to the Investor on such date and registered in the name of the Investor; and (II) the Investor shall deliver to the Company the Purchase Price to be paid for such Shares, determined as set forth in Sections 2(B). In lieu of delivering physical certificates representing the Securities and provided that the Company’s transfer agent then is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Investor, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically transmit the Securities by crediting the account of the Investor’s prime broker (as specified by the Investor within a reasonably in advance of the Investor’s notice) with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system. The Company understands that a delay in the issuance of Securities beyond the Closing Date could result in economic damage to the Investor. After the Effective Date, as compensation to the Investor for such loss, the Company agrees to make late payments to the Investor for late issuance of Securities (delivery of Securities after the applicable Closing Date) in accordance with the following schedule (where “No. of Days Late” is defined as the number of trading days beyond the Closing Date, with the Amounts being cumulative.): 6 --------------------------------------------------------------------------------             LATE PAYMENT FOR EACH     NO. OF DAYS LATE   $10,000 WORTH OF COMMON STOCK 1   $ 100   2   $ 200   3   $ 300   4   $ 400   5   $ 500   6   $ 600   7   $ 700   8   $ 800   9   $ 900   10   $ 1,000   Over 10   $1,000 + $200 for each     Business Day late beyond 10 days The Company shall make any payments incurred under this Section in immediately available funds upon demand by the Investor. Nothing herein shall limit the Investor’s right to pursue actual damages for the Company’s failure to issue and deliver the Securities to the Investor, except that such late payments shall offset any such actual damages incurred by the Investor, and any Repurchase Adjustment Amount, as set forth below. (H) OVERALL LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything contained herein to the contrary, if during the Open Period the Company becomes listed on an exchange that limits the number of shares of Common Stock that may be issued without shareholder approval, then the number of Shares issuable by the Company and purchasable by the Investor, shall not exceed that number of the shares of Common Stock that may be issuable without shareholder approval (the “Maximum Common Stock Issuance”). If such issuance of shares of Common Stock could cause a delisting on the Principal Market, then the Maximum Common Stock Issuance shall first be approved by the Company’s shareholders in accordance with applicable law and the By-laws and Amended and Restated Certificate of Incorporation of the Company, if such issuance of shares of Common Stock could cause a delisting on the Principal Market. The parties understand and agree that the Company’s failure to seek or obtain such shareholder approval shall in no way adversely affect the validity and due authorization of the issuance and sale of Securities or the Investor’s obligation in accordance with the terms and conditions hereof to purchase a number of Shares in the aggregate up to the Maximum Common Stock Issuance limitation, and that such approval pertains only to the applicability of the Maximum Common Stock Issuance limitation provided in this Section 2(H). (I) LIMITATION ON AMOUNT OF OWNERSHIP. Notwithstanding anything to the contrary in this Agreement, in no event shall the Investor be entitled to purchase that number of Shares, which when added to the sum of the number of shares of Common Stock beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3 of the 1934 Act), by the Investor, would exceed 7 --------------------------------------------------------------------------------   4.99% of the number of shares of Common Stock outstanding on the Closing Date, as determined in accordance with Rule 13d-1(j) of the 1934 Act. (J) If, by the third (3rd) business day after the Closing Date, the Company fails to deliver any portion of the shares of the Put to the Investor (the “Put Shares Due”) and the Investor purchases, in an open market transaction or otherwise, shares of Common Stock necessary to make delivery of shares which would have been delivered if the full amount of the shares to be delivered to the Investor by the Company (the “Open Market Share Purchase”) , then the Company shall pay to the Investor, in addition to any other amounts due to Investor pursuant to the Put, and not in lieu thereof, the Open Market Adjustment Amount (as defined below). The “Open Market Adjustment Amount” is the amount equal to the excess, if any, of (x) the Investor’s total purchase price (including brokerage commissions, if any) for the Open Market Share Purchase minus (y) the net proceeds (after brokerage commissions, if any) received by the Investor from the sale of the Put Shares Due. The Company shall pay the Open Market Adjustment Amount to the Investor in immediately available funds within five (5) business days of written demand by the Investor. By way of illustration and not in limitation of the foregoing, if the Holder purchases shares of Common Stock having a total purchase price (including brokerage commissions) of $11,000 to cover an Open Market Purchase with respect to shares of Common Stock it sold for net proceeds of $10,000, the Open Market Purchase Adjustment Amount which the Company will be required to pay to the Holder will be $1,000. SECTION 3. INVESTOR’S REPRESENTATIONS, WARRANTIES AND COVENANTS. The Investor represents and warrants to the Company, and covenants, that: (A) SOPHISTICATED INVESTOR. The Investor has, by reason of its business and financial experience, such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type that it is capable of (I) evaluating the merits and risks of an investment in the Securities and making an informed investment decision; (II) protecting its own interest; and (III) bearing the economic risk of such investment for an indefinite period of time. (B) AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Investor and is a valid and binding agreement of the Investor enforceable against the Investor in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies. (C) SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the Investor will comply with the provisions of Section 9 of the 1934 Act, and the 8 --------------------------------------------------------------------------------   rules promulgated thereunder, with respect to transactions involving the Common Stock. The Investor agrees not to sell the Company’s stock short, either directly or indirectly through its affiliates, principals or advisors, the Company’s common stock during the term of this Agreement. (D) ACCREDITED INVESTOR. Investor is an “Accredited Investor” as that term is defined in Rule 501 (a) of Regulation D of the 1933 Act. (E) NO CONFLICTS. The execution, delivery and performance of the Transaction Documents by the Investor and the consummation by the Investor of the transactions contemplated hereby and thereby will not result in a violation of Partnership Agreement or other organizational documents of the Investor. (F) OPPORTUNITY TO DISCUSS. The Investor has received all materials relating to the Company’s business, finance and operations which it has requested. The Investor has had an opportunity to discuss the business, management and financial affairs of the Company with the Company’s management. (G) INVESTMENT PURPOSES. The Investor is purchasing the Securities for its own account for investment purposes and not with a view towards distribution and agrees to resell or otherwise dispose of the Securities solely in accordance with the registration provisions of the 1933 Act (or pursuant to an exemption from such registration provisions). (H) NO REGISTRATION AS A DEALER. The Investor is not and will not be required to be registered as a “dealer” under the 1934 Act, either as a result of its execution and performance of its obligations under this Agreement or otherwise. (I) GOOD STANDING. The Investor is a Limited Partnership, duly organized, validly existing and in good standing in the State of Delaware. (J) TAX LIABILITIES. The Investor understands that it is liable for its own tax liabilities. (K) REGULATION M. The Investor will comply with Regulation M under the 1934 Act, if applicable. SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in the Schedules attached hereto, or as disclosed on the Company’s SEC Documents, the Company represents and warrants to the Investor that: (A) ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Nevada, and has the requisite corporate power and authorization to own its 9 --------------------------------------------------------------------------------   properties and to carry on its business as now being conducted. Both the Company and the companies it owns or controls (“Subsidiaries”) are duly qualified to do business and are in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on the business, properties, assets, operations, results of operations, financial condition or prospects of the Company and its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements and instruments to be entered into in connection herewith, or on the authority or ability of the Company to perform its obligations under the Transaction Documents (as defined in Section 1 and 4(B), below). (B) AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.      (I) The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement, and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Transaction Documents”), and to issue the Securities in accordance with the terms hereof and thereof.      (II) The execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation the reservation for issuance and the issuance of the Securities pursuant to this Agreement, have been duly and validly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors, or its shareholders.      (III) The Transaction Documents have been duly and validly executed and delivered by the Company.      (IV) The Transaction Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies. (C) CAPITALIZATION. As of the date hereof, the authorized capital stock of the Company consists of 200,000,000 shares of Common Stock, $.001 par value per share, of which as of the date hereof, 39,340,119 shares are issued and outstanding; no shares of Preferred Stock are authorized or issued or outstanding; 31,536,171 shares of common stock are reserved for issuance 10 --------------------------------------------------------------------------------   pursuant to options, warrants and other convertible securities; and an additional 1,614,000 shares of common stock will have been reserved for issuance pursuant to options, warrants and other convertible securities on or before the date of the filing of the Registration Statement with the SEC. All of such outstanding shares have been, or upon issuance will be, validly issued, fully paid and non-assessable. Except as disclosed in the Company’s publicly available filings with the SEC: (I) no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (II) there are no outstanding debt securities; (III) there are no outstanding shares of capital stock, options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, except that the Company may be obligated to issue a warrant to its distributor in China exercisable for up to 1,000,000 shares of common stock, with the exact amount depending upon the number of units ordered by the distributor over a five-year period commencing upon the execution of the related distribution agreement; (IV) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement), except that the Company (A) has granted piggyback registration rights to the Company’s former public relations firm with respect to 41,665 shares of common stock, (B) is presently negotiating the granting of piggyback registration rights with the bankruptcy trustee under the Company’s former royalty agreement with respect to its ZEFS technology with respect to 50,000 shares of common stock, and (C) is presently negotiating the granting of S-8 registration rights to one consultant for 450,000 shares of common stock issuable upon the exercise of options; (V) there are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (VI) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described in this Agreement; (VII) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (VIII) there is no dispute as to the classification of any shares of the Company’s capital stock. 11 --------------------------------------------------------------------------------        The Company has furnished to the Investor, or the Investor has had access through EDGAR to, true and correct copies of the Company’s Amended and Restated Certificate of Incorporation, as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto. (D) ISSUANCE OF SHARES. The Company has reserved, or will have reserved on or before the date of the filing of the Registration Statement with the SEC, 7,000,000 Shares for issuance pursuant to this Agreement, which Shares will have been duly authorized and reserved for issuance (subject to adjustment pursuant to the Company’s covenant set forth in Section 5(F) below) pursuant to this Agreement. Upon issuance in accordance with this Agreement, the Securities will be validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof. In the event the Company cannot register a sufficient number of Shares for issuance pursuant to this Agreement, the Company will use its best efforts to authorize and reserve for issuance the number of Shares required for the Company to perform its obligations hereunder as soon as reasonably practicable. (E) NO CONFLICTS. The execution, delivery and performance of the Equity Line Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (I) result in a violation of the Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws; or (II) conflict with, or constitute a material default (or an event which with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, contract, indenture mortgage, indebtedness or instrument to which the Company or any of its Subsidiaries is a party, or to the Company’s knowledge result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations and the rules and regulations of the Principal Market or principal securities exchange or trading market on which the Common Stock is traded or listed) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected. Except as disclosed in Schedule 4(e), neither the Company nor its Subsidiaries is in violation of any term of, or in default under, the Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws or their organizational charter or by-laws, respectively, or any contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible conflicts, defaults, terminations, amendments, accelerations, cancellations and violations that would not individually or in the aggregate have or constitute a Material Adverse Effect. The business of the 12 --------------------------------------------------------------------------------   Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, statute, ordinance, rule, order or regulation of any governmental authority or agency, regulatory or self-regulatory agency, or court, except for possible violations the sanctions for which either individually or in the aggregate would not have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the 1933 Act or any securities laws of any states, to the Company’s knowledge, the Company is not required to obtain any consent, authorization, permit or order of, or make any filing or registration (except the filing of a registration statement as outlined in the Registration Rights Agreement between the Parties) with, any court, governmental authority or agency, regulatory or self-regulatory agency or other third party in order for it to execute, deliver or perform any of its obligations under, or contemplated by, the Transaction Documents in accordance with the terms hereof or thereof. All consents, authorizations, permits, 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 and are in full force and effect as of the date hereof. Except as disclosed in Schedule 4(e), the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company is not, and will not be, in violation of the listing requirements of the Principal Market as in effect on the date hereof and on each of the Closing Dates and is not aware of any facts which would reasonably lead to delisting of the Common Stock by the Principal Market in the foreseeable future. (F) SEC DOCUMENTS; FINANCIAL STATEMENTS. As of the date hereof, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). The Company has delivered to the Investor or its representatives, or they have had access through EDGAR to, true and complete copies of the SEC Documents. As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in 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 as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, by a firm that is a member of the Public Companies Accounting Oversight Board (“PCAOB”) consistently applied, during the periods involved (except (I) as may be otherwise indicated in such financial statements or the notes thereto, or (II) in 13 --------------------------------------------------------------------------------   the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other written information provided by or on behalf of the Company to the Investor which is not included in the SEC Documents, including, without limitation, information referred to in Section 4(D) of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. Neither the Company nor any of its Subsidiaries or any of their officers, directors, employees or agents have provided the Investor with any material, nonpublic information which was not publicly disclosed prior to the date hereof and any material, nonpublic information provided to the Investor by the Company or its Subsidiaries or any of their officers, directors, employees or agents prior to any Closing Date shall be publicly disclosed by the Company prior to such Closing Date. (G) ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth in the SEC Documents, the Company does not intend to change the business operations of the Company in any material way. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings. (H) ABSENCE OF LITIGATION AND/OR REGULATORY PROCEEDINGS. Except as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company’s Subsidiaries or any of the Company’s or the Company’s Subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a Material Adverse Effect. (I) 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 purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. 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 the Equity Line Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Investor or any of its respective representatives or agents in connection with the Equity Line Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor’s purchase of the Securities, and is not being relied on 14 --------------------------------------------------------------------------------   by the Company. The Company further represents to the Investor that the Company’s decision to enter into the Equity Line Transaction Documents has been based solely on the independent evaluation by the Company and its representatives. (J) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as set forth in the SEC Documents, as of the date hereof, no event, liability, development or circumstance has occurred or exists, or to the Company’s knowledge is contemplated to occur, with respect to the Company or its Subsidiaries or their respective business, properties, assets, prospects, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws on a registration statement filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced. (K) EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is involved in any union labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened. Neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that relations with their employees are good. No executive officer (as defined in Rule 501(f) of the 1933 Act) has notified the Company that such officer intends to leave the Company’s employ or otherwise terminate such officer’s employment with the Company. (L) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth in the SEC Documents, none of the Company’s trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights necessary to conduct its business as now or as proposed to be conducted have expired or terminated, or are expected to expire or terminate within two (2) years from the date of this Agreement. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, except as set forth in the SEC Documents, there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to 15 --------------------------------------------------------------------------------   any of the foregoing. The Company and its Subsidiaries have taken commercially reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties. (M) ENVIRONMENTAL LAWS. The Company (I) is, to the knowledge of the management and directors of the Company, in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”); (II) has, to the knowledge of the management and directors of the Company, received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business; and (III) is in compliance, to the knowledge of the management and directors of the Company, with all terms and conditions of any such permit, license or approval where, in each of the three (3) foregoing cases, the failure to so comply would have, individually or in the aggregate, a Material Adverse Effect. (N) TITLE. The Company and its Subsidiaries have good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the SEC Documents or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its Subsidiaries. Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. (O) INSURANCE. Each of the Company’s Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company reasonably believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any of its Subsidiaries has been refused any insurance coverage sought or applied for and neither the Company nor its Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. (P) REGULATORY PERMITS. The Company and its Subsidiaries have in full force and effect all certificates, approvals, authorizations and permits from the appropriate federal, state, local or foreign regulatory authorities and comparable foreign regulatory agencies, necessary to own, lease or operate their respective properties and assets and conduct their respective businesses, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, approval, 16 --------------------------------------------------------------------------------   authorization or permit, except for such certificates, approvals, authorizations or permits which if not obtained, or such revocations or modifications which, would not have a Material Adverse Effect. (Q) INTERNAL ACCOUNTING CONTROLS. The Company and each of its 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 by a firm with membership to the PCAOB 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. (R) NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect. (S) TAX STATUS. The Company and each of its Subsidiaries has made or filed all United States federal and state 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 and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. (T) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents filed at least ten (10) days prior to the date hereof and except for arm’s length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than the Company could obtain from disinterested third parties and other than the grant of stock options disclosed in the SEC Documents, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the 17 --------------------------------------------------------------------------------   furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. (U) DILUTIVE EFFECT. The Company understands and acknowledges that the number of shares of Common Stock issuable upon purchases pursuant to this Agreement will increase in certain circumstances including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the period between the Effective Date and the end of the Open Period. The Company’s executive officers and directors have studied and fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect on the shareholders of the Company. The Board of Directors of the Company has concluded, in its good faith business judgment, and with full understanding of the implications, that such issuance is in the best interests of the Company. The Company specifically acknowledges that, subject to such limitations as are expressly set forth in the Equity Line Transaction Documents, its obligation to issue shares of Common Stock upon purchases pursuant to this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company. (V) LOCK-UP. The Company shall cause its officers, insiders, directors, and affiliates or other related parties under control of the Company, to refrain from selling Common Stock during each Pricing Period. (W) NO GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor any person acting on its behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Common Stock to be offered as set forth in this Agreement. (X) NO BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS. No brokers, finders or financial advisory fees or commissions will be payable by the Company, it’s agents or Subsidiaries, with respect to the transactions contemplated by this Agreement, except as otherwise provided for in Section 12(M) of this Agreement. SECTION 5. COVENANTS OF THE COMPANY (A) BEST EFFORTS. The Company shall use commercially reasonable efforts to timely satisfy each of the conditions set forth in Section 7 of this Agreement. (B) BLUE SKY. The Company shall, at its sole cost and expense, on or before each of the Closing Dates, take such action as the Company shall reasonably determine is necessary to qualify the Securities for, or obtain exemption for the 18 --------------------------------------------------------------------------------   Securities for, sale to the Investor at each of the Closings pursuant to this Agreement under applicable securities or “Blue Sky” laws of such states of the United States, as reasonably specified by the Investor, and shall provide evidence of any such action so taken to the Investor on or prior to the Closing Date. (C) REPORTING STATUS. Until the first of the following occurs, the Company shall file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status, or take an action or fail to take any action, which would terminate its status as a reporting company under the 1934 Act: (i) this Agreement terminates pursuant to Section 9 and the Investor has the right to sell all of the Securities without restrictions pursuant to Rule 144(k) promulgated under the 1933 Act, or such other exemption; or (ii) the date on which the Investor has sold all the Securities and this Agreement has been terminated pursuant to Section 9. (D) USE OF PROCEEDS. The Company will use the proceeds from the sale of the Shares (excluding amounts paid by the Company for fees as set forth in the Transaction Documents) for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith deem to be in the best interest of the Company. (E) FINANCIAL INFORMATION. During the Registration Period, the Company agrees to make available to the Investor via EDGAR or other electronic means the following documents and information on the forms set forth: (I) within five (5) Trading Days after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-KSB, its Quarterly Reports on Form 10-QSB, any Current Reports on Form 8-K and any Registration Statements or amendments filed pursuant to the 1933 Act; (II) copies of any notices and other information made available or given to the shareholders of the Company generally, contemporaneously with the making available or giving thereof to the shareholders; and (III) within two (2) calendar days of filing or delivery thereof, copies of all documents filed with, and all correspondence sent to, the Principal Market, any securities exchange or market, or the National Association of Securities Dealers, Inc., unless such information is material nonpublic information. (F) RESERVATION OF SHARES. Subject to the following sentence, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, a sufficient number of shares of Common Stock to provide for the issuance of the Securities to the Investor as required hereunder. In the event that the Company determines that it does not have a sufficient number of authorized shares of Common Stock to reserve and keep available for issuance as described in this Section 5(F), the Company shall use commercially reasonable efforts to increase the number of authorized shares of Common Stock by seeking shareholder approval for the authorization of such additional shares. 19 --------------------------------------------------------------------------------   (G) LISTING. The Company shall promptly secure and maintain the listing of all of the Registrable Securities (as defined in the Registration Rights Agreement) on the Principal Market and each other national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed or quoted (subject to official notice of issuance) and shall maintain, such listing of all Registrable Securities from time to time issuable under the terms of the Equity Line Transaction Documents. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market (excluding suspensions of not more than one (1) trading day resulting from business announcements by the Company). The Company shall promptly provide to the Investor copies of any notices it receives from the Principal Market regarding the continued eligibility of the Common Stock for listing on such automated quotation system or securities exchange. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 5(G). (H) TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause each of its Subsidiaries not to, enter into, amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment or arrangement with any of its or any Subsidiary’s officers, directors, persons who were officers or directors at any time during the previous two (2) years, shareholders who beneficially own 5% or more of the Common Stock, or Affiliates or with any individual related by blood, marriage or adoption to any such individual or with any entity in which any such entity or individual owns a 5% or more beneficial interest (each a “Related Party”), except for (I) customary employment arrangements and benefit programs on reasonable terms, (II) any agreement, transaction, commitment or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a disinterested third party other than such Related Party, or (III) any agreement, transaction, commitment or arrangement which is approved by a majority of the disinterested directors of the Company. For purposes hereof, any director who is also an officer of the Company or any Subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment or arrangement. “Affiliate” for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (I) has a 5% or more equity interest in that person or entity, (II) has 5% or more common ownership with that person or entity, (III) controls that person or entity, or (IV) is under common control with that person or entity. “Control” or “Controls” for purposes hereof means that a person or entity has the power, directly or indirectly, to conduct or govern the policies of another person or entity. (I) FILING OF FORM 8-K. On or before the date which is four (4) Trading Days after the Execution Date, the Company shall file a Current Report on Form 8-K with the SEC describing the terms of the transaction contemplated by the Equity 20 --------------------------------------------------------------------------------   Line Transaction Documents in the form required by the 1934 Act, if such filing is required. (J) CORPORATE EXISTENCE. The Company shall use commercially reasonable efforts to preserve and continue the corporate existence of the Company. (K) NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT. The Company shall promptly notify the Investor upon the occurrence of any of the following events in respect of a Registration Statement or related prospectus in respect of an offering of the Securities: (I) receipt of any request for additional information by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or related prospectus; (II) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (III) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Securities for sale in any jurisdiction or the initiation or notice of any proceeding for such purpose; (IV) the happening of any event that makes any statement made in such Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of a Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (V) the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, and the Company shall promptly make available to Investor any such supplement or amendment to the related prospectus. The Company shall not deliver to Investor any Put Notice during the continuation of any of the foregoing events in this Section 5(K). (L) REIMBURSEMENT. If (I) the Investor becomes involved in any capacity in any action, proceeding or investigation brought by any shareholder of the Company, in connection with or as a result of the consummation of the transactions contemplated by the Equity Line Transaction Documents, or if the Investor is impleaded in any such action, proceeding or investigation by any person (other than as a result of a breach of the Investor’s representations and warranties set forth in this Agreement); or (II) the Investor becomes involved in any capacity in any action, proceeding or investigation brought by the SEC against or involving the Company or in connection with or as a result of the consummation of the transactions contemplated by the Equity Line Transaction 21 --------------------------------------------------------------------------------   Documents (other than as a result of a breach of the Investor’s representations and warranties set forth in this Agreement), or if this Investor is impleaded in any such action, proceeding or investigation by any person, then in any such case, the Company will reimburse the Investor for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith, as such expenses are incurred. In addition, other than with respect to any matter in which the Investor is a named party, the Company will pay to the Investor the charges, as reasonably determined by the Investor, for the time of any officers or employees of the Investor devoted to appearing and preparing to appear as witnesses, assisting in preparation for hearings, trials or pretrial matters, or otherwise with respect to inquiries, hearing, trials, and other proceedings relating to the subject matter of this Agreement. The reimbursement obligations of the Company under this section shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliates of the Investor that are actually named in such action, proceeding or investigation, and partners, directors, agents, employees, attorneys, accountants, auditors and controlling persons (if any), as the case may be, of Investor and any such affiliate, and shall be binding upon and inure to the benefit of any successors of the Company, the Investor and any such affiliate and any such person. (M) TRANSFER AGENT. Upon effectiveness of the Registration Statement, and for so long as the Registration Statement is effective, the Company shall deliver instructions to its transfer agent to issue Shares to the Investor that are covered for resale by the Registration Statement free of restrictive legends. SECTION 6. INTENTIONALLY OMITTED SECTION 7. CONDITIONS OF THE COMPANY’S OBLIGATION TO SELL. The obligation hereunder of the Company to issue and sell the Securities to the Investor is further subject to the satisfaction, at or before each Closing Date, of each of the following conditions set forth below. These conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion. (A) The Investor shall have executed this Agreement and the Registration Rights Agreement and delivered the same to the Company. (B) The Investor shall have delivered to the Company the Purchase Price for the Securities being purchased by the Investor between the end of the Pricing Period and the Closing Date via a Put Settlement Sheet (hereto attached as Exhibit D). After receipt of confirmation of delivery of such Securities to the Investor, the Investor, by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company will disburse the funds constituting the Purchase Amount. 22 --------------------------------------------------------------------------------   (C) 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 8. FURTHER CONDITIONS OF THE INVESTOR’S OBLIGATION TO PURCHASE. The obligation of the Investor hereunder to purchase Shares is subject to the satisfaction, on or before each Closing Date, of each of the following conditions set forth below. (A) The Company shall have executed the Equity Line Transaction Documents and delivered the same to the Investor. (B) The Common Stock shall be authorized for quotation on the Principal Market and trading in the Common Stock shall not have been suspended by the Principal Market or the SEC, at any time beginning on the date hereof and through and including the respective Closing Date (excluding suspensions of not more than one (1) Trading Day resulting from business announcements by the Company, provided that such suspensions occur prior to the Company’s delivery of the Put Notice related to such Closing). (C) The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the applicable Closing Date as though made at that time (except for (I) representations and warranties that speak as of a specific date and (II) with respect to the representations made in Sections 4(g), (h) and (j) and the third sentence of Section 4(k) hereof, events which occur on or after the date of this Agreement and are disclosed in SEC filings made by the Company at least ten (10) Trading Days prior to the applicable Put Notice Date) and the Company shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Equity Line Transaction Documents to be performed, satisfied or complied with by the Company on or before such Closing Date, except where the failure to do so would not constitute a Material Adverse Effect. The Investor may request an update as of such Closing Date regarding the representation contained in Section 4(C) above. (D) The Company shall have executed and delivered to the Investor the certificates representing, or have executed electronic book-entry transfer of, the Securities (in such denominations as the Investor shall request) being purchased by the Investor at such Closing. (E) The Board of Directors of the Company shall have adopted resolutions consistent with Section 4(B)(II) above (the “Resolutions”) and such Resolutions shall not have been amended or rescinded prior to such Closing Date. 23 --------------------------------------------------------------------------------   (F) Reserved (G) 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. (H) The Registration Statement shall be effective on each Closing Date and no stop order suspending the effectiveness of the Registration statement shall be in effect or to the Company’s knowledge shall be pending or threatened. Furthermore, on each Closing Date (I) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the SEC’s concerns have been addressed and Investor is reasonably satisfied that the SEC no longer is considering or intends to take such action), and (II) no other suspension of the use or withdrawal of the effectiveness of such Registration Statement or related prospectus shall exist. (I) At the time of each Closing, the Registration Statement (including information or documents incorporated by reference therein) and any amendments or supplements thereto shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or which would require public disclosure or an update supplement to the prospectus. (J) If applicable, the shareholders of the Company shall have approved the issuance of any Shares in excess of the Maximum Common Stock Issuance in accordance with Section 2(H) or the Company shall have obtained appropriate approval pursuant to the requirements of Nevada law and the Company’s Articles of Incorporation and By-laws. (K) The conditions to such Closing set forth in Section 2(E) shall have been satisfied on or before such Closing Date. (L) The Company shall have certified to the Investor the number of Shares of Common Stock outstanding when a Put Notice is given to the Investor. The Company’s delivery of a Put Notice to the Investor constitutes the Company’s certification of the existence of the necessary number of shares of Common Stock reserved for issuance of such Shares. SECTION 9. TERMINATION. This Agreement shall terminate upon any of the following events: 24 --------------------------------------------------------------------------------   (I) when the Investor has purchased an aggregate of Ten Million dollars ($10,000,000) in the Common Stock of the Company pursuant to this Agreement; or, (II) on the date which is thirty-six (36) months after the Effective Date. SECTION 10. SUSPENSION This Agreement shall be suspended upon any of the following events, and shall remain suspended until such event is rectified:      (I) the trading of the Common Stock is suspended by the SEC, the Principal Market or the NASD for a period of two (2) consecutive Trading Days during the Open Period; or,      (II) The Common Stock ceases to be registered under the 1934 Act or listed, quoted or traded on the Principal Market. Immediately upon the occurrence of one of the above-described events, the Company shall send written notice of such event to the Investor. SECTION 11. INDEMNIFICATION. In consideration of the parties mutual obligations set forth in the Transaction Documents, each of the parties (in such capacity, an “Indemnitor”) shall defend, protect, indemnify and hold harmless the other and all of the other party’s shareholders, officers, directors, employees, counsel, 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 reasonable expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (I) any misrepresentation or breach of any representation or warranty made by the Indemnitor or any other certificate, instrument or document contemplated hereby or thereby; (II) any breach of any covenant, agreement or obligation of the Indemnitor contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; or (III) any cause of action, suit or claim brought or made against such Indemnitee by a third party and arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, except insofar as any such misrepresentation, breach or any untrue statement, alleged untrue statement, omission or alleged omission is made in reliance upon and in conformity with information furnished to Indemnitor which is specifically intended for use in the preparation of any such Registration 25 --------------------------------------------------------------------------------   Statement, preliminary prospectus, prospectus or amendments to the prospectus. To the extent that the foregoing undertaking by the Indemnitor may be unenforceable for any reason, the Indemnitor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The indemnity provisions contained herein shall be in addition to any cause of action or similar rights Indemnitor may have, and any liabilities to which the Indemnitor or the Indemnitees may be subject. SECTION 12. GOVERNING LAW; DISPUTES SUBMITTED TO ARBITRATION. (A) ARBITRATION. All disputes arising under this agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without regard to principles of conflict of laws. The parties to this agreement will submit all disputes arising under this agreement to arbitration in Boston, Massachusetts before a single arbitrator of the American Arbitration Association (“AAA”). The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in the Commonwealth of Massachusetts. No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section. No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section. Nothing contained herein shall prevent the party from obtaining an injunction. (B) LEGAL FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth in the Transaction Documents, each party shall pay the fees and expenses of its advisers, counsel, the accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. Any attorneys’ fees and expenses incurred by either the Company or the Investor in connection with the preparation, negotiation, execution and delivery of any amendments to this Agreement or relating to the enforcement of the rights of any party, after the occurrence of any breach of the terms of this Agreement by another party or any default by another party in respect of the transactions contemplated hereunder, shall be paid on demand by the party which is determined, pursuant to Section 12(A), to have breached the Agreement and/or defaulted, as the case may be. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of any Securities. (C) COUNTERPARTS. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original signature. 26 --------------------------------------------------------------------------------   (D) HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Whenever required by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine. (E) SEVERABILITY. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. (F) ENTIRE AGREEMENT; AMENDMENTS. This Agreement is the FINAL AGREEMENT between the Company and the Investor with respect to the terms and conditions set forth herein, and, the terms of this Agreement may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the Parties. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Investor, and no provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. The execution and delivery of the Equity Line Transaction Documents shall not alter the force and effect of any other agreements between the Parties, and the obligations under those agreements. (G) NOTICES. Any notices 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) 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: Save the World Air, Inc. 5125 Lankershim Blvd. North Hollywood, CA 91601 Telephone: (818) 487-8000 Facsimile: (818) 487-8003 27 --------------------------------------------------------------------------------   with a copy to: Lance Jon Kimmel, Esq. SEC Law Firm 11693 San Vicente Boulevard Suite 357 Los Angeles, CA 90049 Telephone: (310)557-3059 Facsimile: (310)388-1320 If to the Investor: Dutchess Private Equities Fund, LP, 50 Commonwealth Avenue, Suite 2 Boston, MA 02116 Telephone: (617) 301-4700 Facsimile: (617) 249-0947 Each party shall provide five (5) days prior written notice to the other party of any change in address or facsimile number. (H) NO ASSIGNMENT. This Agreement may not be assigned. (I)   NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto and is not for the benefit of, nor may any provision hereof be enforced by, any other person, except that the Company acknowledges that the rights of the Investor may be enforced by its general partner. (J)   SURVIVAL. The representations and warranties of the Company and the Investor contained in Sections 2 and 3, the agreements and covenants set forth in Sections 4 and 5, the indemnification provisions set forth in Section 11 and the nondisclosure provisions set forth in Section 13, shall survive each of the Closings and the termination of this Agreement. (K)   PUBLICITY. The Company and the Investor shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Investor without the prior consent of the Investor, except to the extent required by law. The Investor acknowledges that this Agreement and all or part of the Transaction Documents may be deemed to be “material contracts” as that term is defined by Item 28 --------------------------------------------------------------------------------   601(b)(10) of Regulation S-B, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the 1933 Act or the 1934 Act. The Investor further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel. (L) FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. (M) PLACEMENT AGENT. The Company agrees to pay Spencer Clarke LLC, a registered broker dealer eight percent (8%) of the Put Amount on each draw toward the fee. The Investor shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other persons or entities for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents. The Company shall indemnify and hold harmless the Investor, their employees, officers, directors, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney’s fees) and expenses incurred in respect of any such claimed or existing fees, as such fees and expenses are incurred. (N) NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party, as the parties mutually agree that each has had a full and fair opportunity to review this Agreement and seek the advice of counsel on it. (O) REMEDIES. The Investor shall have all rights and remedies set forth in this Agreement and the Registration Rights Agreement and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which the Investor has by law. Any person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any default or breach of any provision of this Agreement, including the recovery of reasonable attorneys fees and costs, and to exercise all other rights granted by law. (P) PAYMENT SET ASIDE. To the extent that the Company makes a payment or payments to the Investor hereunder or under the Registration Rights Agreement or the Investor enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be 29 --------------------------------------------------------------------------------   refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. (Q) PRICING OF COMMON STOCK. For purposes of this Agreement, the bid price of the Common Stock shall be as reported on Bloomberg. SECTION 13. NON-DISCLOSURE OF NON-PUBLIC INFORMATION. (a) The Company shall not disclose non-public information to the Investor, its advisors, or its representatives. (b) Nothing herein shall require the Company to disclose non-public information to the Investor or its advisors or representatives, and the Company represents that it does not disseminate non-public information to any investors who purchase stock in the Company in a public offering, to money managers or to securities analysts, provided, however, that notwithstanding anything herein to the contrary, the Company will, as hereinabove provided, immediately notify the advisors and representatives of the Investor and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting non- public information (whether or not requested of the Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the Registration Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements, therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Section 13 shall be construed to mean that such persons or entities other than the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain non-public information in the course of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that the Registration Statement contains an untrue statement of material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading. * * * 30 --------------------------------------------------------------------------------   SIGNATURE PAGE OF INVESTMENT AGREEMENT Your signature on this Signature Page evidences your agreement to be bound by the terms and conditions of the Investment Agreement and the Registration Rights Agreement as of the date first written above. The undersigned signatory hereby certifies that he has read and understands the Investment Agreement, and the representations made by the undersigned in this Investment Agreement are true and accurate, and agrees to be bound by its terms.                     DUTCHESS PRIVATE EQUITIES FUND, L.P.     BY ITS GENERAL PARTNER,     DUTCHESS CAPITAL MANAGEMENT, LLC               By:                             Douglas H. Leighton, Managing Member               SAVE THE WORLD AIR, INC.               By     ,                    Eugene E. Eichler, Chief Executive Officer     31 --------------------------------------------------------------------------------   LIST OF EXHIBITS       EXHIBIT A   Registration Rights Agreement EXHIBIT B   Opinion of Company’s Counsel EXHIBIT C   Put Notice EXHIBIT D   Put Settlement Sheet 32 --------------------------------------------------------------------------------   EXHIBIT A Registration Rights Agreement 33 --------------------------------------------------------------------------------   EXHIBIT B FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT Date:                      [TRANSFER AGENT]           Re: Save the World Air, Inc. Ladies and Gentlemen:      We are counsel to Save the World Air, Inc., a Nevada corporation (the “Company”), and have represented the Company in connection with that certain Investment Agreement (the “Investment Agreement”) entered into by and among the Company and Duchess Private Equities Fund, LP (the “Holder”), pursuant to which the Company has agreed to issue to the Holder shares of the Company’s common stock, $.001 par value per share (the “Common Stock”) on the terms and conditions set forth in the Investment Agreement. Pursuant to the Investment Agreement, the Company also has entered into a Registration Rights Agreement with the Holder (the “Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issued or issuable under the Investment Agreement under the Securities Act of 1933, as amended (the “1933 Act”). In connection with the Company’s obligations under the Registration Rights Agreement, on             , 2006, the Company filed a Registration Statement on Form SB-2 (File No. 333-          ) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names the Holder as a selling shareholder thereunder.      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] [the Registration Statement has become effective] under the 1933 Act at [enter the time of effectiveness] on [enter the date of effectiveness] and to the best of our knowledge, after telephonic inquiry of a member of the SEC’s staff, no stop order suspending its effectiveness has been issued and no proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement.           Very truly yours,     [Company Counsel] 34 --------------------------------------------------------------------------------   EXHIBIT C Date: RE: Put Notice Number                    Dear Mr. Leighton, This is to inform you that as of today, Save the World Air, Inc., a Nevada corporation (the “Company”), hereby elects to exercise its right pursuant to the Investment Agreement to require Dutchess Private Equities Fund, LP to purchase shares of its common stock. The Company hereby certifies that: The amount of this put is $                    . The Pricing Period runs from                      until                     . The current number of shares issued and outstanding as of the Company are:                           The number of shares currently available for issuance on the SB-2 for the Equity Line are:                           Regards,                   Eugene E. Eichler, Chief Executive Officer     Save the World Air, Inc.     35 --------------------------------------------------------------------------------   EXHIBIT D PUT SETTLEMENT SHEET Date: Dear Mr. Eichler, Pursuant to the Put given by Save the World Air, Inc. to Dutchess Private Equities Fund, L.P. on                                          200  _, we are now submitting the amount of common shares for you to issue to Dutchess. Please have a certificate bearing no restrictive legend totaling                      shares issued to Dutchess Private Equities Fund, LP immediately and send via DWAC to the following account: xxxxxx If not DWAC eligible, please send FedEx Priority Overnight to: XXXXXX Once these shares are received by us, we will have the funds wired to the Company. Regards, Douglas H. Leighton, Managing Member DUTCHESS PRIVATE EQUITIES FUND, L.P. BY ITS GENERAL PARTNER, DUTCHESS CAPITAL MANAGEMENT, LLC 36 --------------------------------------------------------------------------------         DATE   PRICE Date of Day 1   Closing Bid of Day 1 Date of Day 2   Closing Bid of Day 2 Date of Day 3   Closing Bid of Day 3 Date of Day 4   Closing Bid of Day 4 Date of Day 5   Closing Bid of Day 5           LOWEST 1 (ONE) CLOSING BID IN PRICING PERIOD           PUT AMOUNT           AMOUNT WIRED TO COMPANY           PURCHASE PRICE (97)% (NINETY-SEVEN PERCENT))           AMOUNT OF SHARES DUE The undersigned has completed this Put as of this                     day of                                         , 200                 .             SAVE THE WORLD AIR, INC.                       Eugene E. Eichler, Chief Executive Officer     37 --------------------------------------------------------------------------------   SCHEDULE 4(e) CONFLICTS None 38

EXHIBIT 10.4   $650,000,000   CREDIT AGREEMENT   Dated as of February 22, 2006   among   THE BABCOCK & WILCOX COMPANY   as Borrower   and   THE LENDERS, SYNTHETIC INVESTORS AND ISSUERS PARTY HERETO   and   CREDIT SUISSE, CAYMAN ISLANDS BRANCH   as Administrative Agent and Collateral Agent   and   CREDIT SUISSE SECURITIES (USA) LLC   Sole Lead Arranger and Sole Bookrunner   and   JPMORGAN CHASE BANK, N.A.   as Syndication Agent   and   WACHOVIA BANK, NATIONAL ASSOCIATION   and   THE BANK OF NOVA SCOTIA   as Co-Documentation Agents -------------------------------------------------------------------------------- TABLE OF CONTENTS               Page -------------------------------------------------------------------------------- ARTICLE I DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS    2 Section 1.1      Defined Terms    2 Section 1.2      Computation of Time Periods    36 Section 1.3      Accounting Terms and Principles    36 Section 1.4      Certain Terms    37 ARTICLE II THE FACILITIES    38 Section 2.1      The Commitments; Credit-Linked Deposit Account; Delayed Draw Loans    38 Section 2.2      Borrowing Procedures    42 Section 2.3      Swing Loans    43 Section 2.4      Letters of Credit    45 Section 2.5      Reduction and Termination of the Commitments    51 Section 2.6      Repayment of Loans    52 Section 2.7      Evidence of Debt    52 Section 2.8      Optional Prepayments    53 Section 2.9      Mandatory Prepayments    53 Section 2.10      Interest    55 Section 2.11      Conversion/Continuation Option    56 Section 2.12      Fees    56 Section 2.13      Payments and Computations    59 Section 2.14      Special Provisions Governing Eurodollar Rate Loans    62 Section 2.15      Capital Adequacy    64 Section 2.16      Taxes    65 Section 2.17      Substitution of Lenders    69 ARTICLE III CONDITIONS TO LOANS AND LETTERS OF CREDIT    71 Section 3.1      Conditions Precedent to Effectiveness    71 Section 3.2      Conditions Precedent to Each Loan and Letter of Credit    75 Section 3.3      Determinations of Initial Borrowing Conditions    76 ARTICLE IV REPRESENTATIONS AND WARRANTIES    77 Section 4.1      Corporate Existence; Compliance with Law    77 -------------------------------------------------------------------------------- TABLE OF CONTENTS (CONTINUED)               Page -------------------------------------------------------------------------------- Section 4.2      Corporate Power; Authorization; Enforceable Obligations    78 Section 4.3      Ownership of Borrower; Subsidiaries    79 Section 4.4      Financial Statements    79 Section 4.5      Material Adverse Change    80 Section 4.6      Solvency    80 Section 4.7      Litigation    80 Section 4.8      Taxes    80 Section 4.9      Full Disclosure    81 Section 4.10      Margin Regulations    81 Section 4.11      No Burdensome Restrictions; No Defaults    81 Section 4.12      Investment Company Act; Public Utility Holding Company Act    81 Section 4.13      Use of Proceeds    82 Section 4.14      Insurance    82 Section 4.15      Labor Matters    82 Section 4.16      ERISA    83 Section 4.17      Environmental Matters    83 Section 4.18      Intellectual Property    84 Section 4.19      Title; Real Property    84 ARTICLE V FINANCIAL COVENANTS    86 Section 5.1      Maximum Leverage Ratio    86 Section 5.2      Minimum Interest Coverage Ratio    87 ARTICLE VI REPORTING COVENANTS    87 Section 6.1      Financial Statements    87 Section 6.2      Collateral Reporting Requirements    89 Section 6.3      Default Notices    90 Section 6.4      Litigation    90 Section 6.5      Asset Sales    90 Section 6.6      SEC Filings; Press Release    90 Section 6.7      Labor Relations    90 Section 6.8      Tax Returns    91 Section 6.9      Insurance    91   ii -------------------------------------------------------------------------------- TABLE OF CONTENTS (CONTINUED)               Page -------------------------------------------------------------------------------- Section 6.10      ERISA Matters    91 Section 6.11      Environmental Matters    91 Section 6.12      Patriot Act Information    92 Section 6.13      Other Information    92 ARTICLE VII AFFIRMATIVE COVENANTS    93 Section 7.1      Preservation of Corporate Existence, Etc.    93 Section 7.2      Compliance with Laws, Etc.    93 Section 7.3      Conduct of Business    93 Section 7.4      Payment of Taxes, Etc.    93 Section 7.5      Maintenance of Insurance    94 Section 7.6      Access    94 Section 7.7      Keeping of Books    94 Section 7.8      Maintenance of Properties, Etc.    95 Section 7.9      Application of Proceeds    95 Section 7.10      Environmental    95 Section 7.11      Additional Collateral and Guaranties    97 Section 7.12      Real Property    98 Section 7.13      Interest Rate Protection Collateral    99 ARTICLE VIII NEGATIVE COVENANTS    99 Section 8.1      Indebtedness    99 Section 8.2      Liens, Etc.    101 Section 8.3      Investments    103 Section 8.4      Sale of Assets    104 Section 8.5      Restricted Payments    105 Section 8.6      Restriction on Fundamental Changes    106 Section 8.7      Change in Nature of Business    107 Section 8.8      Transactions with Affiliates    107 Section 8.9      Restrictions on Subsidiary Distributions; No New Negative Pledge    107 Section 8.10      Modification of Constituent Documents    108 Section 8.11      Accounting Changes; Fiscal Year    108 Section 8.12      Margin Regulations    108   iii -------------------------------------------------------------------------------- TABLE OF CONTENTS (CONTINUED)               Page -------------------------------------------------------------------------------- Section 8.13      Sale/Leasebacks    108 Section 8.14      Capital Expenditures    108 Section 8.15      Cancellation of Indebtedness Owed to It    109 Section 8.16      No Speculative Transactions    109 ARTICLE IX EVENTS OF DEFAULT    110 Section 9.1      Events of Default    110 Section 9.2      Remedies    112 Section 9.3      Actions in Respect of Letters of Credit    112 ARTICLE X THE ADMINISTRATIVE AGENT, THE FRONTING LENDER AND OTHER AGENTS    113 Section 10.1      Authorization and Action    113 Section 10.2      Administrative Agent’s and Fronting Lender’s Reliance, Etc.    114 Section 10.3      The Agents and the Fronting Lender Individually    115 Section 10.4      Lender Credit Decision    116 Section 10.5      Indemnification    116 Section 10.6      Successor Administrative Agent    117 Section 10.7      Successor Fronting Lender    118 Section 10.8      Concerning the Collateral and the Collateral Documents    118 Section 10.9      Collateral Matters Relating to Related Obligations    119 Section 10.10      Other Agents    120 ARTICLE XI MISCELLANEOUS    121 Section 11.1      Amendments, Waivers, Etc.    121 Section 11.2      Assignments and Participations    124 Section 11.3      Costs and Expenses    128 Section 11.4      Indemnities    129 Section 11.5      Limitation of Liability    131 Section 11.6      Right of Set-off    131 Section 11.7      Sharing of Payments, Etc.    132 Section 11.8      Notices, Etc.    133 Section 11.9      No Waiver; Remedies    134 Section 11.10      Binding Effect    135 Section 11.11      Governing Law    135 Section 11.12      Submission to Jurisdiction; Service of Process    135   iv -------------------------------------------------------------------------------- TABLE OF CONTENTS (CONTINUED)               Page -------------------------------------------------------------------------------- Section 11.13      Waiver of Jury Trial    136 Section 11.14      Marshaling; Payments Set Aside    136 Section 11.15      Section Titles    136 Section 11.16      Execution in Counterparts    136 Section 11.17      Entire Agreement    136 Section 11.18      Confidentiality    137   Schedules                     Schedule I         - Commitments      Schedule II         - Applicable Commitment Fee Rate and   Applicable Margin      Schedule 2.4         - Existing Letters of Credit      Schedule 4.2         - Consents      Schedule 4.3         - Ownership of Subsidiaries      Schedule 4.7         - Litigation      Schedule 4.15         - Labor Matters      Schedule 4.16         - ERISA      Schedule 4.17         - Environmental Matters      Schedule 4.19(a)         - Real Property      Schedule 4.19(b)         - Mortgaged Properties      Schedule 8.1         - Existing Indebtedness      Schedule 8.2         - Existing Liens      Schedule 8.3         - Existing Investments Exhibits                     Exhibit A         - Form of Assignment and Acceptance      Exhibit B-1         - Form of Promissory Note      Exhibit B-2         - Form of Delayed Draw Note      Exhibit C         - Form of Notice of Borrowing      Exhibit D         - Form of Swing Loan Request      Exhibit E         - Form of Letter of Credit Request      Exhibit F         - Form of Notice of Conversion or Continuation      Exhibit G         - Form of Opinion of Counsel for the Loan Parties      Exhibit H         - BWICO Guaranty      Exhibit I         - Pledge and Security Agreement      Exhibit J         - Global Intercompany Note      Exhibit K         - Form of Compliance Certificate      Exhibit L         - Form of Landlord Lien Waiver      Exhibit M         - Effective Date Certificate   v -------------------------------------------------------------------------------- THIS CREDIT AGREEMENT, dated as of February 22, 2006, is entered into by and among THE BABCOCK & WILCOX COMPANY, a Delaware corporation (the “Borrower”), the Lenders (as defined below), the Issuers (as defined below), the Synthetic Investors (as defined below), CREDIT SUISSE SECURITIES (USA) LLC, as sole lead arranger and sole bookrunner (in each such capacity, and together with its successors, the “Arranger”), CREDIT SUISSE, CAYMAN ISLANDS BRANCH (“Credit Suisse”), as administrative agent for the Lenders, the Synthetic Investors and the Issuers (in such capacity, the “Administrative Agent”) and collateral agent for the Lenders, the Synthetic Investors and the Issuers (in such capacity, the “Collateral Agent”), JPMORGAN CHASE BANK, N.A., as syndication agent (the “Syndication Agent”) and WACHOVIA BANK, NATIONAL ASSOCIATION and THE BANK OF NOVA SCOTIA as co-documentation agents (collectively, the “Co-Documentation Agents”).   W I T N E S S E T H:   WHEREAS, the Borrower, together with certain of its direct or indirect Wholly-Owned Domestic Subsidiaries (as hereinafter defined), filed on February 22, 2000 voluntary petitions for reorganization (the “Restructuring”) under Chapter 11 of Title 11 of the United States Code (the “U.S. Bankruptcy Code”) in the United States Bankruptcy Court for the Eastern District of Louisiana (the “U.S. Bankruptcy Court”), and the cases in the U.S. Bankruptcy Court were consolidated for purposes of joint administration of the Borrower and such Subsidiaries (No. 00-10922) (the “Bankruptcy Cases”);   WHEREAS, the Borrower and its applicable Domestic Subsidiaries have emerged from the Bankruptcy Cases pursuant to a joint plan of reorganization confirmed by the U.S. District Court (as hereinafter defined) on January 17, 2006 (as amended, restated, modified or otherwise supplemented through the date hereof and including all exhibits thereto, the “Plan of Reorganization”);   WHEREAS, the Borrower or one of its Subsidiaries has made the MTI Loan and Associated Payments on the date hereof;   WHEREAS, in connection with the Plan of Reorganization, the Borrower has requested the Lenders to extend credit in an aggregate principal amount of up to $650,000,000 on the terms and conditions set forth in this Agreement (and its related schedules and exhibits) in order to recapitalize its existing indebtedness, including its Existing Credit Agreement (the “Recapitalization”) and for working capital needs and other general corporate purposes;   WHEREAS, the Lenders, the Issuers and the Synthetic Investors have agreed to extend certain senior secured credit facilities to the Borrower, in an aggregate amount not to exceed $650,000,000, consisting of (i) $250,000,000 aggregate principal amount of Delayed Draw Loans available in a single drawing on or after the Effective Date but prior to the Delayed Draw Commitment Termination Date, the proceeds of which will be used by the Borrower to refinance indebtedness permitted to be incurred to fund amounts payable to the Asbestos PI Trust to the extent required by, and on the terms -------------------------------------------------------------------------------- and conditions set forth in, the Plan of Reorganization, (ii) a Revolving Facility in the amount of $200,000,000 available at any time and from time to time on or after the Effective Date but prior to the Revolving Facility Termination Date, which will be used only to issue Letters of Credit and for Revolving Loans, the proceeds of which shall be used for working capital needs and for general corporate purposes, and (iii) a Synthetic Facility in the amount of $200,000,000 available at any time and from time to time on or after the Effective Date but prior to the Synthetic Facility Termination Date, which will be used only to issue Letters of Credit, in each case in accordance with this Agreement;   WHEREAS, in connection with the Revolving Facility, Credit Suisse has agreed to extend $15,000,000 in aggregate principal amount of Swing Loans available at any time and from time to time on or after the Effective Date but prior to the Revolving Facility Termination Date, the proceeds of which will be used for the same purposes as the Revolving Loans;   WHEREAS, the Borrower has agreed to secure all of its Obligations by granting to Collateral Agent, for the benefit of Secured Parties, a first priority lien (subject only to Liens permitted hereunder) on substantially all of the Borrower’s domestic assets (other than cash, deposit accounts, Cash Equivalents and securities accounts), including a pledge of all of the Stock of each of its Domestic Subsidiaries and 65% of all the Voting Stock and 100% of all the non-Voting Stock of each of its Foreign Subsidiaries; and   WHEREAS, pursuant to the terms and conditions set forth in the Pledge and Security Agreement, each Subsidiary Guarantor has agreed to guarantee the Obligations hereunder and to secure the Obligations by granting to the Collateral Agent, for the benefit of the Secured Parties, a first priority lien on substantially all of its domestic assets (other than cash, deposit accounts, Cash Equivalents and securities accounts), including a pledge of all of the Stock of each of its Domestic Subsidiaries and 65% of all the Voting Stock and 100% of all the non-Voting Stock of each of its Foreign Subsidiaries;   NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:   ARTICLE I   DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS   Section 1.1 Defined Terms   As used in this Agreement, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):   “Administrative Agent” has the meaning specified in the preamble to this Agreement or any successor thereto pursuant to Section 10.6 (Successor Administrative Agent).   2 -------------------------------------------------------------------------------- “Affected Lender” has the meaning specified in Section 2.17 (Substitution of Lenders).   “Affiliate” means, with respect to any Person, any other Person, directly or indirectly, controlling or that is controlled by or is under common control with such Person, each officer, director or general partner of such Person, and each Person that is the beneficial owner of 10% or more of any class of Voting Stock of such Person. For the purposes of this definition, “control” means the possession of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.   “Agents” means the Administrative Agent, the Collateral Agent, the Co-Documentation Agents and the Syndication Agent.   “Agreement” means this Credit Agreement, dated as of February 22, 2006, as it may be amended, restated, supplemented or otherwise modified from time to time.   “Alternative Currency” means any lawful currency (other than Dollars) of any of the G-10 Countries that is readily transferable into Dollars (or any other currency acceptable to the Administrative Agent in its sole discretion).   “Applicable Commitment Fee Rate” means a rate per annum equal to the applicable rate set forth on Schedule II for the applicable type of Facility.   “Applicable Lending Office” means, with respect to each Lender, its Domestic Lending Office in the case of a Base Rate Loan, and its Eurodollar Lending Office in the case of a Eurodollar Rate Loan.   “Applicable Margin” means, as of any date of determination, a rate per annum equal to the applicable rate set forth on Schedule II.   “Approved Fund” means any Fund that is advised or managed by (a) a Lender or a Synthetic Investor, (b) an Affiliate of a Lender or a Synthetic Investor or (c) an entity or Affiliate of an entity that administers or manages a Lender or a Synthetic Investor.   “Arranger” has the meaning specified in the preamble.   “Asbestos PI Trust” has the meaning specified in the Plan of Reorganization.   “Asbestos PI Trust Note” has the meaning specified in Section 8.1(j).   “Asset Sale” has the meaning specified in Section 8.4 (Sale of Assets).   3 -------------------------------------------------------------------------------- “Assignment and Acceptance” means an assignment and acceptance entered into by a Lender or a Synthetic Investor and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit A (Form of Assignment and Acceptance).   “Authorized Officer” means any Responsible Officer or any other Person designated as an “Authorized Officer” of a Loan Party by prior written notice from such Loan Party to the Administrative Agent.   “Available Credit” means, at any time, an amount equal to (a) the aggregate then effective Commitments minus (b) the aggregate Outstandings at such time.   “Base Rate” means, for any period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall be equal to the greater of the following:   (a) the Prime Rate then in effect; and   (b) 0.5% per annum plus the Federal Funds Rate then in effect.   If the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Rate for any reason, including the inability of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the “Base Rate” shall be determined without regard to clause (b) above until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Federal Funds Rate or the Prime Rate shall be effective on the effective date of such change in the Federal Funds Rate or the Prime Rate, respectively.   “Base Rate Loan” means any Loan during any period in which it bears interest based on the Base Rate.   “Borrower” has the meaning specified in the preamble hereto.   “Borrower’s Accountants” means PricewaterhouseCoopers LLP or other independent nationally recognized public accountants.   “Borrowing” means a borrowing consisting of Revolving Loans or Delayed Draw Loans made or to be made on the same day by the applicable Lenders ratably according to their respective Commitments.   “Business Day” means a day of the year on which banks are not required or authorized to close in New York City and, if the applicable Business Day relates to notices, determinations, fundings and payments in connection with the Eurodollar Rate or any Eurodollar Rate Loans, a day on which dealings in Dollar deposits are also carried on in the London interbank market.   4 -------------------------------------------------------------------------------- “BWICO” means Babcock & Wilcox Investment Company, a Delaware corporation.   “BWICO Guaranty” means the Guaranty to be dated as of the date of the Delayed Draw Loan Credit Date, the form of which is attached hereto as Exhibit H (BWICO Guaranty), to be executed by BWICO in favor of the Administrative Agent.   “Capital Expenditures” means, with respect to any Person for any period, (a) the aggregate of amounts that would be reflected as additions to property, plant or equipment on a consolidated balance sheet of such Person and its Subsidiaries prepared in conformity with GAAP, excluding interest capitalized during construction less (b) the aggregate of such amounts used to acquire assets useful in the Borrower’s and its Subsidiaries’ business (x) in connection with a Reinvestment Event as permitted under Section 2.9 (Mandatory Prepayments) or (y) to the extent such amounts arose from a sale or disposition of equipment described in Section 8.4(c) (Sale of Assets) of the Credit Agreement; provided, however, that the Capital Expenditures of the Borrower shall exclude Capital Expenditures to the extent financed with the proceeds of Indebtedness permitted to be incurred hereunder (other than the Loans).   “Capital Lease” means, with respect to any Person, any lease of (or other arrangement conveying the right to use) property by such Person as lessee that would be accounted for as a capital lease on a balance sheet of such Person prepared in conformity with GAAP.   “Capital Lease Obligations” means, with respect to any Person, the capitalized amount of all obligations of such Person or any of its Subsidiaries under Capital Leases, as determined on a consolidated basis in conformity with GAAP.   “Cash Equivalents” means (a) securities issued or fully guaranteed or insured by the United States government or any agency thereof, (b) certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers’ acceptances of any Lender, Synthetic Investor or any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, any foreign bank, or its branches or agencies, (c) commercial paper, (d) municipal issued debt securities, including notes and bonds, (e) shares of any money market fund that has net assets of not less than $500,000,000 and satisfies the requirements of rule 2a-7 under the Investment Company Act of 1940, (f) investments in so-called “auction rate” securities with reset dates not later than 90 days after acquisition thereof, (g) fully collateralized repurchase agreements and (h) demand deposit accounts; provided, however, that (i) all obligations of the type specified in clauses (a), (c), (d), or (f) above shall have a minimum rating of A-1 or AAA by S&P or P-1 or Aaa by Moody’s, in each case at the time of acquisition thereof, and (ii) the maturities of all obligations of the type described in clauses (a), (b), (c) and (d) above shall not exceed one year from the date of acquisition thereof.   “Cash Interest Expense” means, with respect to any Person for any period, the Interest Expense of such Person for such period less, to the extent included in the calculation of Interest Expense of such Person for such period, (a) the amount of debt   5 -------------------------------------------------------------------------------- discount and debt issuance costs amortized, (b) charges relating to write-ups or write-downs in the book or carrying value of existing Financial Covenant Debt and (c) interest payable in evidences of Indebtedness or by addition to the principal of the related Indebtedness.   “Change of Control” means any of the following: (a) BWICO shall cease to own and control 100% of the issued and outstanding Voting Stock of the Borrower on a fully diluted basis, (b) MII shall cease to beneficially own and control, directly or indirectly, 100% of the issued and outstanding Voting Stock of BWICO on a fully diluted basis, (c) any “person” or “group” (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the date hereof) (excluding MII and its Subsidiaries and excluding underwriters in the course of their distribution of Voting Stock in an underwritten registered public offering provided such underwriters shall not hold such Stock for longer than five Business Days) shall (i) own directly or indirectly, beneficially or of record, Stock representing more than 30% of either the aggregate ordinary voting power or the aggregate equity value represented by the issued and outstanding Stock in MII or (ii) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors of the Borrower, BWICO or MII or (d) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the board of directors of either the Borrower, BWICO or MII (together with any new directors whose election by the board of directors of the Borrower, BWICO or MII, as applicable, or whose nomination for election by the stockholders of the Borrower, BWICO or MII, as applicable, was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of such period or whose elections or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office; provided that the election or appointment as the initial directors of the Borrower and its applicable Domestic Subsidiaries of the individuals proposed to serve as directors in the Notice Pursuant to 11 USC Section 1129(a)(5)(A)(I) of Proposed Officers and Directors of the Reorganized Debtors filed in the U.S. Bankruptcy Court shall not constitute a Change of Control.   “CITGO Settlement” means that certain Stipulation and Accord executed December 21, 2005 by and between the Borrower, Citgo Petroleum Corporation, PDV Midwest Refining L.L.C., certain Underwriters of Loyd’s London and Interested Insurers, and MII and certain of its subsidiaries, as approved by the U.S. Bankruptcy Court.   “Code” means the Internal Revenue Code of 1986 (or any successor legislation thereto).   “Collateral” means all property and interests in property and proceeds thereof now owned or hereafter acquired by any Loan Party in or upon which a Lien is granted under any Collateral Document.   “Collateral Agent” has the meaning specified in the preamble to this Agreement or any successor thereto.   6 -------------------------------------------------------------------------------- “Collateral Documents” means the Pledge and Security Agreement, the Mortgages and any other document executed and delivered by a Loan Party granting or perfecting a Lien on any of its property to secure payment of the Secured Obligations.   “Commitments” means the Revolving Commitments, Synthetic Commitments and Delayed Draw Commitments.   “Commitment Fee” means the Revolving Commitment Fee and the Delayed Draw Commitment Fee specified in Section 2.12(a) (Fees).   “Compliance Certificate” has the meaning specified in Section 6.1(c) (Financial Statements).   “Confirmation Order” shall have the meaning specified in Section 3.1(f) (Confirmation Order).   “Consolidated Net Income” shall mean, for any period, the net income (or loss) of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP.   “Constituent Documents” means, with respect to any Person, (a) the articles of incorporation, certificate of incorporation or certificate of formation (or the equivalent organizational documents) of such Person and (b) the by-laws, operating agreement (or the equivalent governing documents) of such Person.   “Contaminant” means any material, substance or waste that is classified, regulated or otherwise characterized under any Environmental Law as hazardous, toxic, a contaminant or a pollutant or by other words of similar meaning or regulatory effect, including any petroleum or petroleum-derived substance or waste, asbestos and polychlorinated biphenyls.   “Contingent MI Payment” means the contingent payment to be made to the Asbestos PI Trust by MI or one of its Subsidiaries (excluding the Borrower and any of its Subsidiaries except as expressly permitted pursuant to Section 8.1(m)) in connection with the settlement being effected pursuant to, among other documents, the Plan of Reorganization in an aggregate amount of up to $355,000,000 under the conditions set forth in the Plan of Reorganization and such other documents.   “Contractual Obligation” of any Person means any obligation, agreement, undertaking or similar provision of any Security issued by such Person or of any agreement, undertaking, contract, lease, indenture, mortgage, deed of trust or other instrument (excluding the Loan Documents) to which such Person is a party or by which it or any of its property is bound.   “Co-Documentation Agents” has the meaning specified in the preamble to this Agreement.   7 -------------------------------------------------------------------------------- “Credit-Linked Deposit” means, with respect to each Synthetic Investor at any time, amounts actually on deposit in the Credit-Linked Deposit Account credited to such Synthetic Investor’s Sub-Account at such time.   “Credit-Linked Deposit Account” means the account established pursuant to Section 2.1(c) (The Commitments; Credit-Linked Deposit Account; Delayed Draw Loans) by the Administrative Agent, under its sole and exclusive dominion and control, that shall be used solely to hold the Credit-Linked Deposits.   “Credit-Linked Deposit Return” has the meaning specified in Section 2.1(f) (The Commitments; Credit-Linked Deposit Account; Delayed Draw Loans).   “Credit Suisse” has the meaning specified in the preamble to this Agreement.   “Current Assets” shall mean, at any time, the consolidated current assets (other than cash and Cash Equivalents) of the Borrower and the Subsidiaries.   “Current Liabilities” shall mean, at any time, the consolidated current liabilities of the Borrower and the Subsidiaries at such time, but excluding, without duplication, (a) the current portion of any long-term Indebtedness and (b) outstanding Revolving Loans and Swing Loans.   “Customary Permitted Liens” means, with respect to any Person, any of the following Liens:   (a) Liens with respect to the payment of taxes, assessments or governmental charges in each case that are not yet due or that are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by GAAP and, in the case of Mortgaged Property, there is no material risk of forfeiture of such property;   (b) Liens of landlords arising by statute or lease contracts entered into in the ordinary course, inchoate, statutory or construction liens and liens of suppliers, mechanics, carriers, materialmen, warehousemen, producers, operators or workmen and other liens imposed by law created in the ordinary course of business for amounts not yet due or that are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by GAAP;   (c) liens, pledges or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other types of social security benefits, taxes, assessments, statutory obligations or other similar charges or to secure the performance of bids, tenders, sales, leases, contracts (other than for the repayment of borrowed money) or in connection with surety, appeal, customs or performance bonds or other similar instruments;   8 -------------------------------------------------------------------------------- (d) encumbrances arising by reason of zoning restrictions, easements, licenses, reservations, covenants, rights-of-way, utility easements, building restrictions and other similar encumbrances on the use of Real Property not materially detracting from the value of such Real Property and not materially interfering with the ordinary conduct of the business conducted at such Real Property;   (e) encumbrances arising under leases or subleases of Real Property that do not, individually or in the aggregate, materially detract from the value of such Real Property or materially interfere with the ordinary conduct of the business conducted at such Real Property; and   (f) financing statements with respect to a lessor’s rights in and to personal property leased to such Person in the ordinary course of such Person’s business.   “Default” means any event that, with the passing of time or the giving of notice or both, would become an Event of Default.   “Delayed Draw Commitment” means with respect to a Lender, the commitment of such Lender to make Delayed Draw Loans in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule I (Commitments) under the caption “Delayed Draw Commitment,” as amended to reflect each Assignment and Acceptance executed in accordance herewith, and as such amount may be reduced pursuant to this Agreement. “Delayed Draw Commitments” means the aggregate of such commitments for all Lenders.   “Delayed Draw Commitment Fee” shall have the same meaning specified in Section 2.12(a) (Fees).   “Delayed Draw Facility” means the Delayed Draw Commitment of Lenders and the provisions herein relating to the Delayed Draw Loans made by the Lenders with Delayed Draw Commitments. The aggregate amount of the Delayed Draw Commitments as of the Effective Date is $250,000,000.   “Delayed Draw Commitment Period” means the period from and including the Effective Date to and including the Delayed Draw Commitment Termination Date.   “Delayed Draw Commitment Termination Date” means the earliest of (a) December 1, 2006, (b) the date of termination of the Commitments pursuant to Section 2.5 (Reduction and Termination of the Commitments) or Section 9.2 (Remedies), (c) the date of funding of Delayed Draw Loans pursuant to Section 2.1(b) and (d) the date of the issuance of Indebtedness referred to in Section 8.1(j)(y).   “Delayed Draw Lender” means any Lender under the Delayed Draw Facility.   “Delayed Draw Loan” means a Loan made by a Lender to the Borrower pursuant to Section 2.1(b).   9 -------------------------------------------------------------------------------- “Delayed Draw Loan Credit Date” means the date of making of the Delayed Draw Loan.   “Delayed Draw Loan Exposure” means, with respect to any Lender as of any date of determination, (i) prior to the termination of the Delayed Draw Commitments, that Lender’s Delayed Draw Commitment and (ii) after the termination of the Delayed Draw Commitments, the aggregate outstanding principal amount of the Delayed Draw Loans of that Lender.   “Delayed Draw Loan Maturity Date” means the earlier of (i) the sixth anniversary of the Effective Date, and (ii) the date that all Delayed Draw Loans shall become due and payable in full hereunder, whether by acceleration or otherwise.   “Delayed Draw Loan Note” means a promissory note in the form of Exhibit B-2, as it may be amended, supplemented or otherwise modified from time to time.   “Disqualified Stock” means with respect to any Person, any Stock that, by its terms (or by the terms of any Security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is exchangeable for Indebtedness of such Person, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the Synthetic Facility Termination Date.   “Documentary Letter of Credit” means any Letter of Credit that is drawable upon presentation of documents evidencing the sale or shipment of goods, or the rendering of services, purchased by the Borrower or any of its Subsidiaries in the ordinary course of its business.   “Dollar Equivalent” means with respect to any Alternative Currency at the time of determination thereof, the equivalent of such currency in Dollars determined by using the rate of exchange quoted by Credit Suisse in New York, New York at 11:00 a.m. (New York time) on the date of determination to prime banks in New York for the spot purchase in the New York foreign exchange market of such amount of Dollars with such Alternative Currency.   “Dollars” and the sign “$” each mean the lawful money of the United States of America.   “Domestic Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Domestic Lending Office” from time to time to the Borrower and the Administrative Agent.   “Domestic Subsidiary” means any Subsidiary of the Borrower organized under the laws of any state of the United States of America or the District of Columbia.   “EBITDA” means, for any period, (a) Consolidated Net Income for such period plus (b) the sum of, in each case to the extent deducted in the calculation of such   10 -------------------------------------------------------------------------------- Consolidated Net Income but without duplication, (i) any provision for income taxes, (ii) Interest Expense, (iii) depreciation expense, (iv) amortization of intangibles or financing or acquisition costs, (v) any aggregate net loss from the sale, exchange or other disposition of business units by the Borrower or its Subsidiaries and (vi) all other non-cash charges (including impairment of intangible assets and goodwill) and non-cash losses for such period (excluding any non-cash item to the extent it represents an accrual of, or reserve for, cash disbursements for any period ending prior to March 31, 2012); provided, that, to the extent that all or any portion of the income or gains of any Person is deducted pursuant to any of clauses (c)(v) through (c)(viii) below for a given period, any amounts set forth in any of the preceding clauses (b)(i) through (b)(vii) that are attributable to such Person shall not be included for purposes of this clause (b) for such period, minus (c) the sum of, in each case to the extent included in the calculation of such Consolidated Net Income but without duplication, (i) any credit for income tax, (ii) non-cash interest income, (iii) any other non-cash gains or other items which have been added in determining Consolidated Net Income (other than any such gain or other item that has been deducted in determining EBITDA for a prior period), (iv) the income of any Subsidiary or Permitted Joint Venture to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by such Subsidiary or Permitted Joint Venture, as applicable, of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, statute, rule or governmental regulation applicable to such Subsidiary or Permitted Joint Venture, as applicable, (v) the income or loss of any person accrued prior to the date it becomes a Subsidiary or Permitted Joint Venture or is merged into or consolidated with the Borrower or any Subsidiary or the date that such person’s assets are acquired by the Borrower or any Subsidiary or Permitted Joint Venture, (vi) the income of any Person (other than a Subsidiary that is not a Permitted Joint Venture) in which any other Person (other than the Borrower or a wholly owned Subsidiary or any director holding qualifying shares in accordance with applicable law) has an interest, except to the extent of the amount of dividends or other distributions or transfers or loans actually paid to the Borrower or a wholly owned Subsidiary by such person during such period and (vii) any gains attributable to sales of assets out of the ordinary course of business; provided, notwithstanding the foregoing, the EBITDA for the Fiscal Quarters ended June 30, 2005, September 30, 2005 and December 31, 2005 shall be $26,900,000, $30,400,000 and $21,400,000, respectively.   “ECF Period” means (i) in the event that the Borrower or any of its Subsidiaries desires to use any internally generated cash flow of the Borrower or any of its Subsidiaries to pay all or any portion of the Contingent MI Payment, the period commencing on the Effective Date and ending on the last day of the most recent Fiscal Quarter for which financial statements were delivered pursuant to Section 6.1(a) and (ii) in all other cases, the Fiscal Year most recently ended.   “ECF Year End Offer Date” has the meaning specified in Section 2.9(c).   “Effective Date” has the meaning specified in Section 3.1 (Conditions Precedent to Effectiveness).   11 -------------------------------------------------------------------------------- “Eligible Assignee” means (a) a Lender, Synthetic Investor or any Affiliate of a Lender or Synthetic Investor or an Approved Fund, (b) a commercial bank having total assets in excess of $5,000,000,000, (c) a finance company, insurance company or any other financial institution or fund, in each case reasonably acceptable to the Administrative Agent and regularly engaged in making, purchasing or investing in loans and having a net worth, determined in accordance with GAAP, in excess of $250,000,000 or, to the extent net worth is less than such amount, a finance company, insurance company, other financial institution or fund, reasonably acceptable to the Administrative Agent and the Borrower or (d) a savings and loan association or savings bank organized under the laws of the United States or any State thereof having a net worth, determined in accordance with GAAP, in excess of $250,000,000; provided, that, the term Eligible Assignee shall exclude any competitor of the Borrower or any of its Subsidiaries which is primarily engaged in an Eligible Line of Business and which has been previously identified as such by the Borrower to the Administrative Agent.   “Eligible Line of Business” means the businesses and activities engaged in by the Borrower and its Subsidiaries on the Effective Date, any other businesses or activities reasonably related or incidental thereto and any other businesses that, when taken together with the existing businesses of the Borrower and its Subsidiaries, are immaterial with respect to the assets and liabilities of the Borrower and its Subsidiaries, taken as a whole.   “Employee Benefit Plan” means any “employee benefit plan” as defined in Section 3(3) of ERISA which is or was sponsored, maintained or contributed to by, or required to be contributed by, the Borrower, any of its Subsidiaries, any Guarantor or any of their respective ERISA Affiliates.   “Environmental Laws” means all applicable Requirements of Law now or hereafter in effect and as amended or supplemented from time to time, relating to pollution or the regulation and protection of human health, safety, the environment or natural resources, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.); the Hazardous Material Transportation Act, as amended (49 U.S.C. § 1801 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. § 136 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. § 6901 et seq.); the Toxic Substance Control Act, as amended (15 U.S.C. § 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. § 7401 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. § 1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. § 651 et seq.); the Safe Drinking Water Act, as amended (42 U.S.C. § 300f et seq.); and each of their state and local counterparts or equivalents.   “Environmental Liabilities and Costs” means, with respect to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any other Person, whether based in contract, tort, implied or express   12 -------------------------------------------------------------------------------- warranty, strict liability, criminal or civil statute and arising under any Environmental Law, Permit, order or agreement with any Governmental Authority or other Person, in each case relating to and resulting from the past, present or future operations of, or ownership of property by, such Person or any of its Subsidiaries.   “Environmental Lien” means any Lien in favor of any Governmental Authority pursuant to any Environmental Law.   “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.   “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control or treated as a single employer with the Borrower, any of its Subsidiaries or any Guarantor within the meaning of Section 414(b), (c), (m) or (o) of the Code. Any former ERISA Affiliate of the Borrower, any of its Subsidiaries or any Guarantor shall continue to be considered an ERISA Affiliate of the Borrower, such Subsidiary or such Guarantor within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of the Borrower, such Subsidiary or such Guarantor and with respect to liabilities arising after such period for which the Borrower, such Subsidiary or such Guarantor could be liable under the Code or ERISA.   “ERISA Event” means (a) a reportable event described in Section 4043(b) or 4043(c) of ERISA with respect to a Title IV Plan, (b) the withdrawal of the Borrower, any of its Subsidiaries, any Guarantor or any ERISA Affiliate from a Title IV Plan subject to Section 4063 or Section 4064 of ERISA during a plan year in which any such entity was a “substantial employer” (as defined in Section 4001(a)(2) of ERISA) or the termination of any such Title IV Plan resulting, in either case, in a material liability to any such entity, (c) the “complete or partial withdrawal” (within the meaning of Sections 4203 and 4205 of ERISA) of the Borrower, any of its Subsidiaries, any Guarantor or any ERISA Affiliate from any Multiemployer Plan where the Withdrawal Liability is reasonably expected to exceed $1,000,000 (individually or in the aggregate), (d) notice of reorganization, insolvency, intent to terminate or termination of a Multiemployer Plan is received by the Borrower, any of its Subsidiaries, any Guarantor or any ERISA Affiliate, (e) the filing of a notice of intent to terminate a Title IV Plan under Section 4041(c) of ERISA or the treatment of a plan amendment as a termination under Section 4041(e) of ERISA, where such termination constitutes a “distress termination” under Section 4041(c) of ERISA, (f) the institution of proceedings to terminate a Title IV Plan by the PBGC, (g) the failure to make any required contribution to a Title IV Plan or Multiemployer Plan or to meet the minimum funding standard of Section 412 of the Code (in either case, whether or not waived in accordance with Section 412(d) of the Code), (h) the imposition of a lien under Section 412 of the Code or Section 302 of ERISA on the Borrower, any of its Subsidiaries, any Guarantor or any ERISA Affiliate, (i) any other event or condition that might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, (j) the imposition of liability on the Borrower, any of its Subsidiaries, any   13 -------------------------------------------------------------------------------- Guarantor or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA, (k) the occurrence of an act or omission which would reasonably be expected to give rise to the imposition on the Borrower, any of its Subsidiaries, any Guarantor or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any “employee pension plan” (within the meaning of Section 3(2) of ERISA), (l) receipt from the IRS of notice of the failure of any employee pension plan that is intended to be qualified under Section 401(a) of the Code) to qualify under Section 401(a) of the Code, or the failure of any trust forming part of any such employee pension plan to qualify for exemption from taxation under Section 501(a) of the Code; or (m) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Code or pursuant to ERISA with respect to any employee pension plan.   “Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Federal Reserve Board.   “Eurodollar Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Eurodollar Lending Office” from time to time to the Borrower and the Administrative Agent.   “Eurodollar Rate” means, with respect to any Eurodollar Rate Loan for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the beginning of such Interest Period by reference to the British Bankers’ Association Interest Settlement Rates for deposits in Dollars (as set forth by any service selected by the Administrative Agent which has been nominated by the British Bankers’ Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period; provided, however, that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition “Eurodollar Rate” shall be the interest rate per annum determined by the Administrative Agent to be the average of the rates per annum at which deposits in Dollars are offered for such Interest Period to major banks in the London interbank market in London, England by the Administrative Agent at approximately 11:00 a.m. (London time) on the date which is two Business Days prior to the beginning of such Interest Period. Each determination by the Administrative Agent pursuant to this definition shall be conclusive absent manifest error.   “Eurodollar Rate Loan” means any Loan that, for an Interest Period, bears interest based on the Eurodollar Rate.   “Event of Default” has the meaning specified in Section 9.1 (Events of Default).   “Excess Cash Flow” means, for any ECF Period, the excess of (a) the sum, without duplication, of (i) EBITDA for such fiscal year and (ii) the decrease, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year   14 -------------------------------------------------------------------------------- over (b) the sum, without duplication, of (i) the amount of any Taxes payable in cash by the Borrower and the Subsidiaries with respect to such fiscal year, (ii) Interest Expense for such fiscal year payable in cash, (iii) Capital Expenditures made in cash in accordance with Section 8.14 during such fiscal year, except to the extent financed with the proceeds of Indebtedness, equity issuances, casualty proceeds, condemnation proceeds or other proceeds that would not be included in EBITDA, (iv) permanent repayments of Indebtedness (other than mandatory prepayments of Loans pursuant to Section 2.9(c)) made by the Borrower and the Subsidiaries during such fiscal year, but only to the extent that such prepayments by their terms cannot be reborrowed or redrawn and do not occur in connection with a refinancing of all or any portion of such Indebtedness, (v) the increase, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year, (vi) the amount payable in cash by the Borrower and the Subsidiaries to fund any “employee pension benefit plan” (as defined in Title I of ERISA) for such fiscal year, (vii) cash investments by the Borrower and its Subsidiaries in any Permitted Acquisition for such fiscal year, except to the extent financed with the proceeds of Indebtedness, equity issuances, casualty proceeds, condemnation proceeds or other proceeds that would not be included in EBITDA, (viii) cash payments after the Effective Date by the Borrower and its Subsidiaries to the Asbestos PI Trust pursuant to the Plan of Reorganization and (ix) the excess, if any, of cash payments by the Borrower over the amount of accrued expense for any long-term liabilities (including, without duplication, accumulated post-retirement liabilities).   “Excluded Taxes” has the meaning specified in Section 2.16.   “Existing Credit Agreement” means that certain Credit Agreement, dated as of February 21, 2000 (as amended, supplemented or otherwise modified through date hereof), by and among the Borrower, Citibank, N.A., as administrative agent, and others, providing the Borrower and others with a $300 million debtor-in-possession revolving facility.   “Existing Letters of Credit” means each letter of credit outstanding as a “Letter of Credit” immediately prior to the Effective Date under the Existing Credit Agreement, each of which is set forth on Schedule 2.4, and each other letter of credit listed on Schedule 2.4.   “Facilities” means the Revolving Facility, the Synthetic Facility, the Delayed Draw Facility and the provisions herein related to the Revolving Loans, Swing Loans and Letters of Credit.   “Fair Market Value” means (a) with respect to any asset or group of assets (other than a marketable Security) at any date, the value of the consideration obtainable in a sale of such asset at such date assuming a sale by a willing seller to a willing purchaser dealing at arm’s length and arranged in an orderly manner over a reasonable period of time having regard to the nature and characteristics of such asset or, if such asset shall have been the subject of a substantially contemporaneous appraisal by an independent third party appraiser, the basic assumptions underlying which have not materially changed since its date, the value set forth in such appraisal and (b) with respect   15 -------------------------------------------------------------------------------- to any marketable Security at any date, the highest closing sale price of such Security on the Business Day next preceding such date, as appearing in any published list of the principal exchange on which such Security is traded or, if there is no such closing sale price of such Security, the final price for the purchase of such Security at face value quoted on such business day by a financial institution of recognized standing regularly dealing in securities of such type reasonably acceptable to the Administrative Agent and the Borrower.   “Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.   “Federal Reserve Board” means the Board of Governors of the United States Federal Reserve System, or any successor thereto.   “Fee Letter” means the Fee Letter, dated as of December 19, 2005, addressed to the Borrower from Credit Suisse and accepted by the Borrower as of December 19, 2005.   “Financial Covenant Debt” of any Person means Indebtedness of the type specified in clauses (a), (b), (c), (d), (e), (f) and (g) of the definition of “Indebtedness”. For the avoidance of doubt, the term “Financial Covenant Debt” shall not include (a) reimbursement or other obligations with respect to unmatured or undrawn, as applicable, Performance Guarantees and (b) Indebtedness of the Borrower, any Subsidiary of the Borrower or any Permitted Joint Venture that is owed to the Borrower, any Subsidiary of the Borrower or any Permitted Joint Venture.   “Financial Statements” means the financial statements of the Borrower and its Subsidiaries delivered in accordance with Section 3.1(c) (Conditions Precedent to Effectiveness), Section 4.4 (Financial Statements) or 6.1 (Financial Statements).   “Fiscal Quarter” means the fiscal quarter of the Borrower ending on March 31, June 30, September 30 or December 31 of the applicable calendar year, as applicable.   “Fiscal Year” means the fiscal year of the Borrower, which is the same as the calendar year.   “Foreign Ownership Control or Influence” has the meaning given to such phrase in the Federal National Industrial Security Program Operating Manual and any successor documentation or program thereto.   16 -------------------------------------------------------------------------------- “Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.   “Fronting Fee” means the Fronting Fee specified in Section 2.12(b)(i) (Fees).   “Fronting Lender” means Credit Suisse or any other Person that, with the approval of the Synthetic Investors and the Administrative Agent in accordance with Section 10.7 (Successor Fronting Lender), becomes the Fronting Lender hereunder.   “Fund” means any Person (other than a natural Person) that is or will be engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course.   “GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time.   “G-10 Countries” means Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States.   “Governmental Authority” means any nation, sovereign or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any central bank.   “Guarantors” means the Subsidiary Guarantors and, from and after the Delayed Draw Loan Credit Date, BWICO.   “Guaranty Obligation” means, as applied to any Person, without duplication, any direct or indirect liability, contingent or otherwise, of such Person with respect to any Indebtedness of another Person, if the purpose of such Person in incurring such liability is to provide assurance to the obligee of such Indebtedness that such Indebtedness will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Indebtedness will be protected (in whole or in part) against loss in respect thereof, including (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of Indebtedness of another Person and (b) any liability of such Person for Indebtedness of another Person through any agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise acquire such Indebtedness or any security therefor, or to provide funds for the payment or discharge of such Indebtedness (whether in the form of a loan, advance, stock purchase, capital contribution or otherwise), (ii) to maintain the solvency or any balance sheet item, level of income or financial condition of another Person, (iii) to make take-or-pay or similar payments, regardless of non-performance by any other party or parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss or (v) to supply funds to, or in any other manner invest in, such other Person   17 -------------------------------------------------------------------------------- (including to pay for property or services irrespective of whether such property is received or such services are rendered), if (and only if) in the case of any agreement described under clause (b)(i), (ii), (iii), (iv) or (v) above the primary purpose or intent thereof is to provide assurance to the obligee of Indebtedness of any other Person that such Indebtedness will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Indebtedness will be protected (in whole or in part) against loss in respect thereof. The amount of any Guaranty Obligation shall be equal to the amount of the Indebtedness so guaranteed or otherwise supported or, if such amount is not stated or otherwise determinable, the maximum reasonable anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. For the avoidance of doubt, the term “Guaranty Obligation” shall not include reimbursement or other obligations with respect to unmatured or undrawn, as applicable, Performance Guarantees.   “Hedging Contracts” means all Interest Rate Contracts, foreign exchange contracts, currency swap or option agreements, forward contracts, commodity swap, purchase or option agreements, other commodity price hedging arrangements, and all other similar agreements or arrangements designed to alter the risks of any Person arising from fluctuations in interest rates, currency values or commodity prices.   “Indebtedness” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person evidenced by promissory notes, bonds, debentures or similar instruments, (c) all matured reimbursement obligations with respect to letters of credit, bankers’ acceptances, surety bonds, performance bonds, bank guarantees, and other similar obligations, (d) all other obligations with respect to letters of credit, bankers’ acceptances, surety bonds, performance bonds, bank guarantees and other similar obligations, whether or not matured, other than unmatured or undrawn, as applicable, obligations with respect to Performance Guarantees, (e) all indebtedness for the deferred purchase price of property or services, other than trade payables incurred in the ordinary course of business that are not overdue by more than ninety days or disputed in good faith, (f) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement (other than operating leases) with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (g) all Capital Lease Obligations of such Person, (h) all Guaranty Obligations of such Person, (i) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any Stock or Stock Equivalents of such Person, valued, in the case of redeemable preferred stock, at the greater of its voluntary liquidation preference and its involuntary liquidation preference plus accrued and unpaid dividends, (j) net payments that such Person would have to make in the event of an early termination as determined on the date Indebtedness of such Person is being determined in respect of Hedging Contracts of such Person and (k) all Indebtedness of the type referred to above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and general intangibles) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. For the avoidance of doubt, the term “Indebtedness” shall not include reimbursement or other obligations with respect to unmatured or undrawn, as applicable, Performance Guarantees.   18 -------------------------------------------------------------------------------- “Indemnified Matter” has the meaning specified in Section 11.4 (Indemnities).   “Indemnitees” has the meaning specified in Section 11.4 (Indemnities).   “Information Memorandum” means the Confidential Information Memorandum, dated November 30, 2005, in respect of the Facilities.   “Initial Period” has the meaning specified in Section 2.1(f) (The Commitments; Credit-Linked Deposit Account; Delayed Draw Loans).   “Intercompany Subordinated Debt Payment” means any payment or prepayment, whether required or optional, of principal, interest or other charges on or with respect to any Subordinated Debt of the Borrower or any Subsidiary of the Borrower, so long as (a) such Subordinated Debt is owed to the Borrower or a Subsidiary of the Borrower and (b) no Event of Default under Sections 9.1(a), 9.1(b) or 9.1(f) shall have occurred and be continuing.   “Interest Coverage Ratio” means, with respect to any Person for any period, the ratio of (a) EBITDA of such Person for such period to (b) the Cash Interest Expense of such Person for such period; provided, that for purposes of determining the Interest Coverage Ratio for the four Fiscal Quarter periods ending on each of the Fiscal Quarters ending March 31, 2006, June 30, 2006 and September 30, 2006, Cash Interest Expense for such Fiscal Quarter shall be multiplied by 4, 2 and 4/3, respectively.   “Interest Expense” means, for any Person for any period, total interest expense of such Person and its Subsidiaries for such period, as determined on a consolidated basis in conformity with GAAP and including, in any event (without duplication for any period or any amount included in any prior period), (i) net costs under Interest Rate Contracts for such period, (ii) any commitment fee (including, in the case of the Borrower or any of its Subsidiaries, the Revolving Commitment Fee and the Delayed Draw Commitment Fee) accrued, accreted or paid by such Person during such period, (iii) any fees and other obligations (other than reimbursement obligations) with respect to letters of credit (including, in respect of the Borrower or any of its Subsidiaries, the Letter of Credit Participation Fees) and bankers’ acceptances (whether or not matured) accrued, accreted or paid by such Person for such period and (iv) the Fronting Fee. For purposes of the foregoing, interest expense shall (i) be determined after giving effect to any net payments made or received by the Borrower or any Subsidiary with respect to interest rate Hedging Agreements and (ii) exclude interest expense accrued, accreted or paid by the Borrower, any Subsidiary of the Borrower or any Permitted Joint Venture to the Borrower, any Subsidiary of the Borrower or any Permitted Joint Venture.   “Interest Period” means, in the case of any Eurodollar Rate Loan, (a) initially, the period commencing on the date such Eurodollar Rate Loan is made or on   19 -------------------------------------------------------------------------------- the date of conversion of a Base Rate Loan to such Eurodollar Rate Loan and ending one, two, three or six months thereafter or, with the prior written consent of all Lenders, nine or twelve months thereafter, as selected by the Borrower in its Notice of Borrowing or Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.2 (Borrowing Procedures) or 2.11 (Conversion/Continuation Option), and (b) thereafter, if such Loan is continued, in whole or in part, as a Eurodollar Rate Loan pursuant to Section 2.11 (Conversion/Continuation Option), a period commencing on the last day of the immediately preceding Interest Period therefor and ending one, two, three or six months thereafter or, with the prior written consent of all Lenders, nine or twelve months thereafter, as selected by the Borrower in its Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.11 (Conversion/Continuation Option); provided, however, that all of the foregoing provisions relating to Interest Periods in respect of Eurodollar Rate Loans are subject to the following:   (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless the result of such extension would be to extend such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day;   (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month;   (iii) the Borrower may not select any Interest Period in respect of Loans having an aggregate principal amount of less than $5,000,000; and   (iv) there shall be outstanding at any one time no more than ten Interest Periods in the aggregate.   “Interest Rate Contracts” means all interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and interest rate insurance.   “Investment” means, with respect to any Person, (a) any purchase or similar acquisition by such Person of (i) any Security issued by, (ii) a beneficial interest in any Security issued by, or (iii) any other equity ownership interest in, any other Person, (b) any purchase by such Person of all or substantially all of the assets of a business conducted by any other Person, or all or substantially all of the assets constituting what is known to the Borrower to be the business of a division, branch or other unit operation of any other Person, (c) any loan, advance (other than deposits with financial institutions available for withdrawal on demand, prepaid expenses, accounts receivable and similar items made or incurred in the ordinary course of business) or capital contribution by such Person to any other Person, including all Indebtedness of any other Person to such Person arising from a sale of property by such Person other than in the ordinary course of its business, (d) any Guaranty Obligation incurred by such Person in respect of Indebtedness   20 -------------------------------------------------------------------------------- of any other Person and (e) the drawn amounts of Performance Guarantees for the direct or indirect benefit of a Subsidiary or Affiliate or a contract counterparty thereof. For the avoidance of doubt, the term “Investment” shall not include reimbursement or other obligations with respect to unmatured or undrawn, as applicable, Performance Guarantees.   “Inventory” has the meaning specified in the Pledge and Security Agreement.   “IRS” means the Internal Revenue Service of the United States or any successor thereto.   “Issue” means, with respect to any Letter of Credit, to issue, extend the expiry of, renew or increase the maximum stated amount (including by deleting or reducing any scheduled decrease in such maximum stated amount) of, such Letter of Credit. The terms “Issued” and “Issuance” shall have a corresponding meaning.   “Issuer” means each Lender or Affiliate of a Lender that (a) is listed on the signature pages of the Agreement as an “Issuer” or (b) hereafter becomes an Issuer with the approval of the Administrative Agent and the Borrower by agreeing pursuant to an agreement with and in form and substance satisfactory to the Administrative Agent and the Borrower to be bound by the terms hereof applicable to Issuers.   “Landlord Lien Waiver” means a lien waiver signed by a landlord, substantially in the form of Exhibit L, or if requested by the Borrower, such other form that is satisfactory to the Administrative Agent.   “Leases” means, with respect to any Person, all of the leasehold estates in Real Property of such Person, as lessee, as such may be amended, supplemented or otherwise modified from time to time.   “Lender” means each financial institution or other entity that (a) is listed on the signature pages of the Agreement as a “Lender” (including the Fronting Lender and each Swing Loan Lender) or (b) from time to time becomes a party hereto as a Lender by execution of an Assignment and Acceptance.   “Letter of Credit” means each Existing Letter of Credit and any letter of credit issued pursuant to Section 2.4 (Letters of Credit).   “Letter of Credit Participation Fees” means the Revolving Letter of Credit Participation Fee and the Synthetic Letter of Credit Participation Fee.   “Letter of Credit Obligations” means, at any time, without duplication, the aggregate amount of all liabilities at such time of the Borrower to all Issuers with respect to Letters of Credit, whether or not any such liability is contingent, including the sum of (a) the Reimbursement Obligations at such time (or, for any Reimbursement Obligations in any Alternative Currency, the Dollar Equivalent thereof) and (b) the Letter of Credit Undrawn Amounts at such time.   21 -------------------------------------------------------------------------------- “Letter of Credit Reimbursement Agreement” has the meaning specified in Section 2.4(e) (Letters of Credit).   “Letter of Credit Request” has the meaning specified in Section 2.4(c) (Letters of Credit).   “Letter of Credit Undrawn Amounts” means, at any time, the aggregate undrawn face amount of all Letters of Credit outstanding at such time (or, for any Letter of Credit denominated in an Alternative Currency, the Dollar Equivalent thereof).   “Leverage Ratio” means, with respect to any Person as of any day, the ratio of (a) Financial Covenant Debt of such Person and its Subsidiaries determined on a consolidated basis in accordance with GAAP as of such day to (b) EBITDA for such Person for the last four full Fiscal Quarters ending prior to such day.   “Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, lien (statutory or other), security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever intended to assure payment of any Indebtedness or the performance of any other obligation, including any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease and any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any effective financing statement under the UCC or comparable law of any jurisdiction naming the owner of the asset to which such Lien relates as debtor.   “Loan” means any loan made by any Lender pursuant to this Agreement, including, unless the context requires otherwise, any Swing Loan made by the Swing Loan Lender.   “Loan Documents” means, collectively, this Agreement, the Notes (if any), the BWICO Guaranty, each Letter of Credit Reimbursement Agreement, the Collateral Documents, the global intercompany note in the form of Exhibit J and each certificate, agreement or document executed by a Loan Party and delivered to the Administrative Agent or any Lender in connection with or pursuant to any of the foregoing.   “Loan Party” means each of the Borrower and each Guarantor.   “Management Services Agreement” means the Support Services Agreement dated as of January 1, 2000, among MI, the Borrower and certain Affiliates of the Borrower.   “Material Adverse Change” shall mean (a) a material adverse change (other than changes which have occurred pursuant to the Plan of Reorganization and related settlements approved by the U.S. Bankruptcy Court or U.S. District Court in connection with the Restructuring) since December 31, 2004 in any of the condition (financial or otherwise), business, results of operations or properties of the Borrower and the Guarantors taken as a whole, (b) a material adverse change in the perfection or   22 -------------------------------------------------------------------------------- priority of the Liens granted pursuant to the Collateral Documents, (c) the occurrence and continuance of any event or circumstance which could reasonably be expected to have a material adverse effect on the Loan Parties’ ability to perform their respective obligations under the Loan Documents or (d) a material adverse effect on the validity or enforceability against the Loan Parties of the Loan Documents or the rights or remedies of the Administrative Agent, the Lenders, the Synthetic Investors or the Issuers thereunder.   “Material Adverse Effect” means an effect that results in or causes, or would reasonably be expected to result in or cause, a Material Adverse Change.   “Material Intellectual Property” has the meaning specified in the Pledge and Security Agreement.   “Material Subsidiary” means, with respect to any date of determination, a Subsidiary contributing more than (i) 10% of the EBITDA or (ii) 10% of total assets (as determined in accordance with GAAP and based on book value), in each case of the Borrower and its Subsidiaries on a consolidated basis in the Fiscal Year immediately preceding such date.   “MI” shall mean McDermott Incorporated (a Delaware corporation and a wholly owned Subsidiary of MII).   “MII” shall mean McDermott International, Inc. (a Panamanian Corporation).   “MTI Loan and Associated Payments” shall mean an amount or amounts in the aggregate not exceeding $28,100,000, representing monies that are paid or loaned by the Borrower or any Subsidiary of the Borrower to BWICO or any Affiliate of BWICO on the Effective Date as a reimbursement settlement of certain payments made by McDermott Technologies, Inc. to Babcock & Wilcox Canada on December 28, 2005 to extinguish loan and other obligations.   “Moody’s” means Moody’s Investors Services, Inc.   “Mortgaged Properties” mean, initially, each parcel of real property and the improvements thereto owned or leased by a Loan Party and specified on Schedule 4.19(b), and shall include each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 7.12 (Real Property).   “Mortgages” mean the fee or leasehold mortgages or deeds of trust, assignments of leases and rents and other security documents granting a Lien on any Mortgaged Property to secure the Secured Obligations, each in form and substance reasonably satisfactory to the Collateral Agent, as the same may be amended, supplemented, replaced or otherwise modified from time to time in accordance with this Agreement.   23 -------------------------------------------------------------------------------- “Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which the Borrower, any of its Subsidiaries, any Guarantor or any ERISA Affiliate has any obligation or liability, contingent or otherwise.   “Net Cash Proceeds” means proceeds received by any Loan Party (or by any Subsidiary of any Loan Party that is not a Loan Party, (x) to the extent of the Loan Parties’ direct or indirect aggregate interest therein and (y)(1) in the case of a Permitted Joint Venture or a Subsidiary that is not a Wholly-Owned Subsidiary of a Loan Party and (2) if distribution of such proceeds to the Loan Parties is prohibited by Requirements of Law or Contractual Obligations (including Contractual Obligations incorporated within the Constituent Documents of such Subsidiary or Permitted Joint Venture) with any Person other than the Borrower, its Subsidiaries and Permitted Joint Ventures, only to the extent of any distribution of such proceeds actually received by such Loan Party) after the Effective Date in cash or Cash Equivalents from any (a) Asset Sale (other than any Asset Sale permitted under clauses (a), (b), (c), (e), (f), (g), (h) of Section 8.4) permitted hereunder net of (i) the reasonable cash costs of sale, assignment, sale-leaseback or other disposition, (ii) taxes paid or reasonably estimated to be payable as a result thereof (including, for the avoidance of doubt, as a result of any distribution of such proceeds to the Loan Parties) and (iii) for any Asset Sale, any amount required to be paid or prepaid on Indebtedness (other than the Obligations) secured by the assets subject to such Asset Sale, provided, however, that evidence of each of (i), (ii) and (iii) above is provided to the Administrative Agent in form and substance reasonably satisfactory to it, (b) Property Loss Event, net of (i) reasonable costs and expenses associated with settling any claim with respect to such Property Loss Event and (ii) taxes paid or reasonably estimated to be payable as a result thereof, provided, however, that evidence of each of (i) and (ii) above is provided to the Administrative Agent in form and substance reasonably satisfactory to it, or (c) issuance or incurrence of Indebtedness not permitted under this Agreement, net of all taxes paid or reasonably estimated to be payable as a result thereof and reasonable and customary fees, commissions, costs and other expenses incurred by the Borrower and its Subsidiaries in connection therewith.   “Non-Consenting Lender” has the meaning specified in Section 11.1(c) (Amendments, Waivers, Etc.).   “Non-Debtor Affiliate Settlement Agreement” means that certain Non-Debtor Affiliate Settlement Agreement in the form of Exhibit C to the Plan of Reorganization as in effect on the date hereof.   “Non-Funding Lender” has the meaning specified in Section 2.2(c) (Borrowing Procedures).   “Non-Recourse Indebtedness” means Indebtedness of a Permitted Joint Venture or Subsidiary of the Borrower (in each case that is not a Loan Party) (a) that is on terms and conditions reasonably satisfactory to the Administrative Agent, (b) that is not, in whole or in part, Indebtedness of any Loan Party (and for which no Loan Party has created, maintained or assumed any Guaranty Obligation) and for which no holder thereof has or could have upon the occurrence of any contingency, any recourse against   24 -------------------------------------------------------------------------------- any Loan Party or the assets thereof, (c) owing to an unaffiliated third-party (which for the avoidance of doubt does not include the Borrower, any Subsidiary thereof, any other Loan Party, any Permitted Joint Venture (or owner of any interest therein) and any Affiliate of any of them) and (d) the source of repayment for which is expressly limited to the assets or cash flows of such Permitted Joint Venture or Subsidiary.   “Non-U.S. Financial Institution” means each Lender, Synthetic Investor or the Administrative Agent that is not a United States person as defined in Section 7701(a)(30) of the Code.   “Note” means a promissory note of the Borrower payable to any Lender and its registered assigns in a principal amount equal to the amount of such Lender’s Commitment evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from the Revolving Loans (and, if such Lender is also the Swing Loan Lender, Swing Loans), Delayed Draw Loans or Synthetic Loans, as applicable, owing to such Lender.   “Notice of Borrowing” has the meaning specified in Section 2.2(a) (Borrowing Procedures).   “Notice of Conversion or Continuation” has the meaning specified in Section 2.11 (Conversion/Continuation Option).   “Obligations” means the Loans, the Letter of Credit Obligations and all other amounts, obligations, covenants and duties owing by the Borrower and the other Loan Parties to the Agents, any Lender, any Issuer, any Synthetic Investor, any Affiliate of any of them or any Indemnitee, of every type and description (whether by reason of an extension of credit, opening or amendment of a letter of credit or payment of any draft drawn thereunder, loan, guaranty, indemnification, foreign exchange or currency swap transaction, interest rate hedging transaction or otherwise), present or future, arising under (a) this Agreement or any other Loan Document or (b) any Hedging Contract that (i) is in effect on the Effective Date with a counterparty that is the Administrative Agent, a Lender, a Synthetic Investor or any Affiliate of any of the foregoing or (ii) entered into after the Effective Date with a counterparty that was, at the time such Hedging Contract was entered into, the Administrative Agent, a Lender, a Synthetic Investor or any Affiliate of any of the foregoing, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired and whether or not evidenced by any note, guaranty or other instrument or for the payment of money, including all letter of credit and other fees (including, the Commitment Fee and the Fronting Fee), interest (including post-petition interest, whether or not allowed in a bankruptcy proceeding), charges, expenses, attorneys’ fees and disbursements and other sums chargeable to the Borrower under this Agreement or any other Loan Document and all obligations of the Borrower under any Loan Document to provide cash collateral for Letter of Credit Obligations.   25 -------------------------------------------------------------------------------- “Outstandings” means, at any particular time, the sum of the principal amount of the Loans outstanding at such time and the Letter of Credit Obligations outstanding at such time.   “PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.   “Perfection Certificate” shall have the meaning ascribed to it in Section 3.1(h) (Perfection Certificate).   “Performance Guarantee” of any Person means (a) any letter of credit, bankers acceptance, surety bond, performance bond, bank guarantee or other similar obligation issued for the account of such Person to support only trade payables or nonfinancial performance obligations of such Person, (b) any letter of credit, bankers acceptance, surety bond, performance bond, bank guarantee or other similar obligation issued for the account of such Person to support any letter of credit, bankers acceptance, surety bond, performance bond, bank guarantee or other similar obligation issued for the account of a Subsidiary or Permitted Joint Venture of such Person to support only trade payables or non-financial performance obligations of such Subsidiary or Permitted Joint Venture, and (c) any parent company guarantee or other direct or indirect liability, contingent or otherwise, of such Person with respect to trade payables or non-financial performance obligations of a Subsidiary or Permitted Joint Venture of such Person, if the purpose of such Person in incurring such liability is to provide assurance to the obligee that such contractual obligation will be performed, or that any agreement relating thereto will be complied with.   “Permit” means any permit, approval, authorization, license, variance or permission required from a Governmental Authority under an applicable Requirement of Law.   “Permitted Acquisition” means any Proposed Acquisition subject to the satisfaction of each of the following conditions:   (a) if the consideration (excluding performance-based contingent consideration (including, without limitation, earn-out payments and royalty payments)) in respect of any such Proposed Acquisition is in excess of $10,000,000, the Administrative Agent shall receive prior written notice of such Proposed Acquisition, which notice shall include, without limitation, a reasonably detailed description of such Proposed Acquisition;   (b) following such Proposed Acquisition, the Borrower would be in compliance with Section 8.7 (Change in Nature of Business);   (c) if such Proposed Acquisition involves assets primarily located in jurisdictions outside of the United States, the sum of (i) all amounts payable in cash plus (ii) any Indebtedness or other liabilities incurred or assumed by any Loan Party in connection with such Proposed Acquisition, together with all other such Proposed Acquisitions, shall not exceed $10,000,000 (excluding performance-based contingent consideration (including, without limitation, earn-out payments and royalty payments));   26 -------------------------------------------------------------------------------- (d) after giving effect to such Proposed Acquisition, the Available Credit plus any unrestricted cash and Cash Equivalents of the Borrower and its Subsidiaries shall not be less than $50,000,000;   (e) within 30 days (or, in respect of real estate matters, 45 days) after the closing of such Proposed Acquisition, the Borrower (or the Subsidiary making such Proposed Acquisition) and the target of such Proposed Acquisition shall have executed such documents and taken such actions as may be required under Sections Section 7.11 (Additional Collateral and Guaranties) and Section 7.12 (Real Property); and   (f) at the time of such Proposed Acquisition and after giving effect thereto, (i) no Default or Event of Default shall have occurred and be continuing and the Borrower shall have demonstrated compliance with Section 5.1 (Maximum Leverage Ratio) on a pro forma basis as if such maximum Leverage Ratio were 0.25:1.00 more restrictive than as set forth in Section 5.1 and (ii) all representations and warranties contained in Article IV (Representations and Warranties) and in the other Loan Documents shall be true and correct in all material respects.   “Permitted Joint Venture” means any joint venture (which may be in the form of any limited liability company or other Person), including any Domestic Subsidiary of the Borrower that is not a Wholly-Owned Subsidiary thereof, in which the Borrower or any of its Subsidiaries holds Stock or Stock Equivalents or otherwise participates or invests; provided, however, that (a) the investors or participants in such joint venture participate in such joint venture on substantially the same terms as the Borrower or such Subsidiary, (b) the Lenders have a valid, perfected, first priority security interest in the Stock, Stock Equivalents or other interests in such joint venture held by the Borrower or any of its Domestic Subsidiaries except where (i) the governing documents of such joint venture prohibit such a security interest to be granted to the Lenders or (ii) such joint venture has incurred Non-Recourse Indebtedness the terms of which either (x) require security interests in such Stock, Stock Equivalents or other interests to be granted to secure such Non-Recourse Indebtedness or (y) prohibit such a security interest to be granted to the Lenders, and (c) no Loan Party shall, pursuant to such joint venture, be under any Contractual Obligation to make Investments or incur Guaranty Obligations after the later of the Effective Date and the initial formation of such joint venture that would be in violation of any provision of this Agreement.   “Person” means an individual, partnership, corporation (including a business trust), joint stock company, estate, trust, limited liability company, unincorporated association, joint venture or other entity, or a Governmental Authority.   “Plan Effective Date” shall have the meaning ascribed to it in Section 3.1(g) (Plan Effective Date).   27 -------------------------------------------------------------------------------- “Plan of Reorganization” shall have the meaning specified in the recitals to this Agreement.   “Pledge and Security Agreement” means the Pledge and Security Agreement dated as of the date hereof, a copy of which is attached as Exhibit I (Pledge and Security Agreement), executed by the Borrower, each Guarantor and the Administrative Agent.   “Pledged Notes” has the meaning specified in the Pledge and Security Agreement.   “Pledged Stock” has the meaning specified in the Pledge and Security Agreement.   “Prime Rate” means the rate of interest per annum established from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City. Each change in the Prime Rate shall be effective on the date such change is announced as being effective.   “Projections” means those financial projections of the Borrower and its Subsidiaries covering the Fiscal Years ending in 2006 through 2010, inclusive, and for each fiscal quarter of 2006, delivered to the Administrative Agent by the Borrower.   “Property Loss Event” means (a) any loss of or damage to property of the Borrower or any of its Domestic Subsidiaries that results in the receipt by such Person of proceeds of insurance in excess of $5,000,000 individually or $10,000,000 in the aggregate per Fiscal Year for all such losses and damages or (b) any taking of property, or condemnation of property (or deed in lieu thereof), of the Borrower or any of its Domestic Subsidiaries that results in the receipt by such Person of a compensation payment in respect thereof in excess of $5,000,000 individually or $10,000,000 in the aggregate per Fiscal Year for all such takings and condemnations.   “Proposed Acquisition” means the proposed acquisition by the Borrower or any of its Domestic Subsidiaries of all or substantially all of the assets or Stock of any Person or entity (other than a Person or entity who, prior to such Proposed Acquisition, was already a Wholly-Owned Subsidiary of the Borrower and a Domestic Subsidiary), or the merger of any Person or entity (other than a Person or entity who, prior to such Proposed Acquisition, was already a Wholly-Owned Subsidiary of the Borrower and a Domestic Subsidiary) with or into the Borrower or any Domestic Subsidiary of the Borrower (and, in the case of a merger with the Borrower, with the Borrower being the surviving corporation).   “Proposed Change” has the meaning specified in Section 11.1(c) (Amendments, Waivers, Etc.).   “Protective Advances” means all expenses, disbursements and advances incurred by the Administrative Agent pursuant to the Loan Documents after the occurrence and during the continuance of an Event of Default that the Administrative   28 -------------------------------------------------------------------------------- Agent, in its sole discretion, deems necessary or desirable to preserve or protect the Collateral or any portion thereof or to enhance the likelihood, or maximize the amount, of repayment of the Obligations.   “Purchasing Investor” has the meaning specified in Section 11.7 (Sharing of Payments, Etc.).   “Purchasing Lender” has the meaning specified in Section 11.7 (Sharing of Payments, Etc.).   “Ratable Portion” or “ratably” means (i) with respect to any Lender under the Revolving Facility, the percentage obtained by dividing (a) the Revolving Commitment of such Lender by (b) the aggregate Revolving Commitments of all Lenders (or, at any time after the Revolving Facility Termination Date, the percentage obtained by dividing the aggregate outstanding principal amount of Revolving Loans owing to such Lender by the aggregate outstanding principal amount of Revolving Loans owing to all Lenders); (ii) with respect to any Synthetic Investor under the Synthetic Facility, the percentage obtained by dividing the amount of the Credit-Linked Deposit of such Synthetic Investor by the aggregate amount of the Credit-Linked Deposits of all Synthetic Investors.; and (iii) with respect to any Lender under the Delayed Draw Facility, the percentage obtained by dividing (a) the Delayed Draw Commitment of such Lender by (b) the aggregate Delayed Draw Commitments of all Lenders (or, at any time after the Delayed Draw Commitment Termination Date, the percentage obtained by dividing the aggregate principal amount of Delayed Draw Loans owing to such Lender by the aggregate principal amount of Delayed Draw Loans owing to all Lenders).   “Real Property” means all Mortgaged Property and all other real property owned or leased from time to time by any Loan Party or any of its Subsidiaries.   “Recapitalization” shall have the meaning specified in the recitals to this Agreement.   “Register” has the meaning specified in Section 11.2(c) (Assignments and Participations).   “Reimbursement Date” has the meaning specified in Section 2.4(h) (Letters of Credit).   “Reimbursement Obligations” means all matured reimbursement or repayment obligations of the Borrower to any Issuer with respect to amounts drawn under Letters of Credit.   “Reinvestment Deferred Amount” means, with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by any Loan Party in connection therewith that the Borrower (directly or indirectly through one of its Subsidiaries) intends to use to acquire assets useful in its or one of its Subsidiaries’ businesses or, in the case of a Property Loss Event, to effect repairs or replacement, as set forth in the Reinvestment Notice relating to such Reinvestment Event.   29 -------------------------------------------------------------------------------- “Reinvestment Event” means receipt by the Borrower or any of its Subsidiaries of the Net Cash Proceeds from any Asset Sale or Property Loss Event in respect of which the Borrower has delivered a Reinvestment Notice.   “Reinvestment Notice” means a written notice executed by an Authorized Officer of the Borrower stating that no Default or Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through one of its Subsidiaries) intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or Property Loss Event to acquire assets useful in its or one of its Subsidiaries’ businesses or, in the case of a Property Loss Event, to effect repairs or replacement.   “Reinvestment Prepayment Amount” means, with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended or required to be expended pursuant to a Contractual Obligation entered into prior to the relevant Reinvestment Prepayment Date to acquire assets useful in the Borrower’s or a Subsidiary’s business or, in the case of a Property Loss Event, to effect repairs or replacement.   “Reinvestment Prepayment Date” means, with respect to any Reinvestment Event, the earlier of (a) the date occurring 365 days after such Reinvestment Event and (b) the date that is five Business Days after the date on which the Borrower shall have notified the Administrative Agent of the Borrower’s determination not to acquire assets useful in the Borrower’s or a Subsidiary’s business (or, in the case of a Property Loss Event, not to effect repairs or replacement) with all or any portion of the relevant Reinvestment Deferred Amount.   “Release” means, with respect to any Person, any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration, in each case, of any Contaminant into the indoor or outdoor environment or into or out of any property owned by such Person, including the movement of Contaminants through or in the air, soil, surface water, ground water or property and, in each case, in violation of Environmental Law.   “Remedial Action” means all actions required by any applicable Requirement of Law to (a) clean up, remove, treat or in any other way address any Contaminant in the indoor or outdoor environment, (b) prevent the Release or threat of Release or minimize the further Release so that a Contaminant does not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment or (c) perform pre-remedial studies and investigations and post-remedial monitoring and care.   “Requirement of Law” means, with respect to any Person, the common law and all federal, state, local and foreign laws, rules and regulations, orders, judgments, decrees and other determinations of any Governmental Authority or arbitrator, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.   30 -------------------------------------------------------------------------------- “Requisite Lenders” means, at any time, (i) Lenders having Loans, unused Revolving Commitments and Delayed Draw Commitments and (ii) Synthetic Investors having Credit-Linked Deposits, representing at least a majority of the sum of all Loans outstanding, unused Revolving Commitments, Delayed Draw Commitments and Credit-Linked Deposits at such time.   “Responsible Officer” means, with respect to any Person, any of the principal executive officers, managing members or general partners of such Person but, in any event, with respect to financial matters, the chief financial officer, treasurer or controller of such Person.   “Restricted Payment” means (a) any dividend, distribution or any other payment whether direct or indirect, on account of any Stock or Stock Equivalents of the Borrower or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely in Stock or Stock Equivalents (other than Disqualified Stock) or a dividend or distribution payable solely to the Borrower or one or more Subsidiary Guarantors, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Stock or Stock Equivalents of the Borrower or any of its Subsidiaries now or hereafter outstanding other than one payable solely to the Borrower or one or more Subsidiary Guarantors and (c) any payment or prepayment of principal, premium (if any), interest, fees (including fees to obtain any waiver or consent in connection with any Indebtedness) or other charges on, or redemption, purchase, retirement, defeasance, sinking fund or similar payment with respect to, any Subordinated Debt of the Borrower or any other Loan Party, other than any Intercompany Subordinated Debt Payment or any required payment, prepayment, redemption, retirement, purchases or other payments, in each case to the extent permitted to be made by the terms of such Subordinated Debt.   “Restructuring” shall have the meaning specified in the recitals to this Agreement.   “Retained Excess Cash Flow” means the amount of Excess Cash Flow (as calculated for the applicable ECF Period set forth in clause (i) of the definition thereof) minus any amount thereof required to be paid to the Delayed Draw Lenders in accordance with Sections 2.9(c) and 2.9(e).   “Revolving Commitment” means, with respect to each Lender, the commitment of such Lender to make Revolving Loans or to participate in Letters of Credit and Swing Loans under the Revolving Facility in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule I (Revolving Commitments) under the caption “Revolving Commitment,” as amended to reflect each Assignment and Acceptance executed in accordance herewith, and as such amount may be reduced pursuant to this Agreement. “Revolving Commitments” means the aggregate of such commitments for all Lenders.   “Revolving Commitment Fee” shall have the meaning ascribed to it in Section 2.12(a) (Fees).   31 -------------------------------------------------------------------------------- “Revolving Exposure” shall mean, with respect to any Lenders, at any time, the sum of (a) the aggregate principal amount of the outstanding Revolving Loans and participation in Swing Loans held by such Lender at such time plus (b) the Revolving Lender’s Ratable Portion of the Letter of Credit Obligations under the Revolving Facility at such time.   “Revolving Facility” means the Revolving Commitments of Lenders and the provisions herein relating to the Revolving Loans, Swing Loans and Revolving Letters of Credit made by the Lenders with Revolving Commitments (including to reimburse the Issuer for any draw under any Revolving Letter of Credit or to repay any Swing Loan), which shall be in an aggregate principal amount of $200,000,000 on the Effective Date.   “Revolving Facility Termination Date” shall mean the earliest of (a) the fifth anniversary of the Effective Date, (b) the date of termination of all the Revolving Commitments pursuant to Section 2.5 (Reduction and Termination of the Commitments) or Section 9.2 (Remedies) and (c) the date on which all the Obligations become due and payable pursuant to Section 9.2 (Remedies).   “Revolving Lender” means any Lender under the Revolving Facility.   “Revolving Letters of Credit” means and any letter of credit issued under the Revolving Facility pursuant to Section 2.4 (Letters of Credit).   “Revolving Letter of Credit Participation Fee” has the meaning specified in Section 2.12(b)(ii) (Fees).   “Revolving Loan” has the meaning specified in Section 2.1 (The Commitments).   “S&P” means Standard & Poor’s Rating Services.   “SEC” means the U.S. Securities and Exchange Commission.   “Secured Obligations” means, in the case of the Borrower, the Obligations, and, in the case of any other Loan Party, the obligations of such Loan Party under the BWICO Guaranty, the Pledge and Security Agreement and the other Loan Documents to which it is a party.   “Secured Parties” means the Lenders, the Issuers, each Agent, the Synthetic Investors and any other holder of any Obligation.   “Security” means any Stock, Stock Equivalent, voting trust certificate, bond, debenture, promissory note or other evidence of Indebtedness, whether secured, unsecured, convertible or subordinated, or any certificate of interest, share or participation in, or any temporary or interim certificate for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing, but shall not include any evidence of the Obligations.   32 -------------------------------------------------------------------------------- “Selling Investor” has the meaning specified in Section 11.7 (Sharing of Payments, Etc.).   “Selling Lender” has the meaning specified in Section 11.7 (Sharing of Payments, Etc.).   “Solvent” means, with respect to any Person, that the value of the assets of such Person (both at fair value and present fair saleable value) is, on the date of determination, greater than the total amount of liabilities (including contingent and unliquidated liabilities) of such Person as of such date and that, as of such date, such Person is able to pay all liabilities of such Person as such liabilities are expected to mature and does not have unreasonably small capital for its then current business activities. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.   “Special Purpose Vehicle” means any special purpose funding vehicle identified as such in writing by any Lender to the Administrative Agent and controlled by that Lender.   “Standby Letter of Credit” means any Letter of Credit that is not a Documentary Letter of Credit.   “Stock” means shares of capital stock (whether denominated as common stock or preferred stock), partnership or membership interests, equity participations or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or similar business entity, whether voting or non-voting.   “Stock Equivalents” means all securities convertible into or exchangeable for Stock and all warrants, options or other rights to purchase or subscribe for any Stock, whether or not presently convertible, exchangeable or exercisable.   “Sub-Account” has the meaning specified in Section 2.1(c) (The Commitments; Credit-Linked Deposit Account; Delayed Draw Loans).   “Subordinated Debt” means Indebtedness of the Borrower or any of its Subsidiaries that is, by its terms, expressly subordinated to the prior payment of any of the Obligations pursuant to subordination terms and conditions reasonably satisfactory to the Administrative Agent, and, in the case of intercompany loans permitted hereunder, subject to the terms of a Global Intercompany Note substantially in the form of Exhibit J (Global Intercompany Note) hereto. The terms of such Global Intercompany Note and any other Subordinated Debt may permit Intercompany Subordinated Debt Payments.   “Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company or other business entity of which an aggregate of more than 50% of the outstanding Voting Stock is, at the time, directly or indirectly, owned or controlled by such Person or one or more Subsidiaries of such Person.   33 -------------------------------------------------------------------------------- “Subsidiary Guarantor” means each Domestic Subsidiary of the Borrower that becomes party to the Pledge and Security Agreement.   “Swing Loan” has the meaning specified in Section 2.3 (Swing Loans).   “Swing Loan Borrowing” means a borrowing consisting of a Swing Loan.   “Swing Loan Lender” means Credit Suisse or any other Lender that becomes the Administrative Agent or agrees, with the approval of the Administrative Agent and the Borrower, to act as Swing Loan Lender hereunder.   “Swing Loan Request” has the meaning specified in Section 2.3(b) (Swing Loans).   “Syndication Agent” means JPMorgan Chase Bank, N.A.   “Synthetic Commitment” means, with respect to each Synthetic Investor, the commitment of such Synthetic Investor to make deposits in the Credit-Linked Deposit Account in an aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule I (Commitments) under the caption “Synthetic Commitment,” as amended to reflect each Assignment and Acceptance executed in accordance herewith, and as such amount may be reduced pursuant to this Agreement. “Synthetic Commitments” means the aggregate of such commitments for all Lenders.   “Syndication Completion Date” means the date that is 60 days after the Effective Date.   “Synthetic Deposit Amount” shall mean, with respect to each Synthetic Investor, the initial amount of such Synthetic Investor’s Credit-Linked Deposit as shown on the Register (which Register shall be made available to the Borrower on the Effective Date) or in the Assignment and Acceptance pursuant to which such Synthetic Investor assumed its Synthetic Deposit Amount and Credit-Linked Deposit, as the same may be (a) reduced from time to time pursuant to Section 2.5 (Reduction and Termination of the Commitments) and (b) with respect to any individual Synthetic Investor, reduced or increased from time to time pursuant to assignments by or to such Synthetic Investor pursuant to Section 11.2 (Assignments and Participations). As of the Effective Date, the aggregate Synthetic Deposit Amount is $200,000,000.   “Synthetic Facility” means the Synthetic Commitments of all Synthetic Lenders and the provisions herein relating to the Synthetic Loans, Credit-Linked Deposits and Letters of Credit issued under the Synthetic Facility made by each Synthetic Lender which shall be in an aggregate principal amount of $200,000,000 on the Effective Date.   “Synthetic Facility Termination Date” means the earliest of (a) the sixth anniversary of the Effective Date, (b) the date of termination of all the Synthetic Commitments pursuant to Section 2.5 (Reduction and Termination of the Commitments) or Section 9.2 (Remedies) and (c) the date on which all the Obligations become fully due and payable pursuant to Section 9.2 (Remedies).   34 -------------------------------------------------------------------------------- “Synthetic Fee” means the Synthetic Fee specified in Section 2.12(c) (Fees).   “Synthetic Fronted Exposure” means, at any time of determination an amount equal to (a) the aggregate principal amount of the outstanding Synthetic Loans held by the Fronting Lender at such time plus (b) the Letter of Credit Obligations at such time with respect to Synthetic Letters of Credit.   “Synthetic Investor” means each financial institution or other entity that has a Synthetic Deposit Amount.   “Synthetic Lender” means (i) the Fronting Lender and (ii) Synthetic Investors pursuant to the provisions of Section 2.1(c)(ii).   “Synthetic Letters of Credit” means any letter of credit issued under the Synthetic Facility pursuant to Section 2.4 (Letters of Credit).   “Synthetic Letter of Credit Participation Fee” has the meaning specified in Section 2.12(c)(ii) (Fees).   “Synthetic Loan” means a Loan made pursuant to Section 2.1(c)(ii) or Section 2.4(h).   “Tax Affiliate” means, with respect to any Person, (a) any Subsidiary of such Person, and (b) any Affiliate of such Person with which such Person files or is eligible to file U.S. federal income tax returns.   “Tax Return” has the meaning specified in Section 4.8 (Taxes).   “Taxes” has the meaning specified in Section 2.16(a) (Taxes).   “Title Insurance Company” shall have the meaning set forth in Section 3.1(p)(Title Insurance).   “Title IV Plan” means a pension plan, other than a Multiemployer Plan, covered by Title IV of ERISA and to which the Borrower, any of its Subsidiaries, any Guarantor or any ERISA Affiliate has any obligation or liability (contingent or otherwise).   “Treasury Regulations” means the final and temporary (but not proposed) income tax regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).   “U.S. Bankruptcy Code” means Chapter 11 of Title 11 of the United States Code.   “U.S. Bankruptcy Court” means the United States Bankruptcy Court for the Eastern District of Louisiana.   35 -------------------------------------------------------------------------------- “U.S. District Court” means the United States District Court for the Eastern District of Louisiana.   “UCC” has the meaning specified in the Pledge and Security Agreement.   “USA Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended.   “Voting Stock” means Stock of any Person having ordinary power to vote in the election of members of the board of directors, managers, trustees or similar controlling Persons, of such Person (irrespective of whether, at the time, Stock of any other class or classes of such entity shall have or might have voting power by reason of the happening of any contingency).   “Wholly-Owned Domestic Subsidiary” means a Domestic Subsidiary which is a Wholly-Owned Subsidiary.   “Wholly-Owned Subsidiary” means, in respect of any Person, any Subsidiary of such Person, all of the Stock of which (other than director’s qualifying shares, and the like, as may be required by applicable law) is owned by such Person, either directly or indirectly through one or more Wholly-Owned Subsidiaries thereof.   “Withdrawal Liability” means, with respect to the Borrower, any of its Subsidiaries or any Guarantor at any time, the aggregate liability incurred (whether or not assessed) with respect to all Multiemployer Plans pursuant to Section 4201 of ERISA.   Section 1.2 Computation of Time Periods   In this Agreement, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding” and the word “through” means “to and including.”   Section 1.3 Accounting Terms and Principles   (a) Except as set forth below, all accounting terms not specifically defined herein shall be construed in conformity with GAAP and all accounting determinations required to be made pursuant hereto shall, unless expressly otherwise provided herein, be made in conformity with GAAP.   (b) If any change in the accounting principles used in the preparation of the most recent Financial Statements referred to in Section 6.1 (Financial Statements) is hereafter required or permitted by the rules, regulations, pronouncements and opinions of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or any successors thereto) and such change is adopted by the Borrower without objection from the Borrower’s Accountants and results in a change in any of the calculations required by Article V (Financial Covenants) or VIII (Negative   36 -------------------------------------------------------------------------------- Covenants) had such accounting change not occurred, the parties hereto agree to enter into good faith negotiations in order to amend such provisions so as to equitably reflect such change with the desired result that the criteria for evaluating compliance with such covenants by the Borrower shall be the same after such change as if such change had not been made; provided, however, that no change in GAAP that would affect a calculation that measures compliance with any covenant contained in Article V (Financial Covenants) or VIII (Negative Covenants) shall be given effect until such provisions are amended to reflect such changes in GAAP.   Section 1.4 Certain Terms   (a) The words “herein,” “hereof” and “hereunder” and similar words refer to this Agreement as a whole, and not to any particular Article, Section, subsection or clause in this Agreement.   (b) Unless otherwise expressly indicated herein, (i) references in this Agreement to an Exhibit, Schedule, Article, Section, clause or sub-clause refer to the appropriate Exhibit or Schedule to, or Article, Section, clause or sub-clause in this Agreement and (ii) the words “above” and “below”, when following a reference to a clause or a sub-clause of any Loan Document, refer to a clause or sub-clause within, respectively, the same Section or clause.   (c) Each agreement defined in this Article I shall include all appendices, exhibits and schedules thereto. Unless the prior written consent of the Requisite Lenders is required hereunder for an amendment, restatement, supplement or other modification to any such agreement and such consent is not obtained, references in this Agreement to such agreement shall be to such agreement as so amended, restated, supplemented or modified.   (d) References in this Agreement to any statute shall be to such statute as amended or modified, together with any successor legislation, in each case in effect at the time any such reference is operative.   (e) The term “including” when used in any Loan Document means “including without limitation” except when used in the computation of time periods. The phrase “in the aggregate”, when used in any Loan Document, means “individually or in the aggregate,” unless otherwise expressly noted.   (f) The terms “Lender,” “Issuer,” “Synthetic Investor,” “Fronting Lender” and “Administrative Agent” include, without limitation, their respective successors.   (g) Upon the appointment of any successor Administrative Agent pursuant to Section 10.6 (Successor Administrative Agent), references to Credit Suisse in Section 10.3 (The Agents and the Fronting Lender Individually) and in the definitions of Base Rate, Dollar Equivalent and Eurodollar Rate shall be deemed to refer to the financial institution then acting as the Administrative Agent or one of its Affiliates if it so designates.   37 -------------------------------------------------------------------------------- ARTICLE II   THE FACILITIES   Section 2.1 The Commitments; Credit-Linked Deposit Account; Delayed Draw Loans   (a) Revolving Loans. On the terms and subject to the conditions contained in this Agreement, each Lender under the Revolving Facility severally agrees to make loans (each a “Revolving Loan”) to the Borrower from time to time on any Business Day during the period from the Effective Date until the Revolving Facility Termination Date in Dollars in an aggregate principal amount at any time outstanding that will not result in such Lender’s Revolving Exposure exceeding such Lender’s Revolving Commitment; provided, however, that at no time shall any Lender be obligated to make a Revolving Loan in excess of such Lender’s Revolving Commitment. Within the limits of each Lender’s Revolving Commitment, amounts of Revolving Loans repaid may be reborrowed under this Section 2.1. The entire amount of the Revolving Facility will be available in the form of letters of credit issued pursuant to Section 2.4 (“Revolving Letters of Credit”).   (b) Delayed Draw Loans. During the Delayed Draw Commitment Period, subject to the terms and conditions hereof, each Lender severally agrees to make Delayed Draw Loans to Borrower in an aggregate amount up to but not exceeding such Lender’s Delayed Draw Commitment; provided the Borrower may make only one request pursuant to Section 2.2(a) for Delayed Draw Loans (which request shall be in an aggregate amount of not less than the amount necessary to retire and cancel the Asbestos PI Trust Note). Any amount borrowed under this Section 2.1(b) and subsequently repaid or prepaid may not be reborrowed. Subject to Section 2.6(b), all amounts owed hereunder with respect to the Delayed Draw Loans shall be paid in full no later than the Delayed Draw Loan Maturity Date. Each Lender’s Delayed Draw Commitment shall expire on the earlier to occur of (x) Delayed Draw Commitment Termination Date and (y) the date any Delayed Draw Loans are issued pursuant to this Section 2.1(b).   (c) (i) Credit-Linked Deposit Account and Sub-Accounts. On or prior to the Effective Date, the Administrative Agent shall establish the Credit-Linked Deposit Account. The Administrative Agent shall maintain records enabling it to determine at any time the amount of the interest of each Synthetic Investor in the Credit-Linked Deposit Account (the interest of each Synthetic Investor in the Credit-Linked Deposit Account, as evidenced by such records, being referred to herein as such Synthetic Investor’s “Sub-Account”). Each Synthetic Investor irrevocably and unconditionally agrees that its Credit-Linked Deposit shall be available to reimburse the Fronting Lender as provided herein. Each Synthetic Investor further agrees that its right, title and interest in and to the Credit-Linked Deposit Account shall be limited to the right to require amounts in its Sub-Account to be applied as provided herein and that it will have no right to require the return of its Credit-Linked Deposit other than as expressly provided herein. In addition, each Synthetic Investor hereby acknowledges that (i) the Administrative Agent shall have sole dominion and control over the Credit-Linked Deposit Account and no other Person shall have the right to make any withdrawal from the Credit-Linked   38 -------------------------------------------------------------------------------- Deposit Account or to exercise any other right or power with respect thereto, (ii) its Credit-Linked Deposit constitutes payment for its participations in Synthetic Loans made (or deemed made) or to be made (or deemed made) and Synthetic Letters of Credit issued or to be issued hereunder, (iii) its Credit-Linked Deposit and any investments made therewith shall secure its obligations to the Fronting Lender hereunder (each Synthetic Investor hereby granting to the Administrative Agent, for the benefit of the Fronting Lender, a security interest in its Credit-Linked Deposit and agreeing that the Administrative Agent, as holder of the Credit-Linked Deposits, Sub-Accounts and any investments made therewith, will be acting, inter alia, as collateral agent for the Fronting Lender and may set off against its Credit-Linked Deposit amounts owed by such Synthetic Investor to the Fronting Lender), (iv) the Fronting Lender is agreeing to make Synthetic Loans and to acquire participations in Synthetic Letters of Credit in reliance on the availability of such Synthetic Investor’s Credit-Linked Deposit to discharge such Synthetic Investor’s obligations herein and (v) the failure of any Synthetic Investor to make available to the Fronting Lender its Credit-Linked Deposit shall not relieve any other Synthetic Investor of its obligation hereunder to make available to the Fronting Agent its Credit-Linked Deposit, but no Synthetic Investor shall be responsible for the failure of any other Synthetic Investor to make available to the Fronting Lender such other Synthetic Investor’s Credit-Linked Deposit.   (ii) Synthetic Loans. Either (x) upon the occurrence and during the continuance of an Event of Default or (y) pursuant to the reimbursement provisions of Section 2.4(h), the Fronting Lender shall have the absolute right to be reimbursed from the Credit-Linked Deposit Account in an amount equal to the then-outstanding Synthetic Loans of the Fronting Lender made pursuant to Section 2.4(h) (Letters of Credit). Each Synthetic Investor hereby authorizes the withdrawal, and the Administrative Agent hereby agrees to withdraw, from the Credit-Linked Deposit Account (and to debit such Synthetic Investor’s Sub-Account in the amount of) each such Synthetic Investor’s Ratable Portion of such outstanding Synthetic Loans for payment to the Fronting Lender. Subject to the redeposit provisions set forth below, following such withdrawal and reimbursement, each Synthetic Investor will become a Synthetic Lender (without a commitment) to the extent of such withdrawal (and such withdrawal and payment shall not alter the obligation of the Borrower to repay all or any portion of such Synthetic Loans together with interest thereon, all as provided herein). So long as the Commitments shall not have terminated, promptly following receipt by the Administrative Agent of any payment from a Loan Party in respect of such Synthetic Loans and participations after such withdrawals and reimbursement, the Administrative Agent shall redeposit such amount into the Credit-Linked Deposit Account (and credit each Synthetic Investor’s Sub-Account for such Synthetic Investor’s Ratable Portion of such redeposited amount).   (d) Deposits to Credit-Linked Deposit Account. The following amounts will be deposited in the Credit-Linked Deposit Account at the following times (and each Synthetic Investor hereby authorizes and directs the Fronting Lender and the Administrative Agent to effect the same):   39 -------------------------------------------------------------------------------- (i) On the Effective Date, each Synthetic Investor shall deposit in the Credit-Linked Deposit Account an amount in Dollars equal to such Synthetic Investor’s Synthetic Deposit Amount. The obligations of the Synthetic Investors to make the deposits required by this clause (i) are several and not joint, and no Synthetic Investor shall be responsible for any other Synthetic Investor’s failure to make its deposit as so required.   (ii) On any date prior to the Synthetic Facility Termination Date on which the Administrative Agent receives any payment from a Loan Party in respect of Synthetic Loans with respect to which amounts were withdrawn from the Credit-Linked Deposit Account, the Administrative Agent shall deposit in the Credit-Linked Deposit Account, and credit to the Sub-Accounts of the Synthetic Investors, the portion of such payment to be deposited therein, in accordance with clause (c)(ii) of this Section 2.1; provided that, to the extent the aggregate Credit-Linked Deposits would exceed the aggregate Synthetic Deposit Amounts after giving effect to the redeposit of such amounts, such excess shall not be deposited in the Credit-Linked Deposit Account and the Administrative Agent shall instead pay to each Synthetic Investor its Ratable Portion of such excess.   (iii) On any date prior to the Synthetic Facility Termination Date on which the Fronting Lender or any Issuer receives any reimbursement payment from a Loan Party in respect of a Reimbursement Obligation with respect to which amounts were withdrawn from the Credit-Linked Deposit Account to reimburse the Fronting Lender, the Fronting Lender or such Issuer shall forward such reimbursement payment to the Administrative Agent and the Administrative Agent shall deposit in the Credit-Linked Deposit Account, and credit to the Sub-Accounts of the Synthetic Investors, the portion of such reimbursement payment to be deposited therein, in accordance with Section 2.4(h) (Letters of Credit); provided that, to the extent the aggregate Credit-Linked Deposits would exceed the aggregate Synthetic Deposit Amounts after giving effect to the redeposit of such amounts, such excess shall not be deposited in the Credit-Linked Deposit Account and the Administrative Agent shall instead pay to each Synthetic Investor its Ratable Portion of such excess.   (iv) Concurrently with the effectiveness of any assignment by any Synthetic Investor of all or any portion of its Synthetic Deposit Amount and Credit-Linked Deposit, the Administrative Agent shall transfer into the Sub-Account of the assignee the corresponding portion of the amount on deposit in the assignor’s Sub-Account in accordance with Section 11.2 (Assignments and Participations).   (e) Withdrawals from Credit-Linked Deposit Account. Amounts on deposit in the Credit-Linked Deposit Account shall be withdrawn and distributed as follows:   40 -------------------------------------------------------------------------------- (i) On each date on which the Fronting Lender is to be reimbursed by the Synthetic Investors pursuant to clause (c)(ii) of this Section 2.1 for any Synthetic Loan or Section 2.4(h), the Administrative Agent shall withdraw from the Credit-Linked Deposit Account the amount of such Synthetic Loan or participation, as the case may be (and debit the Sub-Account of each Synthetic Investor in the amount of its Ratable Portion of such Synthetic Loan or participation, as the case may be), as reimbursement to the Fronting Lender for such Synthetic Loan or participation, as the case may be. In the event that the total Syndicated Fronted Exposure exceeds the Syndicated Deposit Amount then in effect, the Borrower shall, without notice or demand, immediately terminate and return outstanding Syndicated Letters of Credit or cash collateralize outstanding Syndicated Letters of Credit in an aggregate amount sufficient to eliminate such excess.   (ii) Promptly following each reduction of the Synthetic Deposit Amount pursuant to and in accordance with Section 2.5 (Reduction and Termination of the Commitments), the Administrative Agent shall withdraw from the Credit-Linked Deposit Account and distribute to each Synthetic Investor its Ratable Portion of the amount by which the aggregate amount of Credit-Linked Deposits exceeds the Synthetic Deposit Amount after giving effect to such reduction.   (iii) Promptly following any termination of the Commitments under the Synthetic Facility pursuant to and in accordance with Section 2.5 (Reduction and Termination of the Commitments) or Article IX, the Administrative Agent shall withdraw from the Credit-Linked Deposit Account and distribute to each Synthetic Investor its Ratable Portion of the amount by which the aggregate amount of Credit-Linked Deposits exceeds the Synthetic Fronted Exposure at such time.   (iv) Promptly following (A) the termination of the Commitments under the Synthetic Facility and (B) the reduction to zero of all Synthetic Fronted Exposure, the Administrative Agent shall withdraw from the Credit-Linked Deposit Account and distribute to each Synthetic Investor the entire remaining amount of its Credit-Linked Deposit, and shall close the Credit-Linked Deposit Account.   Each Synthetic Investor irrevocably and unconditionally agrees that its Credit-Linked Deposit may be applied or withdrawn from time to time as set forth in this paragraph (e).   (f) Investment of Credit-Linked Deposits. The Credit-Linked Deposit of each Synthetic Investor will earn for the account of such Synthetic Investor a return on the average daily amount of such Credit-Linked Deposit (the “Credit-Linked Deposit Return”) at a rate per annum equal to (i) in respect of the period commencing on the Effective Date and ending on March 31, 2006 (the “Initial Period”), 4.47% and (ii) in respect of each successive calendar quarter, (A) the three-month Eurodollar Rate (as   41 -------------------------------------------------------------------------------- determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the beginning of such calendar quarter) minus (B) 0.10% per annum, in each case calculated on the basis of the actual number of days elapsed over a year of 360 days. The Credit-Linked Deposit Return accrued through but excluding the last day of each period described in clause (i) or (ii) above shall, subject to Section 2.14(e), be payable by the Administrative Agent to each Synthetic Investor no later than the third Business Day following the last day of such period, and on the Synthetic Facility Termination Date. No Loan Party shall have any obligation under or in respect of the provisions of this clause (f) except as set forth in Section 2.14(e).   (g) Sufficiency of Credit-Linked Deposits. Notwithstanding any other provision of this Agreement, no Synthetic Loan shall be made, and no Synthetic Letter of Credit shall be Issued under the Synthetic Facility, if after giving effect thereto the aggregate amount of the Credit-Linked Deposits would be less than the Synthetic Fronted Exposure after giving effect thereto. The Fronting Lender agrees to provide, at the request of the Borrower or any Issuer, information to the Borrower or such Issuer as to the then-outstanding Synthetic Fronted Exposure and the aggregate amount of the Credit-Linked Deposits.   Section 2.2 Borrowing Procedures   (a) Each Borrowing shall be made on notice given by the Borrower to the Administrative Agent not later than 1:00 p.m. (New York time) (i) one Business Day, in the case of a Borrowing of Base Rate Loans and (ii) three Business Days, in the case of a Borrowing of Eurodollar Rate Loans, prior to the date of the proposed Borrowing. Each such notice shall be in substantially the form of Exhibit C (Form of Notice of Borrowing) (a “Notice of Borrowing”), specifying (A) the date of such proposed Borrowing, (B) the aggregate amount of such proposed Borrowing, (C) whether any portion of the proposed Borrowing will be of Base Rate Loans or Eurodollar Rate Loans, (D) the initial Interest Period or Periods for any such Eurodollar Rate Loans, (E) the Available Credit (after giving effect to the proposed Borrowing), (F) whether such Borrowing is of a Revolving Loan or a Delayed Draw Loan and (G) remittance instructions. The Loans shall be made as Base Rate Loans unless, subject to Section 2.14 (Special Provisions Governing Eurodollar Rate Loans), the Notice of Borrowing specifies that all or a portion thereof shall be Eurodollar Rate Loans. Each Borrowing of Revolving Loans shall be in an aggregate amount that is an integral multiple of $1,000,000 (or $500,000 with respect to Swing Loans) and shall be allocated pro rata in accordance with each Lender’s Revolving Commitment. The Borrower may make only one request for a Borrowing of Delayed Draw Loans in an aggregate amount of not less than the amount necessary to retire and cancel the Asbestos PI Trust Note and such amount shall be allocated pro rata as among the Delayed Draw Lenders in accordance with each Delayed Draw Lender’s Delayed Draw Commitment.   (b) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any proposed Borrowing that such Lender shall not make available to the Administrative Agent such Lender’s Ratable Portion of such Borrowing (or any portion thereof), the Administrative Agent may assume that such Lender has   42 -------------------------------------------------------------------------------- made such Ratable Portion available to the Administrative Agent on the date of such Borrowing in accordance with this Section 2.2 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such Ratable Portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate for the first Business Day and thereafter at the interest rate applicable at the time to the Loans comprising such Borrowing. If such Lender shall repay to the Administrative Agent such corresponding amount, such corresponding amount so repaid shall constitute such Lender’s Loan as part of such Borrowing for purposes of this Agreement. If the Borrower shall repay to the Administrative Agent such corresponding amount, such payment shall not relieve such Lender of any obligation it may have hereunder to the Borrower.   (c) The failure of any Lender to make the Loan or any payment required by it on the date specified (a “Non-Funding Lender”), including any payment in respect of its participation in Swing Loans and Letter of Credit Obligations, shall not relieve any other Lender of its obligations to make such Loan or payment on such date but no such other Lender shall be responsible for the failure of any Non-Funding Lender to make a Loan or payment required under this Agreement.   Section 2.3 Swing Loans   (a) On the terms and subject to the conditions contained in this Agreement, the Swing Loan Lender may, in its sole discretion, make loans (each a “Swing Loan”) otherwise available to the Borrower as part of the Revolving Facility from time to time on any Business Day during the period from the Effective Date until the Revolving Facility Termination Date in an aggregate principal amount outstanding at any time not to exceed $15,000,000; provided, however, that, in no event, shall any Swing Loan be made in excess of the Available Credit with respect to the Revolving Facility. Each Swing Loan shall be a Base Rate Loan and shall in any event mature no later than the Revolving Facility Termination Date. Within the limits set forth in the first sentence of this clause (a), amounts of Swing Loans repaid may be reborrowed under this clause (a).   (b) In order to request a Swing Loan, the Borrower shall telecopy (or, if consented to by the Swing Loan Lender and the Administrative Agent, forward by electronic mail or similar means) to the Swing Loan Lender (with a copy to the Administrative Agent) a duly completed request in substantially the form of Exhibit D (Form of Swing Loan Request) (or shall make such request by telephone and promptly thereafter forward a written confirmation containing the same information), setting forth the requested amount and date of the Swing Loan (a “Swing Loan Request”), to be received by the Swing Loan Lender not later than 3:00 p.m. (New York City time) on the   43 -------------------------------------------------------------------------------- day of the proposed borrowing. Subject to the terms of this Agreement, the Swing Loan Lender shall make a Swing Loan available to the Borrower on the date of the relevant Swing Loan Request. The Swing Loan Lender shall not make any Swing Loan in the period commencing on the first Business Day after it receives written notice from the Administrative Agent or any Lender that one or more of the conditions precedent contained in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) shall not on such date be satisfied, and ending when such conditions are satisfied. The Swing Loan Lender shall not otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) have been satisfied in connection with the making of any Swing Loan.   (c) The Swing Loan Lender shall notify the Administrative Agent in writing (which writing may be a telecopy or, if agreed to by the Administrative Agent, electronic mail) weekly, by no later than 11:00 a.m. (New York time) on the first Business Day of each week, of the aggregate principal amount of its Swing Loans then outstanding.   (d) The Swing Loan Lender may demand at any time that each Revolving Lender pay to the Administrative Agent, for the account of the Swing Loan Lender, in the manner provided in clause (e) below, such Revolving Lender’s Ratable Portion of all or a portion of the outstanding Swing Loans, which demand shall be made through the Administrative Agent, shall be in writing and shall specify the outstanding principal amount of Swing Loans demanded to be paid.   (e) The Administrative Agent shall forward each notice referred to in clause (c) above and each demand referred to in clause (d) above to each Revolving Lender on the day such notice or such demand is received by the Administrative Agent (except that any such notice or demand received by the Administrative Agent after 4:00 p.m. (New York time) on any Business Day or any such demand received on a day that is not a Business Day shall not be required to be forwarded to the Revolving Lenders by the Administrative Agent until the next succeeding Business Day), together with a statement prepared by the Administrative Agent specifying the amount of each Revolving Lender’s Ratable Portion of the aggregate principal amount of the Swing Loans stated to be outstanding in such notice or demanded to be paid pursuant to such demand, and, notwithstanding whether or not the conditions precedent set forth in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) shall have been satisfied (which conditions precedent the Lenders hereby irrevocably waive), each Revolving Lender shall, before 11:00 a.m. (New York time) on the Business Day next succeeding the date of such Revolving Lender’s receipt of such written statement, make available to the Administrative Agent, in immediately available funds, for the account of the Swing Loan Lender, the amount specified in such statement. Upon such payment by a Revolving Lender, such Revolving Lender shall, except as provided in clause (f) below, be deemed to have made a Revolving Loan to the Borrower. The Administrative Agent shall use such funds to repay the Swing Loans to the Swing Loan Lender. To the extent that any Revolving Lender fails to make all or part of such payment available to the Administrative Agent for the account of the Swing Loan Lender, the Borrower shall repay such Swing Loan on demand.   44 -------------------------------------------------------------------------------- (f) Upon the occurrence of a Default under Section 9.1(f) (Events of Default), each Revolving Lender shall acquire, without recourse or warranty, an undivided participation in each Swing Loan otherwise required to be paid by such Revolving Lender pursuant to clause (e) above, which participation shall be in a principal amount equal to such Revolving Lender’s Ratable Portion of such Swing Loan, by paying to the Swing Loan Lender on the date on which such Revolving Lender would otherwise have been required to make a payment in respect of such Swing Loan pursuant to clause (e) above, in immediately available funds, an amount equal to such Revolving Lender’s Ratable Portion of such Swing Loan. If all or part of such amount is not in fact made available by such Revolving Lender to the Swing Loan Lender on such date, the Swing Loan Lender shall be entitled to recover any such unpaid amount on demand from such Revolving Lender together with interest accrued from such date at the Federal Funds Rate for the first Business Day after such payment was due and thereafter at the rate of interest then applicable to Base Rate Loans for Revolving Loans.   (g) From and after the date on which any Revolving Lender (i) is deemed to have made a Revolving Loan pursuant to clause (e) above with respect to any Swing Loan or (ii) purchases an undivided participation interest in a Swing Loan pursuant to clause (f) above, the Swing Loan Lender shall promptly distribute to such Revolving Lender such Revolving Lender’s Ratable Portion of all payments of principal of and interest received by the Swing Loan Lender on account of such Swing Loan other than those received from a Lender pursuant to clause (e) or (f) above.   Section 2.4 Letters of Credit   (a) On the terms and subject to the conditions contained in this Agreement, each Issuer agrees to Issue one or more Letters of Credit at the request of, and for the account of, the Borrower to support obligations of the Borrower, any of its Subsidiaries or any Permitted Joint Ventures from time to time on any Business Day during the period commencing on the Effective Date and ending on (i) in the case of a Revolving Letter of Credit, the earlier of the Revolving Facility Termination Date and January 22, 2011 and (ii) in the case of a Synthetic Letter of Credit, the earlier of the Synthetic Facility Termination Date and January 22, 2012; provided, however, that no Issuer shall Issue any Letter of Credit upon the occurrence of any of the following:   (i) any order, judgment or decree of any Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain such Issuer from Issuing such Letter of Credit or any Requirement of Law applicable to such Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuer shall prohibit, or request that such Issuer refrain from, the Issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuer with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Issuer is not otherwise compensated) not in effect on the date of this Agreement or result in any unreimbursed loss, cost or expense that was not applicable, in effect or known to such Issuer as of the date of this Agreement and that such Issuer in good faith deems material to it;   45 -------------------------------------------------------------------------------- (ii) such Issuer shall have received written notice from the Administrative Agent, any Lender or the Borrower, on or prior to the requested date of Issuance of such Letter of Credit, that one or more of the applicable conditions contained in Section 3.1 (Conditions Precedent to Effectiveness) (with respect to an issuance on the Effective Date) or 3.2 (Conditions Precedent to Each Loan and Letter of Credit) is not then satisfied or duly waived in accordance with Section 11.1 (Amendments, Waivers, Etc.);   (iii) after giving effect to the Issuance of such Letter of Credit, the aggregate Outstandings in respect of the relevant Facility would exceed the aggregate Commitments in respect of the relevant Facility in effect at such time;   (iv) any fees due in connection with a requested Issuance have not been paid;   (v) such Letter of Credit is requested to be issued in a form that is not acceptable to such Issuer, in its sole discretion exercised in a commercially reasonable manner; or   (vi) with respect to any requested Letter of Credit denominated in an Alternative Currency, the Administrative Agent and the Issuer have each approved such Issuance and the Issuer receives notice from the Administrative Agent at or before 11:00 a.m. (New York time) on the date of the proposed Issuance of such Letter of Credit that, immediately after giving effect to the Issuance of such Letter of Credit, the sum of the Dollar Equivalent of the Letter of Credit Obligations at such time in respect of each Letter of Credit denominated in an Alternative Currency would exceed $75,000,000 on the date of such proposed Issuance.   None of the Lenders (other than the Issuers in their capacity as such) shall have any obligation to Issue any Letter of Credit. The Borrower and the Issuers acknowledge the issuance of the Existing Letters of Credit prior to the Effective Date in accordance with the terms of the Existing Credit Agreement and agree that such Existing Letters of Credit are hereby deemed to be issued hereunder on the Effective Date and shall be Synthetic Letters of Credit to the extent of the Synthetic Commitment, with any remaining amount being Revolving Letters of Credit.   (b) In no event shall the expiration date of any Letter of Credit be later than one year from the date of issuance thereof; provided, however, that any Letter of Credit with a fixed term may provide for the renewal thereof for additional periods equal to such term; provided, further, however, that if any such renewal would result in the expiration date of a Letter of Credit to occur later than five Business Days prior to (i) in the case of a Revolving Letter of Credit, the Revolving Facility Termination Date and (ii) in the case of a Synthetic Letter of Credit, the Synthetic Facility Termination Date, then at the time of such renewal the Borrower shall provide cash collateral to the Administrative Agent in an amount equal to 105% of the face amount of such Letter of Credit.   46 -------------------------------------------------------------------------------- (c) In connection with the Issuance of each Letter of Credit, the Borrower shall give the relevant Issuer and the Administrative Agent at least two Business Days’ (unless the relevant Issuer otherwise agrees) prior written notice, in substantially the form of Exhibit E (Form of Letter of Credit Request) (or in such other written or electronic form as is acceptable to the Issuer), of the requested Issuance of such Letter of Credit (a “Letter of Credit Request”). Such notice shall be irrevocable on and after the Issuance of such Letter of Credit (and, prior to such Issuance, may be revoked only with the consent of the Issuer) and shall specify the Issuer of such Letter of Credit, the stated amount of the Letter of Credit requested, the date of Issuance of such requested Letter of Credit, the date on which such Letter of Credit is to expire (which date shall be a Business Day), whether such Letter of Credit is a Revolving Letter of Credit or Synthetic Letter of Credit, and the Person for whose benefit the requested Letter of Credit is to be issued. Such notice, to be effective, must be received by the relevant Issuer and the Administrative Agent not later than 1:00 p.m. (New York time) on the second Business Day prior to the requested Issuance of such Letter of Credit. Notwithstanding the foregoing, the Borrower may deem a Revolving Letter of Credit to be a Synthetic Letter of Credit or a Synthetic Letter of Credit to be a Revolving Letter of Credit; provided, that (i) the Borrower provide the relevant Issuer and the Administrative Agent at least one Business Day’s prior written notice of such change and (ii) there is capacity to issue such Letter of Credit under the Revolving Facility or Synthetic Facility, as applicable.   (d) Subject to the satisfaction of the conditions set forth in this Section 2.4, the relevant Issuer shall, on the requested date, Issue a Letter of Credit on behalf of the Borrower in accordance with such Issuer’s usual and customary business practices. No Issuer shall Issue any Letter of Credit in the period commencing on the first Business Day after it receives written notice from the Administrative Agent or any Lender that one or more of the conditions precedent contained in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) shall not on such date be satisfied, and ending when such conditions are satisfied. The relevant Issuer shall not otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) have been satisfied in connection with the Issuance of any Letter of Credit.   (e) If requested by the relevant Issuer, prior to the issuance of each Letter of Credit by such Issuer, and as a condition of such Issuance and of the participation of each Synthetic Investor or Revolving Lender, as applicable, in the Letter of Credit Obligations arising with respect thereto, the Borrower shall have delivered to such Issuer a letter of credit reimbursement agreement, in such form as the Issuer may employ in its ordinary course of business for its own account (a “Letter of Credit Reimbursement Agreement”), signed by the Borrower, and such other documents or items as may be required pursuant to the terms thereof. In the event of any conflict between the terms of any Letter of Credit Reimbursement Agreement and this Agreement, the terms of this Agreement shall govern.   47 -------------------------------------------------------------------------------- (f) Each Issuer shall:   (i) give the Administrative Agent written notice (or telephonic notice confirmed promptly thereafter in writing, which writing may be a telecopy or, if consented to by the Administrative Agent, electronic mail) of the Issuance or renewal of a Letter of Credit issued by it, of all drawings under a Letter of Credit issued by it, the payment (or the failure to pay when due) by the Borrower of any Reimbursement Obligation and the cancellation, termination or expiration of any Letter of Credit (which notice the Administrative Agent shall promptly notify each Revolving Lender and/or Synthetic Investor of);   (ii) upon the request of any Revolving Lender or Synthetic Investor, furnish to such Revolving Lender or Synthetic Investor copies of any Letter of Credit Reimbursement Agreement to which such Issuer is a party and such other documentation as may reasonably be requested by such Revolving Lender or Synthetic Investor; and   (iii) no later than 5 Business Days following the last Business Day of each calendar quarter (commencing with the calendar quarter ending March 31, 2006), provide to the Administrative Agent (and the Administrative Agent shall provide a copy to each Revolving Lender or Synthetic Investor requesting the same) and the Borrower separate schedules for Documentary and Standby Letters of Credit issued by it, in form and substance reasonably satisfactory to the Administrative Agent, setting forth the aggregate Letter of Credit Obligations outstanding at the end of each calendar quarter and any information requested by the Borrower or the Administrative Agent relating thereto.   (g) Effective with respect to the Existing Letters of Credit upon the occurrence of the Effective Date, and otherwise effective immediately upon the issuance by an Issuer of a Letter of Credit in accordance with the terms and conditions of this Agreement, each Issuer shall be deemed to have sold and transferred to each Revolving Lender or Synthetic Investor, as applicable, and each Revolving Lender or Synthetic Investor, as applicable, shall be deemed irrevocably and unconditionally to have purchased and received from each Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Revolving Lender’s or Synthetic Investor’s Ratable Portion of the Commitments in respect of the Revolving Facility or the Synthetic Facility, as applicable, in such Letter of Credit and the obligations of the Borrower with respect thereto (including all Letter of Credit Obligations with respect thereto) and any security therefor and guaranty pertaining thereto.   (h) The Borrower agrees to pay to the Issuer of any Letter of Credit the amount of all Reimbursement Obligations owing to such Issuer under any Letter of Credit issued for its account no later than the date (the “Reimbursement Date”) that is the next succeeding Business Day after the Borrower receives notice from such Issuer (or, if such notice is not received prior to 11:00 A.M. (New York Time) on any Business Day, then no later than 10 A.M. (New York Time) on the next succeeding Business Day) that payment has been made under such Letter of Credit, irrespective of any claim, set-off, defense or other right that the Borrower may have at any time against such Issuer or any   48 -------------------------------------------------------------------------------- other Person. If any Issuer makes any payment under any Letter of Credit and the Borrower shall not have repaid such amount to such Issuer pursuant to this clause (h) or any such payment by the Borrower in respect thereof is rescinded or set aside for any reason, such Reimbursement Obligation shall be payable on demand with interest thereon computed at the rate of interest applicable during such period to Revolving Loans that are Base Rate Loans, and such Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Revolving Lender and each Synthetic Investor, as applicable, of such failure, and (x) in the case of Revolving Letters of Credit, each Revolving Lender shall promptly and unconditionally pay to the Administrative Agent for the account of such Issuer the amount of such Lender’s Ratable Portion and (y) in the case of a Synthetic Letter of Credit, the Fronting Lender shall withdraw from such Synthetic Investor’s Sub-Account such Synthetic Investor’s Ratable Portion and shall remit such amount to the Administrative Agent for the account of such Issuer, in the case of each of clauses (x) and (y), of such payment in Dollars (or the Dollar Equivalent thereof if such payment was made in an Alternative Currency) and in immediately available funds. If the Administrative Agent so notifies such Lender prior to 11:00 a.m. (New York time) on any Business Day, such Lender shall make available to the Administrative Agent for the account of such Issuer its Ratable Portion of the amount of such payment on such Business Day in immediately available funds as set forth in the immediately preceding sentence. Upon such payment by a Lender or Fronting Lender, as applicable, such Lender or Fronting Lender, as applicable, shall, except during the continuance of a Default or Event of Default under Section 9.1(f) (Events of Default) and notwithstanding whether or not the conditions precedent set forth in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) shall have been satisfied (which conditions precedent the Lenders hereby irrevocably waive), be deemed to have made a Revolving Loan or Synthetic Loan, as applicable, to the Borrower in the principal amount of such payment. Whenever any Issuer receives from the Borrower a payment of a Reimbursement Obligation as to which the Administrative Agent has received for the account of such Issuer any payment from a Lender or Fronting Lender, as applicable, pursuant to this clause (h), such Issuer shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to such Lender or Fronting Lender, as applicable, in immediately available funds, an amount equal to such Lender’s Ratable Portion of the amount of such payment adjusted, if necessary, to reflect the respective amounts the Lenders have paid in respect of such Reimbursement Obligation (and, if such Lender is the Fronting Lender, Fronting Lender shall apply such amount as provided in Section 2.1(d) (Deposits to Credit-Linked Deposit Account).   (i) The Borrower’s obligation to pay each Reimbursement Obligation and the obligations of the Revolving Lenders and Fronting Lender to make payments to the Administrative Agent for the account of the Issuers with respect to Letters of Credit shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, including the occurrence of any Default or Event of Default, and irrespective of any of the following:   (i) any lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein;   49 -------------------------------------------------------------------------------- (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document;   (iii) the existence of any claim, set-off, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any Subsidiary or other Affiliate thereof or any other Person may at any time have against the beneficiary under any Letter of Credit, any Issuer, the Administrative Agent, any Lender any Synthetic Investor or any other Person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction;   (iv) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;   (v) payment by the Issuer under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; or   (vi) any other act or omission to act or delay of any kind of the Issuer, the Lenders, the Synthetic Investors, the Administrative Agent or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.4, constitute a legal or equitable discharge of the Borrower’s obligations hereunder.   Any action taken or omitted to be taken by the relevant Issuer under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not put such Issuer under any resulting liability to the Borrower, any Synthetic Investor or any Lender. In determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof, the Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary and, in making any payment under any Letter of Credit, the Issuer may rely exclusively on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever. Any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in any case, be deemed not to constitute willful misconduct or gross negligence of the Issuer. Notwithstanding the foregoing, nothing in this clause (i) shall be deemed to release any Issuer from liability with respect to its gross negligence or willful misconduct.   50 -------------------------------------------------------------------------------- (j) If and to the extent any Lender shall not have so made its Ratable Portion of the amount of the payment required by clause (h) above available to the Administrative Agent for the account of an Issuer, such Lender agrees to pay to the Administrative Agent for the account of such Issuer forthwith on demand any amount so unpaid together with interest thereon, for the first Business Day after payment was first due at the Federal Funds Rate, and thereafter until such amount is repaid to the Administrative Agent for the account of such Issuer, at the rate per annum applicable to Base Rate Loans for Revolving Loans. The failure of any Lender to make available to the Administrative Agent for the account of an Issuer its Ratable Portion of any such payment shall not relieve any other Lender of its obligation hereunder to make available to the Administrative Agent for the account of such Issuer its Ratable Portion of any payment on the date such payment is to be made, but no Lender shall be responsible for the failure of any other Lender to make available to the Administrative Agent for the account of the Issuer such other Lender’s Ratable Portion of any such payment.   (k) The Issuer shall determine the Dollar Equivalent of the maximum stated amount of each Letter of Credit denominated in an Alternative Currency and each obligation due with respect thereto, and a determination thereof by the Issuer shall be conclusive absent manifest error. The Dollar Equivalent of each Reimbursement Obligation with respect to a drawn Letter of Credit shall be calculated on the date the Issuer pays the draw giving rise to such Reimbursement Obligation. The Issuer shall determine or redetermine the Dollar Equivalent of the maximum stated amount of each Letter of Credit denominated in an Alternative Currency, as applicable, on the date of each Issuance of such Letter of Credit and on the last Business Day of each calendar month thereafter and the Issuer shall promptly notify the Administrative Agent of the determination thereof. The Issuer may determine or redetermine the Dollar Equivalent of any Letter of Credit denominated in an Alternative Currency at any time upon request of any Lender, Synthetic Investor or the Administrative Agent.   Section 2.5 Reduction and Termination of the Commitments   (a) The Borrower may, upon at least three Business Days’ prior notice to the Administrative Agent, terminate in whole or reduce in part the unused portions of the respective Commitments of the Lenders with respect to a particular Facility; provided, however, that (i) each partial reduction shall be in an aggregate amount that is an integral multiple of $5,000,000 and (ii) each such reduction shall be made ratably in accordance with each Lender’s Commitment in respect of such Facility. A notice of termination of the Commitments may state that such notice is conditioned upon the effectiveness of other credit facilities, and if any notice so states it may be revoked by the Borrower by notice to the Administrative Agent on or prior to the date specified for the termination of the Commitments that the refinancing condition has not been met and the termination is to be revoked (it being understood that any Loans outstanding at the time of such notice or drawn thereafter will, upon such revocation, be continued as Base Rate Loans and, thereafter, may be converted to Eurodollar Rate Loans pursuant to Section 2.11).   51 -------------------------------------------------------------------------------- (b) Subject to the proviso set forth in Section 2.9(b) (Mandatory Prepayments), the then current Delayed Draw Commitments shall be reduced on each date on which a prepayment of Delayed Draw Loans is made pursuant to Section 2.9(a) (Mandatory Prepayments) or would be required to be made had the outstanding Delayed Draw Loans equaled the Delayed Draw Commitments then in effect, in each case in the amount of such prepayment (or deemed prepayment) (and the Delayed Draw Commitment of each Lender shall be reduced by its Ratable Portion of such amount).   (c) Upon any reduction of the Commitments under the Synthetic Facility pursuant to clause (a) above or otherwise, the Synthetic Deposit Amount of each Synthetic Investor shall automatically be reduced by its Ratable Portion of such reduction and, if the face amount of any outstanding Synthetic Letters of Credit exceeds the remaining amount of the Synthetic Deposit Amount, the Borrower shall provide cash collateral for the Letters of Credit Obligations with respect to the Synthetic Facility in the manner set forth in Section 9.3 in an amount equal to 105% of such excess.   Section 2.6 Repayment of Loans   (a) The Borrower promises to repay (in cash, in full and in immediately available funds) the entire unpaid principal amount of the (i) Revolving Loans and the Swing Loans on the Revolving Facility Termination Date, (ii) Synthetic Loans on the Synthetic Facility Termination Date and (iii) Delayed Draw Loans on the Delayed Draw Loan Maturity Date (it being understood that other provisions of this Agreement may require all or part of such Obligations to be repaid earlier).   (b) Delayed Draw Loans made pursuant to Section 2.1 will amortize in equal quarterly installments in an aggregate annual amount equal to 1% per annum of the original principal amount of the Delayed Draw Facility, beginning on the last Business Day of first full Fiscal Quarter after the Delayed Draw Facility is utilized, with the balance payable on the Delayed Draw Loan Maturity Date.   Section 2.7 Evidence of Debt   (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing Indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.   (b) The Administrative Agent shall maintain accounts in accordance with its usual practice in which it shall record (i) the amount of each Loan made and, if a Eurodollar Rate Loan, the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable by the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower, whether such sum constitutes principal or interest (and the type of Loan to which it applies), fees, expenses or other amounts due under the Loan Documents and each Lender’s share thereof, if applicable.   52 -------------------------------------------------------------------------------- (c) The entries made in the accounts maintained pursuant to clauses (a) and (b) above shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations recorded therein; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms.   (d) Notwithstanding any other provision of this Agreement, if any Lender requests that the Borrower execute and deliver a promissory note or notes payable to such Lender in order to evidence the Indebtedness owing to such Lender by the Borrower hereunder, the Borrower shall promptly execute and deliver a Note or Notes to such Lender evidencing any Loans of such Lender, substantially in the form of Exhibit B (Form of Promissory Note).   Section 2.8 Optional Prepayments   The Borrower may, at any time, prepay the outstanding principal amount of the Loans and Swing Loans in whole or in part; provided, however, that if any prepayment of any Eurodollar Rate Loan is made by the Borrower other than on the last day of an Interest Period for such Loan, the Borrower shall also pay any amounts owing pursuant to Section 2.14(e) (Breakage Costs); provided, further, that each partial prepayment shall be in an aggregate principal amount that is an integral multiple of $1,000,000 and shall be applied, at the Borrower’s discretion, either (i) to reduce the outstanding principal amount under any Facility or Facilities, or (ii) pro rata between the Revolving Facility, the Synthetic Facility and the Delayed Draw Loans, in each case in accordance with each Lender’s Commitment. Upon the giving of such notice of prepayment, the principal amount of Loans specified to be prepaid shall become due and payable on the date specified for such prepayment.   Section 2.9 Mandatory Prepayments   (a) Upon receipt by the Borrower or any of its Domestic Subsidiaries of Net Cash Proceeds arising from an Asset Sale, Property Loss Event or issuance of Indebtedness (to the extent not otherwise permitted by Section 8.1 (Indebtedness)), the Borrower shall (subject to the proviso in Section 2.9(b)) immediately prepay the Delayed Draw Loans in an amount equal to 100% of such Net Cash Proceeds. Any such mandatory prepayment shall be applied in accordance with clause (b) below.   (b) Any prepayments made by the Borrower in accordance with Section 2.9(a) shall be applied to repay the outstanding principal balance of the Delayed Draw Loans pro rata across remaining scheduled amortization amounts until such Delayed Draw Loans shall have been paid in full; provided, however, that, if such prepayment is to be made from Net Cash Proceeds arising from a Reinvestment Event, the Delayed Draw Loans shall not be required to be repaid to the extent of the Reinvestment Deferred Amount corresponding to such Reinvestment Event until the Reinvestment Prepayment Date corresponding thereto and, then, the Delayed Draw Loans shall be repaid only to the extent of the Reinvestment Prepayment Amount applicable to such Reinvestment Event, if any.   53 -------------------------------------------------------------------------------- (c) If the Leverage Ratio is greater than or equal to 2.00:1.00, the Borrower shall, no later than, subject to the following sentence, the earlier of (i) 120 days after the end of each Fiscal Year of the Borrower, commencing with the Fiscal Year ending on December 31, 2006, and (ii) the date on which the financial statements with respect to such Fiscal Year are delivered pursuant to Section 6.1(b) (such offer date an “ECF Year End Offer Date”), offer to prepay (in accordance with Section 2.9(e)) outstanding Delayed Draw Loans in an aggregate principal amount equal to the lesser of (x) 50% of Excess Cash Flow for the applicable ECF Period less, only in the case of an offer made with respect to payment of the Contingent MI Payment as described in the next sentence, any amount offered pursuant to previous ECF Year End Offer Dates, and (y) $50,000,000. Notwithstanding the foregoing, if the Borrower or any of its Subsidiaries desires to use any internally generated cash flow of the Borrower or any of its Subsidiaries to pay all or any portion of the Contingent MI Payment, then (i) the Borrower shall be required to make such offer no later than the twentieth Business Day prior to the date any portion of the Contingent MI Payment is to be made with such funds and (ii) any amount so offered pursuant to clause (i) shall be deducted from the amount required to be offered to the Delayed Draw Lenders on the next ECF Year End Offer Date to the extent such amount is allocable to Excess Cash Flow for the Fiscal Year applicable to such ECF Year End Offer Date.   (d) If at any time, the aggregate principal amount of Outstandings with respect to the Revolving Facility exceeds the aggregate Commitments with respect to the Revolving Facility at such time, the Borrower shall forthwith prepay the Swing Loans first and then the Revolving Loans then outstanding in an amount equal to such excess. If any such excess remains after repayment in full of the aggregate outstanding Swing Loans and Revolving Loans, the Borrower shall provide cash collateral for the Letter of Credit Obligations with respect to the Revolving Facility in the manner set forth in Section 9.3 (Actions in Respect of Letters of Credit) in an amount equal to 105% of such excess.   (e) Notwithstanding anything in this Section 2.9 to the contrary, (i) the Administrative Agent will promptly notify each Delayed Draw Lender of the amount of such Lender’s Ratable Portion of any prepayment pursuant to Section 2.9(a) or 2.9(c) and such Lender’s option to refuse such amount, (ii) each Delayed Draw Lender will have the right to refuse any such prepayment by giving written notice of such refusal to the Borrower within fifteen Business Days after being given notice by the Administrative Agent pursuant to clause (i) above of such prepayment (it being understood that any Lender which does not notify the Borrower and Administrative Agent of its election to exercise such option to reject on or before such fifteenth Business Day shall be deemed to have elected, as of such date, not to have exercised such option), (iii) the Borrower will make all such prepayments not so refused upon the earlier of (x) such fifteenth Business Day and (y) such time as the Borrower has received notice from each applicable Lender that it consents to or refuses such prepayment and (iv) any prepayment so refused may be retained by the Borrower.   54 -------------------------------------------------------------------------------- (f) In connection with any prepayments by the Borrower of the Delayed Draw Loans pursuant to Section 2.9(a) or 2.9(c), such prepayments shall be applied on a pro rata basis to the then outstanding Delayed Draw Loans being prepaid irrespective of whether such outstanding Delayed Draw Loans are Base Rate Loans or Eurodollar Rate Loans; provided that if no Lenders exercise the right to reject a given mandatory prepayment of the Delayed Draw Loans pursuant to Section 2.9(e), then, with respect to such mandatory prepayment, the amount of such mandatory prepayment shall be applied first to Delayed Draw Loans that are Base Rate Loans to the full extent thereof before application to Delayed Draw Loans that are Eurodollar Rate Loans in a manner that minimizes the amount of any payments required to be made by the Borrower pursuant to Section 2.14.   Section 2.10 Interest   (a) Rate of Interest. All Loans and the outstanding amount of all other Obligations shall bear interest, in the case of Loans, on the unpaid principal amount thereof from the date such Loans are made and, in the case of such other Obligations, from the date such other Obligations are due and payable until, in all cases, paid in full, except as otherwise provided in clause (c) below, as follows:   (i) if a Base Rate Loan or such other Obligation, at a rate per annum equal to the sum of (A) the Base Rate as in effect from time to time plus (B) the Applicable Margin for Base Rate Loans; and   (ii) if a Eurodollar Rate Loan, at a rate per annum equal to the sum of (A) the Eurodollar Rate for such Eurodollar Rate Loan determined for the applicable Interest Period plus (B) the Applicable Margin for Eurodollar Rate Loans in effect from time to time during such Interest Period.   (b) Interest Payments. (i) Interest accrued on each Base Rate Loan shall be payable in arrears (A) in respect of interest that has accrued during the Initial Period, on the last Business Day of the Initial Period, (B) thereafter, on the last Business Day of each calendar quarter and (C) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Base Rate Loan, (ii) interest accrued on each Eurodollar Rate Loan shall be payable in arrears (A) on the last day of each Interest Period applicable to such Loan and, if such Interest Period has a duration of more than three months, on each day during such Interest Period occurring every three months from the first day of such Interest Period, (B) upon the payment or prepayment thereof in full or in part and (C) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Eurodollar Rate Loan and (iii) interest accrued on the amount of all other Obligations shall be payable on demand from and after the time such Obligation becomes due and payable (whether by acceleration or otherwise).   (c) Default Interest. Notwithstanding the rates of interest specified in clause (a) above or elsewhere herein, effective immediately upon the occurrence of an Event of Default of the type described in Section 9.1(a) or (b) and for as long thereafter as such Event of Default shall be continuing, the principal balance of all Loans and the   55 -------------------------------------------------------------------------------- amount of all other Obligations then due and payable shall, upon the election of the Requisite Lenders (except if an Event of Default has occurred under Section 9.1(f) (Events of Default) that results in the automatic acceleration of the Obligations, in which case such interest rate increase shall be immediate), bear interest at a rate that is two percent per annum in excess of the rate of interest applicable to such Loans or other Obligations from time to time.   Section 2.11 Conversion/Continuation Option   (a) The Borrower may elect (i) at any time on any Business Day to convert Base Rate Loans (other than Swing Loans) or any portion thereof to Eurodollar Rate Loans and (ii) at the end of any applicable Interest Period, to convert Eurodollar Rate Loans or any portion thereof into Base Rate Loans or to continue such Eurodollar Rate Loans or any portion thereof for an additional Interest Period; provided, however, that the aggregate amount of the Eurodollar Rate Loans for each Interest Period must be in an amount that is an integral multiple of $1,000,000. Each conversion or continuation shall be allocated among the Loans of each Lender in accordance with such Lender’s Ratable Portion. Each such election shall be in substantially the form of Exhibit F (Form of Notice of Conversion or Continuation) (a “Notice of Conversion or Continuation”) and shall be made by giving the Administrative Agent at least three Business Days’ prior written notice (or telephonic notice promptly confirmed in writing) specifying, in each case, (A) the amount and type of Loan being converted or continued, (B) in the case of a conversion to or a continuation of Eurodollar Rate Loans, the applicable Interest Period and (C) in the case of a conversion, the date of conversion.   (b) The Administrative Agent shall promptly notify each applicable Lender of its receipt of a Notice of Conversion or Continuation and of the options selected therein. Notwithstanding the foregoing, no conversion in whole or in part of Base Rate Loans to Eurodollar Rate Loans, and no continuation in whole or in part of Eurodollar Rate Loans upon the expiration of any applicable Interest Period, shall be permitted at any time during which (i) a Default or an Event of Default shall have occurred and be continuing or (ii) the continuation of, or conversion into, a Eurodollar Rate Loan would violate any provision of Section 2.14 (Special Provisions Governing Eurodollar Rate Loans). If, within the time period required under the terms of this Section 2.11, the Administrative Agent does not receive a Notice of Conversion or Continuation from the Borrower containing a permitted election to continue any Eurodollar Rate Loans for an additional Interest Period or to convert any such Loans, then, upon the expiration of the applicable Interest Period, such Loans shall be automatically converted to Base Rate Loans. Each Notice of Conversion or Continuation shall be irrevocable.   Section 2.12 Fees   (a) Commitment Fees. (i) With respect to the Revolving Facility, the Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender a commitment fee (the “Revolving Commitment Fee”), accruing at a rate per annum equal to the Applicable Commitment Fee Rate applicable to the Revolving   56 -------------------------------------------------------------------------------- Facility on the actual daily amount by which the Revolving Commitment of such Lender exceeds such Lender’s Ratable Portion of the sum of (x) the outstanding principal amount of Revolving Loans plus (y) the outstanding amount of the Letter of Credit Obligations (excluding obligations with respect to Synthetic Letters of Credit) during the period from the Effective Date until the Revolving Facility Termination Date, payable in arrears (A) on the last Business Day of each calendar quarter (commencing with the calendar quarter ending March 31, 2006) and (B) on the Revolving Facility Termination Date.   (ii) With respect to the Delayed Draw Facility, the Borrower agrees to pay to the Administrative Agent for the account of each Delayed Draw Lender a commitment fee (the “Delayed Draw Commitment Fee”), accruing at a rate per annum equal to the Applicable Commitment Fee Rate applicable to the Delayed Draw Facility on the actual daily amount by which the Delayed Draw Commitment of such Lender exceeds such Lender’s Ratable Portion of the outstanding principal amount of Delayed Draw Loans during the period from the Effective Date until the Delayed Draw Commitment Termination Date, payable in arrears (A) on the last Business Day of each calendar quarter (commencing with the calendar quarter ending March 31, 2006) and (B) on the Delayed Draw Commitment Termination Date.   (b) Letter of Credit Fees. The Borrower agrees to pay the following amounts with respect to Letters of Credit issued by any Issuer:   (i) to the Administrative Agent for the account of each Issuer of a Letter of Credit, with respect to each Letter of Credit issued by such Issuer, an issuance fee of 0.125% per annum (“Fronting Fees”), payable in arrears (x) with respect to Revolving Letters of Credit (A) on the last Business Day of each calendar quarter (commencing with the calendar quarter ending March 31, 2006) and (B) on the Revolving Facility Termination Date, and (y) with respect to Synthetic Letters of Credit (A) on the last Business Day of each calendar quarter (commencing with the calendar quarter ending March 31, 2006) and (B) on the Synthetic Facility Termination Date;   (ii) to the Administrative Agent for the account and ratable benefit of the applicable Lenders, with respect to each Revolving Letter of Credit, a fee (the “Revolving Letter of Credit Participation Fee”) accruing at a rate per annum equal to the Applicable Margin for Revolving Loans that are Eurodollar Rate Loans on the maximum amount available from time to time to be drawn under such Revolving Letter of Credit (in the case of any Revolving Letter of Credit denominated in a currency other than Dollars, based on the Dollar Equivalent of the average undrawn amount thereof on the payment date for such fee), payable in arrears (A) on the last Business Day of each calendar quarter (commencing with the calendar quarter ending March 31, 2006) and (B) on the Revolving Facility Termination Date; provided, however, that during the continuance of an Event of Default under Section 9.1(a) or (b), such fee shall be increased, upon the election of the Requisite Lenders (except if an Event of Default has occurred under Section 9.1(f) (Events of Default) that results in the automatic acceleration of the Obligations, in which case such increase shall be immediate), by two percent per annum and shall be payable on demand; and   57 -------------------------------------------------------------------------------- (iii) to the Issuer of any Letter of Credit, with respect to the issuance, amendment or transfer of each Letter of Credit and each drawing made thereunder, documentary and processing charges in accordance with such Issuer’s standard schedule for such charges in effect at the time of issuance, amendment, transfer or drawing, as the case may be.   (c) Synthetic Fees. (i) The Borrower agrees to pay to the Fronting Lender, on behalf of each Synthetic Investor, a fee on the aggregate amount of the Credit-Linked Deposit of all Synthetic Investors (the “Synthetic Fee”) from the Effective Date until the Synthetic Facility Termination Date at an annual rate of one-tenth of one percent (0.10%), payable in arrears on (a) the last Business Day of each calendar quarter (commencing with the calendar quarter ending March 31, 2006) and (b) the Synthetic Facility Termination Date. Such Synthetic Fee shall be payable to the Fronting Lender who will distribute such fee to each Synthetic Investor, in accordance with its Ratable Portion, pursuant to Section 2.12(e).   (ii) The Borrower agrees to pay to the Administrative Agent for payment to the Fronting Lender for the account and ratable benefit of the Synthetic Investors, a fee (the “Synthetic Letter of Credit Participation Fee”) accruing at a rate per annum equal to 2.75%, on the aggregate amount of the Credit-Linked Deposit of all Synthetic Investors, payable in arrears (A) on the last Business Day of each calendar quarter (commencing with the calendar quarter ending March 31, 2006) and (B) on the Synthetic Facility Termination Date; provided, however, that during the continuance of an Event of Default under Section 9.1(a) or (b), such fee shall be increased, upon the election of the Requisite Lenders (except if an Event of Default has occurred under Section 9.1(f) (Events of Default) that results in the automatic acceleration of the Obligations, in which case such increase shall be immediate), by two percent per annum and shall be payable on demand.   (d) Additional Fees. The Borrower has agreed to pay to the Administrative Agent and the Lenders additional fees, the amount and dates of payment of which are embodied in the Fee Letter.   (e) Payment of Fees to Synthetic Investors. The Fronting Lender hereby agrees to pay to each Synthetic Investor such Synthetic Investor’s Ratable Portion of the Synthetic Fee and the Synthetic Letter of Credit Participation Fee received by the Fronting Lender in its capacity as such, promptly following receipt of each of the same from (and only to the extent each such fee is received from) the Borrower or any other Loan Party.   58 -------------------------------------------------------------------------------- Section 2.13 Payments and Computations   (a) The Borrower shall make each payment hereunder (including fees and expenses) not later than 3:00 p.m. (New York time) on the day when due, in Dollars, to the Administrative Agent at its address referred to in Section 11.8 (Notices, Etc.) in immediately available funds without set-off or counterclaim. The Administrative Agent shall promptly thereafter cause to be distributed immediately available funds relating to the payment of principal, interest or fees to the applicable Lenders, in accordance with the application of payments set forth in clauses (e) or (f) below, as applicable, for the account of their respective Applicable Lending Offices; provided, however, that amounts payable pursuant to Section 2.15 (Capital Adequacy), Section 2.16 (Taxes) or Section 2.14(c) (Increased Costs) or (d) (Illegality) shall be paid only to any affected Lender (or, if to the Fronting Lender, only to the extent of the interest of the affected Synthetic Investor) and amounts payable with respect to Swing Loans shall be paid only to the Swing Loan Lender. Payments received by the Administrative Agent after 3:00 p.m. (New York time) shall be deemed (in the Administrative Agent’s sole discretion) to be received on the next Business Day.   (b) All computations of interest and of fees shall be made by the Administrative Agent on the basis of the actual number of days elapsed (in each case calculated to include the first day but exclude the last day) (i) over a year of 365 or 366 days, as the case may be, in the case of interest accruing at the Base Rate when the Base Rate is determined by reference to the Prime Rate, and (ii) over a year of 360 days at all other times). Each determination by the Administrative Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.   (c) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided, however, that if such extension would cause payment to be made in the next calendar month, such payment shall be made on the immediately preceding Business Day. Except as otherwise provided for in Section 2.9, all repayments of any Loans shall be applied as follows: first, to repay such Loans outstanding as Base Rate Loans and then, to repay such Loans outstanding as Eurodollar Rate Loans, with those Eurodollar Rate Loans having earlier expiring Interest Periods being repaid prior to those having later expiring Interest Periods.   (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrower shall not have made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon at the Federal Funds Rate, for the first Business Day, and, thereafter, at the rate applicable to   59 -------------------------------------------------------------------------------- Base Rate Loans under the applicable Facility, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent.   (e) Subject to the provisions of clause (f) below (and except as otherwise provided in Section 2.9 (Mandatory Prepayments)), all payments and any other amounts received by the Administrative Agent from or for the benefit of the Borrower shall be applied as follows: first, to pay principal of, and interest on, any portion of the Loans the Administrative Agent may have advanced pursuant to the express provisions of this Agreement on behalf of any Lender, for which the Administrative Agent has not then been reimbursed by such Lender or the Borrower, second, to pay all other Obligations then due and payable, and third, as the Borrower so designates. Payments in respect of Swing Loans received by the Administrative Agent shall be distributed to the Swing Loan Lender; payments in respect of other Loans received by the Administrative Agent shall be distributed to each applicable Lender in accordance with such Lender’s Ratable Portion of the Commitments with respect to the applicable Facility; and all payments of fees and all other payments in respect of any other Obligation shall be allocated among such of the Lenders and Issuers as are entitled thereto and, for such payments allocated to the Lenders, in proportion to their respective Ratable Portions.   (f) The Borrower hereby irrevocably waives the right to direct the application of any and all payments in respect of the Obligations and any proceeds of Collateral after the occurrence and during the continuance of an Event of Default and agrees that, during such time, the Administrative Agent may, and, upon either (A) the written direction of the Requisite Lenders or (B) the acceleration of the Obligations pursuant to Section 9.2 (Remedies), shall apply all payments in respect of any Obligations and all funds on deposit in any Cash Collateral Account and all other proceeds of Collateral in the following order:   First, to pay interest on and then principal of any portion of (i) the Loans that the Administrative Agent may have advanced on behalf of any Lender for which the Administrative Agent has not then been reimbursed by such Lender or the Borrower and (ii) the Reimbursement Obligations owed to any Issuer for which such Issuer has not then been reimbursed by any Lender or the Borrower;   Second, to pay interest on and then principal of any Swing Loan;   Third, to pay Obligations in respect of any expense reimbursements or indemnities (including fees and expenses in respect of cash management services) then due to the Administrative Agent;   Fourth, to pay Obligations in respect of any expense reimbursements or indemnities (including fees and expenses in respect of cash management services) then due to the Lenders, the Synthetic Investors and the Issuers;   60 -------------------------------------------------------------------------------- Fifth, to pay Obligations in respect of any fees then due to the Administrative Agent, the Lenders, the Synthetic Investors and the Issuers;   Sixth, to pay interest then due and payable in respect of the Loans (ratably to the aggregate principal amount of such Loans) and Reimbursement Obligations;   Seventh, to pay or prepay principal amounts on the Loans and Reimbursement Obligations and to provide cash collateral for outstanding Letter of Credit Undrawn Amounts in the manner described in Section 9.3 (Actions in Respect of Letters of Credit), ratably to the aggregate principal amount of such Loans, Reimbursement Obligations and Letter of Credit Undrawn Amounts; and   Eighth, to the ratable payment of all other Obligations;   provided, however, that if sufficient funds are not available to fund all payments to be made in respect of any Obligation described in any of clauses first through eighth above, the available funds being applied with respect to any such Obligation (unless otherwise specified in such clause) shall be allocated to the payment of such Obligations ratably, based on the proportion of the Administrative Agent’s and each Lender’s, Synthetic Investor’s or Issuer’s interest in the aggregate outstanding Obligations described in such clauses. The order of priority set forth in clauses first through eighth above may at any time and from time to time be changed by the agreement of the Requisite Lenders without necessity of prior notice to or consent of or approval by the Borrower, any Secured Party that is not a Lender, Synthetic Investor or Issuer or by any other Person that is not a Lender, Synthetic Investor or Issuer. The order of priority set forth in clauses first through fifth above may be changed only with the prior written consent of the Administrative Agent in addition to the Requisite Lenders.   (g) At the option of the Administrative Agent during the continuance of an Event of Default, principal, interest, fees, expenses and other sums due and payable in respect of the Swing Loans, Reimbursement Obligations, Loans and Protective Advances may be paid from the proceeds of Swing Loans or Revolving Loans. The Borrower hereby authorizes the Swing Loan Lender to make such Swing Loans pursuant to Section 2.3(a) (Swing Loans) and the Revolving Lenders to make such Revolving Loans pursuant to Section 2.2(a) (Borrowing Procedures) from time to time in the Swing Loan Lender’s or such Revolving Lender’s discretion, that are in the amounts of any and all principal, interest, fees, expenses and other sums payable with respect to the Swing Loans, the Loans, Reimbursement Obligations and Protective Advances, and further authorizes the Administrative Agent to give the Lenders notice of any Borrowing with respect to such Swing Loans and Revolving Loans and to distribute the proceeds of such   61 -------------------------------------------------------------------------------- Swing Loans and Revolving Loans to pay such amounts. The Borrower agrees that all such Swing Loans and Revolving Loans so made shall be deemed to have been requested by it (irrespective of the satisfaction of the conditions in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit), which conditions the Lenders irrevocably waive) and directs that all proceeds thereof shall be used to pay such amounts.   Section 2.14 Special Provisions Governing Eurodollar Rate Loans   (a) Determination of Interest Rate   The Eurodollar Rate for each Interest Period for Eurodollar Rate Loans shall be determined by the Administrative Agent pursuant to the procedures set forth in the definition of “Eurodollar Rate.” The Administrative Agent’s determination shall be presumed to be correct absent manifest error and shall be binding on the Borrower.   (b) Interest Rate Unascertainable, Inadequate or Unfair   If (i) the Administrative Agent determines that adequate and fair means do not exist for ascertaining the applicable interest rates by reference to which the Eurodollar Rate then being determined is to be fixed or (ii) the Requisite Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period (or, in respect of the Credit-Linked Deposit Return, the Initial Period or any calendar quarter) will not adequately reflect the cost to the Lenders and the Synthetic Investors of making or maintaining such Loans (or of making, maintaining or receiving the corresponding Credit-Linked Deposits) for such Interest Period, Initial Period or calendar quarter, the Administrative Agent shall forthwith so notify the Borrower, the Synthetic Investors and the Lenders, whereupon each Eurodollar Rate Loan shall automatically, on the last day of the current Interest Period for such Loan, convert into a Base Rate Loan and the obligations of the Lenders to make Eurodollar Rate Loans or to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended until the Administrative Agent shall notify the Borrower that the Requisite Lenders have determined that the circumstances causing such suspension no longer exist, which notice shall be given promptly following such determination. Thereafter, the Borrower’s right to request, and the Lenders’ obligations, if any, to make Eurodollar Rate Loans shall be restored.   (c) Increased Costs   If at any time any Lender or Synthetic Investor determines that the introduction of, or any change in or in the interpretation of, any law, treaty or governmental rule, regulation or order (including any change by way of imposition or increase of reserve requirements included in determining the Eurodollar Rate) or the compliance by such Lender or Synthetic Investor with any guideline, request or directive from any central bank or other Governmental Authority (whether or not having the force of law), shall (i) have the effect of increasing the cost to such Lender or Synthetic Investor of agreeing to make or making, funding or maintaining any Eurodollar Rate Loan or agreeing to make or making, funding, maintaining or receiving any Credit-   62 -------------------------------------------------------------------------------- Linked Deposit, or (ii) subject any Lender or Synthetic Investor to any Tax of any kind whatsoever with respect to any Eurodollar Rate Loan or Credit-Linked Deposit, or change the basis of taxation of payments to such Lender or Synthetic Investor in respect thereof (except for Taxes or Other Taxes indemnifiable pursuant to Section 2.16 (Taxes) or the imposition of, or any change in the rate of, any Excluded Taxes), then the Borrower shall from time to time, upon demand by such Lender or Synthetic Investor (with a copy of such demand to the Administrative Agent and the Fronting Lender), pay to the Administrative Agent for the account of such Lender or, in the case of a Synthetic Investor, to the Administrative Agent for the account of the Fronting Lender (for the account of the Synthetic Investor), additional amounts sufficient to compensate such Lender or Synthetic Investor for such increased cost. A certificate as to the amount of such increased cost shall be, together with supporting documents, submitted to the Borrower and the Administrative Agent (and, in the case of a Synthetic Investor, to the Fronting Lender) by such Lender or Synthetic Investor and shall be conclusive and binding for all purposes, absent manifest error. Notwithstanding the foregoing, except to the extent, if any, the change (or compliance) referred to in such certificate shall be retroactive, the Borrower shall not be required to compensate a Lender or Synthetic Investor pursuant to this clause (c) for any increased costs or reduction incurred more than 180 days prior to the date of such certificate. The Borrower shall pay such Lender or Synthetic Investor the amount shown as due on any such certificate within 30 days after its receipt of the same.   (d) Illegality   Notwithstanding any other provision of this Agreement, if any Lender determines that the introduction of, or any change in or in the interpretation of, any law, treaty or governmental rule, regulation or order after the date of this Agreement shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to make Eurodollar Rate Loans or to continue to fund or maintain Eurodollar Rate Loans, then, on notice thereof and demand therefor by such Lender to the Borrower through the Administrative Agent, (i) the obligation of such Lender to make or to continue Eurodollar Rate Loans and to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended, and each such Lender shall make a Base Rate Loan as part of any requested Borrowing of Eurodollar Rate Loans and (ii) if the affected Eurodollar Rate Loans are then outstanding, the Borrower shall immediately convert each such Loan into a Base Rate Loan. If, at any time after a Lender gives notice under this Section 2.14(d), such Lender determines that it may lawfully make Eurodollar Rate Loans, such Lender shall promptly give notice of that determination to the Borrower and the Administrative Agent, and the Administrative Agent shall promptly transmit the notice to each other Lender. The Borrower’s right to request, and such Lender’s obligation, if any, to make Eurodollar Rate Loans shall thereupon be restored.   (e) Breakage Costs   In addition to all amounts required to be paid by the Borrower pursuant to Section 2.10 (Interest), the Borrower shall compensate each Lender and Synthetic   63 -------------------------------------------------------------------------------- Investor, upon demand, for all losses, expenses and liabilities (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender or Synthetic Investor to fund or maintain such Lender’s Eurodollar Rate Loan to the Borrower or such Synthetic Investor’s Credit-Linked Deposit, but excluding any loss of the Applicable Margin or other profit on the relevant Loans) that such Lender or Synthetic Investor may sustain (i) if for any reason a proposed Borrowing or continuation of, or conversion into, Eurodollar Rate Loans does not occur on a date specified therefor in a Notice of Borrowing or a Notice of Conversion or Continuation given by the Borrower or in a telephonic request by it for borrowing or conversion or continuation or a successive Interest Period does not commence after notice therefor is given pursuant to Section 2.11 (Conversion/Continuation Option), (ii) if for any reason any Eurodollar Rate Loan is prepaid (including mandatorily pursuant to Section 2.9 (Mandatory Prepayments), by reason of an increase or reduction in Commitments on a date that is not the last day of the applicable Interest Period, (iii) as a consequence of a required conversion of a Eurodollar Rate Loan to a Base Rate Loan as a result of any of the events indicated in Section 2.14(d), (iv) as a consequence of any failure by the Borrower to repay Eurodollar Rate Loans when required by the terms hereof or (v) if, for any reason, the Fronting Lender is required to make any payment in respect of any Credit-Linked Deposit or to reimburse any Synthetic Investor for any similar loss, expense or liability in respect of any Credit-Linked Deposit. Without limiting the foregoing, if any amount withdrawn from the Credit-Linked Deposit Account to reimburse the Fronting Lender as provided herein shall be subsequently reimbursed to the Fronting Lender by the Borrower or any other Loan Party other than on the last day of a calendar quarter, the Fronting Lender shall invest the amount so reimbursed in overnight or short-term cash equivalent investments until the end of such calendar quarter and the Borrower shall pay to the Fronting Lender, upon the Fronting Lender’s request therefor, the amount, if any, by which the interest accrued on a like amount of the Credit-Linked Deposits at the Eurodollar Rate for such calendar quarter shall exceed the interest earned through the investment of the amount so reimbursed for the period from the date of such reimbursement through the end of such calendar quarter, as determined by the Fronting Lender (such determination to be conclusive absent manifest error) and set forth in the request for payment delivered to the Borrower. If the Borrower shall fail to pay an amount due under the preceding sentence, the amount payable by the Fronting Lender to the Synthetic Investors on their Credit-Linked Deposits under Section 2.1(f) (The Commitments; Credit-Linked Deposit Amount) shall be correspondingly reduced and each Synthetic Investor shall without further act succeed, ratably in accordance with its Ratable Portion, to the rights of the Fronting Lender with respect to such amount. The Lender or Synthetic Investor making demand for such compensation shall deliver to the Borrower concurrently with such demand a written statement as to such losses, expenses and liabilities, and this statement shall be conclusive as to the amount of compensation due to such Lender, absent manifest error.   Section 2.15 Capital Adequacy   If at any time any Lender or Synthetic Investor determines that (a) the introduction of, or any change in or in the interpretation of, any law, treaty or governmental rule, regulation or order after the date of this Agreement regarding capital   64 -------------------------------------------------------------------------------- adequacy, (b) compliance with any such law, treaty, rule, regulation or order or (c) compliance with any guideline or request or directive from any central bank or other Governmental Authority (whether or not having the force of law) shall have the effect of reducing the rate of return on such Lender’s or Synthetic Investor’s (or any Person controlling such Lender’s or Synthetic Investor’s) capital as a consequence of its obligations hereunder, in respect of the Credit-Linked Deposits or under or in respect of any Letter of Credit to a level below that which such Lender, Synthetic Investor or Person could have achieved but for such adoption, change, compliance or interpretation, then, upon demand from time to time by such Lender or, through the Fronting Lender, such Synthetic Investor (with a copy of such demand to the Administrative Agent and, in the case of a Synthetic Investor, the Fronting Lender), the Borrower shall pay to the Administrative Agent for the account of such Lender or, in the case of a Synthetic Investor, to the Administrative Agent for the account of the Fronting Lender (for the account of such Synthetic Investor), from time to time as specified by such Lender or Synthetic Investor, additional amounts sufficient to compensate such Lender or Synthetic Investor for such reduction. A certificate as to such amounts setting forth in reasonable detail the basis for such demand and a calculation for such amount shall be submitted to the Borrower and the Administrative Agent by such Lender or Synthetic Investor and shall be conclusive and binding for all purposes absent manifest error. Notwithstanding the foregoing, except to the extent, if any, the change (or compliance) referred to in any such certificate shall be retroactive, the Borrower shall not be required to compensate a Lender or Synthetic Investor pursuant to this Section 2.15 (Capital Adequacy) for any reduction in rates of return with respect to any period prior to the date that is 180 days prior to the date of each such certificate.   Section 2.16 Taxes   (a) Except as otherwise expressly provided in this Section 2.16 (Taxes), any and all payments by the Borrower under each Loan Document shall be made free and clear of and without deduction for any and all taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto and with respect to any corresponding payment that may be made by the Fronting Lender to the Synthetic Investors in respect of the Credit-Linked Deposits, excluding (i) in the case of each Lender and Synthetic Investor and the Administrative Agent (A) taxes measured by its net income, and franchise taxes imposed on it, by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender, Synthetic Investor or the Administrative Agent (as the case may be) is organized and (B) any United States withholding taxes payable with respect to payments under the Loan Documents under laws (including any statute, treaty or regulation) in effect on the Effective Date (or, in the case of any Lender or Synthetic Investor that became a Lender or Synthetic Investor by assignment or transfer after the Effective Date, the effective date of such assignment or transfer, except to the extent that such Lender’s or Synthetic Investor’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower pursuant to this Section 2.16) applicable to such Lender, Synthetic Investor or the Administrative Agent (as the case may be), but not excluding any United States withholding taxes payable as a result of any change in such laws occurring after the Effective Date (or the date of such assignment or transfer, except to the extent that such   65 -------------------------------------------------------------------------------- Lender’s or Synthetic Investor’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower pursuant to this Section 2.16) and (ii) in the case of each Lender and Synthetic Investor, taxes measured by its net income, and franchise taxes imposed on it as a result of a present or former connection between such Lender or Synthetic Investor and the jurisdiction of the Governmental Authority imposing such tax or any taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”). If any Taxes shall be required by law to be deducted from or in respect of any sum payable under any Loan Document to any Lender, the Administrative Agent or any Synthetic Investor, (w) the sum payable by the Borrower shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.16) such Lender, Synthetic Investor or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (x) the Borrower (or, in the case of any sum payable by the Fronting Lender to the Synthetic Investors hereunder, the Fronting Lender) shall make such deductions, (y) the Borrower (or, in the case of any sum payable by the Fronting Lender to the Synthetic Investors hereunder, the Fronting Lender) shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law and (z) the Borrower (or, in the case of any sum payable by the Fronting Lender to the Synthetic Investors hereunder, the Fronting Lender) shall deliver to the Administrative Agent evidence of such payment; provided, however, that failure of the Fronting Lender to provide such evidence shall not relieve the Borrower of any of its obligations hereunder.   (b) In addition, the Borrower shall pay any stamp or documentary taxes or any other excise or property taxes, charges or similar levies of the United States or any political subdivision thereof or any applicable foreign jurisdiction, and all liabilities with respect thereto, in each case arising from any payment made under any Loan Document or from the execution, delivery or registration of, or otherwise with respect to, any Loan Document (collectively, “Other Taxes”).   (c) Except as otherwise expressly provided in this Section 2.16 (Taxes), the Borrower shall indemnify each Lender, Synthetic Investor and the Administrative Agent for the full amount of Taxes and Other Taxes (including any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.16) paid by such Lender, Synthetic Investor or the Administrative Agent (as the case may be) and any liability (including for penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender, the Administrative Agent or such Synthetic Investor (as the case may be) makes written demand therefor (which shall, in case of such Synthetic Investor, be made through the Fronting Lender). Such written demand shall include a certificate setting forth in reasonable detail the type and amount of the indemnification payment to be made; provided, however, that the Borrower shall not be required to compensate a Lender or Synthetic Investor pursuant to this clause (c) for (i) any Taxes or Other Taxes incurred more than 180 days (or, if such Taxes or Other Taxes are measured based on a longer fiscal period, 180 days after the end of the most recent fiscal period therefor) prior to the receipt of such written demand, or (ii) any penalties, interest or other liabilities arising from the willful misconduct or gross negligence of a Lender or Synthetic Investor.   66 -------------------------------------------------------------------------------- (d) The Borrower shall use commercially reasonable efforts to furnish, within 60 days after the date of any payment of Taxes or Other Taxes pursuant to this Section 2.16, to the Administrative Agent, at its address referred to in Section 11.8 (Notices, Etc.), the original or a certified copy of a receipt evidencing payment thereof or such other evidence of payment reasonably satisfactory to the Administrative Agent.   (e) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.16 shall survive the payment in full of the Obligations, until 30 days after the expiration of the statute of limitations applicable to the collection from the relevant Lender, the relevant Synthetic Investor or the Administrative Agent of the Taxes and Other Taxes to which the obligations under this Section 2.16 relate.   (f) Prior to the Effective Date in the case of each Non-U.S. Financial Institution that is a signatory hereto and, otherwise, on the date such Non-U.S. Financial Institution becomes a Non-U.S. Financial Institution and from time to time thereafter if requested by the Borrower or the Administrative Agent, each Non-U.S. Financial Institution shall provide the Administrative Agent and the Borrower (and, if such Non-U.S. Financial Institution is a Synthetic Investor, the Fronting Lender) with two completed originals of each of the following: (i) Form W-8ECI (claiming exemption from withholding because the income is effectively connected with a U.S. trade or business) (or any successor form), (ii) Form W-8BEN (claiming exemption from withholding tax under an income tax treaty) (or any successor form), (iii) in the case of a Non-U.S. Financial Institution claiming exemption under Sections 871(h) or 881(c) of the Code, a Form W-8BEN (claiming exemption from withholding under the portfolio interest exemption) or any successor form or (iv) any other applicable form, certificate or document prescribed by the IRS certifying as to such Non-U.S. Financial Institution’s entitlement to such exemption from United States withholding tax or reduced rate with respect to all payments to be made to such Non-U.S. Financial Institutions under the Loan Documents. Within a reasonable period following written request therefor from the Borrower, each Non-U.S. Financial Institution (but only as long as such Non-U.S. Financial Institution is able to do so pursuant to applicable Requirements of Law) shall provide to each of the Borrower and the Administrative Agent (and, if such Non-U.S. Financial Institution is a Synthetic Investor, the Fronting Lender) such additional Forms W-8BEN or W-8ECI (or any successor or other applicable form, certificate or document prescribed by the IRS) to the extent necessary as a result of any prior form expiring or becoming inaccurate or obsolete. Unless the Borrower and the Administrative Agent (and, if applicable, the Fronting Lender) have received forms or other documents satisfactory to each of them indicating that payments under any Loan Document to or for a Non-U.S. Financial Institution are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrower or the Administrative Agent (or, if applicable, the Fronting Lender) shall withhold amounts required to be withheld by applicable Requirements of Law from such payments at the applicable statutory rate. The fact that the Fronting Lender shall withhold and pay to the   67 -------------------------------------------------------------------------------- relevant taxing authority any amounts pursuant hereto shall not relieve the Borrower of any of its obligation to pay to the Fronting Lender such amounts. The Fronting Lender shall provide the Administrative Agent and the Borrower with any such form or other document received from any Non-U.S. Synthetic Investor.   (g) Each Lender or Synthetic Investor (other than a Non-U.S. Financial Institution) shall, on or prior to the date of its execution and delivery of the Agreement or, as the case may be, the date such Lender becomes a Lender or such Synthetic Investor becomes a Synthetic Investor, provide to each of the Borrower and the Administrative Agent (and, in the case of a Synthetic Investor, the Fronting Lender) two completed original Forms W-9, unless such Lender or Synthetic Investor notifies the Borrower and the Administrative Agent (and, in the case of a Synthetic Investor, the Fronting Lender) that it is an “exempt recipient,” as defined in Treasury Regulations Section 1.6049-4(c) with respect to which no withholding is required. Each Lender and Synthetic Investor (from time to time following written request therefor from the Borrower, but only for so long as such Lender or Synthetic Investor is able to do so pursuant to applicable Requirements of Law) will provide to each of the Borrower and the Administrative Agent (and, in the case of a Synthetic Investor, the Fronting Lender) additional original Forms W-9 or notification of “exempt recipient” status (or any successor or other applicable form, certificate or document prescribed by the IRS) to the extent necessary as a result of any prior form or notification expiring or becoming inaccurate or obsolete.   (h) (i) For any period with respect to which a Lender has failed to provide the Borrower or the Administrative Agent with the appropriate form or other document described in Section 2.16(f) or (g), as applicable (other than if such failure is due to a change in any applicable Requirement of Law occurring after the date on which a form originally was required to be provided, or if such form is not required under Section 2.16(g), such Lender shall not be entitled to indemnification under Section 2.16(a) or (c) with respect to Taxes imposed by reason of such failure.   (ii) For any period with respect to which a Synthetic Investor has failed to provide the Fronting Lender with the appropriate form or other document described in Section 2.16(f) or (g) (other than if such failure is due to a change in any applicable Requirement of Law occurring after the date on which a form originally was required to be provided, or if such form is not required under Section 2.16(g)), neither such Synthetic Investor nor the Fronting Lender shall be entitled to indemnification under Section 2.16(a) or (c) with respect to Taxes imposed by reason of such failure.   (i) If any Lender or the Administrative Agent shall become aware that it (or, in the case of the Fronting Lender, any Synthetic Investor) is entitled to receive a refund in respect of Taxes or Other Taxes as to which such Lender or the Administrative Agent has received a payment from, or has been indemnified by, the Borrower pursuant to this Section 2.16, it shall promptly notify the Borrower of such refund and shall, within 30 days after receipt of a request by the Borrower, apply (or cause such Synthetic   68 -------------------------------------------------------------------------------- Investor to apply) for such refund at the sole cost and expense of the Loan Parties. If any Lender or the Administrative Agent receives a refund in respect of any Taxes or Other Taxes as to which it has received a payment from or has been indemnified by the Borrower pursuant to this Section 2.16, which refund in the good faith judgment of such Lender or Administrative Agent, as the case may be, is attributable to such payment made by the Borrower, it shall promptly notify the Borrower of such receipt and shall, within 30 days after the later of the receipt of a request by the Borrower or the receipt of such refund (unless such Lender reasonably expects that is shall be required to repay such refund to the relevant tax authority), pay the amount of such refund to the Borrower, net of all out-of-pocket expenses of such Lender and taxes imposed on the Lender or Administrative Agent with respect to such amounts (and, in the case of the Fronting Lender, of the Synthetic Investor), without interest thereon and subject to Section 11.6 (Right of Set-off); provided, however, that the Borrower agrees to return such refund to such Lender or the Administrative Agent promptly upon receipt of written notice in the event that such Lender, the relevant Synthetic Investor or the Administrative Agent is required to repay such refund to the relevant tax authority. Nothing contained in this Section 2.16 shall require any Lender or the Administrative Agent to make available to the Borrower any tax return or any other document containing information that it (or, in the case of the Fronting Lender, the Synthetic Investor) deems to be confidential.   (j) Any Lender claiming any additional amounts payable pursuant to this Section 2.16 shall use its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which would be payable or may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.   Section 2.17 Substitution of Lenders   If (a)(i) any Lender (other than the Fronting Lender) or Synthetic Investor makes a claim under Section 2.14(c) (Increased Costs) or 2.15 (Capital Adequacy), (ii) it becomes illegal for any Lender (other than the Fronting Lender) to continue to fund or make any Eurodollar Rate Loan and such Lender notifies the Borrower pursuant to Section 2.14(d) (Illegality), (iii) the Borrower is required to make any payment pursuant to Section 2.16 (Taxes) that is attributable to a particular Lender (other than the Fronting Lender) or Synthetic Investor, (iv) any Lender (other than the Fronting Lender) becomes a Non-Funding Lender or (v) any Synthetic Investor fails to make the initial payment it is required to make in respect of any Credit-Linked Deposit, (b) in the case of clause (a)(i) above, as a consequence of increased costs in respect of which such claim is made, the effective rate of interest payable to such Lender or Synthetic Investor under this Agreement with respect to its Loans exceeds the effective average rate of interest payable to the Requisite Lenders under this Agreement and (c) Lenders holding at least 75% of the aggregate Commitments (considering, for purpose of this clause (c) that the Commitment of the Fronting Lender has been assigned to the Synthetic Investors in accordance with their Ratable Portion) are not subject to such increased costs or illegality, payment or proceedings (any such Lender or Synthetic Investor, an “Affected   69 -------------------------------------------------------------------------------- Lender”), the Borrower may substitute another financial institution for such Affected Lender hereunder, upon reasonable prior written notice (which written notice must be given within 90 days following the notification to the Borrower of any applicable event described in clauses (a)(i), (ii), (iii) or (iv) above) by the Borrower to the Administrative Agent and the Affected Lender (and, if such Affected Lender is a Synthetic Investor, the Fronting Lender) that the Borrower intends to make such substitution, which substitute financial institution (x) must be an Eligible Assignee and (y) if not already a Lender or Synthetic Investor, must be reasonably acceptable to the Administrative Agent; provided, however, that, if more than one Lender or Synthetic Investor claims increased costs, illegality or right to payment arising from the same act or condition and such claims are received by the Borrower within 30 days of each other, then the Borrower may substitute all, but not (except to the extent the Borrower has already substituted one of such Affected Lenders before the Borrower’s receipt of the other Affected Lenders’ claim) less than all, Lenders and Synthetic Investors making such claims. If the proposed substitute financial institution or other entity meets the conditions set forth in clauses (x) through (y) above and the written notice was properly issued under this Section 2.17, the Affected Lender shall sell and the substitute financial institution or other entity shall purchase, at par plus accrued interest, (and, if such Affected Lender is a Synthetic Investor, the Fronting Lender shall execute all documents necessary to effect such sale and substitution) all rights and claims of such Affected Lender under the Loan Documents and the Credit-Linked Deposit and such substitute financial institution or other entity shall assume and the Affected Lender shall be relieved of its Commitments and all other prior unperformed obligations of the Affected Lender under the Loan Documents or, as the case may be, the Credit-Linked Deposit (other than in respect of any damages (other than exemplary or punitive damages, to the extent permitted by applicable law) in respect of any such unperformed obligations). If such Affected Lender is a Lender hereunder, upon the effectiveness of such sale, purchase and assumption (that, in any event shall be conditioned upon the payment in full by the Borrower in cash of all fees, unreimbursed costs and expenses and indemnities accrued and unpaid through such effective date to such Affected Lender), the substitute financial institution or other entity shall become a “Lender” (or if such Affected Lender is a Synthetic Investor, a “Synthetic Investor”) hereunder for all purposes of this Agreement having a Commitment (if applicable) or Credit-Linked Deposit, as applicable, in the amount of such Affected Lender’s Commitment or Credit-Linked Deposit, as applicable, assumed by it and such Commitment or Credit-Linked Deposit, as applicable, of the Affected Lender shall be terminated; provided, however, that all indemnities under the Loan Documents shall continue in favor of such Affected Lender. If such Affected Lender is a Lender or Synthetic Investor hereunder, it shall execute an Assignment and Acceptance to evidence such transfer; provided, however, that the failure of the Affected Lender to execute such Assignment and Acceptance shall not invalidate such assignment, and such Assignment and Acceptance shall be deemed to be executed upon receipt by such Affected Lender of such payment in full.   70 -------------------------------------------------------------------------------- ARTICLE III   CONDITIONS TO LOANS AND LETTERS OF CREDIT   Section 3.1 Conditions Precedent to Effectiveness   This Agreement, including the covenants and obligations of the Borrower hereunder, the obligation of each Lender to make the Loans, the obligation of each Issuer to Issue Letters of Credit and the obligations of each Synthetic Investor to make its Credit-Linked Deposit, shall not become effective until the date (the “Effective Date”) on which all of the following conditions precedent are satisfied or duly waived in accordance with Section 11.1 (Amendments, Waivers, Etc.):   (a) Deliveries at Closing. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a Responsible Officer of the Borrower, (ii) if requested by any Lender, Promissory Notes substantially in the form of Exhibit B-1 (Form of Promissory Note), each executed and delivered by a Responsible Officer of the Borrower, (iii) each Collateral Document, executed and delivered by a Responsible Officer of the Borrower and each Subsidiary Guarantor, as applicable, and (iv) any intercompany notes evidencing Indebtedness permitted to be incurred pursuant to Section 8.1(f) (Indebtedness) with respect to any outstanding intercompany obligations and advances owed to a Loan Party, executed and delivered by the obligor thereof.   (b) Recapitalization. The Recapitalization shall be consummated substantially concurrently with the closing under the Facilities in accordance with applicable law and consistent with the terms described in this Agreement in all material respects; the Plan of Reorganization and all other related documentation shall be satisfactory to the Administrative Agent in its reasonable discretion (it being understood that the Plan of Reorganization as filed as of the date hereof is satisfactory to the Administrative Agent) and such Plan of Reorganization has not been amended in a manner adverse to the interest of the Lenders and Synthetic Investors without the consent of Requisite Lenders. After giving effect to the Recapitalization, the consummation of the Plan of Reorganization and the other transactions contemplated hereby, the Borrower and its Subsidiaries shall have outstanding no Indebtedness or preferred stock other than Indebtedness permitted pursuant to Section 8.1.   (c) Financial Statements. The Administrative Agent shall have received (i) the Projections, (ii) GAAP audited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of the Borrower for the 2002, 2003 and 2004 fiscal years and (iii) GAAP unaudited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of the Borrower for each subsequent fiscal quarter ended at least 45 days before the Effective Date, which financial statements shall not be materially inconsistent in an adverse manner with the financial statements or forecasts previously provided to the Administrative Agent.   (d) Pro Forma Financial Statements. The Administrative Agent shall have received a pro forma consolidated balance sheet and related pro forma consolidated   71 -------------------------------------------------------------------------------- statement of income of the Borrower as of and for the twelve-month period ending on the last day of the most recently completed four-fiscal quarter period, prepared after giving effect to the Recapitalization as if the Recapitalization had occurred as of such date (in the case of such balance sheet) or at the beginning of such period (in the case of such statement of income), which financial statements shall not be materially inconsistent with the forecasts previously provided to the Administrative Agent.   (e) Receipt of Credit-Linked Deposits. The Fronting Lender shall have received the Credit-Linked Deposits from the Synthetic Investors in an aggregate amount equal to the Fronting Lender’s Commitment under the Synthetic Facility.   (f) Confirmation Order. The Administrative Agent and its counsel shall have received a copy of the order, signed by the U.S. District Court and which has been entered by the clerk of the U.S. District Court on the docket, confirming the Plan of Reorganization (the “Confirmation Order”), which shall be in form and substance reasonably satisfactory to the Administrative Agent and its counsel in their sole discretion.   (g) Plan Effective Date. All conditions precedent to the confirmation of the Plan of Reorganization and the “effective date” (or similar term) set forth in the Plan of Reorganization (the “Plan Effective Date”) shall have been met or waived (provided that any such waiver shall have been consented to by Requisite Lenders if such waiver could reasonably be expected to be materially adverse to the Lenders), each of the Plan Effective Date and substantial consummation of the Plan of Reorganization shall have occurred or shall be scheduled to occur but for the funding of the Facilities, and the Plan of Reorganization and the Confirmation Order shall be in full force and effect.   (h) Collateral Documents. The Administrative Agent shall have received a duly executed Perfection Certificate dated on or prior to the Effective Date (“Perfection Certificate”). The Administrative Agent shall have received the results of a recent Lien and judgment search in each relevant jurisdiction with respect to the Borrower and those of the Subsidiaries that shall be Subsidiary Guarantors, and such search shall reveal no Liens on any of the assets of the Borrower or any of such Subsidiaries except, in the case of Collateral other than Pledged Stock (as defined in the Pledge and Security Agreement), for Liens expressly permitted by Section 8.2 (Liens, Etc.) and except for Liens to be discharged on or prior to the Effective Date pursuant to documentation reasonably satisfactory to the Administrative Agent. The Collateral Documents shall be in full force and effect on the Effective Date, and each document (including each Uniform Commercial Code financing statement) required by law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent for the ratable benefit of the Secured Parties a valid, legal and perfected first-priority Lien on, and security interest in, the Collateral (subject to any Liens expressly permitted by Section 8.2 (Liens, Etc.)) shall have been delivered to the Collateral Agent. The Pledged Stock and the Pledged Notes (each as defined in the Pledge and Security Agreement) shall be duly and validly pledged under the Pledge and Security Agreement to the Administrative Agent for the ratable benefit of the Secured Parties, and certificates representing such pledged Collateral, accompanied by instruments of transfer and stock powers endorsed in blank, shall have been delivered to the Administrative Agent.   72 -------------------------------------------------------------------------------- (i) Legal Opinions. The Administrative Agent shall have received, on behalf of itself, the Collateral Agent, the Syndication Agent, the Co-Documentation Agents, the Lenders, the Synthetic Investors and the Issuers, favorable written opinions of (a) Baker Botts L.L.P., counsel to the Loan Parties, in substantially the form of Exhibit G (Form of Opinion of Counsel for the Loan Parties) and (b) each special and local counsel to the Loan Parties as the Administrative Agent may reasonably request, in each case dated as of the Effective Date and addressed to the Administrative Agent, the Collateral Agent, the Syndication Agent, the Co-Documentation Agents, the Lenders, the Synthetic Investors and the Issuers and addressing such other matters as any Lender or any Synthetic Investor through the Administrative Agent may reasonably request;   (j) Certificates. The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation or other formation documents, including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State (or other appropriate governmental authority) of the state of its organization, and a certificate as to the good standing of each Loan Party as of a recent date, from such Secretary of State (or other governmental authority), except in the case of North County Recycling, Inc.; (ii) a certificate of a an Authorized Officer of each Loan Party dated the Effective Date and certifying (A) that attached thereto is a true and complete copy of the by-laws or similar document of such Loan Party as in effect on the Effective Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the board of directors (or similar governing body) of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party, in the case of the Borrower, the borrowings hereunder, in the case of each Loan Party, the granting of the Liens contemplated to be granted by it under the Collateral Documents and, in the case of each Guarantor, the Guaranteeing of the Obligations as contemplated by the Pledge and Security Agreement, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation or other formation documents of such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; (iii) a certificate of another officer as to the incumbency and specimen signature of the Authorized Officer executing the certificate pursuant to clause (ii) above; and (iv) such other documents as the Administrative Agent may reasonably request;   (k) Solvency. The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower, stating that the Borrower and the Guarantors, taken as a whole, are Solvent as of the Effective Date and after giving effect to the initial Loans and Letters of Credit, the application of the proceeds thereof in accordance with Section 7.9 (Application of Proceeds) and the payment of all estimated legal, accounting and other fees related hereto and thereto;   73 -------------------------------------------------------------------------------- (l) Representations and Warranties; No Defaults. The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower to the effect that (A) the condition set forth in Section 3.2(c) (Conditions Precedent to Each Loan and Letter of Credit) has been satisfied and (B) no litigation not listed on Schedule 4.7 (Litigation) shall have been commenced against any Loan Party or any of its Subsidiaries that would reasonably be expected to have a Material Adverse Effect;   (m) USA PATRIOT Act. To the extent requested, the Agents, the Lenders and the Synthetic Investors shall have received all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the USA Patriot Act.   (n) Fees and Expenses. There shall have been paid to the Administrative Agent, for the account of the Administrative Agent, the Lenders and the Synthetic Investors, as applicable, all fees and expenses (including reasonable fees and expenses of counsel to the Administrative Agent) due and payable on or before the Effective Date.   (o) Consents, Etc. Each of the Borrower and its Subsidiaries shall have received all consents and authorizations required pursuant to any enforceable and material Contractual Obligation with any other Person and shall have obtained all consents and authorizations of, and effected all notices to and filings with, any Governmental Authority, in each case, as may be necessary to allow each of the Borrower and its Subsidiaries lawfully to execute, deliver and perform, in all material respects, their respective obligations hereunder and under and the Loan Documents to which each of them, respectively, is, or shall be, a party and each other agreement or instrument to be executed and delivered by each of them, respectively, pursuant thereto or in connection therewith.   (p) Title Insurance. The Administrative Agent shall have received in respect of each Mortgaged Property a mortgagee’s title insurance policy (or policies) or marked up unconditional binder for such insurance. Each such policy shall (i) be in an amount reasonably satisfactory to the Administrative Agent; (ii) insure that the Mortgage insured thereby creates a valid first Lien on, and security interest in, such Mortgaged Property free and clear of all defects and encumbrances, except as disclosed therein; (iii) name the Collateral Agent, for the benefit of the Secured Parties, as the insured thereunder; (iv) be in the form of ALTA Loan Policy - 1970 Form B (Amended 10/17/70 and 10/17/84) (or equivalent policies), if available; (v) contain such endorsements and affirmative coverage as the Administrative Agent may reasonably request in form and substance acceptable to the Administrative Agent; and (vi) be issued by title companies satisfactory to the Administrative Agent (including any such title companies acting as co-insurers or reinsurers, at the option of the Administrative Agent) (in each such case, a “Title Insurance Company”). The Administrative Agent shall have received evidence satisfactory to it that all premiums in respect of each such policy, all charges for mortgage recording tax, and all related expenses, if any, have been paid. The Administrative Agent shall have received a copy of all recorded documents referred to, or listed as exceptions to title in, the title policy or policies referred to above and a copy of all other material documents affecting the Mortgaged Property.   74 -------------------------------------------------------------------------------- (q) Flood Insurance. If requested by the Administrative Agent, the Administrative Agent shall have received (i) a policy of flood insurance that (A) covers any parcel of improved Mortgaged Property that is located in a flood zone and (B) is written in an amount not less than the outstanding principal amount of the indebtedness secured by such Mortgage that is reasonably allocable to such Mortgaged Property or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less and (ii) confirmation that the Borrower has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board of Governors of the Federal Reserve System of the United States.   (r) Landlord Lien Waivers. The Borrower shall use commercially reasonable efforts to deliver to the Administrative Agent Landlord Lien Waivers with respect to any leased Real Property on which any manufacturing or warehouse facility is located.   Section 3.2 Conditions Precedent to Each Loan and Letter of Credit   The obligation of each Lender on any date (including the Effective Date) to make any Loan and of each Issuer on any date (including the Effective Date) to Issue any Letter of Credit is subject to the satisfaction of each of the following conditions precedent:   (a) Request for Borrowing or Issuance of Letter of Credit. With respect to any Loan, the Administrative Agent shall have received a duly executed Notice of Borrowing (or, in the case of Swing Loans, a duly executed Swing Loan Request), and, with respect to any Letter of Credit, the Administrative Agent and the Issuer shall have received a duly executed Letter of Credit Request.   (b) Request for Borrowing of Delayed Draw Loans. With respect to a draw of Delayed Draw Loans, substantially concurrently with such draw of Delayed Draw Loans, the Administrative Agent shall have received (i) the BWICO Guaranty executed by a Responsible Officer of BWICO, (ii) a valid and enforceable first priority pledge of all of the Borrower’s Stock and certificates representing such pledged Stock, accompanied by stock powers or other comparable instruments of transfer endorsed in blank, (iii) a copy of the certificate of incorporation, including all amendments thereto, of BWICO, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing of BWICO as of recent date, from such Secretary of State; (iv) a certificate of an Authorized Officer of BWICO dated the Delayed Draw Loan Credit Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of BWICO as in effect on the Delayed Draw Loan Credit Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly   75 -------------------------------------------------------------------------------- adopted by the board of directors of BWICO authorizing the execution, delivery and performance of the Loan Documents to which BWICO is a party, the granting of the Liens contemplated to be granted by it under the Collateral Documents and the Guaranteeing of the Obligations as contemplated by the BWICO Guaranty, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate of incorporation of BWICO has not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (iii) above and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection therewith on behalf of BWICO; and (v) a certificate of another officer as to the incumbency and specimen signature of the Authorized Officer executing the certificate pursuant to clause (iv) above.   (c) Representations and Warranties; No Defaults. The following statements shall be true on the date of such Loan or Issuance, both before and after giving effect thereto and, in the case of any Loan, to the application of the proceeds therefrom:   (i) the representations and warranties set forth in Article IV (Representations and Warranties) and in the other Loan Documents shall be true and correct on and as of the Effective Date and shall be true and correct in all material respects on and as of any such date after the Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date; and   (ii) no Default or Event of Default shall have occurred and be continuing.   (d) No Legal Impediments. The making of the Loans or the Issuance of such Letter of Credit on such date does not violate any applicable Requirement of Law on the date of or immediately following such Loan or Issuance of such Letter of Credit and is not enjoined, temporarily, preliminarily or permanently.   Each submission by the Borrower to the Administrative Agent of a Notice of Borrowing or a Swing Loan Request and the acceptance by the Borrower of the proceeds of each Loan requested therein, and each submission by the Borrower to an Issuer of a Letter of Credit Request, and the Issuance of each Letter of Credit requested therein, shall be deemed to constitute a representation and warranty by the Borrower as to the matters specified in clause (c) above on the date of the making of such Loan or the Issuance of such Letter of Credit.   Section 3.3 Determinations of Initial Borrowing Conditions   For purposes of determining compliance with the conditions specified in Section 3.1 (Conditions Precedent to Effectiveness), each Lender and each Synthetic Investor shall be deemed to have consented to, approved, accepted or be satisfied with,   76 -------------------------------------------------------------------------------- each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders or the Synthetic Investors unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender or such Synthetic Investor prior to the initial Borrowing or Issuance hereunder specifying its objection thereto and such Lender shall not have made available to the Administrative Agent such Lender’s Ratable Portion of such Borrowing, or such Synthetic Investor shall not have made its Credit-Linked Deposit with the Fronting Lender.   ARTICLE IV   REPRESENTATIONS AND WARRANTIES   To induce the Lenders, the Issuers, the Synthetic Investors and the Administrative Agent to enter into this Agreement, the Borrower represents and warrants each of the following to the Lenders, the Issuers, the Synthetic Investors and the Administrative Agent, on and as of the Effective Date and the making of the Loans and the other financial accommodations on the Effective Date and on and as of each date as required by Section 3.2(c)(i) (Conditions Precedent to Each Loan and Letter of Credit):   Section 4.1 Corporate Existence; Compliance with Law   Each of the Borrower and the Borrower’s Subsidiaries (except with respect to North County Recycling, Inc for the period from the Effective Date through ten Business Days thereafter (or such longer period approved by the Administrative Agent in its sole discretion); provided this exception shall not apply to clause (c) below) (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) is duly qualified to do business as a foreign corporation and in good standing under the laws of each jurisdiction where such qualification is necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect, (c) has all requisite corporate or other organizational power and authority and the legal right to own, pledge, mortgage and operate its properties, to lease the property it operates under lease and to conduct its business as now or currently proposed to be conducted, (d) is in compliance with its Constituent Documents, (e) is in compliance with all applicable Requirements of Law except where the failure to be in compliance would not, in the aggregate, have a Material Adverse Effect and (f) has all necessary licenses, permits, consents or approvals from or by, has made all necessary filings with, and has given all necessary notices to, each Governmental Authority having jurisdiction, to the extent required for such ownership, operation and conduct, except for licenses, permits, consents, approvals or filings that can be obtained or made by the taking of ministerial action to secure the grant or transfer thereof or the failure of which to obtain or make would not, in the aggregate, have a Material Adverse Effect.   77 -------------------------------------------------------------------------------- Section 4.2 Corporate Power; Authorization; Enforceable Obligations   (a) The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby:   (i) are within such Loan Party’s corporate, limited liability company, partnership or other organizational powers;   (ii) have been or, at the time of delivery thereof pursuant to Article III (Conditions To Loans And Letters Of Credit) will have been duly authorized by all necessary corporate, limited liability company or partnership action, including the consent of shareholders, partners and members where required;   (iii) do not and will not (A) contravene such Loan Party’s or any of its Subsidiaries’ respective Constituent Documents, (B) violate any other Requirement of Law applicable to such Loan Party (including Regulations T, U and X of the Federal Reserve Board), or any order or decree of any Governmental Authority or arbitrator applicable to such Loan Party, (C) conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any lawful Contractual Obligation of such Loan Party or any of its Subsidiaries, other than in the case of this clause (C) any such conflict, breach, default, termination or acceleration that could not reasonably be expected to have a Material Adverse Effect, or (D) result in the creation or imposition of any Lien upon any property of such Loan Party or any of its Subsidiaries, other than those in favor of the Secured Parties pursuant to the Collateral Documents; and   (iv) do not require the consent of, authorization by, approval of, notice to, or filing or registration with, any Governmental Authority or any other Person, other than those listed on Schedule 4.2 (Consents) and that have been or will be, prior to the Effective Date, obtained or made, copies of which have been or will be delivered to the Administrative Agent pursuant to Section 3.1 (Conditions Precedent to Effectiveness), and each of which on the Effective Date will be in full force and effect and, with respect to the Collateral, filings required to perfect the Liens created by the Collateral Documents.   (b) This Agreement has been, and each of the other Loan Documents will have been upon delivery thereof pursuant to the terms of this Agreement, duly executed and delivered by each Loan Party who is a party thereto. This Agreement is, and the other Loan Documents will be, when delivered, the legal, valid and binding obligation of each Loan Party who is a party thereto, enforceable against such Loan Party in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.   78 -------------------------------------------------------------------------------- Section 4.3 Ownership of Borrower; Subsidiaries   (a) All of the outstanding capital stock of the Borrower is validly issued, fully paid and non-assessable.   (b) Set forth on Schedule 4.3 (Ownership of Subsidiaries) is a complete and accurate list showing, as of the Effective Date, all Subsidiaries of the Borrower and, as to each such Subsidiary, the jurisdiction of its organization, the number of shares of each class of Stock authorized (if applicable), the number outstanding on the Effective Date and the number and percentage of the outstanding shares of each such class owned (directly or indirectly) by the Borrower. Except as set forth on Schedule 4.3, no Stock of any Subsidiary of the Borrower is subject to any outstanding option, warrant, right of conversion or purchase of any similar right. Except as set forth on Schedule 4.3, all of the outstanding Stock of each Subsidiary of the Borrower owned (directly or indirectly) by the Borrower has been validly issued, is fully paid and non-assessable (to the extent applicable) and is owned by the Borrower or a Subsidiary of the Borrower, free and clear of all Liens (other than the Lien in favor of the Secured Parties created pursuant to the Pledge and Security Agreement), options, warrants, rights of conversion or purchase or any similar rights. Except as set forth on Schedule 4.3, neither the Borrower nor any such Subsidiary is a party to, or has knowledge of, any agreement restricting the transfer or hypothecation of any Stock of any such Subsidiary, other than the Loan Documents and, with respect to any Subsidiary that is a Permitted Joint Venture, the governing documents of such Permitted Joint Venture. The Borrower does not own or hold, directly or indirectly, any Stock of any Person other than such Subsidiaries and Investments permitted by Section 8.3 (Investments).   Section 4.4 Financial Statements   (a) The interim unaudited financial statements comprising the Financial Summary of Operations for Borrower for the quarter ended September 30, 2005, copies of which have been furnished to each Lender, fairly present in all material respects, subject to the absence of footnote disclosure and normal recurring year-end audit adjustments, the consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the consolidated results of the operations of the Borrower and its Subsidiaries for the period ended on such dates, all in conformity with GAAP.   (b) Except as set forth on Schedule 4.4, neither the Borrower nor any of its Subsidiaries has, as of the Effective Date, any material obligation, contingent liability or liability for taxes, long-term leases (other than operating leases) or unusual forward or long-term commitment that is not reflected in the Financial Statements referred to in clause (a) above or in the notes thereto and not otherwise permitted by this Agreement.   (c) The Projections have been prepared by the Borrower taking into consideration past operations of its business, and reflect projections for the period beginning approximately January 1, 2006 and ending approximately December 31, 2010   79 -------------------------------------------------------------------------------- on a Fiscal Quarter by Fiscal Quarter basis for the first year and on a Fiscal Year by Fiscal Year basis thereafter. The Projections are based upon estimates and assumptions stated therein, all of which the Borrower believes, as of the Effective Date, to be reasonable in light of current conditions and current facts known to the Borrower (other than any necessary adjustments due to fees payable in accordance herewith) and, as of the Effective Date, reflect the Borrower’s good faith estimates of the future financial performance of the Borrower and its Subsidiaries and of the other information projected therein for the periods set forth therein.   Section 4.5 Material Adverse Change   Since December 31, 2004, there has been no Material Adverse Change and there have been no events or developments that, in the aggregate, have had a Material Adverse Effect.   Section 4.6 Solvency   Both before and after giving effect to (a) the Loans and Letter of Credit Obligations to be made or extended on the Effective Date or such other date as Loans and Letter of Credit Obligations requested hereunder are made or extended, (b) the disbursement of the proceeds of such Loans pursuant to the instructions of the Borrower, (c) the consummation of the transactions contemplated hereby and (d) the payment and accrual of all transaction costs in connection with the foregoing, each Loan Party is Solvent.   Section 4.7 Litigation   Except as set forth on Schedule 4.7 (Litigation), there are no pending or, to the knowledge of the Borrower, threatened actions, investigations or proceedings against the Borrower or any of its Subsidiaries before any court, Governmental Authority or arbitrator other than those that, in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Schedule 4.7 (Litigation) lists all litigation pending against any Loan Party as of the Effective Date that, if adversely determined, could be reasonably expected to have a Material Adverse Effect.   Section 4.8 Taxes   All federal income and other material tax returns, reports and statements (collectively, the “Tax Returns”) required to be filed by the Borrower or any of its Tax Affiliates have been filed with the appropriate Governmental Authorities in all jurisdictions in which such Tax Returns are required to be filed, all such Tax Returns are true and correct in all material respects, and all material taxes, charges and other impositions reflected therein or otherwise due and payable have been paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for non-payment thereof except where contested in good faith and by appropriate proceedings if adequate reserves therefor have been established on the books of the Borrower or such Tax Affiliate in conformity with GAAP. The Borrower and each of its Tax Affiliates have withheld and timely paid to the respective Governmental Authorities all material amounts required to be withheld.   80 -------------------------------------------------------------------------------- Section 4.9 Full Disclosure   The Information Memorandum and any other information prepared or furnished by or on behalf of any Loan Party and delivered to the Lenders in writing in connection with this Agreement or the consummation of the transactions contemplated hereunder or thereunder (in each case, taken as a whole) does not, as of the time of delivery of such information (with respect to the Information Memorandum, as of the Effective Date only), contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein or herein not misleading; provided, however, that, to the extent any such information was based upon, or constituted, a forecast or projection, such Loan Party represents only, in respect of such projection or forecast, that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information.   Section 4.10 Margin Regulations   The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Federal Reserve Board), and no proceeds of any Borrowing will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock in contravention of Regulation T, U or X of the Federal Reserve Board.   Section 4.11 No Burdensome Restrictions; No Defaults   (a) Neither the Borrower nor any of its Subsidiaries (i) is a party to any Contractual Obligation (x) the compliance with which could reasonably be expected to have a Material Adverse Effect or (y) the performance of which by any thereof would result in the creation of a Lien (other than a Lien permitted under Section 8.2 (Liens, Etc.)) on the property or assets of any thereof or (ii) is subject to any charter restriction that could reasonably be expected to have a Material Adverse Effect.   (b) Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any Contractual Obligation owed by it, other than, in either case, those defaults that would not reasonably be expected to have a Material Adverse Effect.   (c) No Default or Event of Default has occurred and is continuing.   Section 4.12 Investment Company Act; Public Utility Holding Company Act   Neither the Borrower nor any of its Subsidiaries is (a) 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 or (b) a “holding company,” or an “affiliate” or a “holding company” or a “subsidiary company” of a “holding company,” as each such term is defined and used in the Public Utility Holding Company Act of 1935, as amended.   81 -------------------------------------------------------------------------------- Section 4.13 Use of Proceeds   (a) The proceeds of the (i) Revolving Loans are being used by the Borrower only for working capital needs and for general corporate purposes of the Borrower and its Subsidiaries, including the consummation of the transactions contemplated by the Plan of Reorganization (excluding any payments to be made to the Asbestos PI Trust) and the Recapitalization, and (ii) Letters of Credit are being solely used by the Borrower to support warranties, bid bonds, payment or performance obligations and for other general corporate purposes by the Borrower, its Subsidiaries and Permitted Joint Ventures.   (b) The proceeds of the Delayed Draw Loans are being used by the Borrower only to refinance indebtedness of the Borrower pursuant to the Asbestos PI Trust Note.   Section 4.14 Insurance   All policies of insurance of any kind or nature currently maintained by the Borrower or any of its Subsidiaries, including policies of fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers’ compensation and employee health and welfare insurance, are in full force and effect and are of a nature and provide such coverage as is sufficient and as is customarily carried by businesses of the size and character of such Person.   Section 4.15 Labor Matters   (a) There are no strikes, work stoppages, slowdowns or lockouts pending or, to the Borrower’s knowledge, threatened against or involving the Borrower, any of its Subsidiaries or any Guarantor, other than those that, in the aggregate, would not reasonably be expected to have a Material Adverse Effect.   (b) There are no unfair labor practices, grievances or complaints pending, or, to the Borrower’s knowledge, threatened, against or involving the Borrower, any of its Subsidiaries or any Guarantor, nor, to the Borrower’s knowledge, are there any unfair labor practices, arbitrations or grievances threatened involving the Borrower, any of its Subsidiaries or any Guarantor, other than those that if resolved adversely to the Borrower, such Subsidiary or such Guarantor, as applicable, would not reasonably be expected to have a Material Adverse Effect.   (c) Except as set forth on Schedule 4.15 (Labor Matters), as of the Effective Date, there is no collective bargaining agreement covering any employee of the Borrower or its Subsidiaries. With respect to employees of the Borrower or any of its Subsidiaries not already covered by a collective bargaining agreement set forth on Schedule 4.15 (Labor Matters), as of the Effective Date no union representation question exists with respect to such employees and, to Borrower’s knowledge, no union organization activity is taking place as of the Effective Date.   82 -------------------------------------------------------------------------------- Section 4.16 ERISA   (a) Except as set forth on Schedule 4.16 (ERISA), each Employee Benefit Plan that is intended to qualify under Section 401 of the Code has received a favorable determination letter from the IRS indicating that such Employee Benefit Plan is so qualified and nothing has occurred subsequent to the issuance of such determination letter which would cause such Employee Benefit Plan to lose its qualified status. Any trust created under any Employee Benefit Plan is exempt from tax under the provisions of Section 501 of the Code, except where such failures could not reasonably be expected to have a Material Adverse Effect.   (b) The Borrower, each of its Subsidiaries, each Guarantor and each of their respective ERISA Affiliates is in material compliance with all applicable provisions and requirements of ERISA, the Code and applicable Employee Benefit Plan provisions with respect to each Employee Benefit Plan except for non-compliances that would not reasonably be expected to have a Material Adverse Effect.   (c) With respect to each Title IV Plan and each Multiemployer Plan, the Borrower, each of its Subsidiaries, each Guarantor and each of their respective ERISA Affiliates has made all contributions required under ERISA and the Code and are in material compliance with the minimum funding standard of Section 412 of the Code (in each case, whether or not waived in accordance with Section 412(d) of the Code).   (d) There has been no, nor is there reasonably expected to occur, any ERISA Event other than those that would not reasonably be expected to have a Material Adverse Effect.   (e) Except (i) to the extent required under Section 4980B of the Code or similar state laws, and (ii) with respect to which the aggregate liability, calculated on a FAS 106 basis as of September 30, 2005, does not exceed $100,000,000, no Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) to any retired or former employees, consultants or directors (or their dependents) of the Borrower, any of its Subsidiaries, any Guarantor or any of their respective ERISA Affiliates. None of the Borrower, its Subsidiaries, any Guarantor or any of their respective ERISA Affiliates has incurred or reasonably expects to incur any withdrawal liability with respect to any Multiemployer Plan. The Borrower, each of its Subsidiaries, each Guarantor and each of their ERISA Affiliates has complied with the requirements of Section 515 of ERISA with respect to each Multiemployer Plan and are not in material “default” (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan.   Section 4.17 Environmental Matters   (a) Except as disclosed on Schedule 4.17 (Environmental Matters), the operations of the Borrower and each of its Subsidiaries have been and are in compliance   83 -------------------------------------------------------------------------------- with all Environmental Laws, including obtaining and complying with all required environmental, health and safety Permits, other than non-compliances that, in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.   (b) None of the Borrower or any of its Subsidiaries or any Real Property currently or, to the knowledge of the Borrower, previously owned, operated or leased by or for the Borrower or any of its Subsidiaries is subject to any pending or, to the knowledge of the Borrower, threatened, claim, order, agreement, notice of violation, notice of potential liability or is the subject of any pending or threatened proceeding or governmental investigation under or pursuant to Environmental Laws other than those orders, agreements, notices, proceedings or investigations that, in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.   (c) Except as disclosed on Schedule 4.17 (Environmental Matters), to the knowledge of the Borrower, there are no facts, circumstances or conditions arising out of or relating to the operations or ownership of the Borrower or of Real Property owned, operated or leased by the Borrower or any of its Subsidiaries that are not specifically included in the financial information furnished to the Lenders other than those that, in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.   Section 4.18 Intellectual Property   Except where the failure to do so would not, taken as a whole, reasonably be expected to have a Material Adverse Effect, the Borrower and its Subsidiaries own or license or otherwise have the right to use all licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, copyright applications, franchises, authorizations and other intellectual property rights (including all Intellectual Property as defined in the Pledge and Security Agreement) that are necessary for the operations of their respective businesses, without infringement upon or conflict with the rights of any other Person with respect thereto. Except where the failure to do so would not, taken as a whole, reasonably be expected to have a Material Adverse Effect, no slogan or other advertising device, product, process, method, substance, part or component, or other material now employed, or now contemplated to be employed, by the Borrower or any of its Subsidiaries infringes upon or conflicts with any rights owned by any other Person, and no claim or litigation regarding any of the foregoing is pending or threatened.   Section 4.19 Title; Real Property   (a) Each of the Borrower and its Subsidiaries has valid and indefeasible title to, or valid leasehold interests in, all of its material properties and assets (including Real Property) and good title, or valid leasehold interests in, to all personal property, in each case that is purported to be owned or leased by it, including those reflected on the most recent Financial Statements delivered by the Borrower, and none of such properties and assets is subject to any Lien, except Liens permitted under Section 8.2 (Liens, Etc.). The Borrower and its Subsidiaries have received all deeds,   84 -------------------------------------------------------------------------------- assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and have duly effected all recordings, filings and other actions necessary to establish, protect and perfect the Borrower’s and its Subsidiaries’ right, title and interest in and to all such property, other than those that would not reasonably be expected to result in a Material Adverse Effect.   (b) Set forth on Schedule 4.19(a) (Real Property) is a complete and accurate list, as of the Effective Date, of all (a) owned Real Property with a reasonably estimated Fair Market Value in excess of $3,000,000 showing, as of the Effective Date, the street address, county (or other relevant jurisdiction or state) and the record owner thereof and (b) leased Real Property with annual lease payments in excess of $1,000,000 showing, as of the Effective Date, the street address, county (or other relevant jurisdiction or state) and the landlord name, lease date and lease expiration date.   (c) No portion of any Real Property has suffered any material damage by fire or other casualty loss that has not heretofore been completely repaired and restored to its original condition other than those that would not reasonably be expected to have a Material Adverse Effect. As of the Effective Date, no portion of any Mortgaged Property is located in a special flood hazard area as designated by any federal Governmental Authority other than those for which flood insurance has been provided in accordance with Section 3.1(q) (Flood Insurance).   (d) Except as would not reasonably be expected to have a Material Adverse Effect, (a) each Loan Party has obtained and holds all Permits required in respect of all Real Property and for any other property otherwise operated by or on behalf of, or for the benefit of, such person and for the operation of each of its businesses as presently conducted and as proposed to be conducted, (b) all such Permits are in full force and effect, and each Loan Party has performed and observed all requirements of such Permits, (c) no event has occurred that allows or results in, or after notice or lapse of time would allow or result in, revocation or termination by the issuer thereof or in any other impairment of the rights of the holder of any such Permit, (d) no such Permits contain any restrictions, either individually or in the aggregate, that are materially burdensome to any Loan Party, or to the operation of any of its businesses or any property owned, leased or otherwise operated by such person, (e) each Loan Party reasonably believes that each of its Permits will be timely renewed and complied with, without material expense, and that any additional Permits that may be required of such Person will be timely obtained and complied with, without material expense and (f) the Borrower has no knowledge or reason to believe that any Governmental Authority is considering limiting, suspending, revoking or renewing on materially burdensome terms any such Permit.   (e) None of the Borrower or any of its Subsidiaries has received any notice, or has any knowledge, of any pending, threatened or contemplated condemnation proceeding affecting any Real Property or any part thereof, except those that would not reasonably be expected to have a Material Adverse Effect.   85 -------------------------------------------------------------------------------- (f) Each of the Loan Parties, and, to the knowledge of the Borrower, each other party thereto, has complied with all obligations under all leases of Real Property to which it is a party other than those the failure with which to comply would not reasonably be expected to have a Material Adverse Effect and all such leases are legal, valid, binding and in full force and effect and are enforceable in accordance with their terms other than those the failure of which to so comply with the foregoing would not reasonably be expected to have a Material Adverse Effect. No landlord Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any lease payment under any lease of Real Property other than those that would not reasonably be expected to have a Material Adverse Effect.   (g) There are no pending or, to the knowledge of the Borrower, proposed special or other assessments for public improvements or otherwise affecting any material portion of the owned Real Property, nor are there any contemplated improvements to such owned Real Property that may result in such special or other assessments, other than those that would not reasonably be expected to have a Material Adverse Effect.   ARTICLE V   FINANCIAL COVENANTS   The Borrower agrees with the Lenders, the Issuers, the Synthetic Investors and the Administrative Agent to each of the following as long as any Obligation or any Commitment remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing:   Section 5.1 Maximum Leverage Ratio   The Borrower shall maintain a Leverage Ratio, as determined as of the last day of each Fiscal Quarter set forth below, for the four Fiscal Quarters ending on such day, of not more than the maximum amount set forth below for such Fiscal Quarter:   Fiscal Quarter Ending on --------------------------------------------------------------------------------    Maximum Leverage Ratio -------------------------------------------------------------------------------- March 31, 2006    3.50:1.00 June 30, 2006    3.50:1.00 September 30, 2006    3.50:1.00 December 31, 2006    3.50:1.00 March 31, 2007    3.50:1.00 June 30, 2007    3.50:1.00 September 30, 2007    3.25:1.00 December 31, 2007    3.25:1.00 March 31, 2008    3.25:1.00 June 30, 2008    3.00:1.00 September 30, 2008    2.75:1.00 December 31, 2008 and thereafter    2.50:1.00   86 -------------------------------------------------------------------------------- Section 5.2 Minimum Interest Coverage Ratio   The Borrower shall maintain an Interest Coverage Ratio, as determined as of the last day of each Fiscal Quarter set forth below, for the four Fiscal Quarters ending on such day, of not less than the minimum amount set forth below for such four Fiscal Quarters period:   FOUR FISCAL QUARTER ENDING ON --------------------------------------------------------------------------------    MINIMUM INTEREST COVERAGE RATIO -------------------------------------------------------------------------------- March 31, 2006    3.25:1.00 June 30, 2006    3.25:1.00 September 30, 2006    3.25:1.00 December 31, 2006    3.25:1.00 March 31, 2007    3.25:1.00 June 30, 2007    3.25:1.00 September 30, 2007    3.25:1.00 December 31, 2007    3.25:1.00 March 31, 2008    3.25:1.00 June 30, 2008    3.50:1.00 September 30, 2008    3.75:1.00 December 31, 2008 and thereafter    4.00:1.00   ARTICLE VI   REPORTING COVENANTS   The Borrower agrees with the Lenders, the Synthetic Investors and the Administrative Agent to each of the following, as long as any Obligation or any Commitment remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing:   Section 6.1 Financial Statements   The Borrower shall furnish to the Administrative Agent each of the following:   (a) Quarterly Reports. Within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year (unless such period is extended pursuant to SEC guidelines), consolidated unaudited balance sheets as of the close of such quarter and the related statements of income and cash flow for such quarter and that portion of the Fiscal Year ending as of the close of such quarter, setting forth in comparative form the figures for the corresponding period in the prior year, in each case certified by a Responsible Officer of the Borrower as fairly presenting in all material respects the consolidated financial position of the Borrower and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in accordance with GAAP (subject to the absence of footnote disclosure and normal year-end audit adjustments).   87 -------------------------------------------------------------------------------- (b) Annual Reports. Within 90 days after the end of each Fiscal Year (unless such period is extended pursuant to SEC guidelines), consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal Year and related statements of income and cash flows of the Borrower and its Subsidiaries for such Fiscal Year, all prepared in conformity with GAAP and certified, in the case of such consolidated financial statements, without qualification as to the scope of the audit or as to the Borrower being a going concern by the Borrower’s Accountants, together with the report of such accounting firm stating that (i) such financial statements fairly present in all material respects the consolidated financial position of the Borrower and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except for changes in connection with fresh start accounting or with which the Borrower’s Accountants shall concur and that shall have been disclosed in the notes to the financial statements) and (ii) the examination by the Borrower’s Accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards.   (c) Compliance Certificate. Together with each delivery of any financial statement pursuant to clause (a) or (b) above, a certificate of a Responsible Officer of the Borrower substantially in the form of Exhibit K (each, a “Compliance Certificate”) (i) showing in reasonable detail the calculations used in determining the Leverage Ratio and demonstrating compliance with each of the other financial covenants contained in Article V (Financial Covenants), (ii) identifying any Asset Sale during the Fiscal Quarter to which such Compliance Certificate relates (or, in the case of any Compliance Certificate delivered in connection with the financial statements delivered pursuant to clause (b) above, in the last Fiscal Quarter of such Fiscal Year to which such Compliance Certificate relates) and identifying the aggregate consideration received in connection with each such identified Asset Sale and (iii) stating that no Default or Event of Default has occurred and is continuing or, if a Default or an Event of Default has occurred and is continuing, stating the nature thereof and the action which the Borrower has taken or proposes to take with respect thereto.   (d) Budget. Not later than 90 days after the end of each Fiscal Year, and containing substantially the types of financial information contained in the Projections, (i) the annual budget of the Borrower for the Fiscal Year next succeeding such Fiscal Year then ended reviewed by the Board of Directors of the Borrower and (ii) forecasts prepared by management of the Borrower for each Fiscal Quarter in such next succeeding Fiscal Year, including, in each instance described in clause (ii) above, (x) a projected year-end consolidated balance sheet and income statement and statement of cash flows and (y) a statement of all of the material assumptions on which such forecasts are based.   (e) Management Letters, Etc. Within five Business Days after receipt thereof by any Loan Party, copies of each management letter, exception report or similar letter or report received by such Loan Party from its independent certified public accountants.   88 -------------------------------------------------------------------------------- Section 6.2 Collateral Reporting Requirements   The Borrower shall furnish to the Administrative Agent each of the following:   (a) Updated Corporate Chart. Together with each delivery of any financial statement pursuant to Section 6.1(b) (Financial Statements), a corporate organizational chart or other equivalent list, current as of the date of delivery, in form and substance reasonably acceptable to the Administrative Agent and certified as true, correct and complete by an Authorized Officer of the Borrower, setting forth, for each of the Loan Parties, all Persons subject to Section 7.11 (Additional Collateral and Guaranties), all Subsidiaries of any of them and any joint venture (including Permitted Joint Ventures) entered into by any of the foregoing, (i) its full legal name, (ii) its jurisdiction of organization and organizational number (if any) and (iii) the number of shares of each class of its Stock authorized (if applicable), the number outstanding as of the date of delivery, and the number and percentage of the outstanding shares of each such class owned (directly or indirectly) by the Borrower.   (b) Additional Information. From time to time, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral, all as the Administrative Agent may reasonably request, and in reasonable detail.   (c) Additional Filings. At any time and from time to time, upon the reasonable written request of the Administrative Agent, and at the sole expense of the Loan Parties, duly executed, delivered and recorded instruments and documents for the purpose of obtaining or preserving the full benefits of this Agreement, the Pledge and Security Agreement and each other Loan Document and of the rights and powers herein and therein granted (and each Loan Party shall take such further action as the Administrative Agent may reasonably request for such purpose, including the filing of any financing or continuation statement under the UCC or other similar Requirement of Law in effect in any jurisdiction (whether domestic or foreign) with respect to the security interest created by the Pledge and Security Agreement but excluding (i) the execution and delivery of any control agreements with respect to deposit accounts or securities accounts and (ii) any filings to perfect Liens on intellectual property, other than any such filings under the UCC or with the U.S. Patent and Trademark Office or U.S. Copyright Office.   The reporting requirements set forth in this Section 6.2 are in addition to, and shall not modify and are not in replacement of, any rights and other obligation set forth in any Loan Document (including notice and reporting requirements) and satisfaction of the reporting obligations in this Section 6.2 shall not, by itself, operate as an update of any Schedule or any schedule of any other Loan Document and shall not cure, or otherwise affect in any way, any Default or Event of Default, including any failure of any representation or warranty of any Loan Document to be correct in any respect when made.   89 -------------------------------------------------------------------------------- Section 6.3 Default Notices   Promptly and in any event within five Business Days after a Responsible Officer of the Borrower obtains actual knowledge of the existence of any Default or Event of Default, the Borrower shall give the Administrative Agent notice specifying the nature of such Default or Event of Default or other event, including the anticipated effect thereof, which notice, if given by telephone, shall be promptly confirmed in writing on the next Business Day.   Section 6.4 Litigation   Promptly after a Responsible Officer of the Borrower obtains actual knowledge of the commencement thereof, the Borrower shall give the Administrative Agent written notice of the commencement of all actions, suits and proceedings before any domestic or foreign Governmental Authority or arbitrator, regarding the Borrower, any of its Subsidiaries or any Permitted Joint Venture that (i) seeks injunctive or similar relief that, in the reasonable judgment of the Borrower, if adversely determined, would reasonably be expected to result in a Material Adverse Effect or (ii) in the reasonable judgment of the Borrower would expose the Borrower, such Subsidiary or such Permitted Joint Venture to liability in an amount aggregating $20,000,000 or more or that, if adversely determined, would reasonably be expected to have a Material Adverse Effect.   Section 6.5 Labor Relations   Promptly after a Responsible Officer of the Borrower has actual knowledge of the same, the Borrower shall give the Administrative Agent written notice of (a) any material labor dispute to which the Borrower, any of its Subsidiaries, any Guarantors or any Permitted Joint Venture is a party, including any strikes, lockouts or other material disputes relating to any of such Person’s plants and other facilities, provided that such dispute, strike or lockout involves a work stoppage exceeding 30 days, (b) any material Worker Adjustment and Retraining Notification Act or related liability incurred with respect to the closing of any plant or other facility of any such Person affecting 300 or more employees of the Borrower and its Subsidiaries and (c) any union organization activity with respect to employees of the Borrower or any of its Subsidiaries not covered by a collective bargaining agreement as of the Effective Date.   Section 6.6 Tax Returns   Upon the reasonable request of any Lender or any Synthetic Investor, in each case through the Administrative Agent, the Borrower shall provide copies of all federal, state, local and foreign tax returns and reports filed by the Borrower, any of its Subsidiaries or any Permitted Joint Venture in respect of taxes measured by income (excluding sales, use and like taxes).   Section 6.7 Insurance   As soon as is practicable and in any event within 90 days after the end of each Fiscal Year, the Borrower shall furnish the Administrative Agent with a report on   90 -------------------------------------------------------------------------------- the standard “Acord” form outlining all material insurance coverage maintained as of the date of such report by the Borrower, its Subsidiaries and Permitted Joint Ventures and the duration of such coverage.   Section 6.8 ERISA Matters   The Borrower shall furnish the Administrative Agent each of the following:   (a) promptly and in any event within 30 days after a Responsible Officer of the Borrower knows, or has reason to know, that any ERISA Event has occurred that, alone or together with any other ERISA Event, would reasonably be expected to result in liability of the Borrower, any Subsidiary, any Guarantor and/or any ERISA Affiliate in an aggregate amount exceeding $7,500,000, written notice describing the nature thereof, what action the Borrower, any of its Subsidiaries, any Guarantor or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known by such Responsible Officer, any action taken or threatened by the IRS, the Department of Labor or the PBGC with respect to such event;   (b) promptly and in any event within 10 days after a Responsible Officer of the Borrower knows, or has reason to know, that a request for a minimum funding waiver under Section 412 of the Code has been filed with respect to any Title IV Plan, a written statement of an Authorized Officer of the Borrower describing such waiver request and the action, if any, the Borrower, its Subsidiaries and ERISA Affiliates propose to take with respect thereto and a copy of any notice filed with the PBGC or the IRS pertaining thereto;   (c) simultaneously with the date that the Borrower, any of its Subsidiaries or any ERISA Affiliate files with the PBGC a notice of intent to terminate any Title IV Plan, if, at the time of such filing, such termination would require material additional contributions in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA, a copy of each notice; and   (d) promptly, copies of (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower, any of its Subsidiaries, any Guarantor or any of their respective ERISA Affiliates with the IRS with respect to each Title IV Plan; (ii) all notices received by the Borrower, any of its Subsidiaries, any Guarantor or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (iii) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as the Administrative Agent shall reasonably request.   Section 6.9 Environmental Matters   The Borrower shall provide the Administrative Agent promptly, and in any event within 10 Business Days after any Responsible Officer of the Borrower obtains actual knowledge of any of the following, written notice of each of the following:   91 -------------------------------------------------------------------------------- (a) that any Loan Party is or may be liable to any Person as a result of a Release or threatened Release that would reasonably be expected to subject such Loan Party to Environmental Liabilities and Costs of $10,000,000 or more;   (b) the receipt by any Loan Party of notification that any material real or personal property of such Loan Party is or is reasonably likely to be subject to any Environmental Lien;   (c) the receipt by any Loan Party of any notice of violation of or potential liability under, or knowledge by a Responsible Officer of the Borrower that there exists a condition that would reasonably be expected to result in a violation of or liability under, any Environmental Law, except for violations and liabilities the consequence of which, in the aggregate, would not be reasonably likely to subject the Loan Parties collectively to Environmental Liabilities and Costs of $10,000,000 or more; and   (d) promptly following reasonable written request by any Lender or any Synthetic Investor, in each case through the Administrative Agent, a report providing an update of the status of any environmental, health or safety compliance, hazard or liability issue identified in any notice or report delivered pursuant to this Section 6.9.   Section 6.10 Patriot Act Information   Each Lender, each Synthetic Investor and the Administrative Agent (for itself and not on behalf of any Lender or Synthetic Investor) hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender, Synthetic Investor or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Patriot Act. The Borrower shall promptly, following a request by any Agent, any Lender or any Synthetic Investor, provide all documentation and other information that such Agent, such Lender or such Synthetic Investor reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the Patriot Act.   Section 6.11 Other Information   The Borrower shall provide the Administrative Agent, any Lender or any Synthetic Investor with such other information respecting the business, properties, condition, financial or otherwise, or operations of the Borrower, any of its Subsidiaries or any Permitted Joint Venture as the Administrative Agent or such Lender or Synthetic Investor, in each case through the Administrative Agent, may from time to time reasonably request. The Administrative Agent shall provide copies of any written information provided to it pursuant to this Article VI (Reporting Covenants) to any Lender requesting the same. Within ten Business Days after the Effective Date (or such   92 -------------------------------------------------------------------------------- longer period approved by the Administrative Agent in its sole discretion), the Borrower shall have provided the Administrative Agent with a good standing certificate and other documents required by Section 3.1(j)(i) with respect to North County Recycling, Inc.   ARTICLE VII   AFFIRMATIVE COVENANTS   The Borrower agrees with the Lenders, the Synthetic Investors and the Administrative Agent to each of the following, as long as any Obligation or any Commitment remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing:   Section 7.1 Preservation of Corporate Existence, Etc.   The Borrower shall, and shall cause each of its Subsidiaries to, preserve and maintain its legal existence, rights (charter and statutory) and franchises, except as permitted by Sections 8.3 (Investments), 8.4 (Sale of Assets) and 8.6 (Fundamental Changes) and except if, in the reasonable business judgment of the Borrower, it is in the business interest of the Borrower or such Subsidiary not to preserve and maintain such rights (charter and statutory) and franchises, and such failure to preserve the same would not reasonably be expected to have a Material Adverse Effect and would not reasonably be expected to materially affect the interests of the Secured Parties under the Loan Documents or the rights and interests of any of them in the Collateral.   Section 7.2 Compliance with Laws, Etc.   The Borrower shall, and shall cause each of its Subsidiaries to, comply with all applicable Requirements of Law, Contractual Obligations and Permits, except where the failure so to comply would not reasonably be expected to have a Material Adverse Effect.   Section 7.3 Conduct of Business   The Borrower shall, and shall cause each of its Subsidiaries to, (a) conduct its business in the ordinary course (except for non-material changes in the nature or conduct of its business as carried on as of the Effective Date) and (b) use its reasonable efforts, in the ordinary course, to preserve its business and the goodwill and business of the customers, suppliers and others having business relations with the Borrower or any of its Subsidiaries, except where the failure to comply with the covenants in each of clauses (a) and (b) above would not reasonably be expected to have a Material Adverse Effect.   Section 7.4 Payment of Taxes, Etc.   The Borrower shall, and shall cause each of its Subsidiaries to, pay and discharge before the same shall become delinquent, all lawful governmental claims, taxes, assessments, charges and levies, except where (a) contested in good faith, by   93 -------------------------------------------------------------------------------- proper proceedings and adequate reserves therefor have been established on the books of the Borrower or the appropriate Subsidiary in conformity with GAAP or (b) the failure to so pay and discharge would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.   Section 7.5 Maintenance of Insurance   The Borrower shall, and shall cause each of its Subsidiaries to, (a) maintain insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as, in the reasonable determination of the Borrower, is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates and (b) cause all such insurance to name the Collateral Agent on behalf of the Secured Parties as additional insured (with respect to liability and property policies), loss payee (with respect to property policies) or lender’s loss payee (with respect to property policies), as appropriate, and to provide that no cancellation, material addition in amount or material change in coverage shall be effective until after 30 days’ written notice thereof to the Administrative Agent.   Section 7.6 Access   The Borrower shall from time to time during normal business hours, and subject to national security and defense requirements of any Governmental Authority, permit the Administrative Agent, the Synthetic Investors and the Lenders, or any agents or representatives thereof, within five Business Days after written notification of the same (except that during the continuance of an Event of Default, no such notice shall be required) to (a) examine and make copies of and abstracts from the records and books of account of the Borrower and each of its Subsidiaries, (b) visit the properties of the Borrower and each of its Subsidiaries, (c) discuss the affairs, finances and accounts of the Borrower and each of its Subsidiaries with any of their respective officers or directors; provided, that the Borrower will not be required to permit any examination or visit as set forth in clauses (a) and (b) above with respect to each of the Administrative Agent, the Synthetic Investors and the Lenders (or any agents or representatives thereof) (i) within the twelve-month period following the date of the most recent examination or visit by any Synthetic Investor, any Lender or the Administrative Agent (or any agents or representatives thereof), as applicable, unless an Event of Default has occurred and is continuing and (ii) unless such visit is coordinated through the Administrative Agent.   Section 7.7 Keeping of Books   The Borrower shall, and shall cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made in conformity with GAAP of the financial transactions and assets and business of the Borrower and each such Subsidiary.   94 -------------------------------------------------------------------------------- Section 7.8 Maintenance of Properties, Etc.   The Borrower shall, and shall cause each of its Subsidiaries to, maintain and preserve (a) in good working order and condition (ordinary wear and tear excepted) all of its properties necessary in the conduct of its business, (b) all rights, permits, licenses, approvals and privileges (including all Permits) necessary in the conduct of its business and (c) all Material Intellectual Property, except where failure to so maintain and preserve the items set forth in clauses (a), (b) and (c) above would not reasonably be expected to have a Material Adverse Effect.   Section 7.9 Application of Proceeds   The Borrower shall use the entire amount of the proceeds of the Loans as provided in Section 4.13 (Use of Proceeds).   Section 7.10 Environmental   (a) The Borrower shall, and shall cause each of its Subsidiaries to, exercise reasonable due diligence in order to comply in all material respects with all Environmental Laws.   (b) The Borrower agrees that the Administrative Agent may, from time to time, retain, at the expense of the Borrower, an independent professional consultant reasonably acceptable to the Borrower to review any report relating to Contaminants prepared by or for the Borrower and to conduct its own investigation (the scope of which investigation shall be reasonable based upon the circumstances) of any property currently owned, leased, operated or used by the Borrower or any of its Subsidiaries, if (x) a Default or an Event of Default shall have occurred and be continuing, or (y) the Administrative Agent reasonably believes (1) that an occurrence relating to such property is likely to give rise to any Environmental Liabilities and Costs or (2) that a violation of an Environmental Law on or around such property has occurred or is likely to occur, which could, in either such case, reasonably be expected to result in Environmental Liabilities and Costs in excess of $10,000,000, provided that, unless an Event of Default shall have occurred and be continuing, such consultant shall not drill on any property of the Borrower or any of its Subsidiaries without the Borrower’s prior written consent. Borrower shall use its reasonable efforts to obtain for the Administrative Agent and its agents, employees, consultants and contractors the right, upon reasonable notice to Borrower, to enter into or on to the facilities currently owned, leased, operated or used by Borrower or any of its Subsidiaries to perform such tests on such property as are reasonably necessary to conduct such a review and/or investigation. Any such investigation of any property shall be conducted, unless otherwise agreed to by Borrower and the Administrative Agent, during normal business hours and, shall be conducted so as not to unreasonably interfere with the ongoing operations at any such property or to cause any damage or loss at such property. Borrower and the Administrative Agent hereby acknowledge and agree that any report of any investigation conducted at the request of the Administrative Agent pursuant to this subsection will be obtained and shall be used by the Administrative Agent and the Lenders for the purposes of the Lenders’   95 -------------------------------------------------------------------------------- internal credit decisions, to monitor the Loans and to protect the Lenders’ security interests created by the Loan Documents, and the Administrative Agent and the Lenders hereby acknowledge and agree any such report will be kept confidential by them to the extent permitted by law except as provided in the following sentence. The Administrative Agent agrees to deliver a copy of any such report to Borrower with the understanding that Borrower acknowledges and agrees that (i) it will indemnify and hold harmless the Administrative Agent and each Lender from any costs, losses or liabilities relating to Borrower’s use of or reliance on such report, (ii) neither Administrative Agent nor any Lender makes any representation or warranty with respect to such report, and (iii) by delivering such report to Borrower, neither the Administrative Agent nor any Lender is requiring or recommending the implementation of any suggestions or recommendations contained in such report.   (c) Promptly after a Responsible Officer of the Borrower obtains actual knowledge thereof, the Borrower shall advise the Administrative Agent in writing and in reasonable detail of (i) any Release or threatened Release of any Contaminants required to be reported by Borrower or its Subsidiaries, to any Governmental Authorities under any applicable Environmental Laws and which would reasonably be expected to have Environmental Liabilities and Costs in excess of $10,000,000, (ii) any and all written communications with respect to any pending or threatened claims under Environmental Law in each such case which, individually or in the aggregate, have a reasonable possibility of giving rise to Environmental Liabilities and Costs in excess of $10,000,000, (iii) any Remedial Action performed by Borrower or any other Person in response to (x) any Contaminants on, under or about any property, the existence of which has a reasonable possibility of resulting in Environmental Liabilities and Costs in excess of $10,000,000, or (y) any other Environmental Liabilities and Costs in excess of $10,000,000 that could result in Environmental Liabilities and Costs in excess of $10,000,000, (iv) discovery by Borrower or its Subsidiaries of any occurrence or condition on any material property that could cause Borrower’s or its Subsidiaries’ interest in any such property to be subject to any material restrictions on the ownership, occupancy, transferability or use thereof under any applicable Environmental Laws or Environmental Liens, and (v) any written request for information from any Governmental Authority that fairly suggests such Governmental Authority is investigating whether Borrower or any of its Subsidiaries may be potentially responsible for a Release or threatened Release of Contaminants which has a reasonable possibility of giving rise to Environmental Liabilities and Costs in excess of $10,000,000.   (d) Borrower shall promptly notify the Administrative Agent of (i) any proposed acquisition of stock, assets, or property by Borrower or any of its Subsidiaries that would reasonably be expected to expose Borrower or any of its Subsidiaries to, or result in Environmental Liabilities and Costs in excess of $10,000,000 and (ii) any proposed action to be taken by Borrower or any of its Subsidiaries to commence manufacturing, industrial or other similar operations that would reasonably be expected to subject Borrower or any of its Subsidiaries to additional Environmental Laws, that are materially different from the Environmental Laws applicable to the operations of Borrower or any of its Subsidiaries as of the Effective Date.   96 -------------------------------------------------------------------------------- (e) Borrower shall, at its own expense, provide copies of such documents or information as the Administrative Agent may reasonably request in relation to any matters disclosed pursuant to this subsection.   (f) To the extent required by Environmental Laws or Governmental Authorities under applicable Environmental Laws, Borrower shall promptly take, and shall cause each of its Subsidiaries promptly to take, any and all necessary Remedial Action in connection with the presence, handling, storage, use, disposal, transportation or Release or threatened Release of any Contaminants on, under or affecting any property in order to comply in all material respects with all applicable Environmental Laws and Governmental Authorizations. In the event Borrower or any of its Subsidiaries undertakes any Remedial Action with respect to the presence, Release or threatened Release of any Contaminants on or affecting any property, Borrower or any of its Subsidiaries shall conduct and complete such Remedial Action in material compliance with all applicable Environmental Laws, and in material accordance with the applicable policies, orders and directives of all relevant Governmental Authorities except when, and only to the extent that, Borrower or any such Subsidiaries’ liability for such presence, handling, storage, use, disposal, transportation or Release or threatened Release of any Contaminants is being contested in good faith by Borrower or any of such Subsidiaries. In the event Borrower fails to take required actions to address such Release or threatened Release of Contaminants or to address a violation of or liability under Environmental Law, the Administrative Agent may, upon providing the Borrower with 5 Business Days’ prior written notice, enter the property and, at Borrower’s sole expense, perform whatever action the Administrative Agent reasonably deems prudent to rectify the situation.   Section 7.11 Additional Collateral and Guaranties   To the extent not delivered to the Administrative Agent on or before the Effective Date, the Borrower agrees to do promptly each of the following:   (a) execute and deliver to the Administrative Agent such amendments to the Collateral Documents or enter into such new Collateral Documents as the Administrative Agent deems necessary or advisable in order to grant to the Administrative Agent, for the ratable benefit of the Secured Parties, a perfected first-priority security interest in the Stock and Stock Equivalents and other debt Securities of any Subsidiary of the Borrower that are owned by the Borrower or any of its Domestic Subsidiaries; provided, however, that in no event shall the Borrower or any of its Domestic Subsidiaries be required to pledge in excess of 66% of the outstanding Voting Stock (and 100% of the outstanding non-Voting Stock) of any Foreign Subsidiary or any of the stock of any Subsidiary of such Foreign Subsidiary;   (b) deliver to the Administrative Agent the certificates (if any) representing such Stock and Stock Equivalents and other debt Securities, together with (A) in the case of such certificated Stock and Stock Equivalents, undated stock powers or other instruments of transfer endorsed in blank and (B) in the case of such certificated debt Securities, endorsed in blank, in each case executed and delivered by a Responsible Officer of the Borrower or such Subsidiary, as the case may be;   97 -------------------------------------------------------------------------------- (c) in the case of any Wholly-Owned Subsidiary of any Loan Party that is a Domestic Subsidiary, cause such Wholly-Owned Subsidiary (i) to become a party to the Pledge and Security Agreement and the applicable Collateral Documents and (ii) to take such actions necessary or advisable to grant to the Administrative Agent for the ratable benefit of the Secured Parties a perfected security interest in the Collateral described in the Collateral Documents with respect to such Subsidiary, including the filing of UCC financing statements in such jurisdictions as may be required by the Collateral Documents or by law or as may be reasonably requested by the Administrative Agent; and   (d) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Agent.   Section 7.12 Real Property   With respect to any fee interest in any Collateral consisting of Real Property with a reasonably estimated Fair Market Value of $3,000,000 or more or any lease of Collateral consisting of Real Property acquired, or leased for more than $1,000,000 annually, after the Effective Date by the Borrower or any other Loan Party, Borrower or the applicable Loan Party shall promptly (and, in any event, within five Business Days following the date of such acquisition) (i) execute and deliver a first priority Mortgage (subject only to Liens permitted by this Agreement and such Mortgage) in favor of the Collateral Agent, for the benefit of the Secured Parties, covering such Real Property and complying with the provisions herein and in the Collateral Documents, (ii) provide the Secured Parties with title insurance in an amount at least equal to the purchase price of such Real Property (or such other amount as the Administrative Agent shall reasonably specify), and if applicable, flood insurance and lease estoppel certificates, all in accordance with the standards for deliveries contemplated on the Effective Date, as described in Sections 3.1(p) through (r) hereof, (iii) if requested by the Administrative Agent, deliver to the Administrative Agent and the Collateral Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent and the Collateral Agent, (iv) if requested by the Administrative Agent, use commercially reasonable efforts to obtain Landlord Lien Waivers for each Real Property leasehold interest on which a manufacturing facility or warehouse or other facility where Collateral is stored or held; provided, however that no such Landlord Lien Waiver shall be required for any location at which Collateral is stored or located unless the aggregate value of Collateral stored or held at such location exceeds $1,000,000.   98 -------------------------------------------------------------------------------- Section 7.13 Interest Rate Protection   The Borrower shall ensure that for at least two years following the Effective Date no less than 50% of the Borrower’s long-term Indebtedness (excluding any Borrowings of Revolving Loans) effectively bears interest at a fixed rate, either by its terms or through the Borrower entering into, as promptly as practicable after the funding of Delayed Draw Loans (and in any event no later than the 180th day after such funding), Hedging Contracts reasonably acceptable to the Administrative Agent.   ARTICLE VIII   NEGATIVE COVENANTS   The Borrower agrees with the Lenders, the Synthetic Investors and the Administrative Agent to each of the following, as long as any Obligation or any Commitment remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing:   Section 8.1 Indebtedness   The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except for the following:   (a) the Secured Obligations;   (b) Indebtedness existing on the Effective Date and disclosed on Schedule 8.1 (Existing Indebtedness);   (c) Guaranty Obligations incurred by the Borrower or any Guarantor in respect of Indebtedness of the Borrower or any Guarantor that is permitted by this Section 8.1 (other than clause (g) below);   (d) Capital Lease Obligations and purchase money Indebtedness incurred by the Borrower or a Subsidiary of the Borrower to finance the acquisition of fixed assets; provided, however, that the Capital Expenditure related thereto is otherwise permitted by Section 5.4 (Capital Expenditures) and that the aggregate principal amount of all such Capital Lease Obligations and purchase money Indebtedness outstanding at any time shall not exceed $15,000,000 at any time;   (e) Renewals, extensions, refinancings and refundings of Indebtedness permitted by clause (b) or (d) above or this clause (e); provided, however, that any such renewal, extension, refinancing or refunding is in an aggregate principal amount not greater than the principal amount of (plus reasonable fees, expenses and any premium incurred in connection with the renewal, extension, refinancing or refunding of such Indebtedness), and is on terms that in the aggregate are not materially less favorable to the Borrower or such Subsidiary, including as to weighted average maturity, than the Indebtedness being renewed, extended, refinanced or refunded;   99 -------------------------------------------------------------------------------- (f) Indebtedness arising from intercompany loans: (i) from the Borrower to any Subsidiary Guarantor; (ii) from any Subsidiary of the Borrower to the Borrower or any Subsidiary Guarantor; (iii) from any Subsidiary of the Borrower that is not a Loan Party to any other Subsidiary of the Borrower that is not a Loan Party; (iv) from the Borrower or any Subsidiary Guarantor to any Permitted Joint Venture that is a Subsidiary of the Borrower or to any Subsidiary of the Borrower that is not a Subsidiary Guarantor; or (v) from MII or any Affiliate of MII (other than the Borrower or a Subsidiary of the Borrower) to the Borrower or any Subsidiary of the Borrower; provided, however, that (x) all such Indebtedness (other than the Indebtedness described in clause (iii) of this clause (f)) shall be evidenced by promissory notes in the form of Exhibit J and all such notes shall be subject to a first priority Lien pursuant to the Pledge and Security Agreement if the payee is a Loan Party, (y) all such Indebtedness (other than the Indebtedness described in clause (iii) of this clause (f)) shall be Subordinated Debt and, in the case of Indebtedness described in clause (v) only, shall not permit any cash payments of any kind prior to its maturity (unless otherwise permitted pursuant to Section 8.5(e)), and (z) any payment by any such Subsidiary Guarantor under any guaranty of the Obligations shall result in a pro tanto reduction of the amount of any Indebtedness owed by such Subsidiary to the Borrower or to any of its Subsidiaries for whose benefit such payment is made; provided, further that, in each case, the Investment in the intercompany loan by the lender thereof is permitted under Section 8.3 (Investments);   (g) Non-Recourse Indebtedness;   (h) Indebtedness or other liability incurred or assumed by the Borrower or any of its Subsidiaries in connection with a Permitted Acquisition;   (i) other unsecured Indebtedness of the Borrower and its Subsidiaries in an aggregate principal amount not exceeding $20,000,000 at any time outstanding;   (j) (x) Indebtedness of the Borrower in the form of a promissory note in an aggregate principal amount of up to $250,000,000 payable to the Asbestos PI Trust (the “Asbestos PI Trust Note”), and (y) only to the extent there have been no Borrowings of Delayed Draw Loans, the refinancing of the Asbestos PI Trust Note with the issuance of senior (or subordinated) unsecured notes that (A) do not impose any financial covenants on the Borrower or any of its Subsidiaries that are materially more burdensome than the covenants set forth in this Agreement, (B) do not require any scheduled payment on account of principal (whether by redemption, purchase, retirement, defeasance, set-off or otherwise) prior to the date that is six months after the Synthetic Facility Termination Date, (C) have a weighted average life to maturity no shorter than the weighted average life to maturity of the Synthetic Facility, (D) are in an aggregate principal amount not to exceed the amounts then owing (or that may become owing) by the Borrower pursuant to the Asbestos PI Trust Note, and that are sufficient to pay in full, retire and cancel the Asbestos PI Trust Note, plus any reasonable fees and expenses in connection with such issuance of senior (or subordinated) unsecured notes and (E) contain terms and conditions that are customary for such transactions; provided, that prior to any such refinancing BWICO shall have entered into an agreement with the Administrative Agent, for the benefit of the Secured Parties, on terms and conditions reasonably satisfactory to the Administrative Agent, which provides that BWICO shall not pledge or otherwise encumber the Borrower’s Stock;   100 -------------------------------------------------------------------------------- (k) Indebtedness of Foreign Subsidiaries in an aggregate principal amount not to exceed $20,000,000;   (l) Indebtedness with respect to industrial revenue bonds in an aggregate principal amount not to exceed $20,000,000; provided, any such Indebtedness shall be secured only by the property purchased, acquired or constructed with the proceeds of such Indebtedness;   (m) the Contingent MI Payment; provided, however, that such Indebtedness shall only be paid to the extent not previously paid by MI or a Subsidiary of MI (other than the Borrower or any of its Subsidiaries) and may be paid only with the proceeds of (i) a cash capital contribution from MI or a Subsidiary of MI (other than the Borrower or any of its Subsidiaries) to the Borrower in an aggregate amount of not less than $355,000,000 less any amounts permitted by clause (ii) below to be used to pay a portion of the Contingent MI Payment to the extent actually paid and (ii) internally generated cash of the Borrower and its Subsidiaries plus any cash tax refunds received by the Borrower and its Subsidiaries; provided that (1) the Borrower shall have complied with the provisions of Section 2.9(c) and Section 2.9(e), (2) the amount of the internally generated cash flow of the Borrower and its Subsidiaries so used shall not be greater than the Retained Excess Cash Flow, (3) immediately prior to and after giving effect to the making of any such payment, no Revolving Loans shall be outstanding, and (4) after giving effect to any such payment, the aggregate unrestricted cash and Cash Equivalents of the Borrower and its Subsidiaries will not be less than $25,000,000; and   (n) Indebtedness under or in respect of Hedging Contracts that are not speculative in nature.   Section 8.2 Liens, Etc.   The Borrower shall not, and shall not permit any of its Subsidiaries to, create or suffer to exist any Lien upon or with respect to any of their respective properties or assets, whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any right to receive income, except for the following:   (a) Liens created pursuant to the Loan Documents;   (b) Liens existing on the Effective Date and disclosed on Schedule 8.2 (Existing Liens);   (c) Customary Permitted Liens;   (d) Liens granted by the Borrower or any Subsidiary of the Borrower under a Capital Lease and Liens to which any property is subject at the time, on or after the Effective Date, of the Borrower’s or such Subsidiary’s acquisition thereof in accordance with this Agreement, in each case securing Indebtedness permitted under Section 8.1(d) (Indebtedness) and limited to the property purchased (and proceeds thereof) with the proceeds subject to such Capital Lease;   101 -------------------------------------------------------------------------------- (e) purchase money security interests in real property, improvements thereto or equipment (including any item of equipment purchased in connection with a particular construction project that the Borrower or a Subsidiary expects to sell to its customer with respect to such project and that, pending such sale, is classified as inventory) hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any of its Subsidiaries; provided, however, that (i) such security interests secure purchase money Indebtedness permitted under Section 8.1(d) (Indebtedness) and are limited to the property purchased with the proceeds of such purchase money Indebtedness, (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within ninety days of such acquisition or construction, (iii) the Indebtedness secured thereby does not exceed the lesser of the cost or Fair Market Value of such real property, improvements or equipment at the time of such acquisition or construction and (iv) such security interests do not apply to any other property (other than proceeds of such acquired or constructed property) or assets of the Borrower or any of its Subsidiaries;   (f) any Lien securing the renewal, extension, refinancing or refunding of any Indebtedness secured by any Lien permitted by clause (b), (d) or (e) above or this clause (f) without any material change in the assets subject to such Lien;   (g) Liens in favor of lessors securing operating leases permitted hereunder;   (h) Liens securing Non-Recourse Indebtedness permitted under Section 8.1(g) (Indebtedness) on the assets of the Subsidiary or Permitted Joint Venture financed by such Non-Recourse Indebtedness;   (i) Liens arising out of judgments or awards and not constituting an Event of Default under Section 9.1(g) (Events of Default);   (j) Liens encumbering inventory, work-in-process and related property in favor of customers or suppliers securing obligations and other liabilities to such customers or suppliers (other than Indebtedness) to the extent such Liens are granted in the ordinary course of business and are consistent with past business practices;   (k) Liens encumbering assets of Foreign Subsidiaries and securing Indebtedness permitted by Section 8.1(k);   (l) Liens securing Indebtedness permitted by Section 8.1(l) (Indebtedness); provided, such Liens shall be limited to the property purchased, acquired or constructed with the proceeds of such Indebtedness;   (m) Liens with respect to foreign exchange netting arrangements to the extent incurred in the ordinary course of business and consistent with past business practices; provided, that the aggregate outstanding amount of all such obligations and liabilities secured by such Liens shall not exceed $15,000,000 at any time; and   102 -------------------------------------------------------------------------------- (n) Liens not otherwise permitted by the foregoing clauses of this Section 8.2 securing obligations or other liabilities (other than Indebtedness) of the Borrower or any Subsidiary of the Borrower; provided, however, that the aggregate outstanding amount of all such obligations and liabilities secured by such Liens shall not exceed $10,000,000 at any time.   Section 8.3 Investments   The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly make or maintain any Investment except for the following:   (a) Investments existing on the Effective Date and disclosed on Schedule 8.3 (Existing Investments), and any refinancings of such Investments to the extent constituting Indebtedness otherwise permitted under Section 8.1(b), provided such refinancing complies with the provisions of Section 8.1(e);   (b) Investments in cash and Cash Equivalents;   (c) Investments in accounts, contract rights and chattel paper (each as defined in the UCC), notes receivable and similar items arising or acquired from the sale of Inventory in the ordinary course of business consistent with the past practice of the Borrower and its Subsidiaries;   (d) Investments received in settlement of amounts due to the Borrower or any Subsidiary of the Borrower effected in the ordinary course of business;   (e) Investments by: (i) the Borrower in any Subsidiary Guarantor or by any Subsidiary Guarantor in the Borrower or any other Subsidiary Guarantor; (ii) a Subsidiary of the Borrower that is not a Subsidiary Guarantor in the Borrower or any other Subsidiary of the Borrower; or (iii) the Borrower or any Subsidiary Guarantor in a Subsidiary or an Affiliate of the Borrower that is neither a Subsidiary Guarantor nor a Permitted Joint Venture; provided, however, that the aggregate outstanding amount of all such Investments pursuant to this clause (iii) shall not exceed $10,000,000 at any time plus an amount equal to any repayments, interest, returns, profits, distributions, income and similar amounts actually received in cash in respect of any such Investment (which amount shall not exceed the amount of such Investment valued at the fair market value of such Investment at the time such Investment was made);   (f) loans or advances to employees of the Borrower or any of its Subsidiaries (or guaranties of loans and advances made by a third party to employees of the Borrower or any of its Subsidiaries) in the ordinary course of business; provided, that the aggregate principal amount of all such loans and advances and guaranties of loans and advances shall not exceed $1,000,000 at any time;   103 -------------------------------------------------------------------------------- (g) Investments constituting Guaranty Obligations permitted by Section 8.1 (Indebtedness);   (h) direct or indirect Investments in Permitted Joint Ventures engaged in an Eligible Line of Business; provided, however, that the aggregate outstanding amount of all such Investments, including Letters of Credit and other credit support obligations from the Borrower or its Subsidiaries, pursuant to this clause (h) shall not exceed $5,000,000 at any time;   (i) Investments in connection with a Permitted Acquisition;   (j) Investments in Babcock & Wilcox Canada Ltd.; provided, however, that the aggregate outstanding amount of all such Investments pursuant to this clause (j) shall not exceed $25,000,000 at any time;   (k) Investments in Babcock & Wilcox Volund ApS; provided, however, that the aggregate outstanding amount of all such Investments pursuant to this clause (k) shall not exceed $30,000,000 at any time; and   (l) Investments not otherwise permitted hereby; provided, however, that the aggregate outstanding amount of all such Investments shall not exceed $15,000,000 at any time.   Section 8.4 Sale of Assets   The Borrower shall not, and shall not permit any of its Subsidiaries to, sell, convey, transfer, lease or otherwise dispose of any of their respective assets or any interest therein (including the sale or factoring at maturity of any accounts) to any Person, or permit or suffer any other Person to acquire any interest in any of their respective assets or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary’s Stock or Stock Equivalent (any such disposition in excess of $500,000 per transaction or series of related transactions, being an “Asset Sale”) except for the following:   (a) the sale or disposition of inventory in the ordinary course of business;   (b) transfers resulting from any taking or condemnation of any property of the Borrower or any of its Subsidiaries (or, as long as no Default or Event of Default has occurred and is continuing or would result therefrom, deed in lieu thereof);   (c) as long as no Default or Event of Default is continuing or would result therefrom, the sale or disposition of equipment that the Borrower reasonably determines is no longer useful in its or its Subsidiaries’ business, has become obsolete, damaged or surplus or is replaced in the ordinary course of business;   (d) as long as no Default or Event of Default is continuing or would result therefrom, the sale or disposition of assets of any Permitted Joint Venture that, both at the time of such sale and as of the Effective Date, do not constitute, in the aggregate, all or a material part of the assets of such Permitted Joint Venture;   104 -------------------------------------------------------------------------------- (e) as long as no Default or Event of Default is continuing or would result therefrom, the lease or sublease of Real Property not constituting a sale and leaseback, to the extent not otherwise prohibited by this Agreement or the Mortgages;   (f) as long as no Default or Event of Default is continuing or would result therefrom, non-exclusive assignments and licenses of intellectual property of the Borrower and its Subsidiaries in the ordinary course of business;   (g) as long as no Default or Event of Default is continuing or would result therefrom, discounts, adjustments, settlements and compromises of Accounts and contract claims in the ordinary course of business;   (h) any Asset Sale (i) to the Borrower or any Subsidiary Guarantor or (ii) by any Subsidiary that is not a Loan Party to another Subsidiary that is not a Loan Party;   (i) as long as no Default or Event of Default is continuing or would result therefrom, (x) any other Asset Sale for Fair Market Value, at least 75% of which is payable in cash or Cash Equivalents upon such sale; provided, however, that with respect to any such Asset Sale in accordance with this clause (i)(x), the aggregate consideration received for the sale of all assets sold in accordance with this clause (i) during any Fiscal Year, including such Asset Sale, shall not exceed $10,000,000 in the aggregate, (y) the sale of Babcock & Wilcox Volund ApS for Fair Market Value and (z) the sale of the equity interests of Ebensburg Power Company for Fair Market Value; and   (j) Asset Sales permitted by Section 8.13 (Sale/Leasebacks).   Section 8.5 Restricted Payments   The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay or make any sum for any Restricted Payment except for:   (a) Restricted Payments by the Borrower to any Subsidiary Guarantor;   (b) Restricted Payments by (i) any Subsidiary of the Borrower to the Borrower or any Subsidiary Guarantor or (ii) any Subsidiary that is not a Loan Party to another Subsidiary that is not a Loan Party;   (c) Restricted Payments by any Permitted Joint Venture to the Borrower or any Subsidiary Guarantor and to any other direct or indirect holders of equity interests in such Permitted Joint Venture to the extent (i) such Restricted Payments are made pro rata among the holders of the equity interests in such Permitted Joint Venture or (ii) pursuant to the terms of the joint venture or other distribution agreement for such Permitted Joint Venture in form and substance approved by the Administrative Agent (such approval not to be unreasonably withheld or delayed);   105 -------------------------------------------------------------------------------- (d) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Stock or Stock Equivalents of the Borrower or any of its Subsidiaries solely with the proceeds received from the exercise of any warrant or option; and   (e) so long as no Default or Event of Default has occurred and is continuing, or would result therefrom, the Borrower may make Restricted Payments to BWICO in an aggregate amount not to exceed the result of (x) $20,000,000 in the aggregate plus (y) (i) so long as the Leverage Ratio, pro forma for the making of such Restricted Payments, is less than 2.00:1.00, the cumulative amount of Excess Cash Flow for all Fiscal Years completed after the Effective Date and prior to the date of determination minus (ii) the portion of such Excess Cash Flow that has been applied, or will be required to be applied, to the prepayment of Loans in accordance with Section 2.9(c) after the Effective Date and on or prior to the date of determination minus (iii) any Restricted Payments previously made pursuant to this Section 8.5(e)(y) minus (iv) any amount of the Contingent MI Payment made pursuant to Section 8.1(m)(ii), but excluding the amount of any cash tax refunds used in connection with such payment made pursuant to Section 8.1(m)(ii).   Section 8.6 Restriction on Fundamental Changes   Except in connection with a Permitted Acquisition, the Borrower shall not, and shall not permit any of its Subsidiaries to, (a) merge or consolidate with any Person (provided that, if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing (i) any Wholly-Owned Subsidiary may merge into the Borrower so long as the Borrower is the surviving company, (ii) any Wholly-Owned Subsidiary may merge into or consolidate with any other Wholly-Owned Subsidiary in a transaction in which the surviving entity is a Wholly-Owned Subsidiary and no person other than the Borrower or a Wholly-Owned Subsidiary receives any consideration (provided that if any party to any such transaction is a Loan Party, the surviving entity of such transaction shall be a Loan Party) and (iii) any Subsidiary of the Borrower may merge with another person in a transaction constituting an Asset Sale permitted hereunder), (b) acquire all or substantially all of the Stock or Stock Equivalents of any Person, (c) acquire all or substantially all of the assets of any Person or all or substantially all of the assets constituting what is known by the Borrower to be the business of a division, branch or other unit operation of any Person, (d) enter into any joint venture or partnership with any Person that is not a Loan Party other than any Permitted Joint Venture or (e) acquire or create any Subsidiary unless, after giving effect to such acquisition or creation, (i) such Subsidiary is a Permitted Joint Venture or a Wholly-Owned Subsidiary of the Borrower, (ii) the Borrower is in compliance with Section 7.11 (Additional Collateral and Guaranties) and (iii) the Investment in such Subsidiary is permitted under Section 8.3 (Investments).   106 -------------------------------------------------------------------------------- Section 8.7 Change in Nature of Business   The Borrower shall not, and shall not permit any of its Subsidiaries to, engage in any business other than the Eligible Line of Business.   Section 8.8 Transactions with Affiliates   The Borrower shall not, and shall not permit any of its Subsidiaries to, except as otherwise expressly permitted herein, do any of the following: (a) make any Investment in an Affiliate of the Borrower that is not, or does not thereby or in connection therewith become, a Subsidiary of the Borrower or a Permitted Joint Venture, (b) transfer, sell, lease, assign or otherwise dispose of any asset to any Affiliate of the Borrower that is not, or does not thereby or in connection therewith become, a Subsidiary of the Borrower or a Permitted Joint Venture, (c) merge into or consolidate with or purchase or acquire assets from any Affiliate of the Borrower that is not, or does not thereby or in connection therewith become, a Subsidiary of the Borrower, (d) repay any Indebtedness to any Affiliate of the Borrower that is not, or does not thereby or in connection therewith become, a Subsidiary of the Borrower, (e) enter into any other transaction (including any retention bonus or other compensation arrangement) directly or indirectly with or for the benefit of any Affiliate of the Borrower that is not a Guarantor (including guaranties and assumptions of obligations of any such Affiliate) or (f) make any management services payments pursuant to the Management Services Agreement as in effect on the date hereof in an amount in excess of the amounts required to be paid thereunder, except (i) in each case (excluding clause (f)) transactions in the ordinary course of business on a basis no less favorable to the Borrower or such Subsidiary as would be obtained in a comparable arm’s length transaction with a Person not an Affiliate and (ii) payments and releases expressly required or authorized to be made by the Borrower or one of its Subsidiaries pursuant to Section 5.2 of the Non-Debtor Affiliate Settlement Agreement.   Section 8.9 Restrictions on Subsidiary Distributions; No New Negative Pledge   Other than pursuant to the Loan Documents and any agreements governing any Non-Recourse Indebtedness, or any purchase money Indebtedness or Capital Lease Obligations permitted by Section 8.1(b), (d) or (e) (Indebtedness) (in the case of any such purchase money Indebtedness or Capital Lease Obligations, so long as any prohibition or limitation is only effective against the assets financed thereby), the Borrower shall not, and shall not permit any of its Subsidiaries to, (a) other than for Permitted Joint Ventures, agree to enter into or suffer to exist or become effective any consensual encumbrance or consensual restriction of any kind on the ability of such Subsidiary to pay dividends or make any other distribution or transfer of funds or assets or make loans or advances to or other Investments in, or pay any Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower or (b) other than customary non-assignment provisions in contracts entered into in the ordinary course of business, enter into or permit to exist or become effective any enforceable agreement prohibiting or limiting the ability of the Borrower or any Subsidiary to create, incur, assume or permit   107 -------------------------------------------------------------------------------- to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, to secure the Obligations, including any agreement requiring any other Indebtedness or Contractual Obligation to be equally and ratably secured with the Obligations.   Section 8.10 Modification of Constituent Documents   The Borrower shall not, and shall not permit any of its Subsidiaries to, change its capital structure (including the terms of its outstanding Stock) or otherwise amend its Constituent Documents, except for changes and amendments that do not materially and adversely affect the rights and privileges of the Borrower or any of its Subsidiaries and do not materially and adversely affect the interests of the Secured Parties under the Loan Documents or the rights and interests of any of them in the Collateral.   Section 8.11 Accounting Changes; Fiscal Year   The Borrower shall not, and shall not permit any of its Subsidiaries to, (a) make any material change in its accounting treatment and reporting practices or tax reporting treatment, except as required by GAAP or any Requirement of Law and disclosed to the Lenders and the Administrative Agent or (b) change its Fiscal Year.   Section 8.12 Margin Regulations   The Borrower shall not, and shall not permit any of its Subsidiaries to, use all or any portion of the proceeds of any credit extended hereunder to purchase or carry margin stock (within the meaning of Regulation U of the Federal Reserve Board) in contravention of Regulation U of the Federal Reserve Board.   Section 8.13 Sale/Leasebacks   The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any sale and leaseback transaction unless the proceeds of such transaction received by the Loan Parties equal the Fair Market Value of the properties subject to such transaction and, after giving effect to such sale and leaseback transaction, the aggregate Fair Market Value of all properties covered at any one time by all sale and leaseback transactions permitted hereunder (other than any sale and leaseback transaction of property entered into within 90 days of the acquisition of such property) does not exceed $20,000,000.   Section 8.14 Capital Expenditures   The Borrower shall not make or incur, or permit to be made or incurred, Capital Expenditures during each of the Fiscal Years set forth below to be, in the aggregate, in excess of the maximum amount set forth below for such Fiscal Year:   108 -------------------------------------------------------------------------------- FISCAL YEAR --------------------------------------------------------------------------------    MAXIMUM CAPITAL EXPENDITURES -------------------------------------------------------------------------------- 2006    $ 35,000,000 2007 and each Fiscal Year thereafter    $ 30,000,000   ; provided, however, that to the extent the actual amount of such Capital Expenditures for any such Fiscal Year is less than the maximum amount set forth above for such Fiscal Year (provided that actual Capital Expenditures in any Fiscal Year shall be first applied against any carryover from the prior Fiscal Year)), 100% of the difference between such stated maximum amount and such actual Capital Expenditures shall be available for additional Capital Expenditures in the next succeeding Fiscal Year (but shall not be available in any Fiscal Year thereafter).   Section 8.15 Cancellation of Indebtedness Owed to It   The Borrower shall not, and shall not permit any of its Subsidiaries to, cancel any material claim or Indebtedness owed to any of them except in the ordinary course of business.   Section 8.16 No Speculative Transactions   The Borrower shall not, and shall not permit any of its Subsidiaries to, engage in any material speculative transaction or in any material transaction involving the entry into of Hedging Contracts by such Person except for the sole purpose of hedging in the normal course of business.   Section 8.17 Contingent MI Payment.   Except as contemplated by Section 8.1(m), the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, make the Contingent MI Payment.   Section 8.18 Post-Termination Benefits   Except to the extent required under Section 4980B of the Code or similar state laws, the Borrower shall not, and shall not permit any of its Subsidiaries to, without the consent of the Requisite Lenders, adopt any Employee Benefit Plan that provides health or welfare benefits (through the purchase of insurance or otherwise) to any retired or former employees, consultants or directors (or their dependents) of the Borrower or any of its Subsidiaries.   109 -------------------------------------------------------------------------------- ARTICLE IX   EVENTS OF DEFAULT   Section 9.1 Events of Default   Each of the following events shall be an Event of Default:   (a) the Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation when the same becomes due and payable; or   (b) the Borrower shall fail to pay any interest on any Loan, any fee under any of the Loan Documents or any other Obligation (other than one referred to in clause (a) above) and such non-payment continues for a period of three Business Days after the due date therefor; or   (c) any representation or warranty made or deemed made by any Loan Party in any Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or   (d) any Loan Party shall fail to perform or observe (i) any term, covenant or agreement contained in Article V (Financial Covenants), 6.3 (Default Notices), 7.1 (Preservation of Corporate Existence, Etc.), 7.6 (Access) or Article VIII (Negative Covenants) or (ii) any other term, covenant or agreement contained in this Agreement or in any other Loan Document if such failure under this clause (ii) shall remain unremedied for 30 days after the earlier of (A) the date on which a Responsible Officer of the Borrower obtains actual knowledge of such failure and (B) the date on which written notice thereof shall have been given to the Borrower by the Administrative Agent, any Lender or any Synthetic Investor; or   (e) (i) the Borrower or any of its Material Subsidiaries shall fail to make any payment on any recourse Indebtedness of the Borrower or any such Material Subsidiary (other than the Obligations) or any Guaranty Obligation in respect of Indebtedness of any other Person, and, in each case, such failure relates to Indebtedness having a principal amount of $10,000,000 or more when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness or (iii) any such Indebtedness shall become or be declared to be due and payable, or required to be prepaid or repurchased (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; provided that clauses (ii) and (iii) above shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; or   (f) (i) the Borrower or any of its Material Subsidiaries shall generally not pay its debts as such debts become due, shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors, (ii) any   110 -------------------------------------------------------------------------------- proceeding shall be instituted by or against the Borrower or any of its Material Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts, under any Requirement of Law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a custodian, receiver, trustee or other similar official for it or for any substantial part of its property; provided, however, that, in the case of any such proceedings instituted against the Borrower or any of its Material Subsidiaries (but not instituted by the Borrower or any of its Subsidiaries), either such proceedings shall remain undismissed or unstayed for a period of 60 days or more or an order or decree approving or ordering any of the foregoing shall be entered, or (iii) the Borrower or any of its Material Subsidiaries shall take any corporate action to authorize any action set forth in clauses (i) or (ii) above; or   (g) (i) except with respect to the CITGO Settlement, one or more judgments, injunctions or orders (or other similar process) involving, in the case of a money judgment, an amount in excess of $10,000,000 in the aggregate (to the extent not covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage), shall be rendered against one or more of any Loan Party and its Subsidiaries and shall remain unpaid and either (x) enforcement proceedings shall have been commenced by any creditor upon such judgment, injunction or order or (y) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment, injunction or order, by reason of a pending appeal or otherwise, shall not be in effect or (ii) the Borrower or any of its applicable Subsidiaries shall fail in any material respect to comply with the terms and conditions of CITGO Settlement; or   (h) (i) one or more ERISA Events shall occur and the amount of all liabilities and deficiencies resulting therefrom imposed on or which could reasonably be expected to be imposed directly on the Borrower, any of its Subsidiaries or any Guarantor, whether or not assessed, when taken together with amounts of all such liabilities and deficiencies for all other such ERISA Events exceeds $10,000,000 in the aggregate, or (ii) there exists any fact or circumstance that reasonably could be expected to result in the imposition of a Lien or security interest under Section 412(n) of the Code or under ERISA; or   (i) any provision of any Collateral Document or the Holdings Guaranty after delivery thereof pursuant to this Agreement or any other Loan Document shall for any reason, except as permitted by the Loan Documents, cease to be valid and binding on, or enforceable against, any Loan Party which is a party thereto, or any Loan Party shall so state in writing; or   (j) any Collateral Document shall for any reason fail or cease to create a valid Lien on any Collateral with an aggregate value of $5,000,000 or more purported to be covered thereby or, except as permitted by the Loan Documents, such Lien shall fail or cease to be a perfected and first priority Lien or any Loan Party shall so state in writing; or   111 -------------------------------------------------------------------------------- (k) there shall occur any Change of Control; or   (l) MI shall fail, and shall fail to cause one of its Subsidiaries (excluding the Borrower and any of its Subsidiaries except as expressly permitted by Section 8.1(m)), to make any required payments to the Asbestos PI Trust in accordance with the provisions of the Plan of Reorganization, and such failure continues until the earlier to occur of (i) a period of ten days after the due date thereof or (ii) the making of a demand or taking of other enforcement action with respect to such payment obligations by or on behalf of the Asbestos PI Trust; provided, that the foregoing shall no longer constitute an Event of Default if such failure to pay any such required payments is cured by MI or one of its Subsidiaries (other than the Borrower or any of its Subsidiaries except as expressly contemplated by Section 8.1(m)).   Section 9.2 Remedies   During the continuance of any Event of Default, the Administrative Agent (a) may, and, at the request of the Requisite Lenders, shall, by notice to the Borrower declare that all or any portion of the Commitments be terminated, whereupon the obligation of each Lender to make any Loan and each Issuer to Issue any Letter of Credit shall immediately terminate and (b) may and, at the request of the Requisite Lenders, shall, by notice to the Borrower, declare the Loans, all interest thereon and all other amounts and Obligations payable under this Agreement to be forthwith due and payable, whereupon the Loans, all such interest and all such amounts and Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that upon the occurrence of any Event of Default specified in Section 9.1(f) (Events of Default) with respect to the Borrower, (x) the Commitments of each Lender to make Loans and the commitments of each Lender and Issuer to Issue or participate in Letters of Credit shall each automatically be terminated and (y) the Loans, all such interest and all such amounts and Obligations shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. In addition to the remedies set forth above, the Administrative Agent may exercise any remedies provided for by the Collateral Documents in accordance with the terms thereof or any other remedies provided by applicable law.   Section 9.3 Actions in Respect of Letters of Credit   Upon the Revolving Facility Termination Date or the Synthetic Facility Termination Date, as applicable, or as may be required by Section 2.9(d) (Mandatory Prepayments), the Borrower shall pay to the Administrative Agent in immediately available funds at the Administrative Agent’s office referred to in Section 11.8 (Notices, Etc.), for deposit in a Cash Collateral Account, an amount equal to 105% of the sum of all outstanding Letter of Credit Obligations with respect to Revolving Letters of Credit and/or Synthetic Letters of Credit, as the case may be. The Administrative Agent may, from time to time after funds are deposited in any Cash Collateral Account with respect to Letters of Credit (and while an Event of Default has occurred and is continuing or after   112 -------------------------------------------------------------------------------- the acceleration of the Loans), apply funds then held in such Cash Collateral Account to the payment of any amounts, in accordance with Section 2.13(f) (Payments and Computations), as shall have become or shall become due and payable by the Borrower to the Issuers or Lenders in respect of the Letter of Credit Obligations. The Administrative Agent shall promptly give written notice of any such application; provided, however, that the failure to give such written notice shall not invalidate any such application.   ARTICLE X   THE ADMINISTRATIVE AGENT, THE FRONTING LENDER AND OTHER AGENTS   Section 10.1 Authorization and Action   (a) Each Lender, each Synthetic Investor and each Issuer hereby appoints Credit Suisse as the Administrative Agent hereunder, and each Lender, each Synthetic Investor and each Issuer authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent under such agreements and to exercise such powers as are reasonably incidental thereto. Without limiting the foregoing, each Lender, each Synthetic Investor and each Issuer hereby authorizes the Administrative Agent to execute and deliver, and to perform its obligations under, each of the Loan Documents to which the Administrative Agent is a party, to exercise all rights, powers and remedies that the Administrative Agent may have under such Loan Documents and, in the case of the Collateral Documents, to act as Collateral Agent for the Lenders, the Synthetic Investors, the Issuers and the other Secured Parties under such Collateral Documents.   (b) As to any matters not expressly provided for by this Agreement and the other Loan Documents (including enforcement or collection), neither the Administrative Agent, the Collateral Agent nor the Fronting Lender shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Requisite Lenders, and such instructions shall be binding upon all Lenders, each Issuer and all Synthetic Investors; provided, however, that none of the Administrative Agent, the Collateral Agent nor the Fronting Lender shall be required to take any action that (i) the Administrative Agent, the Collateral Agent or, as the case may be, the Fronting Lender in good faith believes exposes it to personal liability unless the Administrative Agent, the Collateral Agent or, as the case may be, the Fronting Lender receives an indemnification satisfactory to it from the Lenders, the Issuers and the Synthetic Investors with respect to such action or (ii) is contrary to this Agreement, any other Loan Document or any applicable Requirement of Law. Upon request, the Administrative Agent agrees to give to each Lender, each Synthetic Investor and each Issuer prompt notice of each notice given to it by any Loan Party pursuant to the terms of this Agreement or the other Loan Documents.   113 -------------------------------------------------------------------------------- (c) In performing its functions and duties hereunder and under the other Loan Documents, the Administrative Agent is acting solely on behalf of the Lenders, the Synthetic Investors and the Issuers and its duties are entirely administrative in nature. The Administrative Agent does not assume and shall not be deemed to have assumed any obligation other than as expressly set forth herein and in the other Loan Documents or any other relationship as the agent, fiduciary or trustee of or for any Lender, Issuer, Synthetic Investor or holder of any other Obligation. The Administrative Agent may perform any of its duties under any Loan Document by or through its agents or employees.   (d) In performing its functions and duties hereunder and under the other Loan Documents, the Collateral Agent is acting solely on behalf of the Secured Parties. The Collateral Agent does not assume and shall not be deemed to have assumed any obligation other than as expressly set forth herein and in the other Loan Documents or any other relationship as the agent, fiduciary or trustee of or for any Lender, Issuer, Synthetic Investor or holder of any other Obligation. The Collateral Agent may perform any of its duties under any Loan Document by or through its agents or employees.   (e) In performing its functions and duties hereunder and under the other Loan Documents, the Fronting Lender is acting solely on behalf of the Synthetic Investors and its duties are entirely administrative in nature. The Fronting Lender does not assume and shall not be deemed to have assumed any obligation other than as expressly set forth herein and in the other Loan Documents or any other relationship as the agent, fiduciary or trustee of or for any Lender, Issuer, Synthetic Investor or holder of any other Obligation. The Fronting Lender may perform any of its duties under any Loan Document by or through its agents or employees.   Section 10.2 Administrative Agent’s and Fronting Lender’s Reliance, Etc.   (a) None of the Administrative Agent, any of its Affiliates or any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it, him, her or them under or in connection with this Agreement or the other Loan Documents, except for its, his, her or their own gross negligence or willful misconduct. Without limiting but subject to the foregoing, the Administrative Agent (a) may treat the payee of any Note as its holder until such Note has been assigned in accordance with Section 11.2 (Assignments and Participations), (b) may rely on the Register to the extent set forth in Section 11.2(c) (Assignments and Participations), (c) may consult with legal counsel (including counsel to the Borrower or any other Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, (d) makes no warranty or representation to any Lender, Issuer or Synthetic Investor and shall not be responsible to any Lender, Issuer or Synthetic Investor for any statements, warranties or representations made by or on behalf of the Borrower or any of its Subsidiaries or the Fronting Lender in or in connection with this Agreement or any other Loan Document, (e) shall not have any duty to ascertain or to inquire either as to the performance or   114 -------------------------------------------------------------------------------- observance of any term, covenant or condition of this Agreement or any other Loan Document, as to the financial condition of any Loan Party or as to the existence or possible existence of any Default or Event of Default, (f) shall not be responsible to any Lender, Issuer or Synthetic Investor for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created under or in connection with, this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or thereto and (g) shall incur no liability under or in respect of this Agreement or any other Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which writing may be a telecopy or, if consented to by the Administrative Agent, electronic mail) or any telephone message believed by it to be genuine and signed or sent by the proper party or parties.   (b) None of the Fronting Lender, any of its Affiliates or any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it, him, her or them under or in connection with this Agreement or the other Loan Documents, except for its, his, her or their own gross negligence or willful misconduct. Without limiting the foregoing, the Fronting Lender (a) may consult with legal counsel (including counsel to the Borrower, any other Loan Party or any Synthetic Investor), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, (b) makes no warranty or representation to any Lender, Issuer or Synthetic Investor and shall not be responsible to any Lender, Issuer or Synthetic Investor for any statements, warranties or representations made by or on behalf of the Borrower or any of its Subsidiaries in or in connection with this Agreement or any other Loan Document, (c) shall not have any duty to ascertain or to inquire either as to the performance or observance of any term, covenant or condition of this Agreement or any other Loan Document, as to the financial condition of any Loan Party or as to the existence or possible existence of any Default or Event of Default, (d) shall not be responsible to any Lender, Issuer or Synthetic Investor for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created under or in connection with, this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or thereto and (e) shall incur no liability under or in respect of this Agreement or any other Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which writing may be a telecopy or, if consented to by the Administrative Agent, electronic mail) or any telephone message believed by it to be genuine and signed or sent by the proper party or parties.   Section 10.3 The Agents and the Fronting Lender Individually   With respect to its Ratable Portion, each Agent that is a Lender shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender. The terms “Lenders”, “Requisite Lenders” and any similar terms shall, unless the context clearly otherwise indicates, include, without limitation, (a) each Agent in its individual capacity as a Lender or as one of the Requisite Lenders and (b) the Fronting Lender in its   115 -------------------------------------------------------------------------------- individual capacity as a Lender or as one of the Requisite Lenders. Each Agent and its respective Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with, any Loan Party as if such Agent were not acting as Agent or, as the case may be, the Fronting Lender.   Section 10.4 Lender Credit Decision   Each Lender, each Issuer and each Synthetic Investor acknowledges that it shall, independently and without reliance upon the Administrative Agent, the Fronting Lender or any other Lender or Synthetic Investor conduct its own independent investigation of the financial condition and affairs of the Borrower, each other Loan Party and each Revolving Lender, in connection with the making and continuance of the Loans and with the issuance of the Letters of Credit. Each Lender, each Issuer and each Synthetic Investor also acknowledges that it shall, independently and without reliance upon the Administrative Agent, the Fronting Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement or other Loan Documents.   Section 10.5 Indemnification   (a) Each Lender agrees to indemnify the Administrative Agent, Collateral Agent and each of their respective Affiliates, and each of their respective directors, officers, employees, agents and advisors (to the extent not reimbursed by the Borrower), from and against such Lender’s aggregate Ratable Portion of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements (including fees, expenses and disbursements of financial and legal advisors) of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against, the Administrative Agent, the Collateral Agent or any of their respective Affiliates, directors, officers, employees, agents and advisors in any way relating to or arising out of this Agreement or the other Loan Documents or any action taken or omitted by the Administrative Agent or Collateral Agent under this Agreement or the other Loan Documents; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent’s, Collateral Agent’s or such Affiliate’s gross negligence or willful misconduct. Without limiting the foregoing, each Lender agrees to reimburse the Administrative Agent or the Collateral Agent, as applicable, promptly upon demand for its ratable share of any out-of-pocket expenses (including fees, expenses and disbursements of financial and legal advisors) incurred by the Administrative Agent or the Collateral Agent, as applicable, in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of its rights or responsibilities under, this Agreement or the other Loan Documents, to the extent that the Administrative Agent or the Collateral Agent, as applicable, is not reimbursed for such expenses by the Borrower or any other Loan Party.   116 -------------------------------------------------------------------------------- (b) Each Synthetic Investor agrees to indemnify the Fronting Lender and each of its Affiliates, and each of their respective directors, officers, employees, agents and advisors (to the extent not reimbursed by the Borrower), from and against such Synthetic Investor’s Ratable Portion of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements (including fees, expenses and disbursements of financial and legal advisors) of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against, the Fronting Lender or any of its Affiliates, directors, officers, employees, agents and advisors in any way relating to or arising out of this Agreement or the other Loan Documents or any action taken or omitted by the Fronting Lender under this Agreement or the other Loan Documents; provided, however, that no Synthetic Investor shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Fronting Lender’s or such Affiliate’s gross negligence or willful misconduct. Without limiting the foregoing, each Synthetic Investor agrees to reimburse the Fronting Lender promptly upon demand for its ratable share of any out-of-pocket expenses (including fees, expenses and disbursements of financial and legal advisors) incurred by the Fronting Lender in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of its rights or responsibilities under, this Agreement or the other Loan Documents, to the extent that the Fronting Lender is not reimbursed for such expenses by the Borrower or any other Loan Party.   Section 10.6 Successor Administrative Agent   The Administrative Agent may resign at any time by giving written notice thereof to the Lenders, the Synthetic Investors and the Borrower. Upon any such resignation, the Requisite Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Requisite Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Synthetic Investors, appoint a successor Administrative Agent, selected from among the Lenders and the Synthetic Investors. In either case, such appointment shall be subject to the prior written approval of the Borrower (which approval may not be unreasonably withheld but shall not be required upon the occurrence and during the continuance of an Event of Default). Upon the acceptance of any appointment as Administrative Agent by a successor Administrative Agent, such successor Administrative Agent shall succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. Prior to any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the retiring Administrative Agent shall take such action as may be reasonably necessary to assign to the successor Administrative Agent its rights as Administrative Agent under the Loan Documents. After such resignation, the retiring Administrative Agent shall continue to have the benefit of this Article X as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.   117 -------------------------------------------------------------------------------- Section 10.7 Successor Fronting Lender   The Fronting Lender may at any time resign by giving written notice thereof to the Synthetic Investors and the Borrower. Upon any such resignation, the Synthetic Investors having outstanding deposits in Credit-Linked Deposit Accounts and Sub-Accounts under the Synthetic Facility shall have the right to appoint by a simple majority vote (based on the aggregate amount of Credit-Linked Deposits) a successor Fronting Lender. If no successor Fronting Lender shall have been so appointed by the Synthetic Investors, and shall have accepted such appointment, within 30 days after the retiring Fronting Lender’s giving of notice of resignation, then the Administrative Agent may, on behalf of the Lenders and Synthetic Investors, appoint a successor Fronting Lender, selected from among the Lenders and the Synthetic Investors. In either case, such appointment shall be subject to the prior written approval of (i) a majority of the Synthetic Investors (based on the aggregate amount of Credit-Linked Deposits) and (ii) unless an Event of Default has occurred and is continuing, the Borrower (such approval not to be unreasonably withheld or delayed). Upon the acceptance of any appointment as Fronting Lender by a successor Fronting Lender, such successor Fronting Lender shall (a) obtain an assignment of the rights and obligations of the Fronting Lender in respect of the Credit-Linked Deposit Account and the Credit-Linked Deposits and (b) obtain an assignment of the Commitment of the Fronting Lender hereunder through an Assignment and Acceptance and, thereafter, shall succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Fronting Lender, and the retiring Fronting Lender shall be discharged from its duties and obligations under this Agreement and the other Loan Documents, and in respect of the Credit-Linked Deposit Account and the Credit-Linked Deposits. The occurrence and effectiveness of the events described in clauses (a) and (b) above shall be a condition precedent to the effectiveness of any resignation of the Fronting Lender. After any effective resignation, the retiring Fronting Lender shall continue to have the benefit of this Article X as to any actions taken or omitted to be taken by it while it was Fronting Lender under this Agreement and the other Loan Documents, and in respect of the Credit-Linked Deposit Account and the Credit-Linked Deposits.   Section 10.8 Concerning the Collateral and the Collateral Documents   (a) Each Lender, each Synthetic Investor and each Issuer agrees that any action taken by the Administrative Agent, the Collateral Agent, the Fronting Lender or the Requisite Lenders (or, where required by the express terms of this Agreement, a different proportion of the Lenders or Synthetic Investors) in accordance with the provisions of this Agreement or the other Loan Documents, and the exercise by the Administrative Agent, the Collateral Agent, the Fronting Lender or the Requisite Lenders (or, where so required, such other proportion) of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be deemed authorized by and shall be binding upon all of the Lenders, Synthetic Investors, Issuers and other Secured Parties. Without limiting the generality of the foregoing, the Administrative Agent and Collateral Agent, as applicable, shall have the sole and exclusive right and authority to (i) act as the disbursing and collecting agent for the   118 -------------------------------------------------------------------------------- Lenders, the Synthetic Investors and the Issuers with respect to all payments and collections arising in connection herewith and with the Collateral Documents, (ii) execute and deliver each Collateral Document and accept delivery of each such agreement delivered by the Borrower or any of its Subsidiaries, (iii) act as collateral agent for the Lenders, the Synthetic Investors, the Issuers and the other Secured Parties for purposes of the perfection of all security interests and Liens created by such agreements and all other purposes stated therein, (iv) manage, supervise and otherwise deal with the Collateral, (v) take such action as is necessary or desirable to maintain the perfection and priority of the security interests and Liens created or purported to be created by the Collateral Documents and (vi) except as may be otherwise specifically restricted by the terms hereof or of any other Loan Document, exercise all remedies given to the Administrative Agent, the Collateral Agent, the Lenders, the Synthetic Investors, the Issuers and the other Secured Parties with respect to the Collateral under the Loan Documents relating thereto, applicable law or otherwise.   (b) Each of the Lenders, the Synthetic Investors and the Issuers hereby directs, in accordance with the terms hereof, the Collateral Agent to release (or, in the case of clause (ii) below, release or subordinate) any Lien held by the Collateral Agent for the benefit of the Secured Parties against any of the following:   (i) all of the Collateral, upon termination of the Commitments and payment and satisfaction in full of all Loans, Reimbursement Obligations and all other Obligations that the Collateral Agent has been notified in writing are then due and payable (and, in respect of contingent Letter of Credit Obligations, with respect to which cash collateral has been deposited or a back-up letter of credit has been issued, in either case on terms reasonably satisfactory to the Administrative Agent and the applicable Issuers);   (ii) any assets that are subject to a Lien permitted by Section 8.2(d), (e) or (f) (Liens, Etc.); and   (iii) if such sale or disposition is permitted by this Agreement (or permitted pursuant to a waiver or consent of a transaction otherwise prohibited by this Agreement), any Collateral sold or disposed of by a Loan Party and/or the guaranty of any Subsidiary Guarantor which has been voluntarily sold or disposed of by a Loan Party.   Each of the Lenders, the Synthetic Investors and the Issuers hereby directs the Collateral Agent to execute and deliver or file such termination and partial release statements and do such other things as are necessary to release Liens to be released pursuant to this Section 10.8 promptly upon the effectiveness of any such release.   Section 10.9 Collateral Matters Relating to Related Obligations   The benefit of the Loan Documents and of the provisions of this Agreement relating to the Collateral shall extend to and be available in respect of any Secured Obligation that is otherwise owed to Persons other than the Administrative   119 -------------------------------------------------------------------------------- Agent, the Collateral Agent, the Lenders, the Synthetic Investors and the Issuers (collectively, “Related Obligations”) solely on the condition and understanding, as among the Collateral Agent and all Secured Parties, that (a) the Related Obligations shall be entitled to the benefit of the Loan Documents and the Collateral to the extent expressly set forth in this Agreement and the other Loan Documents and to such extent the Collateral Agent shall hold, and have the right and power to act with respect to, the BWICO Guaranty, the Pledge and Security Agreement and the Collateral on behalf of and as agent for the holders of the Related Obligations, but the Collateral Agent is otherwise acting solely as agent for the Lenders, the Synthetic Investors and the Issuers and shall have no fiduciary duty, duty of loyalty, duty of care, duty of disclosure or other obligation whatsoever to any holder of Related Obligations, (b) all matters, acts and omissions relating in any manner to the BWICO Guaranty, the Pledge and Security Agreement, the Collateral, or the omission, creation, perfection, priority, abandonment or release of any Lien, shall be governed solely by the provisions of this Agreement and the other Loan Documents and no separate Lien, right, power or remedy shall arise or exist in favor of any Secured Party under any separate instrument or agreement or in respect of any Related Obligation, (c) each Secured Party shall be bound by all actions taken or omitted, in accordance with the provisions of this Agreement and the other Loan Documents, by the Administrative Agent, the Collateral Agent and the Requisite Lenders, each of whom shall be entitled to act at its sole discretion and exclusively in its own interest given its own Commitments and its own interest in the Loans, Letter of Credit Obligations and other Obligations to it arising under this Agreement or the other Loan Documents, without any duty or liability to any other Secured Party or as to any Related Obligation and without regard to whether any Related Obligation remains outstanding or is deprived of the benefit of the Collateral or becomes unsecured or is otherwise affected or put in jeopardy thereby, (d) no holder of Related Obligations and no other Secured Party (except the Administrative Agent, the Collateral Agent, the Lenders, the Synthetic Investors and the Issuers, to the extent set forth in this Agreement) shall have any right to be notified of, or to direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under this Agreement or the Loan Documents and (e) no holder of any Related Obligation shall exercise any right of setoff, banker’s lien or similar right except as expressly provided in Section 11.6 (Right of Set-off).   Section 10.10 Other Agents   (a) Each Lender hereby appoints Credit Suisse Securities (USA) LLC as “Arranger.” Notwithstanding anything to the contrary contained in this Agreement, Credit Suisse Securities (USA) LLC is designated as “Arranger” for title purposes only and, in such capacity, shall not have any obligations or duties whatsoever under this Agreement or any other Loan Document to any Loan Party, any Lender, any Synthetic Investor or any Issuer and shall not have any rights separate from its rights as a Lender, Fronting Lender, Synthetic Investor or as an Administrative Agent, except as expressly provided in this Agreement. Credit Suisse Securities (USA) LLC shall have, for any action or omission made in its capacity as “Arranger,” the benefit of any provision of this Agreement to the same extent as if such action or omission was made in its capacity as Administrative Agent.   120 -------------------------------------------------------------------------------- Each Lender and each Issuer hereby appoints JPMorgan Chase Bank, N.A. as Syndication Agent and hereby authorizes it to act in its capacity as Syndication Agent, and each Lender and each Issuer hereby appoints Wachovia Bank, National Association and The Bank of Nova Scotia as Co-Documentation Agents and hereby authorizes them to act in their capacity as Co-Documentation Agents, on behalf of such Lender and such Issuer in accordance with the terms of this Agreement and the other Loan Documents. Notwithstanding anything to the contrary contained in this Agreement, each Co-Documentation Agent is a Lender designated as “Co-Documentation Agent,” and the Syndication Agent is a Lender designated as “Syndication Agent,” for title purposes only and in such capacity shall have no obligations, liabilities or duties whatsoever under this Agreement or any other Loan Document to any Loan Party, any Lender or any Issuer and shall have no rights separate from their respective rights as a Lender except as expressly provided in this Agreement.   ARTICLE XI   MISCELLANEOUS   Section 11.1 Amendments, Waivers, Etc.   (a) No amendment or waiver of any provision of this Agreement or any other Loan Document nor consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be in writing and signed by the Requisite Lenders (or by the Administrative Agent with the consent of the Requisite Lenders) and, in the case of any amendment, by the Borrower, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by each Lender directly affected thereby and, except with respect to clause (iii), (v) or (vi), the Requisite Lenders (or the Administrative Agent with the consent thereof), do any of the following:   (i) waive any condition specified in Section 3.1 (Conditions Precedent to Effectiveness) or 3.2(c) (Conditions Precedent to Each Loan and Letter of Credit), except with respect to a condition based upon another provision hereof, the waiver of which requires only the concurrence of the Requisite Lenders and, in the case of the conditions specified in Section 3.1 (Conditions Precedent to Effectiveness), subject to the provisions of Section 3.3 (Determinations of Initial Borrowing Conditions);   (ii) increase the Commitment of such Lender;   (iii) extend the scheduled final maturity of any Loan owing to such Lender, or waive, reduce or postpone any scheduled date fixed for the payment or reduction of principal of any such Loan (it being understood that Section 2.9 (Mandatory Prepayments) does not provide for scheduled dates fixed for payment) or for the reduction of such Lender’s Commitment;   121 -------------------------------------------------------------------------------- (iv) reduce the principal amount of any Loan or Reimbursement Obligation owing to such Lender (other than by the payment or prepayment thereof);   (v) reduce the rate of interest on any Loan or Reimbursement Obligations outstanding to such Lender or any fee payable hereunder to such Lender (including, if such Lender is the Fronting Lender, any fee ultimately payable to any Synthetic Investor);   (vi) postpone any scheduled date fixed for payment of such interest or fees owing to such Lender (including, if such Lender is the Fronting Lender, any fee ultimately payable to any Synthetic Investor);   (vii) change the aggregate Ratable Portions of Lenders required for any or all Lenders to take any action hereunder;   (viii) release all or substantially all of the Collateral except as provided in Section 10.8(b) (Concerning the Collateral and the Collateral Documents) or release the Borrower from its payment obligation to such Lender under this Agreement or the Notes owing to such Lender (if any) or release any Guarantor from its obligations under the BWICO Guaranty or the Pledge and Security Agreement except in connection with sale or other disposition of a Subsidiary Guarantor (or all or substantially all of the assets thereof) permitted by this Agreement (or permitted pursuant to a waiver or consent of a transaction otherwise prohibited by this Agreement); or   (ix) amend Section 10.8(b) (Concerning the Collateral and the Collateral Documents), this Section 11.1 or either definition of the terms “Requisite Lenders” or “Ratable Portion”;   and, provided, further, that (t) no amendment shall be made to (i) Section 8.1(m)(Indebtedness),(ii) Section 8.17 (Contingent MI Payment) or (iii) allow the Borrower or any of its Subsidiaries to incur Indebtedness that would (or the proceeds of which would) be used, directly or indirectly, to make or support the making of (or refinance any Indebtedness used to make or support the making of) the Contingent MI Payment, in each case without the prior written consent of each Lender, (u) no amendment shall be made to this clause (a) without the prior written consent of each Lender, (v) no amendment, waiver or consent shall, unless in writing and signed by any Special Purpose Vehicle that has been granted an option pursuant to Section 11.2(f) (Assignments and Participations), affect the grant or nature of such option or the right or duties of such Special Purpose Vehicle hereunder, (w) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement or the other Loan Documents, (x) no amendment, waiver or consent shall, unless in writing and signed by the Fronting Lender in addition to the Lenders required above to take such action, affect the rights or duties of the Fronting Lender under this Agreement or the other Loan Documents, (y) no amendment, waiver or   122 -------------------------------------------------------------------------------- consent shall, unless in writing and signed by such Issuer, affect the rights or duties of any Issuer under this Agreement or the other Loan Documents and (z) for purposes of this clause (a), the Fronting Lender may, by notice to the Administrative Agent (which notice shall then be deemed irrevocable and binding for all purposes under any Loan Document), limit any of its requests, amendments, waivers, consents or agreements under the Synthetic Facility to a dollar amount less than its Commitment (and corresponding to the aggregate amount of the Credit-Linked Deposits of Synthetic Investors having notified the Fronting Lender thereunder of their agreement with such request, amendment, waiver, consent or agreement) and such request, amendment, waiver, consent or agreement shall then be considered to be the request, amendment, waiver, consent or agreement of a Lender with a Commitment equal to such amount.   (b) The Administrative Agent may, but shall have no obligation to, with the written concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances.   (c) If, in connection with any proposed amendment, modification, waiver or termination (a “Proposed Change”) requiring the consent of all affected Lenders and Synthetic Investors, the consent of Requisite Lenders is obtained but the consent of other Lenders or Synthetic Investors whose consent is required is not obtained (any such Lender or Synthetic Investor whose consent is not obtained as described in this Section 11.1(c) being referred to as a “Non-Consenting Lender”), then, at the Borrower’s request, the Administrative Agent or an Eligible Assignee acceptable to the Administrative Agent shall have the right (but shall have no obligation) to purchase from such Non-Consenting Lender, and such Non-Consenting Lender agrees that it shall, upon the Administrative Agent’s request, sell and assign to the Lender acting as the Administrative Agent or such Eligible Assignee, all of the Commitments and Outstandings of such Non-Consenting Lender (or, in the case of a Synthetic Investor, the Credit-Linked Deposit) for an amount equal to the principal balance of all Loans held by the Non-Consenting Lender or amounts on deposit in the Sub-Account of such Non-Consenting Lender, as the case may be, and all accrued interest and fees with respect thereto (including, if such Lender is the Fronting Lender, any fee ultimately payable to any Synthetic Investor) through the date of sale, such purchase and sale to be consummated pursuant to an Assignment and Acceptance, and the Assignee shall pay any processing and recordation fee (which fee may be waived or reduced in the sole discretion of the Administrative Agent); provided, however, that the failure to execute such Assignment and Acceptance by the Non-Consenting Lender shall not invalidate such assignment, and such Assignment and Acceptance shall be deemed to be executed upon receipt by such Non-Consenting Lender of the proceeds of such sale and acceptance. For purposes of this clause (c), if the Fronting Lender has limited its consent to any Proposed Change to any amount lower than its Commitment under the Synthetic Facilities to comply with the instructions of the Synthetic Investors in accordance with clause (a) above then the Fronting Lender shall be a “Non-Consenting Lender” only to the extent of the excess of its Commitment hereunder over such amount, and only such   123 -------------------------------------------------------------------------------- excess Commitment (and the portion of the Fronting Lender’s Outstandings corresponding to such excess Commitment) shall be sold and assigned to the Lender acting as Administrative Agent or such Eligible Assignee as provided in this clause (c).   Section 11.2 Assignments and Participations   (a) Each Lender and Synthetic Investor (other than the Fronting Lender) may sell, transfer, negotiate or assign to one or more Eligible Assignees all or a portion of its rights and obligations hereunder (including all of its rights and obligations with respect to the Revolving Loans, the Swing Loans, the Letters of Credit and the Credit-Linked Deposits); provided, however, that (i) any such assignment shall cover the same percentage of such assignor’s Outstandings and Commitment (or Synthetic Deposit Amount, as applicable), (ii) the aggregate amount being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment and treating related Approved Funds as one assignee for this purpose) shall (if less than the assignor’s entire interest) be an integral multiple of $1,000,000 unless such assignment is made with the consent of the Borrower and the Administrative Agent or is made to a Lender (or a Synthetic Investor) or an Affiliate thereof or an Approved Fund of a Lender (or a Synthetic Investor), (iii) if such assignment is of any Revolving Loan prior to the Revolving Facility Termination Date, unless such Eligible Assignee is a Lender or an Affiliate thereof or an Approved Fund of a Lender, such assignment shall be subject to the prior consent of each Issuer, the Administrative Agent and the Borrower (which consent shall, in each case, not be unreasonably withheld or delayed) and (iv) if such assignment is of any Delayed Draw Commitment prior to the Delayed Draw Commitment Termination Date, unless such Eligible Assignee is a Lender or an Affiliate thereof or an Approved Fund of a Lender, such assignment shall be subject to the prior consent of the Administrative Agent and the Borrower (which consent shall, in each case, not be unreasonably withheld or delayed); and provided, further, that, notwithstanding any other provision of this Section 11.2, the consent of the Borrower shall not be required for any assignment occurring (x) on or prior to the Syndication Completion Date and made by any Lender or Synthetic Investor party to this Agreement as of the Effective Date or (y) when any Default or an Event of Default shall have occurred and be continuing. The Fronting Lender may sell, transfer, negotiate or assign to (A) one successor Fronting Lender pursuant to Section 10.7 (Successor Fronting Lender)) or (B) one or more Synthetic Investors that are Eligible Assignees, all or a portion of its rights and obligations hereunder (including all of its rights and obligations with respect to the Letters of Credit); provided, however, that (x) if any such assignment shall be of the Fronting Lender’s Outstandings and Commitment, such assignment shall cover the same percentage of such Lender’s Outstandings and Commitment and (y) the aggregate amount being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall (if less than the Assignor’s entire interest) be an integral multiple of $1,000,000 unless such assignment is made with the consent of the Borrower and the Administrative Agent.   (b) The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment Agreement via an electronic settlement system acceptable to the Administrative Agent (or, if previously agreed with the Agent,   124 -------------------------------------------------------------------------------- manually), and shall pay to the Administrative Agent a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the Administrative Agent and only one such fee shall be payable in connection with simultaneous assignments to or by two or more Approved Funds), subject in any case to such assignment and any form, including an administrative questionnaire, that the assignee under such Assignment and Acceptance may be required to deliver under Section 2.16 (Taxes). Upon such execution, delivery, acceptance and recording, (i) the assignee thereunder shall become a party hereto and, to the extent that rights and obligations under the Loan Documents have been assigned to such assignee pursuant to such Assignment and Acceptance, have the rights and obligations of the applicable assignor, and if such assignor were an Issuer, of such Issuer hereunder and thereunder, and (ii) the assignor thereunder shall, to the extent that rights and obligations under this Agreement have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except for those surviving the payment in full of the Obligations) and be released from its obligations under the Loan Documents, other than those relating to events or circumstances occurring prior to such assignment and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assignor’s rights and obligations under the Loan Documents, such assignor shall cease to be a party hereto; provided, however, that, if the Fronting Lender also holds separate Commitments or Outstandings hereunder not in its capacity as Fronting Lender, assigning all of such separate Commitments or Outstandings or all of its Commitments and Outstandings as a Fronting Lender (but not both) shall not cause such the Fronting Lender to cease to be a party hereto.   (c) The Administrative Agent shall maintain at its address referred to in Section 11.8 (Notices, Etc.) a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recording of the names and addresses of the Lenders, the Synthetic Investors, the Commitments and the Synthetic Deposit Amounts, and the principal amount of the Loans and Letter of Credit Obligations owing to each Lender from time to time (the “Register”). Any assignment pursuant to this Section 11.2 shall not be effective until such assignment is recorded in the Register. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Loan Parties, the Administrative Agent, the Lenders and the Synthetic Investors may treat each Person whose name is recorded in the Register as a Lender or a Synthetic Investor, as applicable, for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, the Administrative Agent, any Lender or any Synthetic Investor at any reasonable time and from time to time upon reasonable prior notice.   (d) Notwithstanding anything to the contrary contained in clause (c) above, the Loans (including the Notes evidencing such Loans) are registered obligations and the right, title, and interest of the Lenders and their assignees in and to such Loans shall be transferable only upon notation of such transfer in the Register. A Note shall only evidence the Lender’s or an assignee’s right title and interest in and to the related Loan, and in no event is any such Note to be considered a bearer instrument or obligation. This Section 11.2 shall be construed so that the Loans are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related regulations (or any successor provisions of the Code or such   125 -------------------------------------------------------------------------------- regulations). Solely for purposes of this and for tax purposes only, the Administrative Agent shall act as the Borrower’s agent for purposes of maintaining such notations of transfer in the Register.   (e) Upon its receipt of an Assignment and Acceptance executed by an assignor and an assignee, the Administrative Agent shall, if such Assignment and Acceptance has been completed and appropriate forms received, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) except during the period prior to the Syndication Completion Date (during which period the Administrative Agent shall be consulting with the Borrower with respect to assignees), give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice, the Borrower, at its own expense, shall, if requested by such assignee, execute and deliver to the Administrative Agent new Notes to the order of such assignee in an amount equal to the Commitments and Loans assumed by it pursuant to such Assignment and Acceptance and, if an assigning Lender has surrendered any Note for exchange in connection with the assignment and has retained Commitments or Loans hereunder, new Notes to the order of such assigning Lender in an amount equal to the Commitments and Loans retained by it hereunder. Such new Notes shall be dated the same date as the surrendered Notes and be in substantially the form of Exhibit B (Form of Promissory Note), as applicable.   (f) In addition to the other assignment rights provided in this Section 11.2, each Lender (other than the Fronting Lender) may (i) grant to a Special Purpose Vehicle the option to make all or any part of any Loan that such Lender would otherwise be required to make hereunder and the exercise of such option by any such Special Purpose Vehicle and the making of Loans pursuant thereto shall satisfy (once and to the extent that such Loans are made) the obligation of such Lender to make such Loans thereunder, provided, however, that nothing herein shall constitute a commitment or an offer to commit by such a Special Purpose Vehicle to make Loans hereunder and no such Special Purpose Vehicle shall be liable for any indemnity or other Obligation (other than the making of Loans for which such Special Purpose Vehicle shall have exercised an option, and then only in accordance with the relevant option agreement), and (ii) assign, as collateral or otherwise, any of its rights under this Agreement, whether now owned or hereafter acquired (including rights to payments of principal or interest on the Loans) to (x) any Federal Reserve Bank pursuant to Regulation A of the Federal Reserve Board, (y) any trustee for the benefit of the holders of such Lender’s Securities or any other holder of a Lender’s debt obligations or representative of such holder or (z) to any Special Purpose Vehicle to which such Lender has granted an option pursuant to clause (i) above, in each case without notice to or consent of the Borrower or the Administrative Agent; and provided, further, that no such assignment or grant shall release such Lender from any of its obligations hereunder except as expressly provided in clause (i) above. The parties hereto acknowledge and agree that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior debt of any such Special Purpose Vehicle, it will not institute against, or join any other Person in instituting against, any Special Purpose Vehicle that has been granted an option pursuant to this clause (f) any bankruptcy, reorganization, insolvency or liquidation proceeding (such agreement shall survive the payment in full of the Obligations).   126 -------------------------------------------------------------------------------- (g) Each Lender (other than the Fronting Lender) and each Synthetic Investor may sell participations to one or more Persons in or to all or a portion of its rights and obligations under the Loan Documents (including all its rights and obligations with respect to the Revolving Loans, Letters of Credit and the Credit-Linked Deposits). The terms of such participation shall not, in any event, require the participant’s consent to any amendments, waivers or other modifications of any provision of any Loan Document, the consent to any departure by any Loan Party therefrom, or to the exercising or refraining from exercising any powers or rights such Lender or Synthetic Investor may have under or in respect of the Loan Documents (including the right to enforce the obligations of the Loan Parties), except if any such amendment, waiver or other modification or consent would (i) reduce the amount, or postpone any date fixed for, any amount (whether of principal, interest or fees) payable to such participant under the Loan Documents, to which such participant would otherwise be entitled under such participation or (ii) result in the release of all or substantially all of the Collateral or releasing any Guarantor other than in accordance with Section 10.8(b) (Concerning the Collateral and the Collateral Documents). In the event of the sale of any participation by any such Lender or Synthetic Investor, (w) such Lender’s obligations under the Loan Documents shall remain unchanged, (x) such Lender or Synthetic Investor shall remain solely responsible to the other parties for the performance of such obligations, (y) such Lender or Synthetic Investor shall remain the holder of such Obligations for all purposes of this Agreement and (z) the Borrower, the Administrative Agent and the other Lenders and Synthetic Investors shall continue to deal solely and directly with such Lender or Synthetic Investor in connection with such Lender’s or Synthetic Investor’s rights and obligations under this Agreement. Each participant shall be entitled to the benefits of Sections 2.14(d) (Illegality), 2.15 (Capital Adequacy) and 2.16 (Taxes) as if it were a Lender or Synthetic Investor; provided, however, that anything herein to the contrary notwithstanding, the Borrower shall not, at any time, be obligated to make under Section 2.14(d) (Illegality), 2.15 (Capital Adequacy) or 2.16 (Taxes) to the participants in the rights and obligations of any Lender or Synthetic Investor (together with such Lender or Synthetic Investor) any payment in excess of the amount the Borrower would have been obligated to pay to such Lender or Synthetic Investor in respect of such interest had such participation not been sold. In the event that any Lender or Synthetic Investor sells participations in accordance with this Section 11.2(g), such Lender or Synthetic Investor shall maintain a register on which it enters the name of all participants in its rights and obligations under the Loan Documents (the “Participant Register”). Any participation of such Lender’s or Synthetic Investor’s rights and obligations under the Loan Documents may be effected only by the registration of such participation on the Participant Register.   (h) Any Issuer may, with, unless an Event of Default has occurred and is continuing, the prior written consent of the Borrower (such consent not to be unreasonably withheld or delayed) at any time assign its rights and obligations hereunder to any other Lender (other than the Fronting Lender) by an instrument in form and substance satisfactory to the Borrower, the Administrative Agent, such Issuer and such Lender. If any Issuer ceases to be a Lender hereunder by virtue of any assignment made   127 -------------------------------------------------------------------------------- pursuant to this Section 11.2(h), then, as of the effective date of such cessation, such Issuer’s obligations to Issue Letters of Credit pursuant to Section 2.4 (Letters of Credit) shall terminate and such Issuer shall be an Issuer hereunder only with respect to outstanding Letters of Credit issued prior to such date.   Section 11.3 Costs and Expenses   (a) The Borrower agrees upon demand to pay, or reimburse each of the Agents and Fronting Lender for, all of the Administrative Agent’s and the Fronting Lender’s reasonable external audit, appraisal, valuation, filing, document duplication and reproduction and investigation expenses and all of the Agents’ reasonable out-of-pocket legal expenses and for all other reasonable out-of-pocket costs and expenses of every type and nature (including, without limitation, the reasonable fees, expenses and disbursements of the Administrative Agent’s and the Fronting Lender’s counsel, Latham & Watkins LLP, local legal counsel, auditors, accountants, appraisers, printers, insurance and environmental advisors, and other consultants and agents) incurred by any Agent or the Fronting Lender in connection with any of the following: (i) the Administrative Agent’s or the Fronting Lender’s audit and investigation of the Borrower and its Subsidiaries in connection with the preparation, negotiation or execution of any Loan Document or, if an Event of Default has occurred and is continuing, the Administrative Agent’s or Fronting Lender’s periodic audits of the Borrower or any of its Subsidiaries (which audit expenses shall be reimbursed only if conducted when an Event of Default has occurred and is continuing), as the case may be, (ii) the preparation, negotiation, execution or interpretation of this Agreement (including, without limitation, the satisfaction or attempted satisfaction of any condition set forth in Article III (Conditions To Loans And Letters Of Credit), any Loan Document or any proposal letter or engagement letter issued in connection therewith, or the making of the Loans hereunder, (iii) the creation, perfection or protection of the Liens under any Loan Document (including any reasonable fees, disbursements and expenses for local counsel in various jurisdictions), (iv) the ongoing administration of this Agreement and the Loans and Letters of Credit, including consultation with attorneys in connection therewith and with respect to the Administrative Agent’s, the Collateral Agent’s and the Fronting Lender’s rights and responsibilities hereunder and under the other Loan Documents, (v) the protection, collection or enforcement of any Obligation or the enforcement of any Loan Document, (vi) the commencement, defense or intervention in any court proceeding relating in any way to the Obligations, any Loan Party, any of the Borrower’s Subsidiaries, this Agreement or any other Loan Document, (vii) the response to, and preparation for, any subpoena or request for document production with which any Agent or the Fronting Lender is served or deposition or other proceeding in which any Agent or the Fronting Lender is called to testify, in each case, relating in any way to the Obligations, any Loan Party, any of the Borrower’s Subsidiaries, this Agreement or any other Loan Document or (viii) any amendment, consent, waiver, assignment, restatement, or supplement to any Loan Document or the preparation, negotiation, and execution of the same; provided, however, that the Borrower shall not have any obligation under clauses (vi) and (vii) hereunder in connection with any action brought by one Secured Party against another Secured Party (except in its capacity as an Agent, if applicable).   128 -------------------------------------------------------------------------------- (b) The Borrower further agrees to pay or reimburse each Agent and each of the Lenders, Synthetic Investors and Issuers upon demand (which, in the case of the Synthetic Investors, shall be made through the Fronting Lender) for all reasonable out-of-pocket costs and expenses, including, without limitation, reasonable attorneys’ fees (including allocated costs of internal counsel and costs of settlement), incurred by such Agent, such Lenders, Synthetic Investors or Issuers in connection with any of the following: (i) in enforcing any Loan Document or any security therefor or exercising or enforcing any other right or remedy available by reason of an Event of Default, (ii) in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a “work-out” or in any insolvency or bankruptcy proceeding, (iii) in commencing, defending or intervening in any litigation or in filing a petition, complaint, answer, motion or other pleadings in any legal proceeding relating to the Obligations, any Loan Party, any of the Borrower’s Subsidiaries and related to or arising out of the transactions contemplated hereby or by any other Loan Document or (iv) in taking any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) described in clause (i), (ii) or (iii) above; provided, however, that the Borrower shall not have any obligation under clause (iii) hereunder in connection with any action brought by one Secured Party against another Secured Party (except in its capacity as an Agent, if applicable).   Section 11.4 Indemnities   (a) The Borrower agrees to indemnify and hold harmless each Agent, each Lender, each Synthetic Investor and each Issuer and each of their respective Affiliates, and each of the directors, officers, employees, agents, representatives, attorneys, consultants and advisors of or to any of the foregoing (including those retained in connection with the satisfaction or attempted satisfaction of any condition set forth in Article III (Conditions To Loans And Letters Of Credit)) (each such Person being an “Indemnitee”) from and against any and all claims, damages, liabilities, obligations, losses, penalties, actions, judgments, suits, costs, disbursements and expenses of any kind or nature (including reasonable fees, disbursements and expenses of financial and legal advisors to any such Indemnitee) that may be imposed on, incurred by or asserted against any such Indemnitee in connection with or arising out of any investigation, litigation or proceeding, whether or not any such Indemnitee is a party thereto, whether direct, indirect, or consequential and whether based on any federal, state or local law or other statutory regulation, securities or commercial law or regulation, or under common law or in equity, or on contract, tort or otherwise, in any manner relating to or arising out of this Agreement, any other Loan Document, any Obligation, any Letter of Credit or any act, event or transaction related or attendant to any thereof, or the use or intended use of the proceeds of the Loans or Letters of Credit or in connection with any investigation of any potential matter covered hereby (collectively, the “Indemnified Matters”); provided, however, that the Borrower shall not have any obligation under this Section 11.4 to an Indemnitee with respect to (i) any Indemnified Matter caused by or resulting from the gross negligence or willful misconduct of that Indemnitee, as determined by a court of competent jurisdiction in a final non-appealable judgment or order and (ii) any action brought by one Secured Party against another Secured Party (except in its capacity as an Agent, if applicable). Without limiting the foregoing, “Indemnified Matters” include   129 -------------------------------------------------------------------------------- (i) all Environmental Liabilities and Costs arising from or connected with the past, present or future operations of the Borrower or any of its Subsidiaries involving any property subject to a Collateral Document, or damage to real or personal property or natural resources or harm or injury alleged to have resulted from any Release of Contaminants on, upon or into such property or any contiguous real estate, (ii) any costs or liabilities incurred in connection with any Remedial Action concerning any Borrower or any of its Subsidiaries, (iii) any costs or liabilities incurred in connection with any Environmental Lien and (iv) any costs or liabilities incurred in connection with any other matter under any Environmental Law, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, (49 U.S.C. § 9601 et seq.) and applicable state property transfer laws, whether, with respect to any such matter, such Indemnitee is a mortgagee pursuant to any leasehold mortgage, a mortgagee in possession, the successor in interest to the Borrower or any of its Subsidiaries, or the owner, lessee or operator of any property of the Borrower or any of its Subsidiaries by virtue of foreclosure, except, with respect to those matters referred to in clauses (i), (ii), (iii) and (iv) above, to the extent (x) incurred following foreclosure by the Administrative Agent, any Lender, any Synthetic Investor or any Issuer, or the Administrative Agent, any Lender, any Synthetic Investor or any Issuer having become the successor in interest to the Borrower or any of its Subsidiaries and (y) attributable solely to acts of the Administrative Agent, such Lender, such Synthetic Investor or such Issuer or any agent on behalf of the Administrative Agent, such Lender, such Synthetic Investor or such Issuer.   (b) The Borrower shall indemnify each Agent, each Lender, each Synthetic Investor and each Issuer for, and hold each Agent, each Lender, each Synthetic Investor and each Issuer harmless from and against, any and all claims for brokerage commissions, fees and other compensation made against any Agent, any Lender, any Synthetic Investor and any Issuer for any broker, finder or consultant with respect to any agreement, arrangement or understanding made by or on behalf of any Loan Party or any of its Subsidiaries in connection with the transactions contemplated by this Agreement.   (c) The Borrower, at the request of any Indemnitee, shall have the obligation to defend against such investigation, litigation or proceeding or requested Remedial Action and the Borrower, in any event, may participate in the defense thereof with legal counsel of the Borrower’s choice. If such Indemnitee requests the Borrower to defend against such investigation, litigation or proceeding or requested Remedial Action, the Borrower shall promptly do so and such Indemnitee shall have the right to have legal counsel of its choice participate in such defense. No action taken by legal counsel chosen by such Indemnitee in defending against any such investigation, litigation or proceeding or requested Remedial Action, shall vitiate or in any way impair the Borrower’s obligation and duty hereunder to indemnify and hold harmless such Indemnitee.   (d) The Borrower agrees that any indemnification or other protection provided to any Indemnitee pursuant to this Agreement (including pursuant to this Section 11.4) or any other Loan Document shall (i) survive payment in full of the Obligations and (ii) inure to the benefit of any Person that was at any time an Indemnitee under this Agreement or any other Loan Document.   130 -------------------------------------------------------------------------------- Section 11.5 Limitation of Liability   The Borrower agrees that no Indemnitee shall have any liability (whether direct or indirect, in contract, tort or otherwise) to any Loan Party or any of their respective Subsidiaries or any of their respective equity holders or creditors for or in connection with the transactions contemplated hereby and in the other Loan Documents, except for direct damages (as opposed to special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings)) determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnitee’s gross negligence or willful misconduct. The Borrower hereby waives, releases and agrees (for itself and on behalf of its Subsidiaries) not to sue upon any such claim for any special, indirect, consequential or punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor.   Section 11.6 Right of Set-off   Upon the occurrence and during the continuance of any Event of Default, each Lender, each Synthetic Investor and each Affiliate of any of them is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Synthetic Investor or any of their respective Affiliates to or for the credit or the account of the Borrower against any and all of the Obligations now or hereafter existing whether or not such Lender or such Synthetic Investor shall have made any demand under this Agreement or any other Loan Document and even though such Obligations may be unmatured. Each Lender and each Synthetic Investor agrees promptly to notify the Borrower after any such set-off and application made by such Lender or such Synthetic Investor or their respective Affiliates; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and each Synthetic Investor under this Section 11.6 are in addition to the other rights and remedies (including other rights of set-off) that such Lender or such Synthetic Investor may have. Notwithstanding the foregoing or any contrary provision contained herein, in any other Loan Document or in any other agreement between the Borrower or any Subsidiary of the Borrower, on the one hand, and any Secured Party or any Affiliate of any Secured Party, on the other hand, neither any Secured Party nor any Affiliate of any Secured Party shall have, and each Secured Party hereby waives and relinquishes, any right to set off any deposits (general or special, time or demand, provisional or final) held by such Secured Party or Affiliate to or for the credit or the account of the Borrower or any Subsidiary of the Borrower against any or all of the Obligations if such deposits are, and are identified by the Borrower as, the proceeds of a capital contribution made by MI or an Affiliate of MI to the Borrower or a Subsidiary of the Borrower in connection with the Contingent MI Payment.   131 -------------------------------------------------------------------------------- Section 11.7 Sharing of Payments, Etc.   (a) (i) If any Synthetic Investor obtains any payment (whether voluntary, involuntary, through the exercise of any right of set-off or otherwise) owing to it or the Fronting Lender, any interest thereon, fees in respect thereof or amounts due pursuant to Section 11.3 (Costs and Expenses) or 11.4 (Indemnities) (other than payments pursuant to Section 2.14 (Special Provisions Governing Eurodollar Rate Loans), 2.15 (Capital Adequacy) or 2.16 (Taxes)) in excess of its Ratable Portion of all payments of such Obligations obtained by all the Lenders and Synthetic Investors, except as the result of a refinancing of the Synthetic Facility, such Synthetic Investor (a “Purchasing Investor”) shall forthwith purchase from the other Lenders (other than the Fronting Lender) and the other Synthetic Investors (each, a “Selling Investor”) such participations in their Loans or other Obligations or interest in the Credit-Linked Deposits as shall be necessary to cause such Purchasing Investor to share the excess payment ratably with each of them.   (ii) If any Lender obtains any payment (whether voluntary, involuntary, through the exercise of any right of set-off or otherwise) of the Loans owing to it, any interest thereon, fees in respect thereof (including, if such Lender is the Fronting Lender, any fee ultimately payable to any Synthetic Investor) or amounts due pursuant to Section 11.3 (Costs and Expenses) or 11.4 (Indemnities) (other than payments pursuant to Section 2.14 (Special Provisions Governing Eurodollar Rate Loans), 2.15 (Capital Adequacy) or 2.16 (Taxes)) in excess of its Ratable Portion of all payments of such Obligations obtained by all the Lenders and Synthetic Investors, except as the result of a refinancing of the applicable Facility, such Lender (together with a Purchasing Investor, a “Purchasing Lender”) shall forthwith purchase from the other Lenders (each, together with the Selling Investors, a “Selling Lender”) and Synthetic Investors such participations in their Loans or other Obligations as shall be necessary to cause such Purchasing Lender to share the excess payment ratably with each of them.   (iii) Except as expressly provided otherwise with respect to Swing Loans, each Borrowing or withdrawal of a Credit-Linked Deposit, each payment or prepayment of principal of any Borrowing or withdrawal of a Credit-Linked Deposit, each payment of interest on the Loans or Credit-Linked Deposit, each payment of the Commitment Fees, each reduction of the Commitments and each conversion of any Borrowing to or continuation of any Borrowing shall be allocated pro rata among the Lenders and Synthetic Investors, as applicable, in accordance with their respective applicable Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans or Credit-Linked Deposits). For purposes of determining the available Revolving Credit Commitments of the Lenders at any time, each outstanding Swing Loan shall be deemed to have utilized the Revolving Commitments of the Lenders (including those Lenders which shall not have made Swing Loans) pro rata in accordance with such respective Revolving Commitments. Each Lender agrees that in computing such Lender’s portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lender’s percentage of such Borrowing to the next higher or lower whole dollar amount.   132 -------------------------------------------------------------------------------- (b) If all or any portion of any payment received by a Purchasing Lender is thereafter recovered from such Purchasing Lender, such purchase from each Selling Lender shall be rescinded and such Selling Lender shall repay to the Purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Selling Lender’s ratable share (according to the proportion of (i) the amount of such Selling Lender’s required repayment in relation to (ii) the total amount so recovered from the Purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered.   (c) The Borrower agrees that any Purchasing Lender so purchasing a participation from a Selling Lender pursuant to this Section 11.7 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Purchasing Lender were the direct creditor of the Borrower in the amount of such participation.   Section 11.8 Notices, Etc.   All notices, demands, requests and other communications provided for in this Agreement (x) if made by any Synthetic Investor, shall be made through the Fronting Lender or, if expressly provided hereunder, through the Administrative Agent and (y) in any case, shall be given in writing, or, if consented to by the Administrative Agent, by any telecommunication device capable of creating a written record (including electronic mail), and addressed to the party to be notified as follows:   (a) if to the Borrower:   THE BABCOCK & WILCOX COMPANY 20 S. Van Buren Avenue Barberton, Ohio 44203 Attention: Treasurer Telecopy no: (281) 870-5027 E-Mail Addresses: [email protected]   with a copy to:   McDermott International, Inc. 757 North Eldridge Parkway Houston, Texas 77079 Attention: John Nesser Telecopy No: (281) 870-5828 E-Mail Address: [email protected]   133 -------------------------------------------------------------------------------- and   BAKER BOTTS LLP 910 Louisiana Street Houston, TX 77002 Attention: Ted Paris, Esq. Telecopy no: (713) 229-7738 E-Mail Address: [email protected]   (b) if to any Lender, at its Domestic Lending Office;   (c) if to any Issuer, (i) at its Domestic Lending Office, if such Issuer is a Lender or (ii) otherwise, at the Domestic Lending Office of any Lender Affiliated therewith or, in each case at any other address set forth in a notice sent to the Administrative Agent and the Borrower;   (d) if to the Fronting Lender, at its Domestic Lending Office; and   (e) if to the Administrative Agent:   CREDIT SUISSE Eleven Madison Avenue New York, NY 10010 Attention: Thomas Lynch Telecopy no: (212) 325-9205   or at such other address as shall be notified in writing (x) in the case of the Borrower and the Administrative Agent, to the other parties and (y) in the case of all other parties, to the Borrower and the Administrative Agent. All such notices and communications shall be effective upon personal delivery (if delivered by hand, including any overnight courier service), when deposited in the mails (if sent by mail), or when properly transmitted (if sent by a telecommunications device or through the Internet); provided, however, that notices and communications to the Administrative Agent pursuant to Article II (The Facilities) or X (The Administrative Agent, The Fronting Lender and Other Agents) shall not be effective until received by the Administrative Agent (unless otherwise expressly provided hereunder).   Section 11.9 No Waiver; Remedies   No failure on the part of any Lender, any Synthetic Investor, any Issuer or the Administrative Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.   134 -------------------------------------------------------------------------------- Section 11.10 Binding Effect   (a) This Agreement shall become effective when it shall have been executed by each of the parties hereto and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto.   Section 11.11 Governing Law   This Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.   Section 11.12 Submission to Jurisdiction; Service of Process   (a) Any legal action or proceeding with respect to this Agreement or any other Loan Document may be brought, prior to the Effective Date, in the U.S. Bankruptcy Court and, at any time, in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, each party hereto hereby accepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts, except that the Agents, Issuers, Lenders or Synthetic Investors may bring legal action or proceedings in other appropriate jurisdictions with respect to the enforcement of its rights with respect to the Collateral. The parties hereto hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions.   (b) The Borrower irrevocably consents to the service of any and all process in any such action or proceeding by the mailing (by registered or certified mail, postage prepaid) of copies of such process to the Process Agent or the Borrower at its address specified in Section 11.8 (Notices, Etc.). The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.   (c) Nothing contained in this Section 11.12 shall affect the right of the Administrative Agent, any Lender or any Synthetic Investor to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against the Borrower or any other Loan Party in any other jurisdiction.   (d) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase Dollars with such other currency at the spot rate of exchange quoted by the Administrative Agent at 11:00 a.m. (New York time) on the Business Day preceding that on which final judgment is given, for the purchase of Dollars, for delivery two Business Days thereafter.   135 -------------------------------------------------------------------------------- Section 11.13 Waiver of Jury Trial   EACH AGENT AND EACH OF THE LENDERS, THE SYNTHETIC INVESTORS, THE ISSUERS AND THE BORROWER IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.   Section 11.14 Marshaling; Payments Set Aside   None of the Administrative Agent, any Lender, any Synthetic Investor or any Issuer shall be under any obligation to marshal any assets in favor of the Borrower or any other party or against or in payment of any or all of the Obligations. To the extent that the Borrower makes a payment or payments to the Administrative Agent, the Lenders, the Synthetic Investors or the Issuers or any such Person receives payment from the proceeds of the Collateral or exercises its rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, right and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.   Section 11.15 Section Titles   The section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto, except when used to reference such section. If a numbered reference to a clause, sub-clause or subsection hereof is immediately followed by a reference in parenthesis to the title of a section hereof containing such clause, sub-clause or subsection, the reference is only to such clause, sub-clause or subsection and not to the section generally. If a numbered reference to a section hereof is immediately followed by a reference in parenthesis to a section hereof, the title reference shall govern in case of direct conflict.   Section 11.16 Execution in Counterparts   This Agreement may be executed in any number of counterparts and by different parties 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. Signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are attached to the same document. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart hereof.   Section 11.17 Entire Agreement   This Agreement, together with all of the other Loan Documents and all certificates and documents delivered hereunder or thereunder, embodies the entire agreement of the parties and supersedes all prior agreements and understandings relating   136 -------------------------------------------------------------------------------- to the subject matter hereof. Delivery of an executed signature page of this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all parties shall be lodged with the Borrower and the Administrative Agent.   Section 11.18 Confidentiality   (a) Each Lender, each Synthetic Investor and each Agent agree to keep information obtained by it pursuant hereto and the other Loan Documents confidential in accordance with such Lender’s, such Synthetic Investor’s or such Agent’s, as the case may be, reasonable customary practices and agrees that it shall only use such information in connection with the transactions contemplated by this Agreement and not disclose any such information other than (i) to such Lender’s, such Synthetic Investor’s or such Agent’s, as the case may be, employees, representatives and agents that are or are expected to be involved in the evaluation of such information in connection with the transactions contemplated by this Agreement that are advised of the confidential nature of such information and agree to adhere to the confidentiality provisions hereof, (ii) to the extent such information presently is or hereafter becomes available to such Lender, such Synthetic Investor or such Agent, as the case may be, on a non-confidential basis from a source other than the Borrower or its Subsidiaries, Affiliates or agents, (iii) to the extent disclosure is required by law, regulation or judicial order or requested or required by bank regulators or auditors (provided that any Lender, Synthetic Investor or Agent who discloses information pursuant to this clause (iii) shall have provided the Borrower with reasonable prior written notice of such disclosure, and, at the request and expense of the Borrower, shall have reasonably cooperated with the Borrower to obtain a protective order or other appropriate protection or, if it so elects, the Borrower may waive compliance with the terms of this proviso, and, if such protective order or other protection is not obtained, or if the Borrower waives compliance with the provisions hereof, such Lender, Synthetic Investor or Agent, as the case may be, may disclose only that portion of the information that it is legally required to disclose) or (iv) to assignees, participants and Special Purpose Vehicles that are grantees of any option described in Section 11.2(f) (Assignments and Participations) (or potential assignees, participants or grantees) or to any pledgee referred to in Section 11.2(f)(ii) or to any actual or prospective counterparty (or its advisors) to any securitization, swap or derivative transaction relating to the Borrower, its Subsidiaries or the Obligations that, in each case, agree to be bound by the provisions of this Section 11.18.   (b) The Agents, the Lenders and the Synthetic Investors acknowledge that the Borrower and its Subsidiaries perform classified contracts funded by or for the benefit of the United States Federal government and, accordingly, neither the Borrower nor any Subsidiary will be obligated to release, disclose or otherwise make available to any Agent or any Lender any classified or special nuclear material to any parties not in possession of a valid security clearance and authorized by the appropriate agency of the United States Federal government to receive such material. The Agents, the Synthetic Investors and the Lenders agree that in connection with any exercise of a right or remedy the United States Federal government may remove classified information or government-issued property prior to any remedial action implicating such classified information or   137 -------------------------------------------------------------------------------- government-issued property. Upon notice from the Borrower, the Agents, the Synthetic Investors and the Lenders shall take such steps in accordance with this Agreement as may reasonably be requested by the Borrower to enable the Borrower or any Subsidiary thereof to comply with the Foreign Ownership Control or Influence requirements of the United States Federal government imposed from time to time.   (c) Each of the Agents, the Lenders and the Synthetic Investors acknowledges that (i) it has developed compliance procedures regarding the use of material non-public information and (ii) it will handle material non-public information in accordance with applicable law, including Federal and state securities laws.   [Remainder of this page intentionally left blank]   138 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.   THE BABCOCK & WILCOX COMPANY By:   /s/ James R. Easter -------------------------------------------------------------------------------- Name:   James R. Easter Title:   Treasurer -------------------------------------------------------------------------------- CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Administrative Agent, Lender, Synthetic Investor, Issuer and Collateral Agent By:   /s/ Robert Hetu -------------------------------------------------------------------------------- Name:   Robert Hetu Title:   Managing Director By:   /s/ Cassandra Droogan -------------------------------------------------------------------------------- Name:   Cassandra Droogan Title:   Vice President -------------------------------------------------------------------------------- CREDIT SUISSE SECURITIES (USA) LLC, as Sole Lead Arranger and Sole Lead Bookrunner By:   /s/ Robert Hetu -------------------------------------------------------------------------------- Name:   Robert Hetu Title:   Managing Director By:   /s/ Cassandra Droogan -------------------------------------------------------------------------------- Name:   Cassandra Droogan Title:   Vice President -------------------------------------------------------------------------------- JPMORGAN CHASE BANK, N.A., as Syndication Agent, Lender and Issuer By:   /s/ Dianne L. Russell -------------------------------------------------------------------------------- Name:   Dianne L. Russell Title:   Vice President -------------------------------------------------------------------------------- WACHOVIA BANK, NATIONAL ASSOCIATION, as Co-Documentation Agent and Lender By:   /s/ M. Scott Hodges -------------------------------------------------------------------------------- Name:   M. Scott Hodges Title:   Vice President -------------------------------------------------------------------------------- THE BANK OF NOVA SCOTIA, as Co-Documentation Agent, Synthetic Investor and a Lender By:   /s/ V. Gibson -------------------------------------------------------------------------------- Name:   V. Gibson Title:   Assistant Agent -------------------------------------------------------------------------------- WELLS FARGO BANK, N.A., as a Synthetic Investor, Lender and Issuer By:   /s/ Philip C. Lauinger III -------------------------------------------------------------------------------- Name:   Philip C. Lauinger III Title:   Vice President -------------------------------------------------------------------------------- PNC BANK, NATIONAL ASSOCIATION, as Lender, Synthetic Investor and Issuer By:   /s/ James A. Fink -------------------------------------------------------------------------------- Name:   James A. Fink Title:   Managing Director -------------------------------------------------------------------------------- BANK OF AMERICA, N.A., as a Lender and Issuer By:   /s/ Robert W. Troutman -------------------------------------------------------------------------------- Name:   Robert W. Troutman Title:   Managing Director -------------------------------------------------------------------------------- CALYON, NEW YORK BRANCH, as a Synthetic Investor, Lender and Issuer By:   /s/ Page Dillehunt -------------------------------------------------------------------------------- Name:   Page Dillehunt Title:   Director By:   /s/ Bertrand Cord’homme -------------------------------------------------------------------------------- Name:   Bertrand Cord’homme Title:   Director -------------------------------------------------------------------------------- BANK OF SCOTLAND, as a Synthetic Investor and Lender By:   /s/ Karen Welch -------------------------------------------------------------------------------- Name:   Karen Welch Title:   Assistant Vice President -------------------------------------------------------------------------------- NATEXIS BANQUES POPULAIRES, as a Synthetic Investor and Lender By:   /s/ Renaud d’Herbes -------------------------------------------------------------------------------- Name:   Renaud d’Herbes Title:   Senior Vice President / Regional Manager By:   /s/ Louis P. LaVille, III -------------------------------------------------------------------------------- Name:   Louis P. LaVille, III Title:   Vice President / Group Manager -------------------------------------------------------------------------------- NATIONAL CITY BANK, as a Synthetic Investor and Lender By:   /s/ Stephen Monto -------------------------------------------------------------------------------- Name:   Stephen Monto Title:   Vice President -------------------------------------------------------------------------------- WHITNEY NATIONAL BANK, as a Lender By:   /s/ Larry C. Stephens, Jr. -------------------------------------------------------------------------------- Name:   Larry C. Stephens, Jr. Title:   Vice President -------------------------------------------------------------------------------- AMEGY BANK NATIONAL ASSOCIATION, as a Lender By:   /s/ Carmen Jordan -------------------------------------------------------------------------------- Name:   Carmen Jordan Title:   Senior Vice President -------------------------------------------------------------------------------- COMPASS BANK, as a Synthetic Investor and Lender By:   /s/ Tom Brosig -------------------------------------------------------------------------------- Name:   Tom Brosig Title:   Senior Vice President -------------------------------------------------------------------------------- ALLIED IRISH BANKS, PLC., as a Synthetic Investor and Lender By:   /s/ Margaret Brennan -------------------------------------------------------------------------------- Name:   Margaret Brennan Title:   Senior Vice President

EXHIBIT 10.4 INVESTMENT LETTER In connection with the exchange of common stock pursuant to the terms and conditions of the Share Exchange Agreement dated July 6, 2006 to which the undersigned is a party (the "Agreement"), the undersigned hereby represents, warrants, covenants and agrees as set forth below. 1. Exchange Entirely for Own Account. The Valley Forge Composite Technologies, Inc. common stock being exchanged for Quetzal Capital 1, Inc. common stock (hereafter the “Shares”) is being acquired for investment purposes only, for the undersigned's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and the undersigned has no present intention of selling, granting any participation in, or otherwise distributing the Shares or any portion thereof. Further, the undersigned does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to all or any portion of the Shares. 2. No Securities Act Registration. The undersigned understands that the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), by reason of a specific exemption or specific exemptions from the registration provisions of the Securities Act which depend upon, among other things, the bona fide nature of the undersigned's investment intent as expressed herein. 3. Restricted Securities. The undersigned acknowledges that, unless the undersigned has been advised by Quetzal Capital 1, Inc. (the “Company”) that a current registration statement is in effect covering the resale of the Shares, because the Shares have not been registered under the Securities Act, the Shares must be held by the undersigned indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available. The undersigned is aware of the provision of Rule 144 promulgated under the Securities Act that permits the limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the satisfaction of having held the Shares for a certain duration of time, the availability of certain current public information about the Company, the sale being through a "broker's transaction" as provided by Rule 144(f)), and the volume of shares sold not exceeding specified limitations (unless the sale is within the requirements of Rule 144(k) . 4. Accredited and Sophisticated Investor. The undersigned: represents and warrants that at this time the following information is true: Check All That Apply   ____ (a) The undersigned is an individual with a net worth, or a joint net worth together with his or her spouse, in excess of $1,000,000. (In calculating net worth, you may include equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Equity in personal property and real estate should be based on the fair market value of such property minus debt secured by such property.)     --------------------------------------------------------------------------------   ____ (b) The undersigned is an individual that had an individual income in excess of $200,000 in each of the prior two years (2004 and 2005) and reasonably expects an income in excess of $200,000 in the current year (2006); or ____ (c) The undersigned is an individual that had with his/her spouse joint income in excess of $300,000 in each of the prior two years (2004 and 2005) and reasonably expects joint income in excess of $300,000 in the current year (2006). ____ (d) The undersigned is a director, president, vice president in charge of a principal business unit, division or function (such as sales, administration or finance); any other officer who performs a policy making function, or any other person who performs similar policy making functions for Valley Forge Composite Technologies, Inc., a Pennsylvania corporation.   ____ (e) The undersigned, either alone or with the undersigned's professional advisor or advisors, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of acquiring the Shares, and is able to bear the economic risk of the investment in the Shares, including a complete loss of the investment. _____ (f) None of the above. 5. Opportunity to Ask Questions. The undersigned has had an opportunity to ask questions of and receive answers from the Company or its representatives concerning the terms of the undersigned's investment in the Shares, all such questions have been answered to the full satisfaction of the undersigned, and the undersigned has had the opportunity to request and obtain any additional information the undersigned deemed necessary to verify or supplement the information contained therein. The undersigned has reviewed and understands the disclosure provided in the Company’s SEC Reports (as such term is defined in the Agreement), and the information provided in the Information Statement and its attached documents. 6. Investment Risks. The undersigned recognizes that an investment in the Shares involves substantial risks, and is fully aware of and understands all of the risk factors related to the acquisition of the Shares. The undersigned has determined that the acquisition of the Shares is consistent with the undersigned's investment objectives. The undersigned is able to bear the economic risks of an investment in the Shares, and at the present time could afford a complete loss of such investment. 7. Limitation on Manner of Offering. The Shares were not offered to the undersigned by any means of general solicitation or general advertising. 8. Tax and Other Matters. The undersigned is not relying on the Company with respect to tax and other economic considerations involved in the acquisition of the Shares. The undersigned has carefully considered and has, to the extent the undersigned believes such discussion necessary, discussed with the undersigned's professional, legal, tax, accounting and financial advisors the suitability of an investment in the Shares for the undersigned's particular tax and financial situation, and the undersigned has determined that the Shares are a suitable investment for him or her.     --------------------------------------------------------------------------------   9. Restrictive Legends. The undersigned understands that the Shares shall bear one or more of the following restrictive legends: (a) “THESE SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR THE SECURITIES LAWS OF ANY STATE. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION AND QUALIFICATION UNDER THE ACT AND SUCH LAWS IS NOT REQUIRED.” (b) Any legend required by applicable state law. 10. Successors. The representations and warranties contained herein shall be binding upon the heirs, executors, administrators, personal representatives and other successors of the undersigned and shall inure to the benefit of and be enforceable by the Company. 11. Address. The address, telephone number and facsimile number set forth at the end of this letter are the undersigned's true and correct address. 12. Counsel. The undersigned has had the opportunity to discuss this letter and the Agreement with counsel of his or her selection and the undersigned has availed himself or herself of the opportunity to do so to the extent he or she desires. The undersigned is not relying upon the advice of the Company or counsel to the Company to advise the undersigned in connection with the risks and merits of consummating the transactions contemplated by the Agreement.     --------------------------------------------------------------------------------   SHAREHOLDER(S)   Signature  Date   Signature (spouse) Date   Name (Typed or Printed)    Name (Typed or Printed) Mailing Address:  _______________________________   _______________________________   _______________________________ Telephone: _______________________ Tax I.D. Number: ___________________     --------------------------------------------------------------------------------  

CREDIT AGREEMENT Dated as of December 21, 2005 among A.T. CROSS COMPANY, as the Borrower, A.T. CROSS LIMITED , as the UK Borrower, BANK OF AMERICA, N.A., as Administrative Agent, and L/C Issuer, BANK OF AMERICA, N.A. (London Branch), as UK Lender and The Other Lenders Party Hereto     TABLE OF CONTENTS Section Page ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS ................................................... 5 1.01 Defined Terms ....................................................................................................... 5 1.02 Other Interpretive Provisions ................................................................................ 29 1.03 Accounting Terms ................................................................................................. 30 1.04 Rounding ............................................................................................................... 30 1.05 Times of Day .......................................................................................................... 30 1.06 Letter of Credit Amounts ....................................................................................... 30 1.07 Conversion of Foreign Currencies ......................................................................... 30 ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS ...................................... 31 2.01 Committed Loans ................................................................................................... 31 2.02 Borrowings, Conversions and Continuations of Committed Loans ...................... 31 2.03 [Reserved] .............................................................................................................. 34 2.04 Letters of Credit ...................................................................................................... 34 2.05 [Reserved] .............................................................................................................. 42 2.06 Prepayments ........................................................................................................... 42 2.07 Termination or Reduction of Commitments........................................................... 43 2.08 Repayment of Loans ............................................................................................... 43 2.09 Interest .................................................................................................................... 43 2.10 Fees ......................................................................................................................... 44 2.11 Computation of Interest and Fees ........................................................................... 44 2.12 Evidence of Debt .................................................................................................... 45 2.13 Payments Generally; Administrative Agent's Clawback ....................................... 45 2.14 Sharing of Payments by Lenders ........................................................................... 47 ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY ........................................ 48 3.01 Taxes ...................................................................................................................... 48 3.02 Illegality ................................................................................................................. 50 3.03 Inability to Determine Rates .................................................................................. 51 3.04 Increased Costs; Reserves on Eurodollar Rate Loans ........................................... 51 3.05 Compensation for Losses ....................................................................................... 53 3.06 Mitigation Obligations; Replacement of Lenders .................................................. 53 3.07 Survival .................................................................................................................. 54 3.08 Required Costs ....................................................................................................... 54 ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS ................................ 54 4.01 Conditions of Initial Credit Extension .................................................................... 54 4.02 Conditions to all Credit Extensions ........................................................................ 56 ARTICLE V. REPRESENTATIONS AND WARRANTIES ...................................................... 56 5.01 Existence, Qualification and Power; Compliance with Laws ................................ 57 5.02 Authorization; No Contravention ........................................................................... 57 5.03 Governmental Authorization; Other Consents ....................................................... 57 5.04 Binding Effect ........................................................................................................ 57 5.05 Financial Statements; No Material Adverse Effect; No Internal Control Event ... 57 5.06 Litigation ................................................................................................................ 58 5.07 No Default .............................................................................................................. 59 5.08 Ownership of Property; Liens ................................................................................ 59 5.09 Environmental Compliance ............................................................................ 59 5.10 Insurance ......................................................................................................... 59 5.11 Taxes ............................................................................................................... 59 5.12 ERISA Compliance ......................................................................................... 59 5.13 Subsidiaries; Equity Interests .......................................................................... 60 5.14 Margin Regulations; Investment Company Act; Public Utility Holding Company Act .................................................................................................. 60 5.15 Disclosure ....................................................................................................... 61 5.16 Compliance with Laws ................................................................................... 61 5.17 Intellectual Property; Licenses, Etc. ............................................................... 61 ARTICLE VI. AFFIRMATIVE COVENANTS .................................................................... 61 6.01 Financial Statements ....................................................................................... 62 6.02 Certificates; Other Information ....................................................................... 63 6.03 Notices ............................................................................................................ 64 6.04 Payment of Obligations .................................................................................. 65 6.05 Preservation of Existence, Etc ........................................................................ 65 6.06 Maintenance of Properties .............................................................................. 65 6.07 Maintenance of Insurance ............................................................................... 66 6.08 Compliance with Laws ................................................................................... 66 6.09 Books and Records ......................................................................................... 66 6.10 Inspection Rights ............................................................................................ 66 6.11 Use of Proceeds .............................................................................................. 66 6.12 Additional Guarantors .................................................................................... 67 6.13 Post Closing Deliveries ....................................................................................................... 67 ARTICLE VII. NEGATIVE COVENANTS ........................................................................... 67 7.01 Liens ............................................................................................................... 67 7.02 Investments ..................................................................................................... 68 7.03 Indebtedness ................................................................................................... 69 7.04 Fundamental Changes .................................................................................... 70 7.05 Dispositions .................................................................................................... 71 7.06 Restricted Payments ....................................................................................... 71 7.07 Change in Nature of Business ........................................................................ 72 7.08 Transactions with Affiliates ........................................................................... 72 7.09 Burdensome Agreements ................................................................................ 73 7.10 Use of Proceeds ............................................................................................. 73 7.11 Financial Covenants ........................................................................................ 73 7.12 Capital Expenditures ....................................................................................... 73 7.13 Anti-Terrorism Law ........................................................................................ 74 7.14 Embargoed Person .......................................................................................... 74 7.15 Restriction on Excluded Subsidiaries; Loan Party Assets .............................. 74 ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES ................................................. 74 8.01 Events of Default ............................................................................................ 74 8.02 Remedies Upon Event of Default .................................................................... 76 8.03 Application of Funds ....................................................................................... 77 ARTICLE IX. ADMINISTRATIVE AGENT ........................................................................ 78 9.01 Appointment and Authority ............................................................................ 78 9.02 Rights as a Lender ........................................................................................... 78 9.03 Exculpatory Provisions ................................................................................... 78 2 9.04 Reliance by Administrative Agent .......................................................................... 79 9.05 Delegation of Duties ................................................................................................ 80 9.06 Resignation of Administrative Agent ...................................................................... 80 9.07 Non-Reliance on Administrative Agent and Other Lenders .................................... 81 9.08 [Reserved] ................................................................................................................ 81 9.09 Administrative Agent May File Proofs of Claim ..................................................... 81 ARTICLE X. MISCELLANEOUS ................................................................................................ 82 10.01 Amendments, Etc .................................................................................................... 82 10.02 Notices; Effectiveness; Electronic Communication ............................................... 83 10.03 No Waiver; Cumulative Remedies ......................................................................... 85 10.04 Expenses; Indemnity; Damage Waiver ................................................................... 85 10.05 Payments Set Aside ................................................................................................. 87 10.06 Successors and Assigns ........................................................................................... 87 10.07 Treatment of Certain Information; Confidentiality ................................................. 90 10.08 Right of Setoff ......................................................................................................... 91 10.09 Interest Rate Limitation ........................................................................................... 91 10.10 Counterparts; Integration; Effectiveness ................................................................. 91 10.11 Survival of Representations and Warranties ........................................................... 92 10.12 Severability .............................................................................................................. 92 10.13 Replacement of Lenders ......................................................................................... 92 10.14 Governing Law; Jurisdiction; Etc ........................................................................... 93 10.15 Waiver of July Trial ................................................................................................ 94 10.16 USA PATRIOT Act Notice .................................................................................... 94 10.17 ENTIRE AGREEMENT ........................................................................................ 94 10.18 Judgment Currency ................................................................................................. 94 ARTICLE XI. RATIFICATION ..................................................................................................... 95 SIGNATURES ..................................................................................................................................... S-1 3   SCHEDULE AND EXHIBIT INDEX Schedules Schedule I: Post Closing Deliveries Schedule 2.01: Commitments And Applicable Percentages Schedule 5.05: Supplement To Interim Financial Statements Schedule 5.06: Litigation Schedule 5.13: Subsidiaries And Other Equity Investments Schedule 5.17: Intellectual Property Matters Schedule 7.01: Existing Liens Schedule 7.02: Investments Schedule 7.03: Existing Indebtedness Schedule 10.02: Administrative Agent's Office; Certain Addresses For Notices Schedule 10.06: Processing And Recordation Fees Exhibits Exhibit A-1: Form of Committed Loan Notice Exhibit A-2: Form of Eurocurrency Loan Notice Exhibit D: Form of Notes Exhibit E: Form of Compliance Certificate Exhibit F: Form of Assignment and Assumption Exhibit G: Form of Guaranty CREDIT AGREEMENT This CREDIT AGREEMENT ("Agreement") is dated as of December 21, 2005, among A. T. CROSS COMPANY, a Rhode Island corporation having an address at One Albion Road, Lincoln, Rhode Island, 02864 (the "Borrower") as borrower of Committed Loans, A.T. CROSS LIMITED, a corporation organized under the laws of England and Wales (company number 1410574) whose registered office is at Concorde House, Concorde Street, Luton, Bedfordshire, LU2 0JD, ("Cross UK") as borrower of Eurocurrency Loans, each lender from time to time party hereto (collectively, together with the UK Lender, the "Lenders") BANK OF AMERICA, N.A., as Administrative Agent and L/C Issuer and BANK OF AMERICA, N.A. (London Branch) as UK Lender. The Borrower has requested that the Lenders provide a revolving credit facility, and the Lenders are willing to do so on the terms and conditions set forth herein. 4   In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS 1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below: "ACH Transactions" means any cash management or related services (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) provided by Bank of America, N.A. or its Affiliates for the account of the Borrower or its Subsidiaries. "Administrative Agent" means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent. "Administrative Agent's Office" means the Administrative Agent's address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders. "Administrative Questionnaire" means an administrative questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Aggregate Commitments" means the Commitments of all the Lenders providing Committed Loans to make Committed Loans and the Commitment of the UK Lender to make Eurocurrency Loans which aggregate Commitments are on the date hereof Thirty Million Dollars ($30,000,000) which consist of Five Million Dollars ($5,000,000) Dollar Equivalent for Eurocurrency Loans and Twenty-Five Million Dollars ($25,000,000) for Committed Loans which amount automatically and without notice or any further action reduces to Fifteen Million Dollars ($15,000,000) on January 6, 2006, and after such date the Aggregate Commitments shall equal an aggregate amount of Twenty Million Dollars ($20,000,000) as such amount may be further reduced as provided herein. "Agreement" means this Credit Agreement. "Anti-Terrorism Laws" any laws relating to terrorism or money laundering, including the Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the Laws comprising or implementing the Bank Secrecy Act, and the laws administered by OFAX. "Applicable Percentage" means with respect to any Lender at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Commitments represented by such Lender's Commitment at such time. If the commitment of each Lender to make Loans and the 5   obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02 or if the Aggregate Commitments have expired, then the Applicable Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender most recently in effect, giving effect to any subsequent assignments. The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable. "Applicable Margin" shall mean, for each category below, the percentage set forth under the relevant column heading below: LLevel Consolidated Leverage Ratio Commitment Fee Applicable Margin for Eurodollar Rate Comitted Loans and for Eurocurrency Loans Letter of Credit Fee Applicable Margin for Base Rate Loans I Less than 1.00x 0.25% 1.50% 1.50% 0.00% II Greater than or equal to 1.00x Less than 1.50x 0.25% 1.75% 1.75% 0.00% III Greater than or equal to 1.50x but less than 2.00x 0.25% 2.00% 2.00% 0.00% IV Greater than or equal to 2.00x 0.25% 2.25% 2.25% 0.00% For the period commencing on the Closing Date and ending on the third (3rd) Business Day after the Administrative Agent's receipt, pursuant to Section 6.01(b), of the Officer's Certificate for the Borrower's fiscal quarter ending March 31, 2006, a per annum percentage equal to that specified for Level III above, and thereafter as of any date, so long as no Default or Event of Default exists and is continuing and subject to the terms of this definition, the applicable per annum percentage set forth above; provided, that if any Default or Event of Default exists and is continuing the applicable per annum percentage shall be that specified for Level IV above. Changes in the Applicable Margin resulting from changes in the Consolidated Leverage Ratio shall become effective on the date (the "Adjustment Date") that is three (3) Business Days after the date on which financial statements are delivered to the Administrative Agent pursuant to Section 6.01(b) and shall remain in effect until the next change to be effected pursuant to this paragraph; provided that interest rate reductions shall become final only on the basis of the Borrower's annual audited financial statements and (a) in the event that such annual audited financial statements establish that the Borrower was not entitled to a rate reduction which was previously granted, the Borrower shall, upon written demand by the Administrative Agent, repay to the Administrative Agent an amount equal to the excess of (i) interest at the rate which should have been charged based on such annual audited financial statement(s) and (ii) the rate 6   actually charged on the basis of the Borrower's quarterly financial statement(s) and (b) in the event that such annual audited financial statements establish the Borrower was entitled to a rate reduction which was previously not granted, the Agent shall, upon written demand by the Borrower, apply the excess of (i) the rate actually charged on the basis of the Borrower's quarterly financial statement(s) and (ii) interest at the rate which should have been charged based on such annual audited financial statement(s), to the payment of principal outstanding; provided, that in the event that the Borrower fails to provide any financial statements or Officer's Certificate on a timely basis in accordance with Section 6.01(b), the per annum percentage shall be that specified for Level IV above until delivered, and any interest rate increase payable as a result thereof shall be retroactively effective to the date on which the financial statements or Officer's Certificate, as the case may be, should have been received by the Administrative Agent in accordance with Section 6.01(b) and the Borrower shall pay any amount due as a result thereof upon written demand from the Administrative Agent . In addition, at all times while an Event of Default shall have occurred and be continuing, the per annum percentage specified in Level IV above shall apply. Each determination of the Consolidated Leverage Ratio pursuant to the grid above shall be made in a manner consistent with the determination thereof pursuant to Section 6.01(b). "Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "Assignee Group" means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor. "Assignment and Assumption" means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b), and accepted by the Administrative Agent, in substantially the form of Exhibit F or any other form approved by the Administrative Agent. "Attributable Indebtedness" means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease. "Audited Financial Statements" means the audited consolidated balance sheet of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2004, and the related consolidated statements of income or operations, shareholders' equity and cash flows for such fiscal year of the Borrower and its Subsidiaries, including the notes thereto. "Availability Period" means the period from and including the Closing Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Commitments pursuant to Section 2.07, and (c) the date of termination of the commitment of each Lender to make Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02. 7   "Bank of America" means Bank of America, N.A. and its successors. "Bank Product Agreements" means those certain agreements entered into from time to time by the Borrower or its Subsidiaries in connection with any of the Bank Products. "Bank Product Obligations" means all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by the Borrower or its Subsidiaries to Bank of America, N.A. or its Affiliates pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all such amounts that the Borrower is obligated to reimburse to Administrative Agent or any Lender as a result of Administrative Agent or such Lender purchasing participations or executing indemnities or reimbursement obligations with respect to the Bank Products provided to the Borrower or its Subsidiaries pursuant to the Bank Product Agreements. "Bank Products" means any service or facility extended to the Borrower or its Subsidiaries by Bank of America, N.A., or any Affiliate of Bank of America, N.A., including: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash management, including controlled disbursement, accounts or services, or (g) foreign currency exchange agreements or other foreign currency agreements or arrangements. "Bank Product Reserves" means, as of the date of determination, the amount of reserves that Agent has established (based upon Bank of America's or its Affiliate's reasonable determination of the credit exposure in respect of then extant Bank Products), for Bank Products then provided or outstanding. "Base Rate" means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "prime rate." The "prime rate" is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Committed Loan" means a Committed Loan that is a Base Rate Loan. "Base Rate Loan" means a Loan that bears interest based on the Base Rate. "Borrower" has the meaning specified in the introductory paragraph hereto. "Borrower Materials" has the meaning specified in Section 6.02. "Borrowing" means a borrowing consisting of simultaneous Committed Loans of the same Type and, in the case of Eurodollar Rate Committed Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01 and in the case of the Eurocurrency Sublimit, Eurocurrency Loans. 8   "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent's Office is located and, if such day relates to any Eurodollar Rate Loan, or any Eurocurrency Loan means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market. "Capital Expenditure" means for any period, expenditures by the Borrower and its Subsidiaries determined on a consolidated basis, that in accordance with GAAP are or should be included in "property, plant and equipment" or in a similar fixed asset account on its balance sheet. "Cash Collateralize" has the meaning specified in Section 2.04(g). "Cash Equivalents" mean, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (b) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iii) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (a) is at least "adequately capitalized" (as defined in such regulations of its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; and (v) shares of any money market mutual fund that (a) has substantially all of its assets invested continuously in the types of investments referred to in clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000, and (c) has the highest rating obtainable from either S&P or Moody's. "Change in Law" means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority. "Change of Control" means an event or series of events by which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire (such right, an "option 9   right "), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 20% or more of the equity securities other than Class A Common Stock of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right); (b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors); or (c) any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Borrower, or control over the equity securities other than Class A Common Stock of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such securities that such Person or group has the right to acquire pursuant to any option right) representing 20% or more of the combined voting power of such securities. "Charge Over Shares" The Charge Over Shares to be dated on or prior to the Closing Date, from Cross Europe in favor of the Administrative Agent with respect to 65% of the share capital of the Foreign Subsidiaries owned by it other than Cross Germany which shares are not required to be pledged and Cross UK of which 100% of the shares will be pledged as collateral security for Committed Loans of each of the Foreign Subsidiaries and Cross UK, each in form and substance satisfactory to the Lenders and the Agent and all of the share capital as collateral security for Eurocurrency Loans. "Class A Common Stock" means Class A Common shares as designated in the Organizational Documents of the Borrower in effect on the date hereof which shares are publicly traded on a national securities exchange. "Closing Date" means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01. 10   "Code" means the Internal Revenue Code of 1986. "Commitment" means, as to each Lender, other than the UK Lender, its obligation to (a) make Committed Loans to the Borrower pursuant to Section 2.01(a), and (b) purchase participations in L/C Obligations in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 2.01 and as to the UK Lender, to make Eurocurrency Loans to the Cross UK pursuant to Section 2.01(b) or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. "Committed Lender" means, a lender which has a Commitment to make Committed Loans. "Committed Loan" has the meaning specified in Section 2.01. "Committed Loan Notice" means a notice of (a) a Committed Borrowing, (b) a conversion of Committed Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Committed Loans, pursuant to Section 2.02(a)(i), which, if in writing, shall be substantially in the form of Exhibit A. "Compliance Certificate" means a certificate substantially in the form of Exhibit E. "Consolidated Debt Service Coverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated EBITDA for the period of the four prior fiscal quarters ending on such date minus (i) income taxes paid in cash by the Borrower and its Subsidiaries during such period but excluding, without duplication, for the first quarter of 2006 up to $1,300,000 of income taxes paid on account of the assessment thereof pursuant to Section 956 of the Code minus (ii) cash dividends or distributions paid during such period minus (iii) Capital Expenditures (excluding one time Capital Expenditures relating to the Borrower's establishing a place of business in China made on or prior to December 31, 2005 not to exceed $1,000,000 and excluding Capital Expenditures made with the proceeds of insurance received by the Borrower) minus (iv) all payments made for the redemption, repurchase or other acquisition of any of the capital stock of the Borrower to (b) (i) Consolidated Interest Charges plus (ii) all principal of Indebtedness paid during such period (other than voluntary repayments of principal for such period and other than principal payments made during such period on the Preexisting Term Loan), including, without limitation, the payment of the principal component of any payments in respect of Capital Leases. "Consolidated EBITDA" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges for such period, (ii) the provision for Federal, state, local and foreign income taxes payable by the Borrower and its Subsidiaries for such period, (iii) depreciation and amortization expense (iv) any extra ordinary losses (v) restructuring charges up to $1,000,000 in the aggregate for the Borrower's fiscal year ending December 31, 2005 and up to $2,000,000 in the aggregate for the Borrower's fiscal year ending December 31, 2006 (provided any add back for any restructuring charge shall be taken in the quarter during which such restructuring charge 11   is assessed), (vi) all non-cash expenses associated with the LIFO treatment of Inventory (vii) non-cash charges related to compensation expense, (viii) without duplication, for the first quarter of 2006 up to $1,300,000 of income taxes actually paid on account of the assessment thereof pursuant to Section 956 of the Code minus (b) the following: (i) any extraordinary gains to the extent increasing Consolidated Net Income and (ii) all non-cash items increasing Consolidated Net Income for such period including, without limitation, all non-cash increases associated with the LIFO treatment of Inventory. "Consolidated Funded Indebtedness" means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, (b) all purchase money Indebtedness, (c) all direct obligations arising under letters of credit (including standby and commercial), bankers' acceptances, bank guaranties, surety bonds and similar instruments, (d) all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business), (e) Attributable Indebtedness in respect of capital leases and Synthetic Lease Obligations, (f) without duplication, all Guarantees with respect to outstanding Indebtedness of the types specified in clauses (a) through (e) above of Persons other than the Borrower or any Subsidiary, and (g) all Indebtedness of the types referred to in clauses (a) through (f) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Borrower or a Subsidiary is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to the Borrower or such Subsidiary. "Consolidated Interest Charges" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses of the Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, and (b) the portion of rent expense of the Borrower and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP. "Consolidated Leverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the period of the four fiscal quarters most recently ended. "Consolidated Net Income" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the net income of the Borrower and its Subsidiaries (excluding extraordinary gains but including extraordinary losses) for that period. "Consolidated Tangible Net Worth" means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, Shareholders' Equity of the Borrower and its Subsidiaries on that date minus the Intangible Assets of the Borrower and its Subsidiaries on that date. 12   "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Costa Del Mar" means Costa Del Mar Sunglasses, Inc., a corporation organized under the laws of the State of Florida. "Credit Extension" means each of the following: (a) a Borrowing and (b) an L/C Credit Extension. "Cross Asia Pacific" means A.T. Cross (Asia Pacific) Ltd., a corporation organized under the laws of the British Virgin Islands. "Cross Bermuda" means A.T. Cross Limited, a corporation organized under the laws of the Republic of Ireland with a seat of management in Bermuda. "Cross Canada" means A.T. Cross (Canada) Inc., a corporation organized under the laws of Ontario. "Cross China" means a wholly-owned Subsidiary of the Borrower which will conduct its principal business in the Peoples Republic of China. "Cross Europe" means A.T. Cross Europe Ltd., a corporation organized under the laws of England and Wales. "Cross Germany" means A.T. Cross Deutschland, GmbH, a corporation organized under the laws of Germany. "Cross Holland" means A.T. Cross Benelux BV, a corporation organized under the laws of the Netherlands. "Cross International" means A.T.X. International, Inc., a corporation organized under the laws of the State of Rhode Island. "Cross Japan" means Cross Company of Japan Ltd., a corporation organized under the laws of Japan. "Cross Retail" means Cross Retail Ventures, Inc., a corporation organized under the laws of the State of Rhode Island. "Cross Spain" means A.T. Cross Iberia, S.L., a corporation organized under the laws of Spain. 13   "Cross UK" shall the meaning specified in the introduction paragraph hereto. "Debenture" means the Debenture dated or to be dated on or prior to the Closing Date, between Cross UK and the Administrative Agent and in form and substance satisfactory to the Lenders and the Administrative Agent. "Debtor Relief Laws" means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally. "Default" means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default. "Default Rate" means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Margin applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that with respect to a Eurodollar Rate Loan, or a Eurocurrency Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Margin) otherwise applicable to such Loan plus 2% per annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Margin plus 2% per annum. "Defaulting Lender" means any Lender that (a) has failed to fund any portion of the Committed Loans, participations in L/C Obligations required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding. "Disposition" or "Dispose" means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith. "Dollar" and "$" mean lawful money of the United States. "Dollar Equivalent" of any amount means, at the time of determination thereof, (a) if such amount is expressed in Dollars, such amount, (b) if such amount is expressed in Euro, the equivalent of such amount in Dollars determined by using the rate of exchange quoted by the UK Lender in London at 11:00 a.m. London time, on the date of determination, to major banks in London for the spot purchase in the London foreign exchange market of such amount of Dollars with Euro, and (c) if such amount is expressed in Sterling, the equivalent of such amount in Dollars determined by using the rate of exchange quoted by the UK Lender in London at 11:00 a.m. London time, on the date of determination, to major banks in London for the spot purchase in the London foreign exchange market of such amount of Dollars with Sterling. 14   "Domestic Subsidiary" means any Subsidiary that is organized under the laws of any political subdivision of the United States. "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent, and (ii) unless an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, "Eligible Assignee" shall not include the Borrower or any of the Borrower's Affiliates or Subsidiaries. "Environmental Laws" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Equity Interests" means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination. "ERISA" means the Employee Retirement Income Security Act of 1974. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal 15   under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate. "Euro" means the single currency of the Participating Member States. "Eurocurrency" means Euro or Sterling. "Eurocurrency Loan(s)" means a loan denominated in Eurocurrency. "Eurocurrency Loan Notice" means a notice of (a) a Eurocurrency Borrowing or (b) the continuation of a Eurocurrency Loan pursuant to Section 2.02(a)(ii), which, if in writing, shall be substantially in the form of Exhibit A. "Eurocurrency Loan Limit" means a Dollar Equivalent of up to $5,000,000 of Eurocurrency Loans. The Eurocurrency Loan Limit is part of, and not in addition to, the Aggregate Commitments. "Eurocurrency Rate" for any Interest Period with respect to any Eurocurrency Loan: (a) the rate per annum equal to the rate determined by the UK Lender to be the offered rate that appears on page 3750 of the Telerate screen (or any successor thereto) (or such other page of the Telerate as is customary for the Euro or Sterling) that displays an average British Bankers Association Interest Settlement Rate for deposits in Euro (for delivery on the first day of such Interest Period) if a Euro denominated loan and for deposits in Sterling (for delivery on the first day of such Interest Period) if a Sterling denominated loan with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m., London time, two (2) Business Days prior to the first day of such Interest Period for a Euro denominated Loan and on the first day of such Interest Period if a Sterling denominated Loan, or (b) if the rate referenced in the preceding clause (a) does not appear on such page or service or such page or service shall not be available, the rate per annum equal to the rate determined by the UK Lender to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Euro (for delivery on the first day of such Interest Period) if a Euro denominated loan and for deposits in Sterling (for delivery on the first day of such Interest Period) if a Sterling denominated loan with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m., London time, two (2) Business Days prior to the first day of such Interest Period for a Euro denominated loan and on the first day of such Interest Period if a Sterling denominated loan, or 16   (c) if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum deter mined by the UK Lender as the rate of interest at which deposits in Euro or Sterling, as the case may be, for delivery on the first day of such Interest Period in the same day funds in the approximate amount of the Eurocurrency Loan being made, continued or converted by the UK Lender and with a term equivalent to such Interest Period that would be offered to the UK Lender for the applicable Eurocurrency in the London interbank Eurocurrency market at its request at approximately 11:00 a.m., London time, two (2) Business Days prior to such Interest Period for a Euro denominated loan and on the first day of such Interest Period if a Sterling denominated loan. The determination of the Eurocurrency Rate by the UK Lender shall be conclusive in the absence of manifest error. "Eurocurrency Reserve Requirements" means for any days as applied to a Eurocurrency Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for Eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System. "Eurodollar Rate" means, for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate ("BBA LIBOR"), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period. If such rate is not available at such time for any reason, then the "Eurodollar Rate" for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America's London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period. "Eurodollar Rate Committed Loan" means a Committed Loan that bears interest at a rate based on the Eurodollar Rate. "Eurodollar Rate Loan" means a Eurodollar Rate Committed Loan. "Event of Default" has the meaning specified in Section 8.01. "Excluded Subsidiaries" means Cross Bermuda, Cross Spain, Cross Canada, Cross Holland and Cross Germany. 17   "Excluded Taxes" means, with respect to the Administrative Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 10.13), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender's failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01(a). "Executive Order" means Executive Order No. 13224 (effective September 24, 2001). "Federal Funds Rate" means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "Foreign Subsidiary" any Subsidiary of the Borrower that is not a Domestic Subsidiary. "FRB" means the Board of Governors of the Federal Reserve System of the United States. "Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. "GAAP" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting 18   Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied. "Governmental Authority" means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank). "Guarantee" means, as to any Person, any (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term "Guarantee" as a verb has a corresponding meaning. "Guarantors" means, collectively, Cross International, Costa Del Mar and Cross Retail and in the case of the Borrower's guaranty of the obligations of Cross UK, the Borrower. "Guaranty" means the Guaranty made by the Guarantors in favor of the Administrative Agent and the Lenders, substantially in the form of Exhibit G. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Indebtedness" means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP: 19   (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers' acceptances, bank guaranties, surety bonds and similar instruments; (c) net obligations of such Person under any Swap Contract; (d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and, in each case, not past due for more than 60 days after the date on which such trade account payable was created); (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; (f) capital leases and Synthetic Lease Obligations; (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and (h) all Guarantees of such Person in respect of any of the foregoing. For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Indemnitees" has the meaning specified in Section 10.04(b). "Information" has the meaning specified in Section 10.07. "Intangible Assets" means assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges, unamortized debt discount and capitalized research and development costs. 20     "Interest Payment Date" means, (a) as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan or a Eurocurrency Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan, the last Business Day of each March, June, September and December and the Maturity Date. "Interest Period" means as to each Eurodollar Rate Loan, and each Eurocurrency Loan the period commencing on the date such Eurodollar Rate Loan or Eurocurrency Loan, as the case may be, is disbursed or converted to or continued as a Eurodollar Rate Loan or a Eurocurrency Loan, as the case may be, and ending on the date one, two, three or six months thereafter, as selected by the Borrower in its Committed Loan Notice or Eurocurrency Loan Notice, as the case may be, provided that: (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Rate Loan, or a Eurocurrency Loan such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (ii) any Interest Period pertaining to a Eurodollar Rate Loan or a Eurocurrency Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) no Interest Period shall extend beyond the Maturity Date. "Internal Control Event" means a material weakness in, or fraud that involves management or other employees who have a significant role in, the Borrower's internal controls over financial reporting, in each case as described in the Securities Laws. "Investment" means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment. "IP Rights" has the meaning specified in Section 5.17. "IRS" means the United States Internal Revenue Service. 21   "ISP" means, with respect to any Letter of Credit, the "International Standby Practices 1998" published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance). "Issuer Documents" means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Borrower or in favor the L/C Issuer and relating to any such Letter of Credit. "Judgment Currency" has the meaning specified in Section 10.18. "Laws" means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law. "L/C Advance" means, with respect to each Lender, such Lender's funding of its participation in any L/C Borrowing in accordance with its Applicable Percentage. "L/C Borrowing" means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Committed Borrowing. "L/C Credit Extension" means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof. "L/C Issuer" means Bank of America in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder. "L/C Obligations" means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be "outstanding" in the amount so remaining available to be drawn. "Lender" means the Committed Lenders, the L/C Issuer and the UK Lender. "Lending Office" means, as to any Lender, the office or offices of such Lender described as such in such Lender's Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent. "Letter of Credit" means any standby letter of credit issued hereunder. A Letter of Credit may be a commercial letter of credit or a standby letter of credit. 22   "Letter of Credit Application" means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer. "Letter of Credit Expiration Date" means the day that is seven days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day). "Letter of Credit Fee" has the meaning specified in Section 2.04(i). "Letter of Credit Sublimit" means an amount equal to $3,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Commitments. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing). "Loan" means an extension of credit by a Lender to the Borrower under Article II which may be either a Committed Loan or a Eurocurrency Loan. "Loan Documents" means this Agreement, each Note, each Issuer Document, the Guaranty, the Security Documents, the Negative Pledge and each other agreement, document or instrument executed by the Borrower or any of its Subsidiaries in connection therewith as each may be amended, modified or supplemented from time to time. "Loan Parties" means, collectively, the Borrower and each Guarantor. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent) or condition (financial or otherwise) of the Borrower or the Borrower and its Subsidiaries taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party. "Maturity Date" means December 20, 2007, unless sooner due and payable after acceleration or otherwise. "Moody's" means Moody's Investor Services, Inc. "Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions. "Negative Pledge" means the negative pledge dated or to be dated on or prior to the Closing Date between the Borrower and the Administrative Agent and in form and substance 23   satisfactory to the Lenders and the Administrative Agent regarding certain real property having an address at One Albion Road, Lincoln, Rhode Island to be recorded with the real estate records with the applicable Registry of Deeds. "Note" means a promissory note made by the Borrower and/or Cross UK (as applicable) in favor of a Lender evidencing Loans made by such Lender, substantially in the form of Exhibit D. "Obligations" means all advances to, and all debts, liabilities, obligations, covenants and duties of, and all unpaid principal of and interest due from any Loan Party and Cross UK arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, including without limitation, any Reimbursement Obligation and any obligation under any Specified Swap Agreement or any other document made, delivered or given in connection herewith or therewith (including all fees, charges and disbursements of counsel to the Administrative Agent or any Lender) under the Loan Documents and any indemnities or other reimbursement obligations contained in any of the Loan Documents, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or Cross UK or any Affiliate thereof under any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding and all Bank Product Obligations. "Off-Balance Sheet Liabilities" means, with respect to any Person as of any date of determination thereof, without duplication and to the extent not included as a liability on the consolidated balance sheet of such Person and its Subsidiaries in accordance with GAAP: (a) with respect to any asset securitization transaction (including any accounts receivable purchase facility) (i) the unrecovered investment of purchasers or transferees of assets so transferred, and (ii) any other payment, recourse, repurchase, hold harmless, indemnity or similar obligation of such Person or any of its Subsidiaries in respect of assets transferred or payments made in respect thereof, other than limited recourse provisions that are customary for transactions of such type and that neither (x) have the effect of limiting the loss or credit risk of such purchasers or transferees with respect to payment or performance by the obligors of the assets so transferred nor (y) impair the characterization of the transaction as a true sale under applicable Laws (including Debtor Relief Laws); (b) the monetary obligations under any financing lease or so-called "synthetic," tax retention or off-balance sheet lease transaction which, upon the application of any Debtor Relief Law to such Person or any of its Subsidiaries, would be characterized as indebtedness; (c) the monetary obligations under any sale and leaseback transaction which does not create a liability on the consolidated balance sheet of such Person and its Subsidiaries; or (d) any other monetary obligation arising with respect to any other transaction which (i) is characterized as indebtedness for tax purposes but not for accounting purposes in accordance with GAAP or (ii) is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheet of such Person and its Subsidiaries (for purposes of this clause (d), any transaction structured to provide tax deductibility as interest expense of any dividend, coupon or other periodic payment will be deemed to be the functional equivalent of a borrowing). 24   "Organization Documents" means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity. "Other Taxes" means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. "Outstanding Amount" means (i) with respect to Committed Loans, including, without limitation, Eurocurrency Loans, on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Committed Loans, including, without limitation, Eurocurrency Loans, as the case may be, occurring on such date; and (ii) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by the Borrower of Unreimbursed Amounts. "Participant" has the meaning specified in Section 10.06(d). "Participating Member States": means the member states of the European Communities that adopt or have adopted the Euro as their lawful currency in accordance with the legislation of the European Union relating to the European Monetary Union. "PBGC" means the Pension Benefit Guaranty Corporation. "Pension Plan" means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate. "Platform" has the meaning specified in Section 6.02. 25   "Post Closing Deliveries" shall have the meaning specified in Schedule I attached hereto. "Preexisting Term Loan" means that certain term loan evidenced by that certain promissory note dated June 20, 2003 in the original principal amount of $9,000,000 made by the Borrower and Cross International naming the Fleet Precious Metals, Inc., as payee. "Register" has the meaning specified in Section 10.06(c). "Registered Public Accounting Firm" has the meaning specified in the Securities Laws and shall be independent of the Borrower as prescribed by the Securities Laws. "Related Parties" means, with respect to any Person, such Person's Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person's Affiliates. "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived. "Request for Credit Extension" means (a) with respect to a Borrowing which is not a Eurocurrency Loan, conversion or continuation of Committed Loans, a Committed Loan Notice, (b) with respect to a Borrowing which is a Eurocurrency Loan, or continuation of a Eurocurrency Loan, a Eurocurrency Loan Notice and (c) with respect to an L/C Credit Extension, a Letter of Credit Application. "Required Lenders" means, as of any date of determination, Lenders having more than 50% of the Aggregate Commitments (and so long as Bank of America London Branch is the UK Lender their Commitment will be added to the Bank of America Commitment for purposes of determinations among the Lenders) or, if the commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate more than 50% of the Total Outstandings (with the aggregate amount of each Lender's risk participation and funded participation in L/C Obligations being deemed "held" by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders. "Responsible Officer" means the chief executive officer, president, chief financial officer, treasurer or assistant treasurer of a Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party. "Restricted Payment" means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other Equity 26   Interest, or on account of any return of capital to the Borrower's stockholders, partners or members (or the equivalent Person thereof). "Sarbanes-Oxley" means the Sarbanes-Oxley Act of 2002. "SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions. "Securities Laws" means the Securities Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the Public Company Accounting Oversight Board, as each of the foregoing may be amended and in effect on any applicable date hereunder. "Security Agreements" the several Security Agreements dated or to be dated on or prior to the Closing Date as amended, modified or supplemented from time to time, including, without limitation, those amended and restated as of March 1, 2006, and those subsequently executed in accordance with Section 6.12, between the Borrower and its wholly owned Domestic Subsidiaries and the Administrative Agent and in form and substance satisfactory to the Lenders and the Administrative Agent. "Security Documents" the Guaranties, the Security Agreements, the Patent Assignments, the Trademark Assignments, the Debenture, the Charge over Shares, and the Stock Pledge Agreements, and any other documents or instruments from time to time securing any of the Obligations or evidencing such security. "Shareholders' Equity" means, as of any date of determination, consolidated shareholders' equity of the Borrower and its Subsidiaries as of that date determined in accordance with GAAP. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill Corporation. "Specified Swap Agreement" means any Swap Contract entered into by the Borrower or ay of its Subsidiaries and any Lender or any Affiliate thereof. "Sterling" means pounds sterling as lawful currency of the United Kingdom of Great Britain and Northern Ireland. "Stock Pledge Agreement" means the Stock Pledge Agreement dated or to be dated on or prior to the Closing Date, between the Borrower and the Administrative Agent and in form and substance satisfactory to the Lenders and the Administrative Agent which shall include a pledge of 100% of the capital stock of all Domestic Subsidiaries and of 66% of the capital stock of all Foreign Subsidiaries except for Cross Canada, Cross Spain and the Wholly-Owned Subsidiary of the Borrower organized in the Netherlands. "Subsidiary" of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests 27   having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a "Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of the Borrower. "Swap Contract" means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a "Master Agreement"), including any such obligations or liabilities under any Master Agreement. "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender). "Synthetic Lease Obligation" means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment). "Taxes" means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto. "Threshold Amount" means $500,000. "Total Outstandings" means the aggregate Outstanding Amount of all Loans and all L/C Obligations. 28   "Type" means a Base Rate Loan or a Eurodollar Rate Loan. "Unfunded Pension Liability" means the excess of a Pension Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. "UK Lender" means the Bank of America, N.A. (London Branch) and any replacement or successor therefor which has a Commitment to make Eurocurrency Loans hereunder. "United States" and "U.S." mean the United States of America. "Unreimbursed Amount" has the meaning specified in Section 2.04(c)(i). 1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document: (a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The word "will" shall be construed to have the same meaning and effect as the word "shall." Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person's successors and assigns, (iii) the words "herein," "hereof" and "hereunder," and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. (b) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including;" the words "to" and "until" each mean "to but excluding;" and the word "through" means "to and including." 29   (c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document. 1.03 Accounting Terms. Generally. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein. (b) Changes in GAAP. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. 1.04 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number). 1.05 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable). 1.06 Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time. 1.07 Conversion of Foreign Currencies. (a) Consolidated Leverage Ratio. For purposes of calculating the Consolidated Leverage Ratio, any Indebtedness denominated in any currency other than Dollars shall be 30   calculated using the Dollar Equivalent thereof as of the date of the applicable statements on which such Indebtedness is reflected. (b) Dollar Equivalents. The Administrative Agent shall determine the Dollar Equivalent of any amount as required hereby (whether to determine compliance with any covenants specified herein or otherwise), and a determination thereof by the Administrative Agent shall be conclusive absent manifest error. The Administrative Agent may, but shall not be obligated to, rely on any determination made by any Loan Party in any document delivered to the Administrative Agent. The Administrative Agent may determine or redetermine the Dollar Equivalent of any amount on any date either in its reasonable discretion or upon the reasonable request of any Lender, L/C Issuer or the UK Lender. ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS 2.01 Committed Loans. (a) Subject to the terms and conditions set forth herein, each Lender with a Commitment to make Committed Loans severally agrees to make loans to the Borrower (such loans to the Borrower collectively referred to as a "Committed Loan") as provided in Section 2.01(a) from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender's Commitment; provided, however, that after giving effect to any Borrowing for a Committed Loan, (i) the Total Outstandings shall not exceed the Aggregate Commitments for Committed Loans, and (ii) the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lender's Applicable Percentage of the Outstanding Amount of all L/C Obligations shall not exceed such Lender's Commitment for Committed Loans. Within the limits of each Lender's Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01(a), prepay under Section 2.06, and reborrow under this Section 2.01(a). Committed Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein. (b) Subject to the terms and conditions set forth herein, the UK Lender agrees to make Eurocurrency Loans to Cross UK as provided in Section 2.01(b) from time to time, on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the UK Lender's Commitment; provided however, that after giving effect to any Borrowing for a Eurocurrency Loan, the Total Outstandings shall not exceed the Eurocurrency Loan Limit. During the Availability Period, and, subject to the terms and conditions hereof, the Borrower agrees that Cross UK may borrow under this Section 2.01(b), prepay under Section 2.06 and reborrow under this Section 2.01(b). 2.02 Borrowings, Conversions and Continuations of Committed Loans. (a) (i) Each Borrowing other than in Eurocurrency, each conversion of Committed Loans from one Type to the other, and each continuation of Eurodollar Rate Committed Loans shall be made upon the Borrower's irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 11:00 a.m. (i) three Business Days prior to the requested date 31   of any Borrowing of, conversion to or continuation of Eurodollar Rate Committed Loans or of any conversion of Eurodollar Rate Committed Loans to Base Rate Committed Loans, and (ii) on the requested date of any Borrowing of Base Rate Committed Loans; provided, however, that if the Borrower wishes to request Eurodollar Rate Committed Loans having an Interest Period other than one, two, three or six months in duration as provided in the definition of "Interest Period", the applicable notice must be received by the Administrative Agent not later than 11:00 a.m. four Business Days prior to the requested date of such Borrowing, conversion or continuation, whereupon the Administrative Agent shall give prompt notice to the Lenders of such request and determine whether the requested Interest Period is acceptable to all of them. Not later than 11:00 a.m., three Business Days before the requested date of such Borrowing, conversion or continuation, the Administrative Agent shall notify the Borrower (which notice may be by telephone) whether or not the requested Interest Period has been consented to by all the Lenders. Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Each Borrowing of, conversion to or continuation of Eurodollar Rate Committed Loans shall be in a principal amount of $1,000,000 or a whole multiple of $250,000 in excess thereof. Each Borrowing of or conversion to Base Rate Committed Loans shall be in a principal amount of $250,000 or a whole multiple of $100,000 in excess thereof. Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a continuation of Eurodollar Rate Committed Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Committed Loans to be borrowed, converted or continued, (iv) the Type of Committed Loans to be borrowed or to which existing Committed Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Committed Loan in a Committed Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Committed Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Committed Loans. If the Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Committed Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month. (ii) Each Borrowing in Eurocurrency and each continuation of a Borrowing in Eurocurrency shall be made upon the Cross UK's irrevocable notice to the Administrative Agent appropriately completed and signed by a Responsible Officer of Cross UK. Such notice may not be given by telephone. Each such notice must be received by the Administrative Agent not later than 11:00 a.m. London Time (i) five Business Days prior to the requested date of any Borrowing of, or continuation of any Eurocurrency Loans. Each Borrowing of or continuation of Eurocurrency Loans shall be in a principal amount of $500,000 or a whole multiple of $250,000 in excess thereof. Each Eurocurrency Loan Notice shall specify (i) whether Cross UK is requesting a Eurocurrency Loan, or a continuation of a Eurocurrency Loan, (ii) the requested date of the Borrowing or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Eurocurrency Loans to be borrowed or continued, and (iv) the duration of the Interest Period with respect thereto. If Cross UK fails to give a timely written notice requesting a continuation, then the applicable Eurocurrency Loans shall have an Interest 32   Period of one month. If Cross UK requests a Borrowing of, or continuation of Eurocurrency Loans in any such Eurocurrency Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month. (b) (i) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Applicable Percentage of the applicable Committed Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection. In the case of a Borrowing for a Committed Loan each Lender shall make the amount of its Committed Loan available to the Administrative Agent in immediately available funds at the Administrative Agent's Office not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower; provided, however, that if, on the date the Committed Loan Notice with respect to such Borrowing is given by the Borrower, there are L/C Borrowings outstanding, then the proceeds of such Borrowing, first, shall be applied to the payment in full of any such L/C Borrowings, and second, shall be made available to the Borrower as provided above. (ii) Following receipt of a Eurocurrency Loan Notice, the UK Lender shall subject to satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01) make the amount of its Eurocurrency Loan available to Cross UK either by (i) crediting an account of Cross UK on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds. (c) (i) Except as otherwise provided herein, a Eurodollar Rate Committed Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Committed Loan. During the existence of a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Committed Loans without the consent of the Required Lenders. (ii) Except as otherwise provided herein, a Eurocurrency Loan may be continued or converted only on the last day of an Interest Period for such Eurocurrency Loan. During the existence of a Default no Eurocurrency Loans may be requested. (d) (i) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Committed Loans upon determination of such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in Bank of America's prime rate used in determining the Base Rate promptly following the public announcement of such change. 33   (ii) The UK Lender shall promptly notify Cross UK of the interest rate applicable to any Interest Rate Period for Eurocurrency Loans upon determination of such interest rate. (e) After giving effect to all Borrowings, conversions of Committed Loans from one Type to the other, and all continuations of Committed Loans as the same Type, there shall not be more than five Interest Periods in effect with respect to Committed Loans. After giving effect to all Eurocurrency Loans and all continuations thereof, there shall not be more than three Interest Periods in effect with request to Eurocurrency Loans. 2.03 [Reserved] 2.04 Letters of Credit. (a) The Letter of Credit Commitment. (i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the Lenders set forth in this Section 2.04, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrower, and to amend Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drawings under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (x) the amount set forth in Section 2.01(a) will not be exceeded and (y) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit. Each request by the Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrower that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower's ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed. All Letters of Credit issued hereunder shall be denominated in Dollars. (ii) The L/C Issuer shall not issue any Letter of Credit, if: (A) the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance, unless the Required Lenders have approved such expiry date; or (B) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date. (iii) The L/C Issuer shall not be under any obligation to issue any Letter of Credit if: 34   (A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it; (B) the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer; (C) except as otherwise agreed by the Administrative Agent and the L/C Issuer, such Letter of Credit is in an initial stated amount less than $100,000, in the case of a commercial Letter of Credit, or $500,000, in the case of a standby Letter of Credit; (D) such Letter of Credit is to be denominated in a currency other than Dollars; or (E) a default of any Lender's obligations to fund under Section 2.04(c) exists or any Lender is at such time a Defaulting Lender hereunder, unless the L/C Issuer has entered into satisfactory arrangements with the Borrower or such Lender to eliminate the L/C Issuer's risk with respect to such Lender. (iv) The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof. (v) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit. (vi) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term "Administrative Agent" as used in Article IX included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuer. (b) Procedures for Issuance and Amendment of Letters of Credit. 35   (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower. Such Letter of Credit Application must be received by the L/C Issuer and the Administrative Agent not later than 11:00 a.m. at least two Business Days (or such later date and time as the Administrative Agent and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the L/C Issuer may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require. Additionally, the Borrower shall furnish to the L/C Issuer and the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer or the Administrative Agent may require. (ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof. Unless the L/C Issuer has received written notice from any Lender, the Administrative Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV shall not then be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower (or the applicable Subsidiary) or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer's usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender's Applicable Percentage times the amount of such Letter of Credit. (iii) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment. (c) Drawings and Reimbursements; Funding of Participations. 36   (i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Borrower and the Administrative Agent thereof. Not later than 11:00 a.m. on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an "Honor Date"), the Borrower shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing. If the Borrower fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the "Unreimbursed Amount"), and the amount of such Lender's Applicable Percentage thereof. In such event, the Borrower shall be deemed to have requested a Committed Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02 (other than the delivery of a Committed Loan Notice). Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.04(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice. (ii) Each Lender shall upon any notice pursuant to Section 2.04(c)(i) make funds available to the Administrative Agent for the account of the L/C Issuer at the Administrative Agent's Office in an amount equal to its Applicable Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.04(c)(iii), each Lender that so makes funds available shall be deemed to have made a Base Rate Committed Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the L/C Issuer. (iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Committed Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Lender's payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.04(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.04. (iv) Until each Lender funds its Committed Loan or L/C Advance pursuant to this Section 2.04(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender's Applicable Percentage of such amount shall be solely for the account of the L/C Issuer. (v) Each Lender's obligation to make Committed Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.04(c), shall be absolute and unconditional and shall not be affected by any 37   circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender's obligation to make Committed Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02 (other than delivery by the Borrower of a Committed Loan Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein. (vi) If any Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(ii), the L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation. A certificate of the L/C Issuer submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error. (d) Repayment of Participations. (i) At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender's L/C Advance in respect of such payment in accordance with Section 2.04(c), if the Administrative Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Applicable Percentage thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's L/C Advance was outstanding) in the same funds as those received by the Administrative Agent. (ii) If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.04(c)(i) is required to be returned under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement. 38   (e) Obligations Absolute. The obligation of the Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following: (i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document; (ii) the existence of any claim, counterclaim, setoff, defense or other right that the Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit; (iv) any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or (v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or any Subsidiary. The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower's instructions or other irregularity, the Borrower will immediately notify the L/C Issuer. The Borrower shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid. (f) Role of L/C Issuer. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, 39   as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower's pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.04(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the L/C Issuer's willful misconduct or gross negligence or the L/C Issuer's willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. (g) Cash Collateral. Upon the request of the Administrative Agent, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations. Sections 2.06 and 8.02(c) set forth certain additional requirements to deliver Cash Collateral hereunder. For purposes of this Section 2.04, Section 2.06 and Section 8.02(c), "Cash Collateralize" means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuer (which documents are hereby consented to by the Lenders). Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts at Bank of America. (h) Applicability of ISP and UCP. Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued, (i) the rules of the ISP shall apply to each standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance shall apply to each commercial Letter of Credit. (i) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage a Letter of Credit fee (the 40     "Letter of Credit Fee") (i) for each commercial Letter of Credit equal to the Applicable Margin per annum times the daily amount available to be drawn under such Letter of Credit, and (ii) for each standby Letter of Credit equal to the Applicable Margin times the daily amount available to be drawn under such Letter of Credit. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06. Letter of Credit Fees shall be (i) computed on a quarterly basis in arrears and (ii) due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. If there is any change in the Applicable Margin during any quarter, the daily amount available to be drawn under each standby Letter of Credit shall be computed and multiplied by the Applicable Margin separately for each period during such quarter that such Applicable Margin was in effect. Notwithstanding anything to the contrary contained herein, upon the request of the Required Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate. (j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The Borrower shall pay directly to the L/C Issuer for its own account a fronting fee in an amount mutually agreeable to the Borrower and the L/C Issuer with respect to each Letter of Credit computed on the daily amount available to be drawn under such Letter of Credit on a quarterly basis in arrears Such fronting fee shall be due and payable on the tenth Business Day after the end of each March, June, September and December in respect of the most recently-ended quarterly period (or portion thereof, in the case of the first payment), commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06. In addition, the Borrower shall pay directly to the L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable. (k) Conflict with Issuer Documents. In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control. (l) Letters of Credit Issued for Subsidiaries. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary, the Borrower shall be obligated to reimburse the L/C Issuer hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of Subsidiaries inures to the benefit of the Borrower, and that the Borrower's business derives substantial benefits from the businesses of such Subsidiaries. 41   2.05 [Reserved]. 2.06 Prepayments. (a) (i) The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Committed Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of Eurodollar Rate Committed Loans and (B) on the date of prepayment of Base Rate Committed Loans; (ii) any prepayment of Eurodollar Rate Committed Loans shall be in a principal amount of $1,000,000 or a whole multiple of $100,000 in excess thereof; and (iii) any prepayment of Base Rate Committed Loans shall be in a principal amount of $250,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Committed Loans to be prepaid. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender's Applicable Percentage of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05. Each such prepayment shall be applied to the Committed Loans of the Lenders in accordance with their respective Applicable Percentages. (ii) Cross UK may, upon notice to the UK Lender, at any time or from time to time voluntarily prepay Eurocurrency Loans, in whole or in part, without premium or penalty, provided that (i) such notice must be received by the UK Lender not later than 11:00 a.m. and shall specify the date and the amount of such prepayment (A) three Business Days prior to any date of prepayment; (ii) any prepayment shall be in a principal amount of $500,000 or a whole multiple of $250,000 in excess thereof or, if less, the entire principal amount thereof then outstanding; provided, further that that if a Eurocurrency Loan is prepaid on any day other than the last day of the Interest Period applicable thereto, Cross UK shall also pay any amounts owing pursuant to Section 3.05. If any such Notice of Prepayment is given, the amount specified in such Notice of Prepayment shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. (b) If for any reason the Total Outstandings of Committed Loans at any time exceed the Aggregate Commitments for Committed Loans then in effect, the Borrower will immediately prepay Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided, however, that the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.06(b) unless after the prepayment in full of the Committed Loans the Total Outstandings exceed the Aggregate Commitments for Committed Loans then in effect. (c) If for any reason, including, without limitation fluctuation in currency rates at any time, the Total Outstandings of Eurocurrency Loans at any time exceed the Dollar Equivalent of $5,000,000, then Cross UK will immediately prepay Eurocurrency Loans in an aggregate amount equal to such excess. 42   2.07 Termination or Reduction of Commitments. The Borrower may, upon notice to the Administrative Agent, terminate the Aggregate Commitments, or from time to time permanently reduce the Aggregate Commitments; provided that (i) any such notice shall be received by the Administrative Agent not later than 11:00 a.m. five Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $500,000 or any whole multiple of $250,000 in excess thereof, (iii) the Borrower shall not terminate or reduce the Aggregate Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Outstandings would exceed the Aggregate Commitments, and (iv) if, after giving effect to any reduction of the Aggregate Commitments or the Letter of Credit Sublimit exceeds the amount of the Aggregate Commitments, such Sublimit shall be automatically reduced by the amount of such excess. The Administrative Agent will promptly notify the Lenders of any such notice of termination or reduction of the Aggregate Commitments. Any reduction of the Aggregate Commitments shall be applied to the Commitment of each Lender according to its Applicable Percentage. All fees accrued until the effective date of any termination of the Aggregate Commitments shall be paid on the effective date of such termination. 2.08 Repayment of Loans. The Borrower shall repay to the Lenders, which have made Committed Loans, on the Maturity Date the aggregate principal amount of Committed Loan outstanding on such date which are not Eurocurrency Loans, and the Borrower and Cross UK shall repay to the UK Lender on the Maturity Date the aggregate amount of Eurocurrency Loans outstanding on such date. 2.09 Interest. (a) (i) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Committed Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Margin; (ii) each Base Rate Committed Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Margin. (ii) Subject to the provisions of subsection (b) below, each Eurocurrency Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurocurrency Rate for such Interest Period plus the Applicable Margin. (b) (i)If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. (ii) If any amount (other than principal of any Loan) payable by the Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of the Required 43   Lenders, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. (iii) Upon the request of the Required Lenders, while any Event of Default exists, the Borrower shall pay interest on the principal amount of all outstanding Committed Loans and all its other Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. Upon the request of the UK Lender, while any Event of Default exists, Cross UK shall pay interest on the principal amount of all outstanding Eurocurrency Loans and all of its other Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. (iv) Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand. (c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law. 2.10 Fees. In addition to certain fees described in subsections (i) and (j) of Section 2.04: (a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage, a commitment fee equal to the Applicable Margin times the actual daily amount by which the Aggregate Commitments for all Committed Loans and Eurocurrency Loans exceed the sum of (i) the Outstanding Amount of all Committed Loans plus (ii) the Outstanding Amount of Eurocurrency Loans plus (iii) the Outstanding Amount of L/C Obligations. The commitment fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Maturity Date. The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Margin during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Margin separately for each period during such quarter that such Applicable Margin was in effect. (b) Other Fees. The Borrower shall pay to the Administrative Agent $75,000 on the Closing Date as a closing fee, which amount shall be fully earned on the Closing Date and shall not be refundable for any reason whatsoever. 2.11 Computation of Interest and Fees. All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of America's "prime rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All computations of interest for Eurocurrency Loans 44   denominated in Sterling shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.13(a), bear interest for one day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error. 2.12 Evidence of Debt. (a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender's Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto. (b) In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. 2.13 Payments Generally; Administrative Agent's Clawback. (a) General. All payments to be made by the Borrower and Cross UK shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower and Cross UK hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent's Office in Dollars and in immediately available funds not later than 2:00 p.m. Boston time on the date specified herein and in the case of Eurocurrency Loans, to the UK Lender at the UK Lender's office in the Dollar Equivalent of the applicable Eurocurrency in immediately available funds not later than 2:00 p.m. London time on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like 45   funds as received by wire transfer to such Lender's Lending Office. All payments received by the Administrative Agent or the UK Lender, respectively, after 2:00 p.m. Boston or London time, respectively, shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower or Cross UK shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be. (b) (i) Funding by Lenders; Presumption by Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Committed Borrowing of Eurodollar Rate Loans (or, in the case of any Committed Borrowing of Base Rate Loans, prior to 12:00 noon on the date of such Committed Borrowing) that such Lender will not make available to the Administrative Agent such Lender's share of such Committed Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or, in the case of a Committed Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing of Committed Loans available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the applicable Borrowing of Committed Loans to the Administrative Agent, then the amount so paid shall constitute such Lender's Committed Loan included in such Borrowing of Committed Loans. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent. (ii) Payments by Borrower; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuer hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the L/C Issuer, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the L/C Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at 46   the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error. (c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest. (d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make Committed Loans, to fund participations in Letters of Credit and to make payments pursuant to Section 10.04(c) are several and not joint. The failure of any Lender to make any Committed Loan, to fund any such participation or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Committed Loan, to purchase its participation or to make its payment under Section 10.04(c). (e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner. 2.14 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Committed Loans or Eurocurrency Loans made by it, or the participations in L/C Obligations held by it resulting in such Lender's receiving payment of a proportion of the aggregate amount of such Committed Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Committed Loans and subparticipations in L/C Obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Committed Loans and other amounts owing them, provided that: (i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and 47   (ii) the provisions of this Section shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Committed Loans or subparticipations in L/C Obligations to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 Taxes. (a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower or Cross UK hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrower or Cross UK shall be required by applicable law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender, the L/C Issuer or the UK Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or Cross UK shall make such deductions and (iii) the Borrower or Cross UK shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower or Cross UK shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Indemnification by the Borrower. The Borrower and Cross UK shall indemnify the Administrative Agent, each Lender, the L/C Issuer and the UK Lender, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender, the L/C Issuer or the UK Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, the L/C Issuer (with a copy to the Administrative Agent ) or the UK Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, the L/C Issuer or the UK Lender, shall be conclusive absent manifest error. 48   (d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower or Cross UK to a Governmental Authority, the Borrower or Cross UK shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable: (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party, (ii) duly completed copies of Internal Revenue Service Form W-8ECI, (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a "bank" within the meaning of section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a "controlled foreign corporation" described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made. 49   (f) Treatment of Certain Refunds. If the Administrative Agent, any Lender or the L/C Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent, such Lender or the L/C Issuer, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Lender or the L/C Issuer in the event the Administrative Agent, such Lender or the L/C Issuer is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent, any Lender or the L/C Issuer to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person. 3.02 Illegality. If any Lender of, including without limitation, the UK Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office or the UK Lender to make, maintain or fund Eurodollar Rate Loans or Eurocurrency Loans, respectively, or to determine or charge interest rates based upon the Eurodollar Rate or the Eurocurrency Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender or the UK Lender to purchase or sell, or to take deposits of, Dollars, Euros or Sterling, as the case may be, in the London interbank market, then, on notice thereof by such Lender or the UK Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Committed Loans to Eurodollar Rate Committed Loans or the UK Lender to make any Eurocurrency Loans shall be suspended until such Lender or the UK Lender, as the case may be, notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans or upon demand from the UK Lender prepay all such Eurocurrency Loans either on the last day of the Interest Period therefor, if the UK Lender may lawfully continue to maintain such Eurocurrency Loans to such day, or immediately, if the UK Lender may not lawfully continue to maintain such Eurocurrency Loan. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted. 50   3.03 Inability to Determine Rates. If the Required Lenders determine that for any reason in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Committed Loan, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Committed Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Committed Loans or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans in the amount specified therein. 3.04 Increased Costs; Reserves on Eurodollar Rate Loans. (a) Increased Costs Generally. If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit,compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 3.04(e)) or the L/C Issuer or the UK Lender; (ii) subject any Lender, the L/C Issuer or the UK Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit, any Eurodollar Rate Loan or the UK Lender made by it, or change the basis of taxation of payments to such Lender, the L/C Issue or the UK Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the L/C Issuer); or (iii) impose on any Lender, the L/C Issuer or the UK Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Rate Loan (or of maintaining its obligation to make any such Loan) or the UK Lender to maintain any Eurocurrency Loan, or to increase the cost to such Lender or the UK Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer or 51   the UK Lender , the Borrower will pay to such Lender or the L/C Issuer or the UK Lender, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issue or the UK Lender, as the case may be, for such additional costs incurred or reduction suffered. (b) Capital Requirements. If any Lender or the L/C Issuer or the UK Lender determines that any Change in Law affecting such Lender or the L/C Issuer or any Lending Office of such Lender or such Lender's or the L/C Issuer's holding company or the UK Lender, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the L/C Issuer's capital or on the capital of such Lender's or the L/C Issuer's holding company or the UK Lender, if any, as a consequence of this Agreement, the Commitments of such Lender or the UK Lender or the Loans made by, or participations in Letters of Credit held by, such Lender or the UK Lender, or the Letters of Credit issued by the L/C Issuer, to a level below that which such Lender or the L/C Issuer or such Lender's or the L/C Issuer's holding company or the UK Lender could have achieved but for such Change in Law (taking into consideration such Lender's or the L/C Issuer's policies and the policies of such Lender's or the L/C Issuer's holding company with respect to capital adequacy) or the UK Lender, then from time to time the Borrower will pay to such Lender or the L/C Issuer or the UK Lender, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer or such Lender's or the L/C Issuer's holding company or the UK Lender for any such reduction suffered. (c) Certificates for Reimbursement. A certificate of a Lender or the L/C Issuer or the UK Lender setting forth the amount or amounts necessary to compensate such Lender or the L/C Issuer or its holding company or the UK Lender, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender or the L/C Issuer or the UK Lender, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Delay in Requests. Failure or delay on the part of any Lender or the L/C Issuer or the UK Lender to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender's or the L/C Issuer's or the UK Lender's right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the L/C Issuer or the UK Lender pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than six months prior to the date that such Lender or the L/C Issuer or the UK Lender, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the L/C Issuer's or the UK Lender's intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof). (e) Reserves on Eurodollar Rate Loans or Eurocurrency Loans. The Borrower shall pay to each Lender, as long as such Lender or the UK Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional interest on the unpaid principal amount of each Eurodollar Rate Loan or Eurocurrency Loan equal to the actual costs of such reserves allocated to such Loan by such Lender or the UK Lender (as determined by such 52 Lender or the UK Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days' prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender or the UK Lender. If a Lender or the UK Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice. 3.05 Compensation for Losses. Upon demand of any Lender (with a copy to the Administrative Agent) or the UK Lender from time to time, the Borrower and, if relating to a Eurocurrency Loan, Cross UK, jointly and severally with the Borrower, shall promptly compensate such Lender or the UK Lender for and hold such Lender or the UK Lender harmless from any loss, cost or expense incurred by it as a result of: (a) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or (c) any assignment of a Eurodollar Rate Loan or a Eurocurrency Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 10.13; including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower and, if relating to a Eurocurrency Loan, Cross UK, jointly and severally with the Borrower, shall also pay any customary administrative fees charged by such Lender and the UK Lender in connection with the foregoing. For purposes of calculating amounts payable by the Borrower to the Lenders or the UK Lender under this Section 3.05, each Lender and the UK Lender shall be deemed to have funded each Eurodollar Rate Committed Loan on the Eurocurrency Loan, as the case may be, made by it at the Eurodollar Rate on the Eurocurrency Rate, as the case may be, for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Committed Loan or such Eurocurrency Loan was in fact so funded. 3.06 Mitigation Obligations; Replacement of Lenders. (a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any 53 Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, the Borrower may replace such Lender in accordance with Section 10.13. 3.07 Survival. All of the Borrower's obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder. 3.08 Required Costs. Cross UK shall pay to the UK Lender, upon demand all UK Mandatory Bank of England costs and charges and all FSA Costs customarily charged or assessed by the UK Lender for commercial loans of the character provided herein. ARTICLE IV. CONDITIONS PRECEDENT TO Credit Extensions 4.01 Conditions of Initial Credit Extension. The obligation of the L/C Issuer and each Lender, including without limitation, the UK Lender, to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent: (a) The Administrative Agent's receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and each of the Lenders: (i) executed counterparts of the Loan Documents, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower; (ii) a Note executed by the Borrower in favor of each Lender requesting a Note and a Note executed by Cross UK in favor of the UK Lender; 54 (iii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party; (iv) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and that each of the Borrower and each of its Subsidiaries is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; (v) a favorable opinion of Edwards Angell Palmer and Dodge, LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, in form and substance reasonably satisfactory to the Administrative Agent addressing such matters concerning the Loan Parties and the Loan Documents as the Required Lenders may reasonably request; (vi) a certificate of a Responsible Officer of each Loan Party either (A) attaching copies of all consents, licenses and approvals required in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required; (vii) a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied, and (B) that there has been no event or circumstance since June 30, 2005 that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect; and (C) a calculation of the Consolidated Leverage Ratio as of the last day of the fiscal quarter of the Borrower most recently ended prior to the Closing Date; (viii) a duly completed Compliance Certificate as of the last day of the fiscal quarter of the Borrower ended on September 30, 2005, signed by a Responsible Officer of the Borrower; (ix) evidence that all insurance required to be maintained pursuant to the Loan Documents has been obtained and is in effect; and (x) such other assurances, certificates, documents, consents or opinions as the Administrative Agent, the L/C Issuer, the UK Lender or the Required Lenders reasonably may require. (b) Any fees required to be paid on or before the Closing Date shall have been paid. 55   (c) Unless waived by the Administrative Agent, the Borrower shall have paid all fees, charges and disbursements of counsel to the Administrative Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent). Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto. 4.02 Conditions to all Credit Extensions. The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type, or a continuation of Eurodollar Rate Committed Loans) is subject to the following conditions precedent: (a) The representations and warranties of the Borrower and each other Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct on and as of the date of such Credit Extension, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes of this Section 4.02, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01. (b) No Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof. (c) The Administrative Agent and, if applicable, the L/C Issuer or the UK Lender shall have received a Request for Credit Extension in accordance with the requirements hereof. Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type or a continuation of Eurodollar Rate Committed Loans) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension. ARTICLE V. REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Administrative Agent and the Lenders that: 56   5.01 Existence, Qualification and Power; Compliance with Laws. Each Loan Party and each Subsidiary thereof (a) is duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, and (d) is in compliance with all Laws; except in each case referred to in clause (b)(i), (c) or (d), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. 5.02 Authorization; No Contravention. The execution, delivery and performance by each Loan Party and Cross UK of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law. Each Loan Party and each Subsidiary thereof is in compliance with all Contractual Obligations referred to in clause (b)(i), except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. 5.03 Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party or Cross UK of this Agreement or any other Loan Document. 5.04 Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party and Cross UK that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party and Cross UK, enforceable against each Loan Party that is party thereto in accordance with its terms. 5.05 Financial Statements; No Material Adverse Effect; No Internal Control Event. (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the 57   date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness. (b) The unaudited consolidated and consolidating balance sheet of the Borrower and its Subsidiaries dated September 30, 2005, and the related consolidated and consolidating statements of income or operations, shareholders' equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments. Schedule 5.05 sets forth all material indebtedness and other liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the date of such financial statements, including liabilities for taxes, material commitments and Indebtedness. (c) Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect. (d) Since the date of the Audited Financial Statements, no Internal Control Event has occurred. (e) The consolidated operating budget which shall have included without limitation a consolidated and consolidating forecasted balance sheet and statements of income and cash flows of the Borrower and its Subsidiaries delivered pursuant to Section 6.01(c) were prepared in good faith on the basis of the assumptions stated therein, which assumptions the Borrower believes were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Borrower's best estimate of its future financial performance. 5.06 Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect provided, the Borrower is involved in the litigation set forth on Schedule 5.06 which, if adversely determined, could not reasonably be expected to have a Material Adverse Effect. 58   5.07 No Default. Neither the Borrower nor any Subsidiary is in default under or with respect to any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document. 5.08 Ownership of Property; Liens. Each of the Borrower and each Subsidiary has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The property of the Borrower and its Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01. 5.09 Environmental Compliance. The Borrower and its Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof the Borrower has reasonably concluded that such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.10 Insurance. The properties of the Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts (after giving effect to any self-insurance compatible with the following standards), with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or the applicable Subsidiary operates. 5.11 Taxes. The Borrower and its Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Borrower or any Subsidiary that would, if made, have a Material Adverse Effect. Neither any Loan Party nor any Subsidiary thereof is party to any tax sharing agreement. 5.12 ERISA Compliance. Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws. Each Plan that is intended to qualify under 59   Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. The Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect. (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) except as disclosed on Schedule 5.12(c) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA. 5.13 Subsidiaries; Equity Interests. The Borrower has no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by a Loan Party in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens. The Borrower has no equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13. All of the outstanding Equity Interests in the Borrower have been validly issued, and are fully paid and nonassessable. 5.14 Margin Regulations; Investment Company Act; Public Utility Holding Company Act. (a) The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock. (b) None of the Borrower, any Person Controlling the Borrower, or any Subsidiary (i) is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning 60     of the Public Utility Holding Company Act of 1935, or (ii) is or is required to be registered as an "investment company" under the Investment Company Act of 1940. 5.15 Disclosure. The Borrower has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. 5.16 Compliance with Laws. Each of the Borrower and each Subsidiary is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 5.17 Intellectual Property; Licenses, Etc. The Borrower and its Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, "IP Rights") that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person. To the best knowledge of the Borrower, no material slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower or any Subsidiary infringes upon any rights held by any other Person. Except as specifically disclosed in Schedule 5.17, no claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. ARTICLE VI. AFFIRMATIVE COVENANTS So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause each Subsidiary to: 61   6.01 Financial Statements. Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated and consolidating statements of income or operations, shareholders' equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by (i) a report and opinion of a Registered Public Accounting Firm of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with generally accepted auditing standards and applicable Securities Laws and shall not be subject to any "going concern" or like qualification or exception or any qualification or exception as to the scope of such audit and (ii) an attestation report of such Registered Public Accounting Firm as to the Borrower's internal controls pursuant to Section 404 of Sarbanes-Oxley, if applicable, expressing a conclusion to which the Required Lenders do not reasonably object, and such consolidating statements to be certified by a Responsible Officer of the Borrower to the effect that such statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Borrower and its Subsidiaries; (b) as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated and consolidating statements of income or operations, shareholders' equity and cash flows for such fiscal quarter and for the portion of the Borrower's fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, such consolidated statements to be certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations, shareholders' equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes and such consolidating statements to be certified by a Responsible Officer of the Borrower to the effect that such statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Borrower and its Subsidiaries; and (c) as soon as available, but in any event at least 30 days after the end of each fiscal year of the Borrower, a consolidated operating budget which shall include, without limitation, a consolidated and consolidating forecasted balance sheet and statements of income and cash flows of the Borrower and its Subsidiaries on a monthly basis, prepared on a basis consistent with the budget delivered by the Borrower to its Board of Directors and consistent with past practice or otherwise in form satisfactory to the Administrative Agent. . 62   6.02 Certificates; Other Information. Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders: (a) concurrently with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its independent certified public accountants certifying such financial statements and stating that in making the examination necessary therefor no knowledge was obtained of any Default under the financial covenants set forth herein or, if any such Default shall exist, stating the nature and status of such event; (b) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower; (c) promptly after any request by the Administrative Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Borrower by independent accountants in connection with the accounts or books of the Borrower or any Subsidiary, or any audit of any of them; (d) promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements which the Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to the Administrative Agent pursuant hereto; (e) promptly after the furnishing thereof, copies of any statement or report furnished to any holder of debt securities of any Loan Party or any Subsidiary thereof pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to the Lenders pursuant to Section 6.01 or any other clause of this Section 6.02; and (f) promptly, and in any event within five Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation or other inquiry by such agency regarding financial or other operational results of any Loan Party or any Subsidiary thereof; and (g) promptly, such additional information regarding the business, financial or corporate affairs of the Borrower or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender may from time to time reasonably request. Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the 63   Borrower's website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower's behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Borrower shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(b) to the Administrative Agent. Except for such Compliance Certificates, the Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents. The Borrower hereby acknowledges that (a) the Administrative Agent will make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Borrower hereunder (collectively, "Borrower Materials") by posting the Borrower Materials on IntraLinks or another similar electronic system (the "Platform") and (b) certain of the Lenders may be "public-side" Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a "Public Lender"). The Borrower hereby agrees that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked "PUBLIC" which, at a minimum, shall mean that the word "PUBLIC" shall appear prominently on the first page thereof; (x) by marking Borrower Materials "PUBLIC," the Borrower shall be deemed to have authorized the Administrative Agent, the L/C Issuer and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07); (y) all Borrower Materials marked "PUBLIC" are permitted to be made available through a portion of the Platform designated "Public Investor;" and (z) the Administrative Agent shall be entitled to treat any Borrower Materials that are not marked "PUBLIC" as being suitable only for posting on a portion of the Platform not designated "Public Investor." 6.03 Notices. Promptly notify the Administrative Agent and each Lender: (a) of the occurrence of any Default; (b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Borrower or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Subsidiary and any 64   Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws; (c) of the occurrence of any ERISA Event; (d) of any material change in accounting policies or financial reporting practices by the Borrower or any Subsidiary; and (e) of the occurrence of any Internal Control Event . Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached. 6.04 Payment of Obligations. Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness. 6.05 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect. 6.06 Maintenance of Properties. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities. 65   6.07 Maintenance of Insurance. Maintain with financially sound and reputable insurance companies not Affiliates of the Borrower, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons and providing for not less than 30 days' prior notice to the Administrative Agent of termination, lapse or cancellation of such insurance. 6.08 Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect. 6.09 Books and Records. Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be. 6.10 Inspection Rights. Permit representatives and independent contractors of the Administrative Agent and each Lender (a) to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, as often as may be reasonably desired, and (b) to conduct commercial finance exams twice during each fiscal year, all at the expense of the Borrower and at such reasonable times during normal business hours, upon reasonable advance notice to the Borrower; provided, that so long as a Default or Event of Default exists and is continuing the Administrative Agent may conduct commercial finance exams as frequently as the Administrative Agent determines; provided, however, that when an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice, 6.11 Use of Proceeds. Use the proceeds of the Credit Extensions for general corporate purposes not in contravention of any Law or of any Loan Document. 66   6.12 Additional Guarantors. Notify the Administrative Agent at the time that any Person becomes a Domestic Subsidiary, and promptly thereafter (and in any event within [30] days), cause such Person to (a) become a Guarantor by executing and delivering to the Administrative Agent a counterpart of the Guaranty or such other document as the Administrative Agent shall deem appropriate for such purpose, and (b) deliver to the Administrative Agent documents of the types referred to in clauses (iii) and (iv) of Section 4.01(a) and favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in clause (a)), all in form, content and scope reasonably satisfactory to the Administrative Agent. 6.13 Post Closing Deliveries. On or before May 1, 2006 , the Borrower shall deliver the Post Closing Deliveries to the Administrative Agent in form and substance reasonably satisfactory to the Administrative Agent. ARTICLE VII. NEGATIVE COVENANTS So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly: 7.01 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following: (a) Liens pursuant to any Loan Document; (b) Liens existing on the date hereof and listed on Schedule 7.01 and any renewals or extensions thereof, provided that (i) the property covered thereby is not changed, (ii) the amount secured or benefited thereby is not increased, (iii) the direct or any contingent obligor with respect thereto is not changed, and (iv) any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.03(b); (c) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP; (d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person; 67   (e) pledges or deposits in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA; (f) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (g) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person; (h) Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h); (i) Liens securing Indebtedness permitted under Section 7.03(e); provided that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (ii) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition; and (j) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of customs duties in connection with the importation of goods. 7.02 Investments. Make any Investments, except: (a) Investments held by the Borrower or such Subsidiary in the form of Cash Equivalents; (b) advances to officers, directors and employees of the Borrower and Subsidiaries in an aggregate amount not to exceed $250,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes; (c) Investments of the Borrower in any wholly-owned Guarantor and Investments of any wholly-owned Guarantor in the Borrower or in another wholly-owned Guarantor; (d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss; (e) Guarantees permitted by Section 7.03; (f) intercompany Investments by any Loan Party in any other Loan Party; 68   (g) intercompany Investments after the date hereof by any Loan Party in any Foreign Subsidiary other than Cross China and the Excluded Subsidiaries, in an aggregate amount of up to $550,000 during any fiscal year; (h) Investments in Cross China made prior to December 21, 2005 consisting of up to, in the aggregate, $250,000 in cash and $3,750,000 book value of equipment located in China; (i) Investments in Cross China, in addition to those permitted in (h) immediately preceding, (A) for Equipment, in an aggregate amount of up to $1,750,000, which Investments may be made by contributing cash to enable Cross China to purchase the Equipment or by contributing the Equipment directly to Cross China, such Equipment contributed directly to Cross China to be valued at the purchase price therefor, and (B) for working capital, and not for the acquisition of Equipment, in an aggregate amount of up to $500,000, in the case of (A) and (B) for each of the Borrower's fiscal years 2006 and 2007; or (j) Investments on the date hereof set forth on Schedule 7.02. 7.03 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness under the Loan Documents; (b) Indebtedness outstanding on the date hereof and listed on Schedule 7.03 and any refinancings, refundings, renewals or extensions thereof; provided that (i) the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder and (ii) the terms relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material terms taken as a whole, of any such refinancing, refunding, renewing or extending Indebtedness, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable in any material respect to the Loan Parties or the Lenders than the terms of any agreement or instrument governing the Indebtedness being refinanced, refunded, renewed or extended and the interest rate applicable to any such refinancing, refunding, renewing or extending Indebtedness does not exceed the then applicable market interest rate; (c) Guarantees of the Borrower or any Subsidiary in respect of Indebtedness otherwise permitted hereunder of the Borrower or any wholly-owned Subsidiary or any other Guarantor; (d) obligations (contingent or otherwise) of the Borrower or any Subsidiary existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person, and not for purposes of speculation or taking a "market view;" and (ii) such Swap Contract does not 69   contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party; (e) Indebtedness of the Borrower or any Guarantor in respect of capital leases and purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(i); provided, however, that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed $500,000; (f) Indebtedness of any Foreign Subsidiary, other than an Excluded Subsidiary, in respect of capital leases and purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(i); provided, however, that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed $500,000; (g) Indebtedness owing from any Loan Party to any other Loan Party; provided that any indebtedness to any Loan Party is subordinated on terms and conditions satisfactory to the Administrative Agent in right of payment to all Indebtedness of the Loan Parties under the Loan Documents; (h) Indebtedness from Cross Japan to Cross Bermuda to Cross UK in an aggregate principal amount not to exceed $3,100,000 as such principal amount is reduced by prepayments thereof, provided that the promissory note evidenced such Indebtedness is pledged to and delivered to the Administrative Agent by Cross UK and no reborrowings are permitted thereunder; and (i) unsecured Indebtedness of the Borrower or any Guarantor in an aggregate principal amount not to exceed $500,000 at any time outstanding. 7.04 Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result therefrom: (a) any Subsidiary may merge with (i) the Borrower, provided that the Borrower shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries, provided that when any wholly-owned Subsidiary Guarantor is merging with another Subsidiary, the wholly-owned Subsidiary Guarantor shall be the continuing or surviving Person; and (b) any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Subsidiary; provided that if the transferor in such a transaction is a wholly-owned Subsidiary Guarantor, then the transferee must either be the Borrower or a wholly-owned Subsidiary Guarantor. (c) any Excluded Subsidiary, at the Borrower's option, may be wound up and dissolved; 70   (d) any Foreign Subsidiary other than Cross UK may be merged, consolidated or amalgamated into any other Foreign Subsidiary other than Cross UK or an Excluded Subsidiary; and (e) any Excluded Subsidiary may (i) be merged with or into any other Subsidiary of the Borrower provided that the Excluded Subsidiary is not the surviving entity or (ii) make a Disposition of its assets to any other Subsidiary of the Borrower pursuant to a transaction of liquidation or dissolution. 7.05 Dispositions. Make any Disposition or enter into any agreement to make any Disposition, except: (a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business; (b) Dispositions of inventory in the ordinary course of business; (c) Dispositions of equipment or real property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement property; (d) Dispositions of property by any Subsidiary to the Borrower or to a wholly-owned Subsidiary; provided that if the transferor of such property is a Guarantor, the transferee thereof must either be the Borrower or a Guarantor; (e) Dispositions permitted by Section 7.04; (f) non-exclusive licenses of IP Rights in the ordinary course of business and substantially consistent with past practice for terms not exceeding five years; (g) Dispositions by the Borrower and its Subsidiaries not otherwise permitted under this Section 7.05; provided that (i) at the time of such Disposition, no Default shall exist or would result from such Disposition and (ii) the aggregate book value of all property Disposed of in reliance on this clause (g) in any fiscal year shall not exceed $500,000; (h) Disposition by the Borrower prior to December 21, 2005 of up to $3,750,000 book value of equipment to Cross China; (i) Dispositions of Equipment by the Borrower having aggregate value of up to $1,750,000 minus the amount of cash the Borrower provides to Cross China as an Investment to enable Cross China to purchase Equipment directly as permitted under Section 7.02(h), for each of the Borrower's fiscal year 2006 and 2007; (j) Disposition of the Capital Stock of any Excluded Subsidiary; and 71   (k) Disposition by the Borrower of accounts receivable from Cross Japan, Cross Asia Pacific and Cross UK as account debtors to Cross Bermuda provided that such accounts receivable are sold at par or at a discount of no more than 5%. provided , however, that any Disposition pursuant to clauses (a) through (k) shall be for fair market value. 7.06 Restricted Payments. Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, or issue or sell any Equity Interests, except that, so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom: (a) each Subsidiary may make Restricted Payments to the Borrower, the Guarantors and any other Person that owns an Equity Interest in a Subsidiary, ratably according to their respective holdings of the type of Equity Interest in respect of which such Restricted Payment is being made, provided that Cross UK may not make any Restricted Payments; (b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person provided such Equity Interests are pledged to the Administrative Agent so that the Administrative Agent has at all times a pledge of 100% of the issued and outstanding Equity Interests of each Guarantor and 66% of the issued and outstanding Equity Interests of all Foreign Subsidiaries other than the Excluded Subsidiaries; (c) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire Equity Interests issued by it with the proceeds received from the substantially concurrent issue of new shares of its common stock or other common Equity Interests; and (d) so long as no Default or Event of Default has occurred and is continuing and no Default or Event of Default would be caused after giving effect to such redemption, the Borrower may redeem its capital stock pursuant to a program to be approved by the Required Lenders in their sole discretion. 7.07 Change in Nature of Business. Engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the date hereof or any business substantially related or incidental thereto. 7.08 Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm's length transaction with a Person other than an Affiliate, provided, however, any Foreign Subsidiary may not enter into a transaction with the 72   Borrower or any Guarantor unless expressly permitted in Section 7.01 through Section 7.07 hereof. 7.09 Burdensome Agreements. Enter into any Contractual Obligation (other than this Agreement or any other Loan Document) that (a) limits the ability (i) of any Subsidiary to make Restricted Payments to the Borrower or any Guarantor or to otherwise transfer property to the Borrower or any Guarantor, (ii) of any Subsidiary to Guarantee the Indebtedness of the Borrower or (iii) of the Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person; provided, however, that this clause (iii) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under Section 7.03(e) solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person. 7.10 Use of Proceeds. Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose. 7.11 Financial Covenants. (a) Consolidated Tangible Net Worth. Permit Consolidated Tangible Net Worth at any time to be less than the sum of (i) $47,000,000, (ii) an amount equal to 50% of the Consolidated Net Income earned in each full fiscal quarter ending after December 31, 2005 (with no deduction for a net loss in any such fiscal quarter) and (iii) an amount equal to 50% of the aggregate increases in Shareholders' Equity of the Borrower and its Subsidiaries after the date hereof by reason of the issuance and sale of Equity Interests of the Borrower or any Subsidiary (other than issuances to the Borrower or a wholly-owned Subsidiary), including upon any conversion of debt securities of the Borrower into such Equity Interests. (b) Consolidated Debt Service Ratio. Permit the Consolidated Debt Service Coverage Ratio as of the end of any fiscal quarter of the Borrower to be less than 1.50:1.00. (c) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio at any time during any period of four fiscal quarters of the Borrower to be greater than 2.50:1.00. 7.12 Capital Expenditures. Make or become legally obligated to make any Capital Expenditure in respect of the purchase or other acquisition of any fixed or capital asset (excluding normal replacements and maintenance which are properly charged to current operations), except for capital expenditures in the ordinary course of business not exceeding, in the aggregate for the Borrower and the Guarantors in excess of $7,000,000 during each fiscal year; provided that the Borrower and the Guarantor shall not make Capital Expenditures in excess of $4,000,000 for any asset or assets which are or will be located outside of the United States provided, further, that so long as no Default has occurred and is continuing or would result 73   from such expenditure, any portion of any amount set forth above, if not expended in the fiscal year for which it is permitted above, may be carried over for expenditure in the next following fiscal year. 7.13 Anti-Terrorism Law. Knowingly, with the intent to violate the Executive Order or any other Anti-Terrorism Law, (i) conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in Section 7.14, (ii) deal in, or otherwise engage in any transaction relating to, any property or interest in property prohibited pursuant to the Executive Order or any other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. 7.14 Embargoed Person. Cause or permit (a) any of the funds or properties of the Loan Parties or any of their Subsidiaries that are used to repay the Loans to constitute property of, or be beneficially owned directly or indirectly by, any person subject to sanctions or trade restrictions under United States law ("Embargoed Person" or "Embargoed Persons") that is identified on (1) the "List of Specially Designated Nationals and Blocked Persons" maintained by OFAC and/or on any other similar list maintained by OFAC pursuant to any authorizing statute including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. SS 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or Requirement of Law promulgated thereunder, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by a Requirement of Law, or the Loans made by the Lenders or the UK Lender would be in violation of a Requirement of Law, or (2) the Executive Order, any related enabling legislation or any other similar Executive Orders or (b) any Embargoed Person to have any direct or indirect interest, of any nature whatsoever in the Loan Parties, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by a Requirement of Law or the Loans are in violation of a Requirement of Law. 7.15 Restriction on Excluded Subsidiaries; Loan Party Assets. (a) If an Excluded Subsidiary, shall not engage in any business other than in incidental sales of Inventory of the Borrower and its Subsidiaries. (b) Remove from the United States, without making a Disposition permitted hereunder, any assets in excess of equipment having a book value of, in the aggregate, $500,000 in any fiscal year. ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES 8.01 Events of Default. Any of the following shall constitute an Event of Default: 74   (a) Non-Payment. The Borrower or any other Loan Party or Cross UK fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan or any L/C Obligation, or (ii) within three days after the same becomes due, any interest on any Loan or on any L/C Obligation, or any fee due hereunder, or (iii) within five days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or (b) Specific Covenants. The Borrower fails to perform or observe any term, covenant or agreement contained in any of Section 6.01, 6.02, 6.03, 6.05, 6.10, 6.11, 6.12 or 6.13 or Article VII ; or (c) Other Defaults. Any Loan Party or Cross UK fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days; or (d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party or Cross UK herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading when made or deemed made; or (e) Cross-Default. (i) The Borrower or any Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which the Borrower or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which the Borrower or any Subsidiary is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by the Borrower or such Subsidiary as a result thereof is greater than the Threshold Amount; or (f) Insolvency Proceedings, Etc. Any Loan Party or any of its Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, 75   rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or (g) Inability to Pay Debts; Attachment. (i) The Borrower or any Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or (h) Judgments. There is entered against the Borrower or any Subsidiary (i) a final judgment or order for the payment of money in an aggregate amount exceeding the Threshold Amount (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 10 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold Amount, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount; or (j) Invalidity of Loan Documents. Any provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document; or (k) Change of Control. There occurs any Change of Control. 8.02 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions: (a) declare the commitment of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated; 76   (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; (c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents; provided , however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender. 8.03 Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order: First , to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such; Second , to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal, interest and Letter of Credit Fees) payable to the Lenders and the L/C Issuer (including fees, charges and disbursements of counsel to the respective Lenders and the L/C Issuer (including fees and time charges for attorneys who may be employees of any Lender or the L/C Issuer) and the UK Lender and amounts payable under Article III), ratably among them in proportion to the respective amounts described in this clause Second payable to them; Third , to payment of that portion of the Obligations constituting accrued and unpaid Letter of Credit Fees and interest on the Loans, L/C Borrowings and other Obligations, ratably among the Lenders, the L/C Issuer and the UK Lender in proportion to the respective amounts described in this clause Third payable to them; 77   Fourth , to payment of that portion of the Obligations constituting unpaid principal of the Loans and L/C Borrowings, ratably among the Lenders, the L/C Issuer and the UK Lender in proportion to the respective amounts described in this clause Fourth held by them; Fifth , to the Administrative Agent for the account of the L/C Issuer, to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit; and Last , the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law. Subject to Section 2.04(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above. ARTICLE IX. ADMINISTRATIVE AGENT 9.01 Appointment and Authority. Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuer, and the Borrower shall not have rights as a third party beneficiary of any of such provisions. 9.02 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders. 9.03 Exculpatory Provisions. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent: 78   (a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing; (b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and (c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower, a Lender or the L/C Issuer. The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. 9.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume 79   that such condition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. 9.05 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. 9.06 Resignation of Administrative Agent. The Administrative Agent may at any time give notice of its resignation to the Lenders, the L/C Issuer and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the L/C Issuer directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section. Upon the acceptance of a successor's appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent's resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent. 80     9.07 Non-Reliance on Administrative Agent and Other Lenders. Each Lender and the L/C Issuer acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the L/C Issuer also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. 9.08 [Reserved] 9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise: (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuer and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer and the Administrative Agent under Sections 2.04(i) and (j), 2.10 and 10.04) allowed in such judicial proceeding; and (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.10 and 10.04. Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding. 81   ARTICLE X MISCELLANEOUS 10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall: (a) waive any condition set forth in Section 4.01(a) without the written consent of each Lender; (b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender; (c) postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment (excluding mandatory prepayments) of principal, interest, fees or other amounts due to the Lenders (or any of them) or any scheduled or mandatory reduction of the Aggregate Commitments hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; (d) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause [(iv)][(v)] of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of "Default Rate" or to waive any obligation of the Borrower to pay interest or Letter of Credit Fees at the Default Rate; (e) change Section 2.14 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender; [or] (f) change any provision of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the 82   Commitment of such Lender may not be increased or extended without the consent of such Lender. 10.02 Notices; Effectiveness; Electronic Communication. (a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows: (i) if to the Borrower, the Administrative Agent or the L/C Issuer, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and (ii) if to the UK Lender, to the address, telecopier number, electronic mail address or telephone number specified on Schedule 10.02. Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b). (b) Electronic Communications. Notices and other communications to the Lenders and the L/C Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgement from the intended recipient (such as by the "return receipt requested" function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor. 83   (c) The Platform. THE PLATFORM IS PROVIDED "AS IS" AND "AS AVAILABLE." THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the "Agent Parties") have any liability to the Borrower, any Lender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower's or the Administrative Agent's transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to the Borrower, any Lender, the L/C Issuer or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages). (d) Change of Address, Etc. Each of the Borrower, the Administrative Agent, the L/C Issuer and the UK Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower, the Administrative Agent and the L/C Issuer. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender. (e) Reliance by Administrative Agent, L/C Issuer and Lenders. The Administrative Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and UK Lender Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify the Administrative Agent, the L/C Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording. 84   10.03 No Waiver; Cumulative Remedies. No failure by any Lender, the L/C Issuer or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.04 Expenses; Indemnity; Damage Waiver. (a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent), in connection with the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, any Lender or the L/C Issuer (including the fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or the L/C Issuer), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. (b) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the L/C Issuer, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party 85   or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee's obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction. (c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the L/C Issuer or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the L/C Issuer or such Related Party, as the case may be, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) or the L/C Issuer in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or L/C Issuer in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.12(d). (d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby. (e) Payments. All amounts due under this Section shall be payable not later than ten Business Days after demand therefor. (f) Survival. The agreements in this Section shall survive the resignation of the Administrative Agent and the L/C Issuer and the UK Lender, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations. 86   10.05 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Administrative Agent, the L/C Issuer or any Lender, or the Administrative Agent, the L/C Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent, the L/C Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders and the L/C Issuer under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement. 10.06 Successors and Assigns. (a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the L/C Issuer and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Assignments by Lenders. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this subsection and (b), participations in L/C Obligations) at the time owing to it); provided that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal 87   outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if "Trade Date" is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met; (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Loans or the Commitment assigned; (iii) any assignment of a Commitment must be approved by the Administrative Agent, unless the Person that is the proposed assignee is itself a Lender (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); and (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount, if any, required as set forth in Schedule 10.06, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section. (c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent's Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The 88   entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by each of the Borrower and the L/C Issuer at any reasonable time and from time to time upon reasonable prior notice. In addition, at any time that a request for a consent for a material or substantive change to the Loan Documents is pending, any Lender may request and receive from the Administrative Agent a copy of the Register. (d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower's Affiliates or Subsidiaries) (each, a "Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender's participations in L/C Obligations) owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.13 as though it were a Lender. (e) Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.01(e) as though it were a Lender. (f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. 89   (g) Electronic Execution of Assignments. The words "execution," "signed," "signature," and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act. 10.07 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent, the Lenders and the L/C Issuer agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates' respective partners, directors, officers, employees, agents, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any Lender, the L/C Issuer or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower. For purposes of this Section, "Information" means all information received from the Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis prior to disclosure by the Borrower or any Subsidiary, provided that, in the case of information received from the Borrower or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Each of the Administrative Agent, the Lenders and the L/C Issuer acknowledges that (a) the Information may include material non-public information concerning the Borrower or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws. 90   10.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer, irrespective of whether or not such Lender or the L/C Issuer shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender or the L/C Issuer different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the L/C Issuer or their respective Affiliates may have. Each Lender and the L/C Issuer agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application. 10.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the "Maximum Rate"). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder. 10.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature 91   page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. 10.11 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding. 10.12 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.13 Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, if any Lender is a Defaulting Lender or if any other circumstance exists hereunder that gives the Borrower the right to replace a Lender as a party hereto, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that: (a) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 10.06(b); (b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts); 92   (c) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; and (d) such assignment does not conflict with applicable Laws. A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. 10.14 Governing Law; Jurisdiction; Etc. (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS. (b) SUBMISSION TO JURISDICTION. THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS SITTING IN SUFFOLK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF MASSACHUSETTS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH MASSACHUSETTS STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION. (c) WAIVER OF VENUE. THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN 93   INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. (d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW. 10.15 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 10.16 USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act. 10.17 Entire Agreement. This Agreement and the other Loan Documents represent the final agreement AMONG the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral agreements AMONG the parties. 10.18 Judgment Currency. For the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars, in Euro or in Sterling into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which 94   the accordance with normal banking procedures the Administrative agent could purchase Dollars or Euro or Sterling, as the case may be, with such other currency at the spot rate of exchange quoted by the Administrative Agent at 11:00 a.m., Boston time, the Business Day preceding that on which final judgment is given for the purchase of Dollars, Euro or Sterling for delivery two (2) Business Days thereafter. The obligation of the Borrower in respect of any such sum due from it to the Administrative Agent, the UK Lender or any other Lender hereunder or under the other Loan Documents shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than that in which shall sum is denominated in accordance with the applicable provisions of this Agreement (the "Agreement Currency"), but discharged only to the extent that on the Business Day following receipt by the Administrative Agent of any sum adjusted to be so due in the Judgment Currency, the Administrative Agent may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Administrative Agent or UK Lender in the Agreement Currency, the Borrower agrees, as a separate obligating and notwithstanding any such judgment, to indemnify the Administrative Agent or the Person to whom such obligation was owing against such lost. ARTICLE XI. RATIFICATION This Agreement and all of the other Loan Documents, as amended, are hereby ratified and confirmed and remain in full force and effect. 95 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.   A.T. CROSS COMPANY   By: KEVIN F. MAHONEY   Name: Kevin F. Mahoney   Title: CFO   S-1 Credit Agreement Signature Page         A.T. CROSS LIMITED   By: KEVIN F. MAHONEY   Name: Kevin F. Mahoney   Title: Director   S-2 Credit Agreement Signature Page     BANK OF AMERICA, N.A., as Administrative Agent   By: CHRISTOPHER S. ALLEN   Name: Christopher S. Allen   Title: Senior Vice President   S-3 Credit Agreement Signature Page     BANK OF AMERICA, N.A., as L/C Issuer and Lender   By: CHRISTOPHER S. ALLEN   Name: Christopher S. Allen   Title: Senior Vice President   S-4 Credit Agreement Signature Page     BANK OF AMERICA, N.A., (LONDON BRANCH) as UK Lender   By: KEITH THOMAS   Name: Keith Thomas   Title: Vice President   S-5 Credit Agreement Signature Page     SCHEDULE I POST CLOSING DELIVERIES AND CONDITIONS Each of the following items shall be performed, completed and/or delivered in a form and substance satisfactory to Bank of America and its counsel. 1. Completion of due diligence. 2. Deliver of stock certificates, updated stock and stock powers in blank for each of the following entities: a. A.T.X. International, Inc. b. Costa Del Mar Sunglasses, Inc. c. Cross Retail Ventures, Inc. d. A. T. Cross Limited (BDA/Ireland) e. A. T. Cross (Europe) Ltd. f. A. T. Cross Limited g. Cross Company of Japan, Ltd. h. A. T. Cross (Asia Pacific) Ltd 3. Deliver Control Agreement in a form reasonably acceptable to Bank of America's counsel for each of the following entities: a. A. T. CROSS Company b. A.T.X. International, Inc. c. Costa Del Mar Sunglasses, Inc. d. Cross Retail Ventures, Inc. 4. Deliver and finalize all Perfection Certificates. 5. Rectify Perfection Certificate Intellectual Property Schedules with search results 6. Deliver Certificate of Insurance naming Bank of America as Loss Payee. 7. Obtain Landlord Waivers for each of the following locations: a. Concorde House, Concorde Street, Luton, Bedfordshire, England b. 100 Higginson Avenue, Cumberland/Lincoln, Rhode Island c. 123 N. Orchard Street, Bldg, 6, Ormond Beach, Florida d. 1-41-21, Kaigan, Minato-ku, Tokyo, Japan 8. Deliver lien searches for each of the entities set forth below. All liens must be acceptable to Bank of America. a. A. T. CROSS Company b. A. T. Cross (Europe) Ltd. c. A.T.X. International, Inc. 1   d. Costa Del Mar Sunglasses, Inc. e. Cross Retail Ventures, Inc. f. A. T. Cross Limited (BDA/Ireland) g. A. T. Cross Benelux BV h. A. T. Cross Limited i. Cross Company of Japan, Ltd. j. A. T. Cross Deutschland GmbH k. A. T. Cross (Asia Pacific) Ltd. 9. Deliver Officer's Certificates with all attachments thereto for each of the following entities: a. A. T. CROSS Company b. A. T. Cross (Europe) Ltd. c. A.T.X. International, Inc. d. Costa Del Mar Sunglasses, Inc. e. Cross Retail Ventures, Inc. f. A. T. Cross Limited (BDA/Ireland) g. A. T. Cross Benelux BV h. A. T. Cross Limited i. Cross Company of Japan, Ltd. j. A. T. Cross Deutschland GmbH k. A. T. Cross (Asia Pacific) Ltd. 10. Deliver legal opinions of Edwards, Angell, Palmer and Dodge LLP and Cross UK counsel that cover all matters requested by Bank of America and its counsel 11. Deliver Officer's Solvency Certificates for each of the following entities: a. A. T. CROSS Company b. A. T. Cross (Europe) Ltd. c. A.T.X. International, Inc. d. Costa Del Mar Sunglasses, Inc. e. Cross Retail Ventures, Inc. f. A. T. Cross Limited (BDAIIreland) g. A. T. Cross Benelux BV h. A. T. Cross Limited i. Cross Company of Japan, Ltd. 2   j. A. T. Cross Deutschland GmbH k. A. T. Cross (Asia Pacific) Ltd. 12. Deliver evidence of payoff of Wachovia facility for Costa Del Mar Sunglasses, Inc. (guaranteed by A. T. CROSS Company). 13. Deliver long-form legal existence and good standing certificates and certificates of foreign qualification from each principal business jurisdiction for each of the following entities: a. A. T. CROSS Company b. A. T. Cross (Europe) Ltd. c. A.T.X. International, Inc. d. Costa Del Mar Sunglasses, Inc. e. Cross Retail Ventures, Inc. f. A. T. Cross Limited (BDA/Ireland) g. A. T, Cross Limited h. Cross Company of Japan, Ltd. i. A. T. Cross (Asia Pacific) Ltd. 14. Deliver all remaining schedules required by the Credit Agreement: a. Schedule 5.05 b. Schedule 5.06 c. Schedule 5.13 d. Schedule 5.17 e. Schedule 7.01 f. Schedule 7.02 g. Schedule 7.03 h. Schedule 10.02 (additional notice information, if required) 3     Schedule 5.05   Supplement to Interim Financial Statements The interim financial statements of Borrower and its Subsidiaries delivered to Lenders on or about even date herewith reflect all material indebtedness and other liabilities, direct or contingent, of Borrower and its consolidated Subsidiaries as of the date of such interim financial statements, including liabilities for taxes, material commitments and Indebtedness.   Schedule 5.06   Litigation   1. Unilever Bestfoods and CCL Custom Manufacturing, Inc. v. American Steel & Aluminum Corporation; et al.; CCL Custom Manufacturing, Inc. v. Arkwright Incorporated, et al. Consolidated: C.A. No. 01 496ML. United States District Court for the District of Rhode Island. A.T. Cross Company is names as one of approximately sixty defendants in a contribution suit brought by the Plaintiffs relating to the J.M. Mills Landfill site, which is part of the Peterson/Puritan Superfund site in Cumberland, Rhode Island. These complaints allege that A.T. Cross Company is liable under the Comprehensive Environmental Response, Compensation, and Liability Act for contribution for past and future costs incurred at the site. Past and future costs, excluding the required remedy, are estimated at approximately $7 million. In the second quarter of 2005, A.T. Cross Company received a settlement demand of approximately $600,000 from the Plaintiffs to resolve all claims related to the current litigation. A.T. Cross Company does not currently believe that the information provided to date supports the Plaintiff's demand. 2. Thomas W. Nielson v. A.T. Cross Company. Civil Action No. 2:03CV00586CTS, U.S. District Court, District of Utah, Central Division. This is a patent infringement/trade dress misappropriation suit against A.T. Cross Company, in which the Plaintiff alleges that A.T. Cross Company's ION product (covered by U.S. Patent No. 6,273,627 issued 8/14/01) infringes Plaintiff's patent and/or was developed based upon trade secrets which A.T. Cross Company misappropriated from Plaintiff. A hearing on A.T. Cross Company's motion for summary judgment is scheduled for February 9, 2006. The case was dismissed on February 1, 2006. The Plaintiff filed a Motion to Reconsider on February 3, 2006. 3. A.T. Cross Company v. Silvon Software, Inc., U.S. D.C. (District of RI) C.A. No. 06-06-T. This case alleges breach of contract, misrepresentation and breach of warranty arising out of the sale of Silvon Software, Inc. to A.T. Cross Company of an integrated computer software package that failed to operate as warranted and represented. 4. A.T. Cross Company and A.T.X. International, Inc. v. ProInnovative, Inc. and Edward C. Leand d/b/a/ Advanced Advertising Products, U.S.D.C. (District of RI) C.A. No. 06- 20S. This case alleges patent infringement, trade dress infringement and unfair competition arising out of the defendants' sale of a product which is a close copy of the ION pen sold by the plaintiffs. Schedule 5.12(e)(i)   ERISA Compliance   As of January 1, 2005, the unfunded pension liability of the A.T. Cross Company Pension Plan was $2,786,059. Schedule 5.13   Subsidiaries and Other Equity Investments Part (a). Subsidiaries. Subsidiary Type of Organization Ownership Interest of Borrower A.T.X. International, Inc. Corporation 100% Costa Del Mar Sunglasses, Inc. Corporation 100%   Cross Retail Ventures, Inc. Corporation 85% A.T. Cross Limited ("Bermuda") Corporation 100%   A.T. Cross (Benelux) B.V. Corporation 100% A.T. Cross (Canada) Inc. Corporation 100% A.T. Cross Iberia, S.L. Corporation 100% A.T. Cross (Europe) Ltd. ("Europe") Corporation Borrower holds 100% of the equity interests in Bermuda, which holds 100% of the equity interests in Europe A.T. Cross Limited (U.K. entity) Corporation Borrower holds 100% of the equity interests in Bermuda, which holds 100% of the equity interests in Europe, which holds 100% of the equity interests in this Subsidiary. Cross Company of Japan, Ltd. Corporation Borrower holds 100% of the equity interests in Bermuda, which holds 100% of the equity interests in Europe, which holds 100% of the equity interests in this Subsidiary. A.T. Cross Deutschland GmbH Corporation Borrower holds 100% of the equity interests in Bermuda, which holds 100% of the equity interests in Europe, which holds 100% of the equity interests in this Subsidiary. A.T. Cross (Asia Pacific) Limited Corporation Borrower holds 100% of the equity interests in Bermuda, which holds 100% of the equity interests in Europe, which holds 100% of the equity interests in this Subsidiary. A.T. Cross Writing Instruments & Accessories Company, Ltd.* Corporation 100%           Part (b). Other Equity Investments. None.   *This entity is still in the process of being formed. Schedule 5.17   Intellectual Property Matters   1. Thomas W. Nielson v. A.T. Cross Company. Civil Action No. 2:03CV00586CTS, U.S. District Court, District of Utah, Central Division. This is a patent infringement/trade dress misappropriation suit against A.T. Cross Company, in which the Plaintiff alleges that A.T. Cross Company's ION product (covered by U.S. Patent No. 6,273,627 issued 8/14/01) infringes Plaintiff's patent and/or was developed based upon trade secrets which A.T. Cross Company misappropriated from Plaintiff. A hearing on A.T. Cross Company's motion for summary judgment is scheduled for February 9, 2006. The case was dismissed on February 1, 2006. The Plaintiff filed a Motion to Reconsider on February 3, 2006. 2. A.T. Cross Company v. Silvon Software, Inc., U.S.D.C. (District of RI) C.A. No. 06-06-T. This case alleges breach of contract, misrepresentation and breach of warranty arising out of the sale by Silvon Software, Inc. to A.T. Cross Company of an integrated computer software package that failed to operate as warranted and represented. 3. A.T. Cross Company and A.T.X. International, Inc. v. ProInnovative, Inc. and Edward C. Leand d/b/a Advanced Advertising Products, U.S.D.C. (District of RI) C.A. No. 06-20S. This case alleges patent infringement, trade dress infringement and unfair competition arising out of the defendants' sale of a product which is a close copy of the ION pen sold by the plaintiffs. Schedule 7.01   Existing Liens   Entity Liens A.T. Cross Company UCC-1 Financing Statement in favor of Hanna Paper Recycling, Inc. and filed with the Rhode Island Secretary of State on July 18, 2005 as Instrument Number 011962 (as amended and continued from time to time)* UCC-1 Financing Statement in favor of IBM Credit LLC and filed with the Rhode Island Secretary of State on August 17, 2005 as Instrument Number 200502651650 (as amended and continued from time to time) Utility Easement to Narragansett Electric Company dated January 28, 1938 and recorded in Book 45 at Page 469, as supplemented by grant dated June 5, 1939 and recorded in Book 46 at Pages 288 and 289 Assignment of Rights to A.T. Cross Company from Trustees of the Industrial Foundation of Rhode Isalnd as to agreements recorded in Book 79 at Page 161 and in Book 80 at Page 75 Option for Right of Way Easement to Blackstone Valley Electric Company recorded in Book 110 at Page 427 Easement of Blackstone Valley Electric Company recorded in Book 110 Page 554, as affected by Use of Right of Way Agreement recorded in Book 253 at Page 46 Easement to Blackstone Valley Electric Company recorded in Book 192 at Page 464 RIDEM-Division of Groundwater and Freshwater Wetlands permit conditions (with Consent Agreement and Notice of Permit) recorded in Book 293 at Page 129 RIDEM-Division of Freshwater Wetlands Insignificant Alteration Permit recorded in Book 365 at Page 8 RIDEM-Division of Freshwater Wetlands Insignificant Alteration Permit recorded in Book 381 at Page 89     RIDEM-Division of Freshwater Wetlands Insignificant Alteration Permit recorded in Book 431 at Page 213 Assent Agreement with Narragansett Electric Company recorded in Book 461 at Page 243 RIDEM-Office of Waste Management Limited Order of Approval recorded in Book 746 at Page 217 Terms and conditions set forth on recorded plans A.T.X. International, Inc. None Costa Del Mar Sunglasses, Inc. None Cross Retail Ventures, Inc. None A.T. Cross Limited None A.T. Cross (Benelux) B.V. None A.T. Cross (Canada) Inc. None A.T. Cross Iberia, S.L. None A.T. Cross (Europe) Ltd. None A.T. Cross Limited (U.K. entity) None Cross Company of Japan, Ltd. None A.T. Cross Deutschland GmbH None A.T. Cross (Asia Pacific) Limited None A.T. Cross Writing Instruments & Accessories Company, Ltd. None *This Financing Statement relates to certain trash removal equipment owned by Hanna Paper Recycling, Inc. ("Hanna") and placed on the property of A.T. Cross Company. A.T. Cross Company is not indebted to Hanna under any lease or other financing arrangement. Schedule 7.02   Investments None Schedule 7.03   Existing Indebtedness A. Third Party Indebtedness: Entity Indebtedness A.T. Cross Company Obligations due and owing to IBM Credit LLC under that certain Supplement Number D00C40333 dated as of June 15, 2005 to Term Lease Master Agreement No. DSO1594 by and between A.T. Cross Company and IBM Credit LLC. (as amended, restated or modified from time to time) A.T.X. International, Inc. None Costa Del Mar Sunglasses, Inc. None Cross Retail Ventures, Inc. None A.T. Cross Limited None A.T. Cross (Benelux) B.V. None A.T. Cross (Canada) Inc. None A.T. Cross Iberia, S.L. None A.T. Cross (Europe) Ltd. None A.T. Cross Limited (U.K. entity) None Cross Company of Japan, Ltd. None A.T. Cross Deutschland GmbH None A.T. Cross (Asia Pacific) Limited None A.T. Cross Writing Instruments & Accessories Company, Ltd. None   B. Inter-Company Indebtedness : [See spreadsheet attached hereto] NET INTERCOMPANY ACCOUNT BALANCES A. T. Cross Company and Subsidiaries NOVENBER 2005 Receiving Company Paying Company $ & Amount & Amount Variance LC US$ LC US$ France UK           - UK France   217,170 $ 372,294 317,496 $ 372,296 (2) UK Benelux       2,026,983 $ 2,376,840 (2,376,840) Benelux UK   2,117,965 $ 2,483,526 62,234 $ 106,688 2,376,838 Benelux France   1,620 $ 1,900 1,620 $ 1,899 1 France Benelux         - UK Iberia   12 $ 21     21 Iberia UK   55,255 $ 64,792 37,806 $ 64,811 (19) UK Germany   308,535 $ 528,922 2,219,762 $ 2,602,894 (2,073,972) Germany UK   2,771,862 $ 3,250,285 686,177 $ 1,176,314 2,073,971 Benelux Hong Kong   2,015 $ 2,362     2,362 Hong Kong Benelux           - Iberia Benelux       - $ - - Benelux Iberia           - UK Cross           - Cross UK     $ 11,425,085 6,664,577 $ 11,425,085 (0)           Iberia Cross   - $ -     - Cross Iberia   - $ - - $ - - France Cross     $ -     - Cross France   - $ - - $ - - Germany Cross   - $ - - $ - - Cross Germany     $ (665,176) 567,266 $ (665,176) 0 Benelux Cross   - $ - - $ - - Cross Benelux           -           Euro HQ Asia / Pacific     $ 28,800   $ 28,800 - Asia / Pacific Euro HQ     $ 1,000   $ 1,000 - Euro HQ Cross           - Cross Euro HQ     $ 28,800   $ 28,800 - CCJ Hong Kong   108,900 $ 910     910 Hong Kong CCJ   182,653 $ 23,556 2,633,406 $ 22,015 1,541 CCJ Taiwan   362,120 $ 3,027 108,754 $ 3,241 (214) Taiwan CCJ   100,423 $ 2,993 341,794 $ 2,857 136 CCJ Cross           - Cross CCJ     $ 93,081 (18,500,128) $ (154,661) 247,742 Hong Kong Taiwan   212,313 $ 27,381 870,609 $ 25,944 1,437 Taiwan Hong Kong           - Hong Kong Cross   293,364 $ 37,834     37,834 Cross Hong Kong     $ 4,372,244 37,764,393 $ 4,870,360 (498,116) Taiwan Cross           - Cross Taiwan     $ 1,601,051 52,400,915 $ 1,561,547 39,504 Singapore Cross   1,033 $ 610     610 Cross Singapore     $ 796,375 1,462,253 $ 863,607 (67,231) Singapore Hong Kong   8,093 $ 4,780 35,420 $ 4,568 212 Hong Kong Singapore   291,624 $ 37,610 65,180 $ 38,495 (885) Australia Cross           - Cross Australia     $ 55,672 75,662 $ 55,672 0 Hong Kong Australia           - Australia Hong Kong   - $ - - $ - - Cross Canada     $ 1,208,722     1,208,722 Canada Cross   1,240,307 $ 1,060,711   $ 2,269,433 (1,208,722) Cross Head Office     $ (17,773,795)     (17,773,795) Head Office Cross     $ 17,773,794     17,773,794 Head Office Euro HQ     $ 111,743   $ 111,743 - Euro HQ Head Office           - Cross Retail Venture     $ 3,113,065   $ 3,113,065 - Retail Venture Cross           - Cross International     $ 26,113,181     26,113,181 International Cross     $ 11,358,212   $ 37,471,393 (26,113,181) Cross Costa Del Mar     $ 1,017,976   $ 1,018,274 (298) Costa Del Mar Cross     $ (1,666)   $ (1,665) (1) TOTAL $ 68,561,679   $ 68,796,139 $ (234,460) ENTRY: Cash - (75,801) Trade Accounts Receivable (26,832) Intercompany Receivables (68,561,679) (1,244) Inventory 123,821 (48,020) Other Current Assets - - Accounts Payable 10,664 (39,501) Intercompany Payables 68,796,139 Accrued Expenses - (247,740) Income Taxes Payable Net Sales 568,089 Cost of Goods Sold (436,522) 116,173 SG&A - selling 67,577 Foreign Exchange ______ 10,664 ======   SCHEDULE 10.02 ADMINISTRATIVE AGENT'S OFFICE; CERTAIN ADDRESSES FOR NOTICES Borrower: A.T. Cross Company One Albion Road Lincoln, Rhode Island 02865 Attention: Kevin F. Mahoney, CFO Telephone: 401-333-1200 Telecopier: 401-334-2861 Electronic Mail: [email protected] Website Address: www.cross.com with a copy to : A.T. Cross Company One Albion Road Lincoln, Rhode Island 02865 Attention: Office of General Counsel Telephone: 01-333-1200 Telecopier: 401-333-3912 ADMINISTRATIVE AGENT: Administrative Agent's Office Bank of America, N.A. 100 Federal Street Mail Code: MA5-100-07-06 Boston, Massachusetts 02110 Attention: Christopher S. Allen Telephone: 617-434-2493 Telecopier: 617-434-1279 Electronic Mail: [email protected] Account No.: Ref:_________________________ ABA# 111000012 L/C ISSUER: Bank of America, N.A. 100 Federal Street Mail Code: MA5-100-07-06 Boston, Massachusetts 02110 Attention: Christopher S. Allen Telephone: 617-434-2493 Telecopier: 617-434-1279       1 Electronic Mail: [email protected] UK LENDER: Bank of America, N.A. 5 Canada Square London, E14 5AQ, United Kingdom Attention: Keith Thomas Telephone: + 44 (0) 20 7174 5834 Telecopier: + 44 (0) 20 7174 6436 Electronic Mail: [email protected] Account No.: Ref: ____________________ ABA# 111000012   EXHIBIT A-1 FORM OF COMMITTED LOAN NOTICE Date: ___________, _____ To: Bank of America, N.A., as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Credit Agreement, dated as of December __, 2005 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among A. T. Cross Company, a Rhode Island corporation (the "Borrower"), A. T. Cross (UK) Ltd., a corporation organized under the laws of England and Wales ("Cross UK"), the Lenders from time to time party thereto, Bank of America, N.A. as Administrative Agent and L/C Issuer, and Bank of America, N.A. (London Branch) as UK Lender. The undersigned hereby requests (select one): ___ A Borrowing of Committed Loans ___A conversion or continuation of Loans 1. On __________________________ (a Business Day). 2. In the amount of $____________________ 3. Comprised of __________________________[Type of Committed Loan requested] 4. For Eurodollar Rate Loans: with an Interest Period of ________ months. The Committed Borrowing, if any, requested herein complies with the provisos to the first sentence of Section 2.01 of the Agreement. A. T. CROSS COMPANY By: ________________________________ Name: ______________________________ Title: _______________________________     A -1 Form of Committed Loan Notice   EXHIBIT A-2 FORM OF EUROCURRENCY LOAN NOTICE Date: ___________, _____ To: Bank of America, N.A., as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Credit Agreement, dated as of December __, 2005 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among A. T. Cross Company, a Rhode Island corporation (the "Borrower"), A. T. Cross (UK) Ltd., a corporation organized under the laws of England and Wales ("Cross UK"), the Lenders from time to time party thereto, Bank of America, N.A. as Administrative Agent and L/C Issuer, and Bank of America, N.A. (London Branch) as UK Lender. The undersigned hereby requests (select one): ___ A Borrowing of Committed Loans ___A conversion or continuation of Loans 1. On ____________________________ (a Business Day). 2. In the amount of $_____________________. 3. With an Interest Period of ________ months. The Committed Borrowing, if any, requested herein complies with the provisos to the first sentence of Section 2.01 of the Agreement. A. T. CROSS (UK) LTD. By: _________________________________ Name: ______________________________ Title: _______________________________     A -2 Form of Eurocurrency Loan Notice   EXHIBIT D FORM OF NOTE FOR VALUE RECEIVED, A. T. Cross Company, a Rhode Island corporation (the "Borrower"), hereby promises to pay to Bank of America, N.A. or registered assigns (the "Lender"), and for all Eurocurrency Loans evidenced by this Note, the Borrower and A. T. Cross (UK) Ltd., a corporation organized under the laws of England and Wales (the "UK Borrower"), jointly and severally, promise to pay to the Lender, in accordance with the provisions of the Agreement (as hereinafter defined), the principal amount of each Loan from time to time made by the Lender to the Borrower or to the UK Borrower under that certain Credit Agreement, dated as of December __, 2005 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among the Borrower, the UK Borrower, the Lenders from time to time party thereto, Bank of America, N.A., as Administrative Agent and L/C Issuer, and Bank of America, N.A. (London Branch) as UK Lender. The Borrower promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan, and the Borrower and the UK Borrower, jointly and severally, promise to pay interest on the unpaid principal amount of each Eurocurrency Loan from the date of such Eurocurrency Loan, until such principal amount is paid in full, at such interest rates and at such times as provided in the Agreement. 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 Agreement. This Note is one of the Notes referred to in the 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 Guaranty and the Security Documents. Upon the occurrence and continuation of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Loans made by the Lender or the UK Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender or the UK Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto.   The Borrower and the UK Borrower, each 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.     D -1 Form of Note     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. A T. CROSS COMPANY By: ___________________________________ Name: _________________________________ Title:___________________________________.   A T. CROSS (UK) LTD. By: ___________________________________ Name: _________________________________ Title: __________________________________     D -2 Form of Note   LOANS AND PAYMENTS WITH RESPECT THERETO Date Type of Loan Made Amount of Loan Made End of Interest Period Amount of Principal or Interest Paid This Date Outstanding Principal Balance This Date Notation Made By _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________     D -3 Form of Note     EXHIBIT E FORM OF COMPLIANCE CERTIFICATE Financial Statement Date: , To: Bank of America, N.A., as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Credit Agreement, dated as of December 22, 2005 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among A. T. Cross Company, a Rhode Island corporation (the "Borrower"), A. T. Cross Ltd., a corporation organized under the laws of England and Wales (Registration No. 1410574) ("Cross UK"), the Lenders from time to time party thereto, Bank of America, N.A., as Administrative Agent and L/C Issuer, and Bank of America, N.A. (London Branch) as UK Lender. The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the Vice President, Finance and Chief Financial Officer of the Borrower, and that, as such, he/she is authorized to execute and deliver this Certificate to the Administrative Agent on the behalf of the Borrower, and that: [Use following paragraph 1 for fiscal year-end financial statements] 1. Attached hereto as Schedule 1 are the year-end audited financial statements required by Section 6.01(a) of the Agreement for the fiscal year of the Borrower ended as of the above date, together with the report and opinion of an independent certified public accountant required by such section. [Use following paragraph 1 for fiscal quarter-end financial statements] 1. Attached hereto as Schedule 1 are the unaudited financial statements required by Section 6.01(b) of the Agreement for the fiscal quarter of the Borrower ended as of the above date. Such financial statements fairly present the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes. 2. The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Borrower during the accounting period covered by the attached financial statements. E -1 Form of Compliance Certificate     3. A review of the activities of the Borrower during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period the Borrower performed and observed all its Obligations under the Loan Documents, and to the best knowledge of the undersigned during such fiscal period, the Borrower performed and observed each covenant and condition of the Loan Documents applicable to it, and no Default has occurred and is continuing. 4. The representations and warranties of the Borrower contained in Article V of the Agreement, and any representations and warranties of the Borrower that are contained in any document furnished at any time under or in connection with the Loan Documents, are true and correct on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Compliance Certificate, the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Agreement shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Agreement, including the statements in connection with which this Compliance Certificate is delivered. 5. The financial covenant analyses and information set forth on Schedule 2 attached hereto are true and accurate on and as of the date of this Certificate. 6. The Borrower hereby represents and warrants that the Consolidated Leverage Ratio for the fiscal quarter ended _____________ is ________ and the Applicable Margin under the Agreement for the period is: Level ___ [insert Level I, II, III or IV as applicable] IN WITNESS WHEREOF, the undersigned has executed this Certificate as of , . A. T. CROSS COMPANY By: Name: Title:     E -2 Form of Compliance Certificate     For the Quarter/Year ended ___________________("Statement Date") SCHEDULE 2 to the Compliance Certificate ($ in 000's) I. Section 7.11(a) - Consolidated Tangible Net Worth. A. Actual Consolidated Tangible Net Worth at Statement Date:     1. Shareholders' Equity: $___________   2. Intangible Assets: $___________   3. Consolidated Tangible Net Worth (Line I.A1 less Line I.A.2): $___________ B. 50% of Consolidated Net Income for each full fiscal quarter ending after December 31, 2005 (no reduction for losses): $___________ C. 50% of increases in Shareholders' Equity after date of Agreement from issuance and sale of Equity Interests (including from conversion of debt securities):   $___________ D. Minimum required Consolidated Tangible Net Worth (Lines I.B + I.C plus $______________): $___________ E. Excess (deficient) for covenant compliance (Line I.A - I.D): $___________         II. Section 7.11 (b) - Consolidated Debt Service Ratio. A. Consolidated EBITDA for four consecutive fiscal quarters ending on above date ("Subject Period"):     1. Consolidated Net Income for Subject Period: $___________   2. Consolidated Interest Charges for Subject Period: $___________   3. Provision for income taxes for Subject Period: $___________   4. Depreciation expenses for Subject Period: $___________   5. Amortization expenses for Subject Period: $___________   6. Extraordinary losses: $___________   7. Restructuring charges or expenses: $___________   8. Non-cash expenses associated with LIFO treatment of Inventory: $___________   9. Non-cash charges related to compensation expense: $___________   E -3 Form of Compliance Certificate   10. Extraordinary gains to the extent: $___________   11. Non-cash items increasing Consolidated Net Income: $___________   12. Consolidated EBITDA (Lines II.A.1 + 2 + 3 + 4 + 5 + 6 +7 + 8 + 9 - 10 - 11): $___________ B. Income taxes paid in cash: $___________ C. Cash dividends or distributions: $___________ D. Capital Expenditures: $___________ E. Consolidated Interest Charges for Subject Period: $___________ F. Principal of Indebtedness paid during Subject Period: $___________ G. Consolidated Interest Coverage Ratio (Line II.A.12 - Line II.B.- Line II.C - Line II.D) ¸ (Line II.E + Line II.F): $___________ Minimum required: 1.50 to 1.00   III. Section 7.11 (c) - Consolidated Leverage Ratio. A. Consolidated Funded Indebtedness at Statement Date: $___________ B. Consolidated EBITDA for Subject Period (Line II.A.12 above): $_______   C. Consolidated Leverage Ratio (Line III.A ¸ Line III.B): ________ to 1 Maximum permitted: 2.50 to 1.00   IV. Section 7.12 - Capital Expenditures. A. Capital expenditures made during fiscal year to date: $___________ B. Capital expenditures that could have made during prior fiscal year but which were not made: $___________ C. Maximum permitted capital expenditures ($7,000,000.00 + Line IV.B.): $___________ D. Excess (deficient) for covenant compliance (Line IV.C - IV.A), provided Line IV.E is < $1,000,000: $___________ E. Capital expenditures made for any asset or assets which are or will be located outside of the United States $___________ F. Capital expenditures made for assets for China $___________   E -4 Form of Compliance Certificate     For the Quarter/Year ended ___________________("Statement Date") SCHEDULE 3 to the Compliance Certificate ($ in 000's) Consolidated EBITDA (in accordance with the definition of Consolidated EBITDA as set forth in the Agreement) Consolidated EBITDA Quarter Ended __________ Quarter Ended __________ Quarter Ended __________ Quarter Ended __________ Twelve Months Ended __________ Consolidated Net Income + Consolidated Interest Charges           + income taxes           +non cash expenses related to inventory           +income taxes paid under 956           + depreciation expense           + amortization expense           + extraordinary losses           + restructuring charges or expenses (up to $1,000,000 from 12/31/05 and up to $2,000,000 for 12/31/05)           + non-cash expenses associated with the LIFO treatment of Inventory           E -5 Form of Compliance Certificate     + non-cash charges related to compensation expense           - extraordinary gain           - non-cash items increasing Consolidated Net Income           = Consolidated EBITDA             E -6 Form of Compliance Certificate       EXHIBIT F ASSIGNMENT AND ASSUMPTION This Assignment and Assumption (this "Assignment and Assumption") is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the "Assignor") and [Insert name of Assignee] (the "Assignee"). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the "Credit Agreement"), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full. For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor's rights and obligations as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including, without limitation, the Letters of Credit and the Swing Line Loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as, the "Assigned Interest"). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor. 1. Assignor: ______________________________ 2. Assignee: ______________________________ [and is an Affiliate/Approved Fund of [identify Lender]] 3. Borrower(s): A. T. Cross Company, a Rhode Island corporation A. T. Cross (UK) Ltd., a corporation organized under the laws of England and Wales 4. Administrative Agent: Bank of America, N.A., as the administrative agent under the Credit Agreement 5. Credit Agreement: Credit Agreement, dated as of December __, 2005, among the Borrower, A. T. Cross (UK) Ltd., the Lenders from time to time party thereto, Bank of   F -1 Form of Assignment and Assumption     America, N.A., as Administrative Agent and L/C Issuer, and Bank of America, N.A. (London Branch) as UK Lender.     6. Assigned Interest:       Facility Assigned Aggregate Amount of Commitment/Loans for all Lenders* Amount of Commitment/Loans Assigned* Percentage Assigned of Commitment/Loans     CUSIP Number           _____________ $________________ $________________ ______________%   _____________ $________________ $________________ ______________%   _____________ $________________ $________________ ______________%   [7. Trade Date: __________________] Effective Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.] The terms set forth in this Assignment and Assumption are hereby agreed to: ASSIGNOR [NAME OF ASSIGNOR] By: _____________________________ Title: ASSIGNEE [NAME OF ASSIGNEE] By: _____________________________ Title: [Consented to and] Accepted: BANK OF AMERICA, N.A., as Administrative Agent By: _________________________________ Title: [Consented to:] By: _________________________________ Title:   F -2 Form of Assignment and Assumption     ANNEX 1 TO ASSIGNMENT AND ASSUMPTION [___________________] STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION 1. Representations and Warranties. 1.1. Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document. 1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.   F -3 Form of Assignment and Assumption     2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date. 3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of The Commonwealth of Massachusetts.   F -4 Form of Assignment and Assumption     EXHIBIT G CH&S DRAFT 12/16/05 GUARANTY AGREEMENT THIS GUARANTY AGREEMENT, (this "Agreement") is made as of the ___ day of December, 2005, by _______________, _______________ ("Guarantor"), to Bank of America, N.A. as Administrative Agent (the "Agent") under the Credit Agreement dated as of the date hereof (as amended and restated by and through the date hereof and as may be further amended, restated, modified and/or supplemented from time to time, the "Credit Agreement"). Capitalized terms used in this Agreement and not otherwise defined shall have the same meanings herein as in the Credit Agreement. W I T N E S S E T H: WHEREAS, Guarantor owns one hundred percent (100%) of the outstanding capital stock of ______________ (the "Company"); and WHEREAS, Guarantor and the Agent and other Lenders from time to time party thereto, have entered into the Credit Agreement, pursuant to which the Lenders have agreed, subject to the terms and conditions set forth therein, to make advances and term loans to the Borrower (collectively, the "Loans"); WHEREAS, the obligations of the Lender to enter into the Credit Agreement, and the obligations of the Lender to make the Loans, are subject to the condition, among others, that Guarantor execute and deliver this Agreement; NOW, THEREFORE, in consideration of the willingness of the Lender to make the Loans to the Borrower, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by Guarantor, Guarantor hereby agrees as follows: 1. Guaranteed Obligations; Limitation. (a) Guarantor does hereby irrevocably, unconditionally guarantee, as primary obligor and not merely as surety, the due and punctual payment and performance by the Borrower of the following obligations to the Lenders (individually, a "Guaranteed Obligation" and collectively the "Guaranteed Obligations"): (i) principal of and premium, if any, and interest on the Loans (including, without limitation, the payment of interest, and other amounts that would accrue and become due but for the filing of a petition in bankruptcy or the operation of the automatic stay under Section 362(a) of Title 11 of the United States Code, as amended (the "Bankruptcy Code")); and (ii) any and all other Obligations, and any and all other obligations of the Borrower to the Agent and the Lenders under the Credit Agreement or the other Loan Documents, all as amended from time to time and whether executed on or after the date hereof, whether for principal, interest, fees, premiums, expenses, indemnification or otherwise. 4023816v2     2. Payment Under Guaranty. Upon failure by the Borrower punctually to pay or perform any Guaranteed Obligation when due (whether at maturity, at a date fixed for any payment or prepayment thereof or upon acceleration or otherwise), after the expiration of any applicable grace period, the Agent may make written demand upon Guarantor for the full payment and/or performance of the Guaranteed Obligations, and Guarantor binds and obliges itself to make such payment or performance forthwith upon such demand. GUARANTOR ACKNOWLEDGES THAT ALL GUARANTEED OBLIGATIONS SHALL, TO THE FULLEST EXTENT PERMISSIBLE UNDER ANY LAW NOW OR HEREAFTER APPLICABLE HERETO, BE CONCLUSIVELY PRESUMED TO HAVE BEEN CREATED IN RELIANCE ON THIS AGREEMENT. 3. Waiver of Demands, Notices, Diligence, etc. Guarantor hereby assents to all of the terms and conditions of the Guaranteed Obligations and waives, to the extent permitted by applicable law: (a) each of: (i) demand for the payment of the principal of any Guaranteed Obligation or of any claim for interest or any part thereof (other than the demand provided for in Section 2 hereof); (ii) notice of (A) the occurrence of a default or an event of default and (B) any forbearance or waiver by the Lenders of any Guaranteed Obligation; (iii) protest of the nonpayment of the principal of any Guaranteed Obligation or of any claim for interest or any part thereof; (iv) notice of presentment, demand (other than the demand provided for in Section 2 hereof) and protest; (v) notice of any indulgences or extensions granted to the Borrower or any successor to the Borrower or any person or party which shall have assumed the obligations of the Borrower; (vi) any requirement of diligence or promptness on the part of the Lenders in the enforcement of any of its rights under the provisions of any Guaranteed Obligation or this Agreement; (vii) any enforcement of any Guaranteed Obligation; (viii) any right which Guarantor might have to require the Agent or the Lenders to marshall or proceed against any other guarantor of the Guaranteed Obligations or to realize on any Collateral therefor; and (ix) any and all notices of every kind and description which may be required to be given by any statute or rule of law in any jurisdiction; 2 4023816v2     (b) all rights and benefits under any applicable law purporting to reduce Guarantor's obligations in proportion to the obligation of the principal or providing that the obligation of a surety or guarantor must neither be larger nor in any other respect more burdensome than that of the principal; (c) the benefit of any statute of limitations affecting the Guaranteed Obligations or Guarantor's liabilities hereunder or under any other law now or hereafter applicable hereto; (d) any rights, defenses and other benefits that Guarantor may have by reason of (i) any failure of the Agent to hold a commercially reasonable public or private foreclosure sale or to otherwise comply with applicable law in connection with a disposition of any collateral for the Guaranteed Obligations; (ii) any election of remedies made by the Lender under the Uniform Commercial Code, as adopted in Massachusetts or in any other state in which Collateral may be located or whose laws are otherwise deemed to govern the terms of this Guaranty Agreement; or (iii) any protection afforded pursuant to the antideficiency or similar other laws of Massachusetts, any other state in which Collateral may be located or any other state limiting or discharging the Borrower's indebtedness or purporting to limit the amount of any deficiency judgment; and (e) any rights, defenses, claims or benefits waived in Section 4 hereof. The waivers and other provisions set forth in this Section 3 and in Section 4 shall be effective notwithstanding the fact that the Borrower ceases to exist by reason of its liquidation, merger, consolidation voluntary or involuntary dissolution or otherwise. 4. Obligations of Guarantor Unconditional; Continuing and Irrevocable Guaranty. (a) All payments hereunder shall be made free and clear of any and all deductions, withholdings or setoffs, including any and all deductions, withholdings or setoffs on account of taxes. The liability of Guarantor hereunder is independent of and not in consideration of or contingent upon the liability of the Company to the Lenders and a separate action or actions may be brought and prosecuted against Guarantor, whether or not any action is brought or prosecuted against the Company and regardless of whether the Company is joined in any such action or actions. This Agreement shall be construed as a continuing, absolute and unconditional guaranty of payment (and not merely of collection) without regard to: (i) the legality, validity or enforceability of the Credit Agreement or any other Loan Document or any of the other Guaranteed Obligations, any lien of the Agent on any item of Collateral or any other guaranty; (ii) any defense (other than payment), deduction (including deductions for taxes), withholding, setoff or counterclaim that may now or at any time hereafter be available to the Company, Guarantor or other obligor against, and any right of setoff at any time held by, the Agent or the Lenders; (iii) any claim arising out of or relating to any amendment (including amendments which increase the amount of Loans made or available to the 3 4023816v2     Borrower thereunder), extension or other modification of the Credit Agreement or any other Loan Document consented to by the Lender, and Guarantor acknowledges and agrees that the Lender shall be entitled to amend, extend, forbear under, waive any Default or Event of Default or take any other action deemed advisable in the sole discretion of the Lender with respect to the Credit Agreement and the other Loan Documents; or (iv) any other circumstance whatsoever, legal or equitable, (with or without notice to or knowledge of Guarantor), whether or not similar to any of the foregoing, that constitutes, or might be construed to constitute, an equitable or legal discharge of or defense to payment available to the Borrower, Guarantor or other obligor under the Credit Agreement or other Loan Documents or under applicable law, including the Bankruptcy Code, or in any other instance. Any payment or other circumstance that operates to toll any statute of limitations applicable to any Guaranteed Obligations shall also operate to toll the statute of limitations applicable to Guarantor. The obligations of Guarantor under this Agreement shall not be affected by any action taken under any Guaranteed Obligation in the exercise of any right or remedy therein conferred, or by any failure or omission on the part of the Agent to enforce any right given thereunder or hereunder or any remedy conferred thereby or hereby, or by any release of any security or any other guaranty at any time existing for the benefit of any Guaranteed Obligation, or by the merger or consolidation of the Borrower, or by the sale, lease or transfer by the Borrower to any person of any or all of its properties. (b) This is a continuing guaranty of the Guaranteed Obligations and may not be revoked and shall not otherwise terminate until the date on which the Guaranteed Obligations have been paid and performed in full in cash, and the obligations of the Lenders to make Loans under the Credit Agreement shall have terminated. 5. Subordination of Claims of Guarantor; Waiver of Subrogation and Certain Other Rights. Any claims against the Guarantor or any other guarantor under the Credit Agreement or any other Person from time to time party to the Credit Agreement as "Borrower" or "Guarantor" (collectively, the "Loan Parties" and each a "Loan Party") to which Guarantor may be or become entitled (including, without limitation, claims by subrogation or otherwise by reason of any payment or performance by Guarantor in satisfaction and discharge, in whole or in part, of its obligations under this Agreement) shall be and hereby are made subject and subordinate to the prior payment in full in cash or performance in full of the Guaranteed Obligations. WITHOUT LIMITING THE FOREGOING, GUARANTOR WAIVES ANY AND ALL RIGHTS OF SUBROGATION, INDEMNITY, CONTRIBUTION OR REIMBURSEMENT, AND ANY AND ALL BENEFITS OF AND RIGHT TO ENFORCE ANY POWER, RIGHT OR REMEDY THAT THE LENDER MAY NOW OR HEREAFTER HAVE IN RESPECT OF THE GUARANTEED OBLIGATIONS AGAINST THE BORROWER, GUARANTOR OR ANY OTHER LOAN PARTY OR OTHER OBLIGOR, ANY AND ALL BENEFITS OF AND RIGHTS TO PARTICIPATE IN ANY COLLATERAL, NOW OR HEREAFTER HELD BY THE LENDER, AND ANY AND ALL OTHER RIGHTS AND CLAIMS (AS DEFINED IN THE BANKRUPTCY CODE) GUARANTOR MAY HAVE AGAINST THE LENDER, THE BORROWER, ANY OTHER LOAN PARTY OR ANY OTHER OBLIGOR, UNDER   4 4023816v2     APPLICABLE LAW OR OTHERWISE, AT LAW OR IN EQUITY, BY REASON OF ANY PAYMENT HEREUNDER OR OTHERWISE, UNLESS AND UNTIL THE GUARANTEED OBLIGATIONS SHALL HAVE BEEN INDEFEASIBLY PAID IN FULL IN CASH. Without limitation of the foregoing, Guarantor shall exercise no voting rights, shall file no claim, shall waive any election pursuant to Section 1111(b) of the Bankruptcy Code and shall not participate or appear in any bankruptcy or insolvency case involving the Borrower with respect to the Guaranteed Obligations unless and until all the Guaranteed Obligations shall have been in full in cash in cash. If, notwithstanding the foregoing, any amount shall be paid to Guarantor on account of any such rights at any time, such amount shall be held in trust for the benefit of the Lenders and shall forthwith be paid to the Agent to be held as collateral for or credited and applied in reduction of the Guaranteed Obligations in accordance with the terms of the Credit Agreement. 6. Representations and Warranties of Guarantor . In order to induce the Lenders to enter into the Credit Agreement and to induce the Lenders to make the Loans to the Borrower thereunder, Guarantor represents and warrants that: (a) This Agreement constitutes the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of creditors' rights generally. (b) Guarantor hereby acknowledges that it has reviewed and caused its counsel to review copies of, and is fully familiar with, this Agreement, the Credit Agreement, the other Security Documents and each of the other Loan Documents executed and delivered by the Borrower and the other Loan Parties. Guarantor warrants and agrees that each representation, warranty and waiver set forth in this Agreement is made with Guarantor having full knowledge of its significance and consequences and after having consulted with counsel of its own choosing and that, under the circumstances, each such waiver is in the best interest of Guarantor in furtherance of its business plan, is reasonable and should not be found contrary to public policy or law. Guarantor acknowledges and agrees that any breach of any representation, warranty or covenant of Guarantor in this Agreement may constitute an Event of Default under the Credit Agreement and under each of the other Loan Documents. 7. Set-off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default, the Agent is hereby authorized, to the extent not prohibited by applicable law, without prior notice to Guarantor or to any other Person, any such notice being expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by the Lender to or for the credit or the account of Guarantor, against and on account of the obligations and liabilities of Guarantor to the Agent under this Agreement then due and payable, irrespective of whether the Lender shall have made any demand hereunder. The Agent agrees to promptly notify Guarantor after any such set off and application, provided, however, that the failure to give such notice shall not affect the validity of such set off and application. 5 4023816v2     8. Reinstatement. This Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time any amount received by the Lenders in respect of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy, dissolution (voluntary or involuntary), liquidation or reorganization of the Borrower, Guarantor, or upon the appointment of an intervenor or conservator of, or trustee or similar official for, the Borrower, Guarantor or any other Loan Party or any substantial part of any of their respective properties, or otherwise, all as though said payments had not been made. 9. Notices. All notices and other communications to Guarantor or the Agent hereunder shall be in writing and shall be personally delivered or mailed by telegraphic, telex or facsimile transmission, reputable overnight courier or first class mail, postage prepaid, as follows: (a) If to the Agent: Bank of America, N.A. _________________ Boston, Massachusetts 02110 Attention: Christopher S. Allen Title: Senior Vice President Facsimile No. (617) 434-1297 with a copy to: James R. Kane, Esq. Choate, Hall & Stewart LLP Two International Place Boston, Massachusetts 02110 Facsimile No.: 617-248-4000 (b) If to Guarantor: ______________________ ______________________ ______________________ ______________________ ______________________ Attn: ____________________ Facsimile No.: ____________ or to such other address or addresses as the party to whom such notice is directed may have designated in writing to the other parties hereto. A notice shall be deemed to have been duly given and 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.   6 4023816v2     10. Miscellaneous; Successors; Counterparts; Severability. (a) This Agreement shall inure to the benefit of and be binding upon the Agent, the Lenders and Guarantor and their respective successors and assigns, and the term "Lender" shall be deemed to include any other holder or holders of any of the Guaranteed Obligations. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which shall be an original, but all of which together shall constitute one instrument. References herein to this "Agreement" shall be deemed references to this Agreement as amended, modified and/or supplemented from time to time. (b) All covenants under this Agreement shall be given independent effect so that if a particular action or condition is not permitted by any such covenant, the fact that it would be permitted by another covenant, by any exception thereto, or otherwise within the limitations thereof, shall not avoid the occurrence of a Default or Event of Default if such action is taken or such condition exists. (c) None of the parties to this Agreement shall be deemed to be the drafter of this Agreement, and this Agreement shall not be interpreted in favor of or against any party hereto on such basis. (d) No claim shall be made by Guarantor against the Lenders or the Affiliates, directors, officers, employees or agents of the Lenders for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or under any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith; and Guarantor waives, releases and agrees not to sue upon any claim for any such damages. 11. Governing Law; Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT, INCLUDING THE VALIDITY HEREOF AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. GUARANTOR, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, HEREBY CONSENTS TO THE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, AS WELL AS TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF ITS OBLIGATIONS HEREUNDER OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE IN ANY SUCH COURTS. GUARANTOR FURTHER AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING IN ANY OF SUCH COURTS SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED PERSONALLY OR BY CERTIFIED MAIL TO IT AT ITS ADDRESS AS PROVIDED IN SECTION 9 HEREOF OR   7 4023816v2     AS OTHERWISE PROVIDED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. GUARANTOR IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED BY OR AGAINST IT IN RESPECT OF ITS OBLIGATIONS HEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY.   8 4023816v2     IN WITNESS WHEREOF, the parties have executed this Guaranty Agreement as a sealed instrument as of the date first above written. [_____________________] By:_______________________________ Title   9 4023816v2  

EXHIBIT 10.9 MASSEY ENERGY COMPANY Incentive Award Agreement (Based on Cumulative Earnings Before Taxes) THIS AGREEMENT dated as of November 12, 2006, between MASSEY ENERGY COMPANY, a Delaware Corporation (the “Company”) and [            ] (“Participant”) is made pursuant and subject to the provisions of the Massey Energy Company 2006 Stock and Incentive Compensation Plan, as amended from time to time (the “Plan”), a copy of which is attached. All terms used herein that are defined in the Plan have the same meaning given them in the Plan. 1. Incentive Award. Pursuant to the Plan, the Company, on November 12, 2006 (the “Grant Date”), awarded to Participant, subject to the terms and conditions of the Plan and subject further to the terms and conditions herein set forth, the opportunity to earn a cash payment based on the satisfaction of the performance criteria set forth in Paragraph 3 below (the “Incentive Award”). 2. Definitions. (a) Earnout Period means the three year period from January 1, 2007 through December 31, 2009 (“Earnout Period”). (b) Performance Period EBT means the Company’s cumulative earnings before taxes, for the three fiscal years of the Company ending December 31, 2007, December 31, 2008, and December 31, 2009 (the “Performance Period EBT”), all as confirmed by the Company’s Chief Financial Officer and the Chairman of the Compensation Committee (“Committee”); provided, however, that extraordinary, unusual or infrequently occurring events and transactions, may, in the sole discretion of the Committee, be excluded pursuant to the Plan in such determination. 3. Amount of Award. Subject to Paragraph 5 and except as provided in Paragraphs 4 and 6 below, Participant’s Incentive Award will be calculated under the amount and formula shown in column (b) below, based on satisfaction of the criteria set forth in column (a) below:       (a) Performance Period EBT   (b) Participant’s Incentive Award High Target   $             million   $[                    ] Middle Target   $             million   $[                    ] Low Target   $             million   $[                    ] If the Performance Period EBT falls between any target amounts, the amount of Participant’s Incentive Award is calculated proportionately between the two nearest target levels. No Incentive Award will be paid if the Performance Period EBT is less than the low target of $             million and no increase to the Incentive Award will be made for cumulative earnings before taxes above the high target of $             million. Participant’s Incentive Award for the Earnout Period, to the extent earned, will be paid in cash on or about March 31, 2010. -------------------------------------------------------------------------------- 4. Death or Disability. If Participant dies or becomes permanently and totally disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”) (“Permanently and Totally Disabled”) while in the employ or service of the Company or a Subsidiary within the Earnout Period, Participant or Participant’s estate will be entitled to receive a pro rata portion of Participant’s Incentive Award as calculated pursuant to Section 3, based on the portion of the Earnout Period elapsed prior to Participant’s death or becoming Permanently and Totally Disabled. 5. Forfeiture. Participant’s right to receive an Incentive Award is forfeited if Participant’s employment or service with the Company and its Subsidiaries terminates during the Earnout Period for any reason other than on account of Participant’s death or becoming Permanently and Totally Disabled or as set forth in Paragraph 6 below. 6. Change in Control. Notwithstanding any other provision of this Agreement, Participant’s right to receive an Incentive Award shall be earned if Participant’s employment or service terminates within two years following a Change in Control that occurs during the Earnout Period. 7. Notice. Any notice or other communications given pursuant to this Agreement shall be in writing and shall be personally delivered or mailed by United States registered or certified mail, postage prepaid, return receipt requested, to the following addresses:   If to the Company:   By hand-delivery:   By mail: Massey Energy Company   Massey Energy Company Attention: Corporate Secretary   Attention: Corporate Secretary 4 North Fourth Street   P.O. Box 26765 Richmond, Virginia 23219   Richmond, Virginia 23261 If to Participant:   [Name]   [Address]   [Address]   8. Confidentiality. Participant agrees that this Agreement and the receipt of this Incentive Award are conditioned upon Participant not disclosing the terms of this Agreement or the receipt of the Incentive Award to anyone other than Participant’s spouse, confidential financial advisor, or senior management of the Company prior to end of the Earnout Period. If Participant discloses such information to any person other than those named in the prior sentence, except as may be required by law, Participant agrees that this Incentive Award will be forfeited.   2 -------------------------------------------------------------------------------- 9. No Right to Continued Employment or Service. This Agreement does not confer upon Participant any right to continue in the employ or service of the Company or a Subsidiary, nor shall it interfere in any way with the right of the Company or a Subsidiary to terminate such employment or service at any time. 10. Governing Law. This Agreement shall be governed by the laws of the State of Delaware. 11. Conflicts. In the event of any conflict between the provisions of the Plan as in effect on the date hereof and the provisions of this Agreement, the provisions of the Plan shall govern. All references herein to the Plan shall mean the Plan as in effect on the date hereof or as duly amended. 12. Participant Bound by Plan. Participant hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. 13. Binding Effect. Subject to the limitations stated above and in the Plan, this Agreement shall be binding upon and inure to the benefit of the legatees, distributees, and personal representatives of Participant and the successors of the Company. 14. Taxes. Participant shall make arrangements acceptable to the Company for the satisfaction of income and employment tax withholding requirements attributable to the vesting or payment of this Award. 15. Employment and Service. In determining cessation of employment or service, transfers between the Company and/or any Subsidiary shall be disregarded, and changes in status between that of a Member, a Non-Employee Service Provider and a Non-Employee Director shall be disregarded. IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by a duly authorized officer, and Participant has affixed his signature hereto.   MASSEY ENERGY COMPANY By:     [Authorized Officer]   [Participant]   3

Exhibit 10.17   MANAGEMENT AGREEMENT BY AND   BETWEEN   HPT TRS IHG-1, INC.   AND   INTERCONTINENTAL HOTELS GROUP RESOURCES, INC.   --------------------------------------------------------------------------------   Table of Contents     Page ARTICLE 1 DEFINITIONS 1   1.1  8.1(c) Statement 1   1.2  Accounting Principles 1   1.3  Affiliate 1   1.4  Agreed Upon Procedure Letter 1   1.5  Authorized Mortgage 2   1.6  Arbitration 2   1.7  Award 2   1.8  Bank Accounts 2   1.9  Base Management Fee 2   1.10  Base Year 2   1.11  Brand 3   1.12  Brand Standards 3   1.13  Buildings 3   1.14  Business Day 3   1.15  Capital Replacements 3   1.16  Capital Replacements Budget 3   1.17  Code 3   1.18  Collateral Agency Agreement 3   1.19  Collateral Agent 3   1.20  Competitor 4   1.21  Condemnation 4   1.22  Condemnor 4   1.23  Consolidated Financials 4   1.24  Consumer Price Index 4   1.25  Controlling Interest 4   1.26  Debt Service Coverage Ratio 4   1.27  Deposit 4   1.28  Disbursement Rate 4   1.29  Effective Date 4   1.30  Environmental Laws 4   1.31  Environmental Notice 4   1.32  Expiration Date 4   1.33  Fiscal Month 5   1.34  Fiscal Year 5   1.35  Furniture, Fixtures and Equipment or FF&E 5   1.36  Government Agencies 5   1.37  Gross Revenues 5   1.38  Guarantor 6   1.39  Guaranty 6   1.40  Hazardous Substances 6   1.41  Hotel 6   1.42  HPT 7   1.43  IHG 7   1.44  Incentive Management Fee 7   1.45  Initial Term 7   1.46  Initial Working Capital 7   i --------------------------------------------------------------------------------     1.47  Insurance Requirements 7   1.48  Interest Rate 7   1.49  Lease 7   1.50  Legal Requirements 7   1.51  Management Fees 7   1.52  Manager 8   1.53  Manager Default 8   1.54  Manager Event of Default 8   1.55  Material Repair 8   1.56  New Management Agreement 8   1.57  NOI 8   1.58  Officer’s Certificate 8   1.59  Opening Date 8   1.60  Operating Cost(s) 8   1.61  Operating Equipment 9   1.62  Operating Profit 9   1.63  Operating Standards 9   1.64  Operating Supplies 9   1.65  Owner 9   1.66  Owner’s Percentage Priority 10   1.67  Owner’s Priority 10   1.68  Parent 10   1.69  Person 10   1.70  Pledged Hotels 10   1.71  Priority Coverage Ratio 10   1.72  Purchase Agreement 10   1.73  Purchaser 10   1.74  Renewal Terms 10   1.75  Repairs 10   1.76  Replacement Property 11   1.77  Reservation System 11   1.78  Reserve Account 11   1.79  Reserve Percentage 11   1.80  Residual Distribution 11   1.81  Restricted Area 11   1.82  Restricted Period 11   1.83  Rooms Revenue 11   1.84  SARA 11   1.85  Secured Obligations 11   1.86  Services Fees 11   1.87  Sites 11   1.88  Subsidiary 11   1.89  Substitute Tenant 12   1.90  System Marks 12   1.91  Term 12   1.92  Transaction Documents 12   1.93  Transferred Hotels 12   ii --------------------------------------------------------------------------------     1.94  Uniform System of Accounts 12   1.95  Ultimate Parent 12   1.96  Unsuitable for Its Permitted Use 12   1.97  Working Capital 12   1.98  Yearly Budget 12 ARTICLE 2 SCOPE OF AGREEMENT 13   2.1  Engagement of Manager 13   2.2  Additional Services 14   2.3  Use of Hotels 15   2.4  Right to Inspect 15   2.5  Right of Offset 15   2.6  Condition of the Hotels 15 ARTICLE 3 TERM AND RENEWALS 16   3.1  Term 16   3.2  Renewal Term 16   3.3  Owner’s Termination Right at End of Term 16 ARTICLE 4 TITLE TO HOTEL 16   4.1  Covenants of Title 16   4.2  Non-Disturbance 17   4.3  Financing 17   4.4  Sale of a Hotel 19   4.5  Sale of All the Hotels 20   4.6  The Lease 20   4.7  Restricted Sale 20 ARTICLE 5 REQUIRED FUNDS 20   5.1  Working Capital 20   5.2  Reserve Account 21   5.3  Additional Requirements for Reserve 22   5.4  Ownership of Replacements 22   5.5  Manager Reserve Advances 22   5.6  No Additional Contributions 23 ARTICLE 6 BRAND STANDARDS AND MANAGER’S CONTROL 23   6.1  Brand Standards 23   6.2  Manager’s Control 23   6.3  Arbitration 23 ARTICLE 7 OPERATION OF THE HOTEL 23   7.1  Permits 24   7.2  Equipment and Supplies 24   7.3  Personnel 24   7.4  Sales, Marketing and Advertising 25   7.5  Reservation and Communication Services 25   7.6  Maintenance and Repairs 26   7.7  Material Repairs 26   7.8  Liens; Credit 27   7.9  Real Estate and Personal Property Taxes 27   7.10  Contest 28   iii --------------------------------------------------------------------------------   ARTICLE 8 FISCAL MATTERS 28   8.1  Accounting Matters 28   8.2  Yearly Budgets 30   8.3  Bank Accounts 30   8.4  Consolidated Financials 31 ARTICLE 9 FEES TO MANAGER 31   9.1  Management Fees 31   9.2  Services Fees 32 ARTICLE 10 DISBURSEMENTS 32   10.1  Disbursement of Funds 32   10.2  Residual Distribution 33   10.3  Owner’s Priority 34   10.4  Owner’s Percentage Priority 34   10.5  No Interest 34   10.6  Amounts Outstanding at End of Term 34   10.7  Survival 34 ARTICLE 11 CERTAIN OTHER SERVICES 35   11.1  Optional Services 35   11.2  Purchasing 35 ARTICLE 12 SIGNS AND SERVICE MARKS 35   12.1  Signs 35   12.2  System Marks 35   12.3  System Mark Litigation 36 ARTICLE 13 INSURANCE 36   13.1  Insurance Coverage 36   13.2  Insurance Policies 38   13.3  Insurance Certificates 39   13.4  Insurance Proceeds 39   13.5  Manager’s Insurance Program 39 ARTICLE 14 INDEMNIFICATION AND WAIVER OF SUBROGATION 39   14.1  Indemnification 39   14.2  Waiver of Subrogation 39   14.3  Survival 40 ARTICLE 15 DAMAGE TO AND DESTRUCTION OF THE HOTEL 40   15.1  Termination 40   15.2  Restoration 41 ARTICLE 16 CONDEMNATION 41   16.1  Total Condemnation 41   16.2  Partial Condemnation 42   16.3  Temporary Condemnation 42   16.4  Effect of Condemnation 43 ARTICLE 17 DEFAULT AND TERMINATION 43   17.1  Manager Events of Default 43   17.2  Remedies for Manager Defaults 44   17.3  Remedies for Owner Defaults 45   17.4  Post Termination Obligations 45   17.5  Deposit 47   iv --------------------------------------------------------------------------------   ARTICLE 18 NOTICES 48   18.1  Procedure 48 ARTICLE 19 RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS 49   19.1  Relationship 49   19.2  Further Actions 50 ARTICLE 20 APPLICABLE LAW 50 ARTICLE 21 SUCCESSORS AND ASSIGNS 50   21.1  Assignment 50   21.2  Binding Effect 51 ARTICLE 22 RECORDING 51   22.1  Memorandum of Agreement 52   ARTICLE 23 FORCE MAJEURE 52   23.1  Operation of Hotel 52   23.2  Extension of Time 52 ARTICLE 24 GENERAL PROVISIONS 52   24.1  Trade Area Restriction 52   24.2  Environmental Matters 53   24.3  Authorization 53   24.4  Severability 54   24.5  Merger 54   24.6  Formalities 54   24.7  Consent to Jurisdiction; No Jury Trial 54   24.8  Performance on Business Days 55   24.9  Attorneys’ Fees 55   24.10  Section and Other Headings 55   24.11  Documents 55   24.12  Remedies Not Cumulative 55   24.13  No Political Contributions 55   24.14  REIT Qualification 55   24.15  Further Compliance with Section 856(d) of the Code 56   24.16  Adverse Regulatory Event 56   24.17  Commercial Leases 57   24.18  Nonliability of Trustees 57   24.19  Arbitration 58   24.20  Estoppel Certificates 59   24.21  Confidentiality 59   24.22  Hotel Warranties 60   v --------------------------------------------------------------------------------   MANAGEMENT AGREEMENT   THIS MANAGEMENT AGREEMENT (this “Agreement”) is made and entered into as of July 1, 2003, by and between HPT TRS IHG-1, INC., a Maryland corporation (“Owner”), and INTERCONTINENTAL HOTELS GROUP RESOURCES, INC. a Delaware corporation (“Manager”).   W I T N E S S E T H   WHEREAS, pursuant to the Purchase Agreement (this and other capitalized terms used and not otherwise defined herein having the meanings ascribed to such terms in Article 1), on the Effective Date: (a) Purchaser is acquiring the Hotels from Manager or its Affiliate(s); (b) Purchaser and Owner, its Affiliate, are entering into the Lease; and (c) Owner and Manager are entering into this Agreement; and   WHEREAS, Owner wishes to engage Manager and Manager wishes to be engaged to manage and operate the Hotels, subject to and upon the terms and conditions set forth in this Agreement.   NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are herein acknowledged, Owner and Manager, intending to be legally bound, hereby agree as follows:   ARTICLE 1   DEFINITIONS   Capitalized Term used in this Agreement and not otherwise defined herein shall have the meanings set forth below, in the Section of this Agreement referred to below, or in such other document or agreement referred to below:   1.1           “8.1(C) STATEMENT”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN SECTION 8.1(C).   1.2           “ACCOUNTING PRINCIPLES”  SHALL MEAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AS ADOPTED IN THE UNITED STATES OF AMERICA, CONSISTENTLY APPLIED.   1.3           “AFFILIATE”  SHALL MEAN, WITH RESPECT TO ANY PERSON, (A) IN THE CASE OF ANY SUCH PERSON WHICH IS A PARTNERSHIP, ANY PARTNER IN SUCH PARTNERSHIP; (B) IN THE CASE OF ANY SUCH PERSON WHICH IS A LIMITED LIABILITY COMPANY, ANY MEMBER OF SUCH COMPANY; (C) ANY OTHER PERSON WHICH IS A PARENT, OR SUBSIDIARY OR A SUBSIDIARY OF A PARENT WITH RESPECT TO SUCH PERSON OR TO ONE OR MORE OF THE PERSONS REFERRED TO IN THE PRECEDING CLAUSES (A) AND (B), AND; (D) ANY OTHER PERSON WHO IS AN OFFICER, DIRECTOR, TRUSTEE OR EMPLOYEE OF, OR PARTNER IN, SUCH PERSON OR ANY PERSON REFERRED TO IN THE PRECEDING CLAUSES (A), (B) AND (C).   1.4           “AGREED UPON PROCEDURE LETTER”  SHALL MEAN, A LETTER FROM ERNST & YOUNG OR ANOTHER FIRM OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT (THE “AUDITOR”) SELECTED BY MANAGER AND APPROVED BY OWNER (WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED), WHICH LETTER SHALL, SUBJECT TO THE LIMITATIONS AND CONDITIONS IMPOSED BY THE AUDITOR,   --------------------------------------------------------------------------------   ADDRESS THE FOLLOWING COMPONENTS AND SUCH OTHER REASONABLE MATTERS AS OWNER, AND THE AUDITOR SHALL REASONABLY AGREE:   (A)           THAT AUDITOR HAS TESTED MANAGER’S SYSTEMS OF INTERNAL CONTROLS.   (B)           THAT AUDITOR HAS VERIFIED THAT THE INFORMATION PROVIDED WAS GENERATED FROM THE SAME REPORTING SYSTEMS AS MANAGER USES FOR ITS REGULAR PERIODIC ACCOUNTING AND REPORTING.   (C)           THAT AUDITOR HAS VERIFIED THE MATHEMATICAL ACCURACY OF THE 8.1(C) STATEMENT.   (D)           THAT AUDITOR HAS RECOMPUTED THE ANNUAL CALCULATION OF MANAGEMENT FEES, SERVICE FEES, CONTRIBUTIONS TO THE RESERVE ACCOUNT, EXPENDITURES FROM THE RESERVE ACCOUNT, OWNER’S PERCENTAGE PRIORITY AND THE RESIDUAL DISTRIBUTION.   (E)           THAT AUDITOR HAS CONFIRMED THE HOTELS SUBJECTED TO AUDIT PROCEDURES BY MANAGER’S INTERNAL AUDIT DEPARTMENT, IF ANY, AND REVIEWED WORK PAPERS PROVIDED IN CONNECTION THEREWITH. IF AUDITOR HAS PERFORMED HOTEL LEVEL AUDIT PROCEDURES AT ANY HOTEL, AUDITOR SHALL IDENTIFY THOSE HOTELS AND LIST THE PROCEDURES PERFORMED AND RESULTS OBTAINED. IN ANY EVENT AT LEAST THREE HOTELS SHALL BE SUBJECTED TO AUDIT PROCEDURES EACH FISCAL YEAR BY EITHER INTERNAL AUDIT OR THE AUDITOR.   1.5           “AUTHORIZED MORTGAGE”  SHALL MEAN ANY FIRST MORTGAGE, FIRST DEED-OF-TRUST OR FIRST DEED TO SECURE DEBT AND OTHER RELATED SECURITY DOCUMENTS GRANTED IN CONNECTION THEREWITH NOW OR HEREAFTER GRANTED BY PURCHASER TO SECURE A LOAN TO, OR OTHER DEBT OF, PURCHASER OR ITS AFFILIATES WHICH IS MADE BY AN INSTITUTIONAL LENDER, INVESTMENT BANK, PUBLICLY TRADED INVESTMENT FUND OR OTHER SIMILAR PERSON REGULARLY MAKING LOANS SECURED BY HOTELS OR INCURRED IN CONNECTION WITH THE ISSUANCE OF A MORTGAGE BACKED SECURITY, WHICH LOAN OR DEBT PROVIDES FOR (I) LEVEL PAYMENTS OF INTEREST AND PRINCIPAL AND (II) AMORTIZATION AND OTHER TERMS WHICH ARE COMMERCIALLY REASONABLE.   1.6           “ARBITRATION”  SHALL MEAN AN ARBITRATION CONDUCTED IN ACCORDANCE WITH THE TERMS OF SECTION 24.19.   1.7           “AWARD”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN THE LEASE.   1.8           “BANK ACCOUNTS”  SHALL MEAN ONE OR MORE BANK ACCOUNTS ESTABLISHED FOR THE OPERATION OF THE HOTELS IN OWNER’S NAME AT A BANK SELECTED BY MANAGER AND APPROVED BY OWNER.   1.9           “BASE MANAGEMENT FEE”  SHALL MEAN SEVEN PERCENT (7%) OF THE AGGREGATE GROSS REVENUES AT THE HOTELS IN EACH FISCAL YEAR DURING TERM.   1.10         “BASE YEAR”  SHALL MEAN, FOR EACH HOTEL, THE 2004 FISCAL YEAR; PROVIDED, HOWEVER, IF THERE SHALL OCCUR A CASUALTY, CONDEMNATION OR OTHER FORCE MAJEURE EVENT WITH RESPECT TO A HOTEL WHICH CAUSES A MATERIAL DECLINE IN GROSS REVENUES FOR SUCH HOTEL FOR THE 2004 FISCAL YEAR OR A FORCE MAJEURE EVENT NATIONALLY OR IN ANY RELEVANT MARKET THAT RESULTS IN A TEN PERCENT (10%) ANNUAL DECLINE IN REVPAR FOR THE UPSCALE SEGMENT (OR OTHER APPROPRIATE SEGMENT) AS CALCULATED BY SMITH TRAVEL RESEARCH, NATIONALLY OR IN THE RELEVANT MARKET, WHICH CAUSES A MATERIAL DECLINE IN GROSS REVENUES FOR ANY HOTEL, THE   2 --------------------------------------------------------------------------------   BASE YEAR FOR SUCH HOTEL SHALL BE ADJUSTED TO BE THE FIRST FULL FISCAL YEAR OF OPERATION OF SUCH HOTEL AFTER THE TERMINATION OF ANY SUCH CASUALTY, CONDEMNATION OR FORCE MAJEURE EVENT.   1.11         “BRAND”  SHALL MEAN, COLLECTIVELY, THE STAYBRIDGE SUITES HOTEL SERVICE MARKS, THE BRAND STANDARDS, AND ALL OF THE ATTRIBUTES AND FEATURES CUSTOMARILY ASSOCIATED WITH THE STAYBRIDGE SUITES HOTEL CHAIN IN NORTH AMERICA FROM TIME TO TIME.   1.12         “BRAND STANDARDS”  SHALL MEAN THE STANDARDS OF OPERATION, AS AMENDED FROM TIME TO TIME, IN EFFECT AT SUBSTANTIALLY ALL HOTELS WHICH ARE OPERATED UNDER THE STAYBRIDGE SUITES NAME, WHICH STANDARDS SHALL INCLUDE, BUT NOT BE LIMITED TO, STANDARDS OF OPERATION FROM TIME TO TIME REQUIRED OF OWNERS OF SIMILAR HOTELS OR MAY BE SPECIFIED IN MANUALS AND OTHER GUIDELINES PROVIDED BY THE OWNER OF THE SYSTEM MARKS OR ITS AFFILIATES.   1.13         “BUILDINGS”  SHALL MEAN, COLLECTIVELY, ALL BUILDINGS, STRUCTURES AND IMPROVEMENTS NOW OR HEREAFTER LOCATED ON THE SITES, AND ALL FIXTURES AND EQUIPMENT ATTACHED TO, FORMING A PART OF AND NECESSARY FOR THE OPERATION OF SUCH BUILDINGS, STRUCTURES AND IMPROVEMENTS AS A HOTEL (INCLUDING, WITHOUT LIMITATION, HEATING, LIGHTING, SANITARY, AIR-CONDITIONING, LAUNDRY, REFRIGERATION, KITCHEN, ELEVATOR AND SIMILAR ITEMS) HAVING GUEST SLEEPING ROOMS, EACH WITH BATH, AND SUCH (I) RESTAURANTS, BARS, BANQUET, MEETING AND OTHER PUBLIC AREAS; (II) COMMERCIAL SPACE, INCLUDING CONCESSIONS AND SHOPS; (III) PARKING FACILITIES AND AREAS; (IV) STORAGE AND SERVICE AREAS; (V) RECREATIONAL FACILITIES AND AREAS; (VI) PERMANENTLY AFFIXED SIGNAGE; (VII) PUBLIC GROUNDS AND GARDENS; AND (VIII) OTHER FACILITIES AND APPURTENANCES, AS MAY HEREAFTER BE ATTACHED TO AND FORM A PART OF SUCH BUILDING, STRUCTURES AN IMPROVEMENTS IN ACCORDANCE WITH THIS AGREEMENT.   1.14         “BUSINESS DAY”  SHALL MEAN ANY DAY OTHER THAN SATURDAY, SUNDAY, OR ANY OTHER DAY ON WHICH BANKING INSTITUTIONS IN THE COMMONWEALTH OF MASSACHUSETTS ARE AUTHORIZED BY LAW OR EXECUTIVE ACTION TO CLOSE.   1.15         “CAPITAL REPLACEMENTS”  SHALL MEAN, COLLECTIVELY, REPLACEMENTS AND RENEWALS TO THE FF&E AND REPAIRS WHICH ARE NORMALLY CAPITALIZED UNDER THE ACCOUNTING PRINCIPLES.   1.16         “CAPITAL REPLACEMENTS BUDGET”  SHALL MEAN THE ANNUAL BUDGET FOR CAPITAL REPLACEMENTS AT THE HOTELS, COVERING A FISCAL YEAR, AS PREPARED BY MANAGER AND APPROVED BY OWNER AS PART OF A YEARLY BUDGET. REFERENCES TO YEARLY BUDGET SHALL BE DEEMED TO INCORPORATE THE CAPITAL REPLACEMENT BUDGET UNLESS SPECIFICALLY EXCLUDED.   1.17         “CODE”  SHALL MEAN THE INTERNAL REVENUE CODE OF 1986 AND THE TREASURY REGULATIONS PROMULGATED THEREUNDER, EACH AS FROM TIME TO TIME AMENDED.   1.18         “COLLATERAL AGENCY AGREEMENT”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN THE GUARANTY.   1.19         “COLLATERAL AGENT”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN THE GUARANTY.   3 --------------------------------------------------------------------------------   1.20         “COMPETITOR”  SHALL MEAN ANY PERSON WHICH OWNS DIRECTLY OR THROUGH AN AFFILIATE A HOTEL BRAND, TRADE NAME, SYSTEM, OR CHAIN HAVING AT LEAST FIFTEEN (15) HOTELS (EXCLUDING A MERE FRANCHISEE OR MERE PASSIVE INVESTOR).   1.21         “CONDEMNATION”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN THE LEASE   1.22         “CONDEMNOR”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN THE LEASE.   1.23         “CONSOLIDATED FINANCIALS”  SHALL MEAN FOR ANY FISCAL YEAR OR ANY INTERIM PERIOD OF ANY PERSON, ANNUAL OR INTERIM FINANCIAL STATEMENTS OF SUCH PERSON PREPARED ON A CONSOLIDATED BASIS, INCLUDING SUCH PERSON’S CONSOLIDATED BALANCE SHEET AND THE RELATED STATEMENTS OF INCOME AND CASH FLOWS, ALL IN REASONABLE DETAIL, AND SETTING FORTH IN COMPARATIVE FORM THE CORRESPONDING FIGURES FOR THE CORRESPONDING PERIOD IN THE PRECEDING FISCAL YEAR, AND PREPARED IN ACCORDANCE WITH THE ACCOUNTING PRINCIPLES THROUGHOUT THE PERIODS REFLECTED OR IF SUCH PERSON’S PRINCIPAL PLACE OF BUSINESS IS THE UNITED KINGDOM, IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AS ADOPTED IN THE UNITED KINGDOM, CONSISTENTLY APPLIED THROUGHOUT THE PERIODS REFLECTED PROVIDED THAT ANY SUCH FINANCIAL STATEMENT WHICH IS AUDITED SHALL CONTAIN A RECONCILIATION OF ANY DIFFERENCES BETWEEN SUCH ACCOUNTING PRINCIPLES AND ACCOUNTING PRINCIPLES.   1.24         “CONSUMER PRICE INDEX”  SHALL MEAN THE CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS, U.S. CITY AVERAGE, PUBLISHED BY THE UNITED STATES BUREAU OF LABOR STATISTICS.   1.25         “CONTROLLING INTEREST”  SHALL MEAN THE POSSESSION, DIRECTLY OR INDIRECTLY, OF THE POWER TO DIRECT OR CAUSE THE DIRECTION OF THE BUSINESS, MANAGEMENT OR POLICIES OF SUCH PERSON.   1.26         “DEBT SERVICE COVERAGE RATIO”  SHALL MEAN, WITH RESPECT TO ANY LOAN OR OTHER DEBT SECURED BY AN AUTHORIZED MORTGAGE, THE QUOTIENT OBTAINED BY DIVIDING (A) THE NOI OF THE PROPERTIES SECURING SUCH LOAN OR OTHER DEBT FOR THE TWELVE (12) MONTHS ENDING ON SUCH DATE BY (B) REGULARLY SCHEDULED INTEREST AND PRINCIPAL PAYMENTS PROJECTED TO BE PAID THEREUNDER DURING THE FIRST (1ST) TWELVE (12) MONTHS AFTER THE FIRST DAY OF THE MONTH NEXT AFTER THE DATE ON WHICH SUCH AUTHORIZED MORTGAGE IS GRANTED DIVIDED.   1.27         “DEPOSIT”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN SECTION 17.5.   1.28         “DISBURSEMENT RATE”  SHALL MEAN A PER ANNUM RATE EQUAL TO THE GREATER OF (I) THE SUM OF THE PER ANNUM RATE FOR TWENTY (20) YEAR U.S. TREASURY OBLIGATIONS AS PUBLISHED IN THE WALL STREET JOURNAL, PLUS THREE HUNDRED (300) BASIS POINTS AND (II) TEN PERCENT (10%).   1.29         “EFFECTIVE DATE”  SHALL MEAN THE DATE HEREOF.   1.30         “ENVIRONMENTAL LAWS”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN SECTION 24.2(B).   1.31         “ENVIRONMENTAL NOTICE”  SHALL HAVE THE MEANING GIVEN SUCH TERMS IN SECTION 24.2(A).   1.32         “EXPIRATION DATE”  SHALL MEAN THE DATE ON WHICH THE TERM SHALL EXPIRE.   4 --------------------------------------------------------------------------------   1.33         “FISCAL MONTH”  SHALL MEAN EACH CALENDAR MONTH IN THE TERM OR EACH PARTIAL CALENDAR MONTH IN THE TERM.   1.34         “FISCAL YEAR”  SHALL MEAN EACH CALENDAR YEAR IN THE TERM AND EACH PARTIAL CALENDAR YEAR IN THE TERM.   1.35         “FURNITURE, FIXTURES AND EQUIPMENT” OR “FF&E”  SHALL MEAN, COLLECTIVELY, ALL FURNITURE, FURNISHINGS AND EQUIPMENT (EXCEPT OPERATING EQUIPMENT AND REAL PROPERTY FIXTURES) NOW OR HEREAFTER LOCATED AND INSTALLED IN OR ABOUT THE HOTELS WHICH ARE USED IN THE OPERATION THEREOF AS HOTELS IN ACCORDANCE WITH THE STANDARDS SET FORTH IN THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION (I) OFFICE FURNISHINGS AND EQUIPMENT; (II) SPECIALIZED HOTEL EQUIPMENT NECESSARY FOR THE OPERATION OF ANY PORTION OF THE BUILDING AS A STAYBRIDGE SUITES HOTEL, INCLUDING EQUIPMENT FOR KITCHENS, LAUNDRIES, DRY CLEANING FACILITIES, BARS, RESTAURANTS, PUBLIC ROOMS, COMMERCIAL SPACE, PARKING AREAS, AND RECREATIONAL FACILITIES; AND (III) ALL OTHER FURNISHINGS AND EQUIPMENT HEREAFTER LOCATED AND INSTALLED IN OR ABOUT THE BUILDINGS WHICH ARE USED IN THE OPERATION OF THE BUILDINGS AS A STAYBRIDGE SUITES HOTEL IN ACCORDANCE WITH THE STANDARDS SET FORTH IN THIS AGREEMENT.   1.36         “GOVERNMENT AGENCIES”  SHALL MEAN ANY COURT, AGENCY, AUTHORITY, BOARD (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL PROTECTION, PLANNING AND ZONING), BUREAU, COMMISSION, DEPARTMENT, OFFICE OR INSTRUMENTALITY OF ANY NATURE WHATSOEVER OF ANY GOVERNMENTAL OR QUASI-GOVERNMENTAL UNIT OF THE UNITED STATES OR ANY STATE OR ANY COUNTY OR ANY POLITICAL SUBDIVISION OF ANY OF THE FOREGOING, WHETHER NOW OR HEREAFTER IN EXISTENCE, HAVING JURISDICTION OVER OWNER, THE SITES OR THE HOTELS.   1.37         “GROSS REVENUES”  SHALL MEAN FOR ANY PERIOD WITH RESPECT TO EACH HOTEL, ALL REVENUES AND INCOME OF ANY NATURE DERIVED DIRECTLY OR INDIRECTLY FROM SUCH HOTEL OR FROM THE USE OR OPERATION THEREOF, INCLUDING WITHOUT LIMITATION ROOM SALES; FOOD AND BEVERAGE SALES (REGARDLESS OF WHETHER OWNER, MANAGER OR ANY OF THEIR AFFILIATES OWN THE ITEMS BEING SOLD); TELEPHONE, TELEGRAPH, FAX AND INTERNET REVENUES; RENTAL OR OTHER PAYMENTS FROM LESSEES, SUBLEASES, CONCESSIONAIRES AND OTHERS OCCUPYING OR USING SPACE OR RENDERING SERVICES AT SUCH HOTEL (BUT NOT THE GROSS RECEIPTS OF SUCH LESSEES, SUBLEASES OR CONCESSIONAIRES); AND THE ACTUAL CASH PROCEEDS OF BUSINESS INTERRUPTION, USE, OCCUPANCY OR SIMILAR INSURANCE; PROVIDED, HOWEVER, THAT GROSS REVENUES SHALL NOT INCLUDE THE FOLLOWING (AND THERE SHALL BE APPROPRIATE DEDUCTIONS MADE IN DETERMINING GROSS REVENUES FOR):  GRATUITIES OR SERVICE CHARGES IN THE NATURE OF A GRATUITY ADDED TO A CUSTOMER’S BILL; FEDERAL, STATE OR MUNICIPAL EXCISE, SALES OR USE TAXES OR ANY OTHER TAXES COLLECTED DIRECTLY FROM PATRONS OR GUESTS OR INCLUDED AS PART OF THE SALES PRICE OF ANY GOODS OR SERVICES; INTEREST RECEIVED OR ACCRUED WITH RESPECT TO THE FUNDS IN THE RESERVE ACCOUNT OR (OTHER THAN FOR PURPOSES OF CALCULATING THE INCENTIVE MANAGEMENT FEE AND THE RESIDUAL DISTRIBUTION) THE OTHER OPERATING ACCOUNTS OF THE HOTELS; ANY REFUNDS, REBATES, DISCOUNTS AND CREDITS OF A SIMILAR NATURE, GIVEN, PAID OR RETURNED IN THE COURSE OF OBTAINING GROSS REVENUES OR COMPONENTS THEREOF; INSURANCE PROCEEDS (OTHER THAN PROCEEDS FROM BUSINESS INTERRUPTION OR OTHER LOSS OF INCOME INSURANCE; CONDEMNATION PROCEEDS (OTHER THAN FOR A TEMPORARY TAKING); CREDITS OR REFUNDS MADE TO CUSTOMERS, GUESTS OR PATRONS; SUMS AND CREDITS RECEIVED BY OWNER FOR LOST OR DAMAGED MERCHANDISE; PROCEEDS FROM THE SALE OR OTHER DISPOSITION OF A HOTEL, ANY PART THEREOF, OF   5 --------------------------------------------------------------------------------   FF&E OR ANY OTHER ASSETS OF THE HOTELS; OR PROCEEDS OF ANY FINANCING OR RE-FINANCING; THE INITIAL WORKING CAPITAL AND ANY OTHER MATTERS SPECIFICALLY EXCLUDED FROM GROSS REVENUES PURSUANT TO THIS AGREEMENT.   1.38         “GUARANTOR”  SHALL MEAN THE GUARANTOR UNDER THE GUARANTY.   1.39         “GUARANTY”  SHALL MEAN THE GUARANTY AGREEMENT OF EVEN DATE HEREWITH MADE BY IHG FOR THE BENEFIT OF, INTER ALIA, OWNER, AS THE SAME MAY BE AMENDED, SUPPLEMENTED OR REPLACED FROM TIME TO TIME.   1.40         “HAZARDOUS SUBSTANCES”  SHALL MEAN ANY SUBSTANCE:   (A)           THE PRESENCE OF WHICH REQUIRES OR MAY HEREAFTER REQUIRE NOTIFICATION, INVESTIGATION OR REMEDIATION UNDER ANY FEDERAL, STATE OR LOCAL STATUTE, REGULATION, RULE, ORDINANCE, ORDER, ACTION OR POLICY; OR   (B)           WHICH IS OR BECOMES DEFINED AS A “HAZARDOUS WASTE,” “HAZARDOUS MATERIAL” OR “HAZARDOUS SUBSTANCE” OR “POLLUTANT” OR “CONTAMINANT” UNDER ANY PRESENT OR FUTURE FEDERAL, STATE OR LOCAL STATUTE, REGULATION, RULE OR ORDINANCE OR AMENDMENTS THERETO INCLUDING, WITHOUT LIMITATION, THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT (42 U.S.C. SECTION 9601 ET SEQ.) AND THE RESOURCE CONSERVATION AND RECOVERY ACT (42 U.S.C. SECTION 6901 ET SEQ.) AND THE REGULATIONS PROMULGATED THEREUNDER; OR   (C)           WHICH IS TOXIC, EXPLOSIVE, CORROSIVE, FLAMMABLE, INFECTIOUS, RADIOACTIVE, CARCINOGENIC, MUTAGENIC OR OTHERWISE HAZARDOUS AND IS OR BECOMES REGULATED BY ANY GOVERNMENTAL AUTHORITY, AGENCY, DEPARTMENT, COMMISSION, BOARD, AGENCY OR INSTRUMENTALITY OF THE UNITED STATES, ANY STATE OF THE UNITED STATES, OR ANY POLITICAL SUBDIVISION THEREOF; OR   (D)           THE PRESENCE OF WHICH AT A HOTEL CAUSES OR MATERIALLY THREATENS TO CAUSE AN UNLAWFUL NUISANCE UPON SUCH HOTEL OR TO ADJACENT PROPERTIES OR POSES OR MATERIALLY THREATENS TO POSE A HAZARD TO SUCH HOTEL OR TO THE HEALTH OR SAFETY OF PERSONS ON OR ABOUT SUCH HOTEL; OR   (E)           WITHOUT LIMITATION, WHICH CONTAINS GASOLINE, DIESEL FUEL OR OTHER PETROLEUM HYDROCARBONS OR VOLATILE ORGANIC COMPOUNDS; OR   (F)            WITHOUT LIMITATION, WHICH CONTAINS POLYCHLORINATED BIPHENYLS (PCBS) OR ASBESTOS OR UREA FORMALDEHYDE FOAM INSULATION; OR   (G)           WITHOUT LIMITATION, WHICH CONTAINS OR EMITS RADIOACTIVE PARTICLES, WAVES OR MATERIAL; OR   (H)           WITHOUT LIMITATION, CONSTITUTES MATERIALS WHICH ARE NOW OR MAY HEREAFTER BE SUBJECT TO REGULATION PURSUANT TO THE MATERIAL WASTE TRACKING ACT OF 1988, OR ANY APPLICABLE LAWS PROMULGATED BY ANY GOVERNMENT AGENCIES.   1.41         “HOTEL”  SHALL MEAN EACH HOTEL LOCATED AT A SITE INCLUDING ALL OF THE OWNER’S INTEREST IN SUCH SITE, THE BUILDING THERE, THE FURNITURE, FIXTURES AND EQUIPMENT THERE, THE OPERATING   6 --------------------------------------------------------------------------------   EQUIPMENT THERE AND THE OPERATING SUPPLIES THERE; PROVIDED, HOWEVER, UPON THE TERMINATION OF THE AGREEMENT WITH RESPECT TO LESS THAN ALL OF THE HOTELS, PURSUANT TO THE TERMS HEREOF OR OTHERWISE, THE TERM “HOTEL” SHALL, WITH RESPECT TO THE OBLIGATION OF THE PARTIES THEREAFTER ACCRUING, ONLY REFER TO A HOTEL WITH RESPECT TO WHICH THIS AGREEMENT IS IN FULL FORCE AND EFFECT.   1.42         “HPT”  SHALL MEAN HOSPITALITY PROPERTIES TRUST, A MARYLAND REAL ESTATE INVESTMENT TRUST, TOGETHER WITH ITS SUCCESSORS AND PERMITTED ASSIGNS.   1.43         “IHG”  SHALL MEAN INTERCONTINENTAL HOTELS GROUP PLC, ITS SUCCESSORS AND ASSIGNS.   1.44         “INCENTIVE MANAGEMENT FEE”  SHALL MEAN FOR ANY FISCAL YEAR, FIFTY PERCENT (50%) OF THE EXCESS, IF ANY, OF GROSS REVENUES FROM ALL OF THE HOTELS IN EXCESS OF THE APPLICATIONS THEREOF MADE PURSUANT TO SECTIONS 10.1(A) THROUGH AND INCLUDING 10(N).   1.45         “INITIAL TERM”  SHALL MEAN THE PERIOD COMMENCING ON THE EFFECTIVE DATE AND ENDING ON THE LAST DAY OF THE MONTH IN WHICH OCCURS THE DAY THAT IS TWENTY (20) YEARS AFTER THE EFFECTIVE DATE.   1.46         “INITIAL WORKING CAPITAL”  SHALL HAVE THE MEANING GIVEN TO SUCH TERM IN SECTION 5.1.   1.47         “INSURANCE REQUIREMENTS”  SHALL MEAN ALL TERMS OF ANY INSURANCE POLICY REQUIRED BY THIS AGREEMENT AND ALL REQUIREMENTS OF THE ISSUER OF ANY SUCH POLICY AND ALL ORDERS, RULES AND REGULATIONS AND ANY OTHER REQUIREMENTS OF THE NATIONAL BOARD OF FIRE UNDERWRITERS (OR ANY OTHER BODY EXERCISING SIMILAR FUNCTIONS) BINDING UPON THE HOTELS.   1.48         “INTEREST RATE”  SHALL MEAN A RATE, NOT TO EXCEED THE MAXIMUM LEGAL INTEREST RATE, EQUAL TO THE GREATER OF (I) TWELVE (12%) PERCENT PER ANNUM AND (II) TWO PERCENT (2%) PER ANNUM IN EXCESS OF THE DISBURSEMENT RATE DETERMINED AS OF THE FIRST DAY THAT INTEREST ACCRUES ON ANY AMOUNT TO WHICH SUCH INTEREST RATE IS TO BE APPLIED.   1.49         “LEASE”  SHALL MEAN THE LEASE AGREEMENT DATED AS OF THE EFFECTIVE DATE, BY AND BETWEEN HPT IHG PROPERTIES TRUST AND OWNER, AS THE SAME MAY BE AMENDED FROM TIME TO TIME IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.   1.50         “LEGAL REQUIREMENTS”  SHALL MEAN ALL FEDERAL, STATE, COUNTY, MUNICIPAL AND OTHER GOVERNMENTAL STATUTES, LAWS, RULES, ORDERS, REGULATIONS, ORDINANCES, JUDGMENTS, DECREES, INJUNCTIONS AND REQUIREMENTS AFFECTING OWNER(EXCLUDING ANY REQUIREMENTS WHICH AFFECT OWNER’S STATUS AS A REAL ESTATE INVESTMENT TRUST), A HOTEL OR THE MAINTENANCE, CONSTRUCTION, ALTERATION, MANAGEMENT OR OPERATION THEREOF, WHETHER NOW OR HEREAFTER ENACTED OR IN EXISTENCE, INCLUDING, WITHOUT LIMITATION, (A) ALL PERMITS, LICENSES, AUTHORIZATIONS, CERTIFICATES AND REGULATIONS NECESSARY TO OPERATE A HOTEL, (B) ALL COVENANTS, AGREEMENTS, RESTRICTIONS AND ENCUMBRANCES, (C) ALL ENVIRONMENTAL LAWS AND (D) THE OUTCOME OF ANY ARBITRATION.   1.51         “MANAGEMENT FEES”  SHALL MEAN, COLLECTIVELY, THE BASE MANAGEMENT FEE AND THE INCENTIVE MANAGEMENT FEE.   7 --------------------------------------------------------------------------------   1.52         “MANAGER”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN THE PREAMBLE TO THIS AGREEMENT.   1.53         “MANAGER DEFAULT”  SHALL MEAN A MANAGER EVENT OF DEFAULT OR ANY OTHER CIRCUMSTANCES WITH WHICH THE GIVING OF NOTICE, THE PASSAGE OF TIME OR BOTH WOULD CONSTITUTE A MANAGER EVENT OF DEFAULT OR OTHERWISE ENTITLE OWNER TO TERMINATE THIS AGREEMENT IN ITS ENTIRETY PURSUANT TO THE TERMS HEREOF.   1.54         “MANAGER EVENT OF DEFAULT”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN SECTION 17.1.   1.55         “MATERIAL REPAIR”  SHALL MEAN A REPAIR THE COST WHICH EXCEEDS $250,000; PROVIDED, HOWEVER, ON JANUARY 1 OF EACH YEAR STARTING IN 2005 SAID $250,000 SHALL BE ADJUSTED TO REFLECT THE PERCENTAGE CHANGE IN THE CONSUMER PRICE INDEX SINCE THE PRIOR JANUARY 1.   1.56         “NEW MANAGEMENT AGREEMENT”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN SECTION 4.4.   1.57         “NOI”  SHALL MEAN, WITH RESPECT TO ANY PROPERTY, FOR ANY PERIOD, THE GROSS OPERATING PROFIT (AS DEFINED IN THE UNIFORM SYSTEM OF ACCOUNTS) OF SUCH PROPERTY FOR SUCH PERIOD NET OF, FOR SUCH PERIOD AND SUCH PROPERTY, REAL AND PERSONAL PROPERTY TAXES AND CASUALTY AND LIABILITY INSURANCE PREMIUMS, AN IMPUTED RESERVE FOR CAPITAL REPLACEMENTS EQUAL TO FIVE PERCENT (5%) OF GROSS REVENUES, AN IMPUTED MANAGEMENT FEE EQUAL TO THREE PERCENT (3%) OF GROSS REVENUES AND AN IMPUTED ROYALTY FEE OF FIVE PERCENT (5%) OF ROOM REVENUES.   1.58         “OFFICER’S CERTIFICATE”  SHALL MEAN AS TO ANY PERSON, A CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER OR CHIEF ACCOUNTING OFFICER OF SUCH PERSON, DULY AUTHORIZED, ACCOMPANYING THE FINANCIAL STATEMENTS REQUIRED TO BE DELIVERED BY SUCH PERSON PURSUANT TO SECTIONS 8.1 AND 17.4, IN WHICH SUCH OFFICER SHALL CERTIFY TO SUCH OFFICER’S BEST KNOWLEDGE (A) THAT SUCH STATEMENTS HAVE BEEN PROPERLY PREPARED IN ACCORDANCE WITH THE ACCOUNTING PRINCIPLES, (B) IN THE EVENT THAT THE CERTIFYING PARTY IS AN OFFICER OF IHG OR ANOTHER GUARANTOR, THAT SUCH STATEMENTS ARE TRUE, CORRECT AND COMPLETE IN ALL MATERIAL RESPECTS AND FAIRLY PRESENT THE CONSOLIDATED FINANCIAL CONDITION OF SUCH PERSON AT AND AS OF THE DATES THEREOF AND THE RESULTS OF ITS AND THEIR OPERATIONS FOR THE PERIODS COVERED THEREBY AND THAT THERE IS NO DEFAULT ON THE PART OF THE GUARANTOR UNDER THE GUARANTY, AND (C) IN THE EVENT THAT THE CERTIFYING PARTY IS AN OFFICER OF MANAGER AND THE CERTIFICATE IS BEING GIVEN IN SUCH CAPACITY, THAT SUCH STATEMENTS FAIRLY PRESENT THE FINANCIAL OPERATION OF THE HOTELS.   1.59         “OPENING DATE”  SHALL MEAN FOR EACH HOTEL, THE DATE SET FORTH AS SUCH ON EXHIBIT B FOR SUCH HOTEL.   1.60         “OPERATING COST(S)”  SHALL MEAN, COLLECTIVELY, ALL COSTS AND EXPENSES OF THE HOTELS (REGARDLESS OF WHETHER THE SAME IS INCURRED BY OWNER, PURCHASER OR MANAGER) THAT ARE NORMALLY CHARGED AS AN OPERATING EXPENSE UNDER ACCOUNTING PRINCIPLES, INCLUDING, WITHOUT LIMITATION:   (I)            THE COST OF OPERATING SUPPLIES, WAGES, SALARIES AND EMPLOYEE FRINGE BENEFITS, ADVERTISING AND PROMOTIONAL EXPENSES, THE COST OF PERSONNEL TRAINING PROGRAMS, UTILITY   8 --------------------------------------------------------------------------------   AND ENERGY COSTS, OPERATING LICENSES AND PERMITS, MAINTENANCE COSTS, AND EQUIPMENT RENTALS;   (II)           ALL EXPENDITURES MADE FOR MAINTENANCE AND REPAIRS TO KEEP THE HOTEL IN GOOD CONDITION AND REPAIR (OTHER THAN CAPITAL REPLACEMENTS);   (III)          PREMIUMS FOR INSURANCE REQUIRED HEREUNDER;   (IV)          THE SERVICES FEES;   (V)           REAL ESTATE AND PERSONAL PROPERTY TAXES AND EXPENSES EXCEPT TO THE EXTENT EXPRESSLY SPECIFIED OTHERWISE HEREIN;   (VI)          AUDIT, LEGAL AND ACCOUNTING FEES AND EXPENSES EXCEPT TO THE EXTENT EXPRESSLY SPECIFIED OTHERWISE HEREIN; AND   (VII)         RENT OR LEASE PAYMENT FOR EQUIPMENT USED AT THE HOTELS IN THE OPERATION THEREOF.   Notwithstanding anything contained herein to the contrary, Operating Costs shall exclude:  (a) the Base Management Fee and the Incentive Management Fee; (b) items expressly excluded from Operating Costs pursuant to the terms hereof; (c) items for which Manager or its Affiliates are to indemnify Purchaser or Owner; (d) items for which Owner or its Affiliates are to indemnify Manager (e) items for which Manager or its Affiliates has expenses agreed under the Transaction Documents to be liable at its own cost and expense; (f) amounts payable to Owner or its Affiliates under the Purchase Agreement or the Transaction Documents or for periods not included in the Term; (g) any reimbursement of advances made by Manager or Owner; (h) the cost of Capital Replacements; (i) the Minimum Rent and the Additional Rent under the Lease; (j) debt service on any loan or other debt secured by an Authorized Mortgage or other financing obtained by Purchaser, Owner or Manager other than equipment financing permitted hereunder; and (k) except as provided in Sections 2.2, 6.1 or 11.1, the cost of providing any services by the Manager or its Affiliates using their own personnel to the Hotels which are not performed at the Hotels; and (l) any cost incurred in connection with the sale of the Hotels from Manager to Owner including, without limitation, any expense incurred in connection with performing obligations under the Purchase Agreement or any agreement, instrument, indemnity or undertaking executed and delivered by any IHG Party in connection with the Closing thereunder.   1.61         “OPERATING EQUIPMENT”  SHALL HAVE THE MEANING GIVEN TO THE TERM “PROPERTY AND EQUIPMENT” UNDER THE UNIFORM SYSTEM OF ACCOUNTS.   1.62         “OPERATING PROFIT”  SHALL MEAN FOR ANY PERIOD, THE EXCESS, IF ANY, OF GROSS REVENUES FOR ALL OF THE HOTELS FOR SUCH PERIOD OVER THE SUM OF OPERATING COSTS FOR SUCH PERIOD.   1.63         “OPERATING STANDARDS”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN SECTION 2.1.   1.64         “OPERATING SUPPLIES”  SHALL HAVE THE MEANING GIVEN TO THE TERM “INVENTORIES” UNDER THE UNIFORM SYSTEM OF ACCOUNTS.   1.65         “OWNER”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN THE PREAMBLE TO THIS AGREEMENT AND SHALL INCLUDE ITS SUCCESSORS AND ASSIGNS.   9 --------------------------------------------------------------------------------   1.66         “OWNER’S PERCENTAGE PRIORITY”  SHALL MEAN, FOR EACH FISCAL YEAR AFTER THE 2004 FISCAL YEAR, AN AMOUNT, NOT LESS THAN ZERO ($0) EQUAL TO THE AGGREGATE OF THE SUM OF SEVEN AND ONE-HALF PERCENT (7.5%) OF THE GROSS REVENUES OF EACH HOTEL FOR SUCH FISCAL YEAR IN EXCESS OF THE GROSS REVENUES FOR SUCH HOTEL FOR ITS BASE YEAR.   1.67         “OWNER’S PRIORITY”  SHALL MEAN AN ANNUAL AMOUNT EQUAL TO THE SUM OF (A) SIXTEEN MILLION EIGHT HUNDRED SEVENTY TWO THOUSAND DOLLARS ($16,872,000) PER ANNUM PLUS, (B) EFFECTIVE ON THE DATE OF EACH DISBURSEMENT BY PURCHASER OR OWNER PURSUANT TO SECTIONS 5.2 (C), 15.2 (IN EXCESS OF NET INSURANCE PROCEEDS) OR 16.2 (IN EXCESS OF THE AWARD) HEREOF, AN AMOUNT EQUAL TO THE AMOUNT SO DISBURSED MULTIPLIED BY THE DISBURSEMENT RATE (DETERMINED AS OF THE DATES ON WHICH SUCH SUMS ARE ADVANCED) PLUS, (C) EFFECTIVE AS OF THE FIRST DAY OF THE FIRST RENEWAL TERM, THE AMOUNT, IF ANY, TO BE ADDED TO THE OWNER’S PRIORITY PURSUANT TO SECTIONS 17.5(B) OR 17.5(D). OWNER’S PRIORITY SHALL BE SUBJECT TO FURTHER ADJUSTMENT AS PROVIDED IN SECTION 15.1(C).   1.68         “PARENT”  SHALL MEAN WITH RESPECT TO ANY PERSON, ANY PERSON WHO OWNS DIRECTLY, OR INDIRECTLY THROUGH ONE OR MORE SUBSIDIARIES OR AFFILIATES, GREATER THAN FIFTY PERCENT (50%) OF THE VOTING OR BENEFICIAL INTEREST IN, OR OTHERWISE HAS THE RIGHT OR POWER (WHETHER BY CONTRACT, THROUGH OWNERSHIP OF SECURITIES OR OTHERWISE) TO CONTROL, SUCH PERSON.   1.69         “PERSON”  SHALL MEAN ANY INDIVIDUAL OR ENTITY, AND THE HEIRS, EXECUTORS, ADMINISTRATORS, LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF SUCH INDIVIDUAL OR ENTITY WHERE THE CONTEXT SO ADMITS.   1.70         “PLEDGED HOTELS”  SHALL MEAN, WITH RESPECT TO ANY LOAN OR OTHER DEBT SECURED BY AN AUTHORIZED MORTGAGE, COLLECTIVELY, THE HOTELS WHICH SECURE SUCH LOAN OR OTHER DEBT.   1.71         “PRIORITY COVERAGE RATIO”  SHALL MEAN FOR ANY PERIOD, FOR ANY HOTEL OR GROUP OF HOTELS, THE QUOTIENT OF (A) THE EXCESS OF GROSS REVENUE FOR SUCH HOTEL OR GROUP OF HOTELS FOR SUCH PERIOD OVER AMOUNTS DISTRIBUTED OR APPLIED FOR SUCH PERIOD PURSUANT TO SECTIONS 10.1(A), (B), (F) (H) AND (I), OF THIS AGREEMENT ALLOCATED TO SUCH HOTEL OR GROUP OF HOTELS (AS APPLICABLE), DIVIDED BY (B) THE SUM OF THE OWNER’S PRIORITY ALLOCATED TO SUCH HOTEL OR GROUP OF HOTELS (AS APPLICABLE)FOR SUCH PERIOD, PLUS THE OWNER’S PERCENTAGE PRIORITY FOR SUCH PERIOD ALLOCATED TO SUCH HOTELS OR GROUP OF HOTEL (AS APPLICABLE), PLUS, FOR PURPOSES OF SECTION 17.5(B) ONLY, ANY INCREASE IN THE OWNER’S PRIORITY THAT WILL OCCUR UPON THE RETURN OF THE DEPOSIT TO MANAGER PURSUANT TO THAT SECTION.   1.72         “PURCHASE AGREEMENT”  SHALL MEAN THAT CERTAIN PURCHASE AND SALE AGREEMENT BETWEEN HPT AND MANAGER OR ITS AFFILIATE(S) PURSUANT TO WHICH PURCHASER HAS ON THE EFFECTIVE DATE ACQUIRED THE HOTELS FROM MANAGER OR ITS AFFILIATE(S).   1.73         “PURCHASER”  SHALL MEAN THE LANDLORD UNDER THE LEASE.   1.74         “RENEWAL TERMS”  SHALL MEAN ANY PERIOD OF YEARS EXTENDING THE TERM OF THIS AGREEMENT, COMMENCING UPON THE EXPIRATION OF THE INITIAL TERM OR ANY EXTENSIONS THERETO, AS PROVIDED IN ARTICLE 3.   1.75         “REPAIRS”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN SECTION 7.6.   10 --------------------------------------------------------------------------------   1.76         “REPLACEMENT PROPERTY”  SHALL MEAN A STAYBRIDGE SUITE HOTEL OR OTHER TYPE OF HOTEL MUTUALLY ACCEPTABLE TO THE PARTIES ACQUIRED BY PURCHASER IN SUBSTITUTION FOR A HOTEL WITH RESPECT TO WHICH THIS AGREEMENT WAS TERMINATED PURSUANT TO SECTION 16.1.   1.77         “RESERVATION SYSTEM”  SHALL MEAN A COMPUTERIZED NETWORK OF HIGH SPEED TERRESTRIAL AND SATELLITE-LINKED HARDWARE AND DATA LINES CONNECTING HOTELS, CENTRAL RESERVATION CENTERS, DATA PROCESSING CENTERS AND TRAVEL AGENCIES WHICH PROVIDES RESERVATION SERVICES TO THE STAYBRIDGE SUITES HOTEL CHAIN IN NORTH AMERICA.   1.78         “RESERVE ACCOUNT”  SHALL MEAN AN INTEREST-BEARING ACCOUNT ESTABLISHED FOR FUNDS TO BE HELD IN RESERVE FOR CAPITAL REPLACEMENTS IN PURCHASER’S NAME AT A BANK SELECTED BY PURCHASER.   1.79         “RESERVE PERCENTAGE”  SHALL MEAN WITH RESPECT TO EACH HOTEL, THE FOLLOWING PERCENTAGES FOR THE FOLLOWING PERIODS:   Period after first day of the Fiscal Month following such Hotel’s Opening Date   Reserve Percentage           0 – 12 months   2 % 13 – 24 months   3 % 25 – 36 months   4 % 37th month and thereafter   5 %   1.80         “RESIDUAL DISTRIBUTION”  SHALL MEAN AMOUNTS TO BE DISTRIBUTED TO OWNER PURSUANT TO SECTION 10.2.   1.81         “RESTRICTED AREA”  SHALL MEAN, FOR ANY HOTEL, THE AREA AROUND SUCH HOTEL DEPICTED ON EXHIBIT D.   1.82         “RESTRICTED PERIOD”  SHALL MEAN, FOR EACH HOTEL, THE PERIOD ENDING ON THE THIRD (3RD) ANNIVERSARY OF THE EFFECTIVE DATE.   1.83         “ROOMS REVENUE”  SHALL MEAN ALL REVENUE DERIVED FROM THE RENTAL OF GUEST ROOMS IN A HOTEL DETERMINED IN ACCORDANCE WITH THE ACCOUNTING PRINCIPLES.   1.84         “SARA”  SHALL MEAN THE SUPERFUND AMENDMENTS AND REAUTHORIZATION ACT OF 1986.   1.85         “SECURED OBLIGATIONS”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN SECTION 17.5.   1.86         “SERVICES FEES”  SHALL MEAN THE FEES SPECIFIED IN SECTION 9.2.   1.87         “SITES”  SHALL MEAN THE PARCELS OF REAL ESTATE MORE PARTICULARLY DESCRIBED ON EXHIBIT A.   1.88         “SUBSIDIARY”  SHALL MEAN WITH RESPECT TO ANY PERSON, ANY ENTITY (A) IN WHICH SUCH PERSON OWNS DIRECTLY, OR INDIRECTLY, GREATER THAN TWENTY PERCENT (20%) OF THE VOTING OR BENEFICIAL INTEREST OR (B) WHICH SUCH PERSON OTHERWISE HAS THE RIGHT OR POWER TO CONTROL (WHETHER BY CONTRACT, THROUGH OWNERSHIP OF SECURITIES OR OTHERWISE).   11 --------------------------------------------------------------------------------   1.89         “SUBSTITUTE TENANT”  SHALL HAVE THE MEANING GIVEN AND TERM IN SECTION 4.2.   1.90         “SYSTEM MARKS”  SHALL MEAN ALL SERVICE MARKS, TRADEMARKS, COPYRIGHTS, TRADE NAMES, LOGO TYPES, COMMERCIAL SYMBOLS, PATENTS OR OTHER SIMILAR RIGHTS OR REGISTRATIONS NOW OR HEREAFTER HELD, APPLIED FOR OR LICENSED BY MANAGER OR ANY AFFILIATE OF MANAGER IN CONNECTION WITH THE STAYBRIDGE SUITES BRAND OF HOTELS.   1.91         “TERM”  SHALL MEAN THE TERM OF THIS AGREEMENT AS IT MAY BE EXTENDED OR TERMINATED.   1.92         “TRANSACTION DOCUMENTS”  SHALL MEAN, COLLECTIVELY, THIS AGREEMENT, THE PURCHASE AGREEMENT, ANY AGREEMENT, INSTRUMENT, INDEMNITY OR UNDERTAKING EXECUTED AND DELIVERED BY AN IHG PARTY IN CONNECTION WITH THE CLOSING, THE GUARANTY AND THE COLLATERAL AGENCY AGREEMENT.   1.93         “TRANSFERRED HOTELS”  SHALL HAVE THE MEANING GIVEN SUCH TERM IN SECTION 4.4.   1.94         “UNIFORM SYSTEM OF ACCOUNTS”  SHALL MEAN THE UNIFORM SYSTEM OF ACCOUNTS FOR THE LODGING INDUSTRY, NINTH REVISED EDITION, 1996, AS PUBLISHED BY THE EDUCATIONAL INSTITUTE OF THE AMERICAN HOTEL AND MOTEL ASSOCIATION, AS IT MAY BE AMENDED FROM TIME TO TIME.   1.95         “ULTIMATE PARENT”  SHALL MEAN, WITH RESPECT TO ANY PERSON, EACH PARENT OF SUCH PERSON WHO IN TURN HAS NO PARENT.   1.96         “UNSUITABLE FOR ITS PERMITTED USE”  SHALL MEAN WITH RESPECT TO A HOTEL, A STATE OR CONDITION OF SUCH HOTEL SUCH THAT (A) FOLLOWING ANY DAMAGE OR DESTRUCTION INVOLVING SUCH HOTEL, SUCH HOTEL CANNOT BE OPERATED IN THE GOOD FAITH JUDGMENT OF MANAGER OR OWNER ON A COMMERCIALLY PRACTICABLE BASIS AND IT CANNOT REASONABLY BE EXPECTED TO BE RESTORED TO SUBSTANTIALLY THE SAME CONDITION AS EXISTED IMMEDIATELY BEFORE SUCH DAMAGE OR DESTRUCTION AND OTHERWISE AS REQUIRED UNDER ARTICLE 15 HEREOF, USING ONLY THE NET PROCEEDS OF INSURANCE OBTAINED IN CONNECTION THEREWITH AND OTHER FUNDS THAT OWNER OR MANAGER ELECT TO PROVIDE PURSUANT TO THE TERMS OF ARTICLE 15 HEREOF WITHIN TWELVE (12) MONTHS FOLLOWING SUCH DAMAGE OR DESTRUCTION OR SUCH SHORTER PERIOD OF TIME AS TO WHICH BUSINESS INTERRUPTION INSURANCE IS AVAILABLE TO COVER AMOUNTS PAYABLE TO OWNER HEREUNDER AND OTHER COSTS RELATED TO THE HOTEL FOLLOWING SUCH DAMAGE OR DESTRUCTION, OR (B) AS THE RESULT OF A PARTIAL TAKING BY CONDEMNATION, SUCH HOTEL CANNOT BE OPERATED, IN THE GOOD FAITH JUDGMENT OF MANAGER OR OWNER ON A COMMERCIALLY PRACTICABLE BASIS IN LIGHT OF THEN EXISTING CIRCUMSTANCES.   1.97         “WORKING CAPITAL”  SHALL MEAN FUNDS THAT ARE USED (OR HELD FOR USE) IN THE DAY-TO-DAY OPERATION OF THE BUSINESS OF THE HOTELS, INCLUDING, WITHOUT LIMITATION, CHANGE AND PETTY CASH FUNDS, AMOUNTS DEPOSITED IN OPERATING BANK ACCOUNTS, RECEIVABLES, AMOUNTS DEPOSITED IN PAYROLL ACCOUNTS, PREPAID EXPENSES AND FUNDS REQUIRED TO MAINTAIN OPERATING SUPPLIES, LESS ACCOUNTS PAYABLE AND ACCRUED CURRENT LIABILITIES, EXCLUSIVE OF ANY FUNDS IN THE RESERVE ACCOUNT.   1.98         “YEARLY BUDGET”  SHALL MEAN, WITH RESPECT TO EACH HOTEL, THE ANNUAL OPERATING BUDGET OF SUCH HOTEL, COVERING A FISCAL YEAR, AS PREPARED BY MANAGER IN ACCORDANCE WITH THE ACCOUNTING PRINCIPLES AND APPROVED BY OWNER. SUCH BUDGET SHALL INCLUDE AN OPERATING   12 --------------------------------------------------------------------------------   BUDGET, A BUSINESS PLAN AND A CAPITAL REPLACEMENT BUDGET. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE YEARLY BUDGET SHALL INCLUDE A PROJECTION OF THE ESTIMATED FINANCIAL RESULTS OF THE OPERATION OF EACH HOTEL FOR THE FISCAL YEAR. SUCH PROJECTION SHALL PROJECT THE ESTIMATED GROSS REVENUES, DEPARTMENTAL PROFITS, OPERATING COSTS AND OPERATING PROFIT FOR THE FISCAL YEAR FOR EACH HOTEL.   ARTICLE 2   SCOPE OF AGREEMENT   2.1           ENGAGEMENT OF MANAGER. SUBJECT TO THE TERMS OF THIS AGREEMENT, OWNER HEREBY GRANTS TO MANAGER THE SOLE AND EXCLUSIVE RIGHT TO SUPERVISE AND DIRECT THE MANAGEMENT AND OPERATION OF THE HOTELS FOR THE TERM. MANAGER HEREBY ACCEPTS SUCH GRANT AND AGREES THAT IT WILL CONTROL, SUPERVISE AND DIRECT THE MANAGEMENT AND OPERATION OF THE HOTELS, IN AN EFFICIENT AND ECONOMICAL MANNER CONSISTENT WITH STANDARDS PREVAILING IN WELL MANAGED HOTELS SIMILAR TO THE HOTELS, INCLUDING ALL ACTIVITIES IN CONNECTION THEREWITH WHICH ARE CUSTOMARY AND USUAL TO SUCH AN OPERATION (ALL OF THE FOREGOING, COLLECTIVELY, THE “OPERATING STANDARDS”). SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, THE OPERATING STANDARDS AND THE BRAND STANDARDS, MANAGER SHALL HAVE THE RIGHT TO DETERMINE OPERATING POLICY, STANDARDS OF OPERATION, QUALITY OF SERVICE AND ANY OTHER MATTERS AFFECTING CUSTOMER RELATIONS OR MANAGEMENT AND OPERATION OF THE HOTELS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, AND IN ADDITION TO THE OTHER FUNCTIONS TO BE PERFORMED BY MANAGER PURSUANT TO THIS AGREEMENT, MANAGER SHALL, IN CONNECTION WITH THE HOTELS AND IN ACCORDANCE WITH THE BRAND STANDARDS, THE OPERATING STANDARDS AND THE TERMS OF THIS AGREEMENT, PERFORM EACH OF THE FOLLOWING FUNCTIONS, PROVIDED, HOWEVER, EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, THE COSTS AND EXPENSES OF PERFORMING THE FOLLOWING FUNCTIONS SHALL BE OPERATING COSTS:   (A)           ESTABLISH AND REVISE, AS NECESSARY, ADMINISTRATIVE POLICIES AND PROCEDURES, INCLUDING POLICIES AND PROCEDURES FOR THE CONTROL OF REVENUE AND EXPENDITURES, FOR THE PURCHASING OF SUPPLIES AND SERVICES, FOR THE CONTROL OF CREDIT, AND FOR THE SCHEDULING OF MAINTENANCE, AND VERIFY THAT THE FOREGOING PROCEDURES ARE OPERATING IN A SOUND MANNER.   (B)           MANAGE EXPENDITURES TO REPLENISH OPERATING SUPPLIES AND OPERATING EQUIPMENT, MAKE PAYMENTS ON ACCOUNTS PAYABLE AND COLLECT ACCOUNTS RECEIVABLE.   (C)           ARRANGE FOR AND SUPERVISE PUBLIC RELATIONS AND ADVERTISING AND PREPARE MARKETING PLANS.   (D)           PROCURE ALL OPERATING SUPPLIES AND REPLACEMENT OPERATING EQUIPMENT.   (E)           PROVIDE, OR CAUSE TO BE PROVIDED, RISK MANAGEMENT SERVICES RELATING TO THE TYPES OF INSURANCE REQUIRED TO BE OBTAINED OR PROVIDED BY MANAGER UNDER THIS AGREEMENT.   (F)            REASONABLY COOPERATE (PROVIDED THAT EXCEPT AS HEREIN EXPRESSLY PROVIDED MANAGER SHALL NOT BE OBLIGATED TO ENTER INTO ANY AMENDMENTS OF THIS AGREEMENT OR, UNLESS OWNER AGREES TO REIMBURSE MANAGER THEREFORE, TO INCUR ANY MATERIAL EXPENSE INCLUDING ANY INTERNAL EXPENSES) IN ANY ATTEMPT(S) TO: (I) EFFECTUATE A SALE OR OTHER TRANSFER OF A HOTEL   13 --------------------------------------------------------------------------------   SUBJECT TO THE TERMS OF SECTIONS 4.4 AND 4.5 OF THIS AGREEMENT; OR (II) TO OBTAIN ANY AUTHORIZED MORTGAGE.   (G)           NEGOTIATE, ENTER INTO AND ADMINISTER SERVICE CONTRACTS AND LICENSES FOR THE OPERATION OF THE HOTELS, INCLUDING, TO THE EXTENT APPROPRIATE, CONTRACTS AND LICENSES FOR HEALTH AND SAFETY SYSTEMS MAINTENANCE, ELECTRICITY, GAS, TELEPHONE, CLEANING, ELEVATOR AND BOILER MAINTENANCE, AIR CONDITIONING MAINTENANCE, LAUNDRY AND DRY CLEANING, MASTER TELEVISION SERVICE, USE OF COPYRIGHTED MATERIALS (SUCH AS MUSIC AND VIDEOS), ENTERTAINMENT AND OTHER SERVICES AS MANAGER DEEMS ADVISABLE.   (H)           NEGOTIATE, ENTER INTO AND ADMINISTER CONTRACTS FOR THE USE OF BANQUET AND MEETING FACILITIES AND GUEST ROOMS BY GROUPS AND INDIVIDUALS.   (I)            TAKE REASONABLE ACTION TO COLLECT AND INSTITUTE IN ITS OWN NAME OR IN THE NAME OF OWNER OR A HOTEL, IN EACH INSTANCE AS MANAGER IN ITS REASONABLE DISCRETION DEEMS APPROPRIATE, LEGAL ACTIONS OR PROCEEDINGS TO COLLECT CHARGES, RENT OR OTHER INCOME DERIVED FROM THE OPERATION OF THE HOTELS OR TO OUST OR DISPOSSESS GUESTS, TENANTS, MEMBERS OR OTHER PERSONS IN POSSESSION THEREFROM, OR TO CANCEL OR TERMINATE ANY LEASE, LICENSE OR CONCESSION AGREEMENT FOR THE BREACH THEREOF OR DEFAULT THEREUNDER BY THE TENANT, LICENSEE OR CONCESSIONAIRE.   (J)            MAKE REPRESENTATIVES AVAILABLE TO CONSULT WITH AND ADVISE OWNER OR OWNER’S DESIGNEE AT OWNER’S REASONABLE REQUEST CONCERNING POLICIES AND PROCEDURES AFFECTING THE CONDUCT OF THE BUSINESS OF THE HOTELS.   (K)           COLLECT AND ACCOUNT FOR AND REMIT TO GOVERNMENTAL AUTHORITIES ALL APPLICABLE EXCISE, SALES, OCCUPANCY AND USE TAXES OR SIMILAR GOVERNMENTAL CHARGES COLLECTED BY OR AT THE HOTELS DIRECTLY FROM GUESTS, MEMBERS OR OTHER PATRONS, OR AS PART OF THE SALES PRICE OF ANY GOODS, SERVICES OR DISPLAYS, SUCH AS GROSS RECEIPTS, ADMISSION OR SIMILAR OR EQUIVALENT TAXES, DUTIES, LEVIES OR CHARGES.   (L)            KEEP OWNER ADVISED OF EVENTS WHICH MIGHT REASONABLY BE EXPECTED TO HAVE A MATERIAL EFFECT ON THE FINANCIAL PERFORMANCE OR VALUE OF ANY HOTEL.   (M)          TO THE EXTENT IN MANAGER’S CONTROL, OBTAIN AND MAINTAIN ALL APPROVALS NECESSARY TO USE AND OPERATE THE HOTELS IN ACCORDANCE WITH THE BRAND STANDARDS, OPERATING STANDARDS AND LEGAL REQUIREMENTS.   (N)           PERFORM SUCH OTHER TASKS WITH RESPECT TO THE HOTELS AS ARE GENERALLY PERFORMED BY MANAGERS OF SIMILAR HOTELS CONSISTENT WITH THE OPERATING STANDARDS AND THE BRAND STANDARDS.   2.2           ADDITIONAL SERVICES. ANY FEES FOR SERVICES NOT INCLUDED IN THE MANAGEMENT FEES FOR THE HOTELS SHALL BE CONSISTENT WITH FEES ESTABLISHED FOR SIMILAR TYPES OF HOTELS MANAGED BY MANAGER OR ITS AFFILIATES. ANY DISPUTES UNDER THIS SECTION 2.2 SHALL BE RESOLVED BY ARBITRATION.   14 --------------------------------------------------------------------------------   2.3           USE OF HOTELS. MANAGER SHALL NOT USE, AND SHALL EXERCISE COMMERCIALLY REASONABLE EFFORTS TO PREVENT THE USE OF, THE HOTELS AND OWNER’S AND MANAGER’S PERSONAL PROPERTY USED IN CONNECTION WITH THE HOTELS, IF ANY, FOR ANY UNLAWFUL PURPOSE. MANAGER SHALL NOT COMMIT, AND SHALL USE COMMERCIALLY REASONABLE EFFORTS TO PREVENT THE COMMISSION OF, ANY WASTE AT THE HOTELS. MANAGER SHALL NOT USE, AND SHALL USE COMMERCIALLY REASONABLE EFFORTS TO PREVENT THE USE OF, THE HOTELS IN SUCH A MANNER AS WILL CONSTITUTE AN UNLAWFUL NUISANCE THEREON OR THEREIN. MANAGER SHALL USE COMMERCIALLY REASONABLE EFFORTS TO PREVENT THE USE OF THE HOTELS IN SUCH A MANNER AS MIGHT REASONABLY BE EXPECTED TO IMPAIR OWNER’S OR PURCHASER’S TITLE THERETO OR ANY PORTION THEREOF OR MIGHT REASONABLY BE EXPECTED TO GIVE RISE FOR A CLAIM OR CLAIMS FOR ADVERSE USE OR ADVERSE POSSESSION BY THE PUBLIC, AS SUCH, OR OF IMPLIED DEDICATION OF THE HOTELS OR ANY PORTION THEREOF.   2.4           RIGHT TO INSPECT. MANAGER SHALL PERMIT OWNER AND ITS AUTHORIZED REPRESENTATIVES TO INSPECT OR SHOW THE HOTELS DURING USUAL BUSINESS HOURS UPON NOT LESS THAN TWENTY FOUR (24) HOURS’ NOTICE, PROVIDED THAT ANY INSPECTION BY PURCHASER OR ITS REPRESENTATIVES SHALL NOT UNREASONABLY INTERFERE WITH THE USE AND OPERATION OF THE HOTELS AND FURTHER PROVIDED THAT IN THE EVENT OF AN EMERGENCY AS DETERMINED BY PURCHASER IN ITS REASONABLE DISCRETION, PRIOR NOTICE SHALL NOT BE REQUIRED.   2.5           RIGHT OF OFFSET. MANAGER SHALL NOT OFFSET AGAINST ANY AMOUNTS OWED TO OWNER; PROVIDED, HOWEVER, MANAGER MAY OFFSET AMOUNTS WHICH OWNER HAS FAILED TO FUND IN VIOLATION OF SECTION 5.2(C) AGAINST THE AMOUNTS OWED TO OWNER HEREUNDER PROVIDED THAT AFTER GIVING EFFECT TO SUCH OFFSET THERE SHALL STILL BE PAID TO OWNER AN AMOUNT SUFFICIENT TO PAY REGULARLY SCHEDULED PAYMENTS OF INTEREST AND PRINCIPAL UNDER ANY LOAN OR OTHER DEBT SECURED BY AN AUTHORIZED MORTGAGE AND ATTRIBUTABLE TO THE PLEDGED HOTELS.   2.6           CONDITION OF THE HOTELS. MANAGER ACKNOWLEDGES RECEIPT AND DELIVERY OF POSSESSION OF EACH HOTEL, AND MANAGER ACCEPTS EACH HOTEL IN ITS “AS IS” CONDITION AS OF THE EFFECTIVE DATE, SUBJECT TO THE RIGHTS OF PARTIES IN POSSESSION, THE EXISTING TITLE, INCLUDING ALL COVENANTS, CONDITIONS, RESTRICTIONS, RESERVATIONS, MINERAL LEASES, EASEMENTS AND OTHER MATTERS OF RECORD OR THAT ARE VISIBLE OR APPARENT ON THE HOTELS, ALL APPLICABLE LEGAL REQUIREMENTS, AND SUCH OTHER MATTERS WHICH WOULD BE DISCLOSED BY AN INSPECTION OF THE HOTELS AND THE RECORD TITLE THERETO OR BY AN ACCURATE SURVEY THEREOF. MANAGER REPRESENTS THAT:  IT HAS INSPECTED THE HOTELS INCLUDING THE FF&E AND ALL OF THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IN COMPLIANCE WITH THE BRAND STANDARDS IN ALL MATERIAL RESPECTS; EXCEPT FOR CAPITAL REPLACEMENT TO BE MADE FROM TIME TO TIME USING FUNDS TO BE DEPOSITED IN THE RESERVE ACCOUNT PURSUANT TO SECTION 5.2(A), MANAGER CURRENTLY DOES NOT ANTICIPATED THE NEED TO MAKE CAPITAL REPLACEMENTS DURING THE FIRST FIVE YEARS OF THE TERM (PROVIDED, HOWEVER, SUCH REPRESENTATION IS NOT A GUARANTY OR WARRANTY THAT NO SUCH CAPITAL REPLACEMENT WILL BE REQUIRED); AND IT IS NOT RELYING ON ANY REPRESENTATION OR WARRANTY OF OWNER, PURCHASER OR ANY OF THEIR AGENTS OR EMPLOYEES WITH RESPECT TO ANY OF THE MATTERS SET FORTH IN THIS SECTION. MANAGER WAIVES ANY CLAIM OR ACTION AGAINST OWNER AND PURCHASER WITH RESPECT TO THE CONDITION OF THE HOTELS.   15 --------------------------------------------------------------------------------   PURCHASER AND OWNER MAKE NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE HOTELS OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT.   ARTICLE 3   TERM AND RENEWALS   3.1           TERM. THE TERM OF THIS AGREEMENT SHALL BE FOR A PERIOD BEGINNING ON THE EFFECTIVE DATE AND CONTINUING FOR THE INITIAL TERM AND ANY EXTENSION OF THE TERM HEREOF IN ACCORDANCE WITH THE PROVISION OF THIS AGREEMENT, UNLESS SOONER TERMINATED AS HEREINAFTER PROVIDED.   3.2           RENEWAL TERM. THE TERM MAY BE EXTENDED, AT MANAGER’S OPTION, FOR UP TO TWO (2) CONSECUTIVE PERIODS (EACH, A “RENEWAL TERM”) OF TWELVE (12) YEARS AND SIX (6) MONTHS EACH ON NOT LESS THAN TWO (2) YEARS’ PRIOR NOTICE TO OWNER. IN THE EVENT MANAGER FAILS TO GIVE NOTICE OF ITS ELECTION NOT TO EXERCISE EITHER OF ITS OPTIONS TO EXTEND THE TERM ON OR BEFORE THE DATE WHICH IS THE DAY PRIOR TO THE DATE THAT IS TWO (2) YEARS PRIOR TO THE THEN EXPIRATION DATE, MANAGER SHALL BE DEEMED TO HAVE EXERCISED THE APPLICABLE EXTENSION OPTION. THE TERMS AND PROVISIONS OF THIS AGREEMENT WILL REMAIN IN EFFECT AS STATED HEREIN DURING ANY RENEWAL TERM EXCEPT THAT MANAGER SHALL HAVE NO RIGHT TO EXTEND THE TERM BEYOND THE RENEWAL TERMS HEREIN PROVIDED.   3.3           OWNER’S TERMINATION RIGHT AT END OF TERM. IF MANAGER, GIVES NOTICE OF ITS ELECTION NOT TO EXTEND OR IF MANAGER SHALL HAVE NO FURTHER RIGHT TO EXTEND THE TERM, AT ANY TIME DURING THE LAST TWO YEARS OF THE TERM, OWNER MAY TERMINATE THIS AGREEMENT ON NOT LESS THAN THIRTY (30) DAYS’ PRIOR WRITTEN NOTICE.   ARTICLE 4   TITLE TO HOTEL   4.1           COVENANTS OF TITLE. DURING THE TERM, PROVIDED NO MANAGER DEFAULT EXISTS, MANAGER SHALL HAVE THE RIGHT PEACEABLY AND QUIETLY TO OPERATE THE HOTELS IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, FREE FROM INTERFERENCE, DISTURBANCE AND EVICTION BY OWNER OR PURCHASER OR BY ANY OTHER PERSON OR PERSONS CLAIMING BY, THROUGH OR UNDER OWNER OR PURCHASER, SUBJECT ONLY TO TERMINATION OF THIS AGREEMENT AS HEREIN PROVIDED. EXCEPT AS MAY OTHERWISE BE PROVIDED HEREIN, OWNER, AT OWNER’S OWN EXPENSE (AND NOT AS AN OPERATING COST), SHALL PROSECUTE ALL APPROPRIATE ACTIONS, JUDICIAL OR OTHERWISE, REQUIRED TO ASSURE SUCH QUIET AND PEACEABLE OPERATION BY MANAGER AND SHALL PAY AND DISCHARGE ANY RENTAL OBLIGATIONS UNDER THE LEASE. WITHOUT MANAGER’S WRITTEN CONSENT, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD, OWNER SHALL NOT ENTER INTO AN AGREEMENT, COVENANT OR ENCUMBRANCE AFFECTING TITLE TO THE HOTELS EXCEPT IN CONNECTION WITH AUTHORIZED MORTGAGES AND SALES OR TRANSFERS OF THE HOTELS NOT PROHIBITED HEREBY.   16 --------------------------------------------------------------------------------   4.2           NON-DISTURBANCE. PURCHASER AGREES THAT IN THE EVENT THE LEASE TERMINATES PRIOR TO EXPIRATION OR EARLIER TERMINATION OF THE TERM, SO LONG AS (I) THERE EXISTS NO UNCURED MANAGER EVENT OF DEFAULT AND (II) OWNER IS NOT OTHERWISE ENTITLED TO TERMINATE THIS AGREEMENT: (A) MANAGER SHALL NOT BE DISTURBED IN ITS RIGHTS UNDER THIS AGREEMENT BY PURCHASER; (B) PURCHASER SHALL ASSUME THE OBLIGATIONS OF OWNER UNDER THIS AGREEMENT; AND (C) MANAGER SHALL ATTORN TO PURCHASER AND RECOGNIZE PURCHASER AS THE “OWNER” UNDER THIS AGREEMENT. PURCHASER SHALL HAVE THE RIGHT TO ASSIGN ALL OF ITS RIGHT, TITLE AND INTEREST IN, TO AND UNDER THIS AGREEMENT TO A NEW TENANT (A “SUBSTITUTE TENANT”) TO WHICH PURCHASER SHALL LEASE THE HOTELS (PURSUANT TO A LEASE WHICH IMPOSES NO GREATER RISKS, OBLIGATIONS, DUTIES OR LIABILITY ON MANAGER THAN THE LEASE (ASSUMING THE SAME HAD NOT BEEN TERMINATED) AND FOR A TERM EQUAL TO THE UNEXPIRED TERM OF THIS AGREEMENT) WHICH SUBSTITUTE TENANT SHALL EXPRESSLY ASSUME ALL OF THE OWNER’S OBLIGATIONS UNDER THIS AGREEMENT. UPON SUCH ASSIGNMENT TO, AND ASSUMPTION BY, A SUBSTITUTE TENANT, PURCHASER SHALL BE RELIEVED OF ALL FUTURE OBLIGATIONS ARISING UNDER THIS AGREEMENT (OTHER THAN ANY EXPRESSLY IMPOSED ON PURCHASER PURSUANT TO SECTIONS 4.2 THROUGH AND INCLUDING 4.7), MANAGER SHALL ATTORN TO THE SUBSTITUTE TENANT AND RECOGNIZE THE SUBSTITUTE TENANT AS THE “OWNER” UNDER THIS AGREEMENT, AND THE TERM “LEASE” AS USED IN THIS AGREEMENT SHALL BE DEEMED TO REFER TO SUCH LEASE BETWEEN PURCHASER AND THE SUBSTITUTE TENANT.   4.3           FINANCING.   (A)           PURCHASER SHALL BE ENTITLED TO ENCUMBER THE HOTELS OR ANY OF THEM WITH ONE OR MORE AUTHORIZED MORTGAGES WHICH IS EXPRESSLY SUBORDINATE TO THIS AGREEMENT OR IN CONNECTION WITH WHICH THE FOLLOWING TERMS AND CONDITIONS ARE SATISFIED:   (i)            loan or other debt secured by such Authorized Mortgage shall not be cross-collateralized with other property or hotels which are not managed or franchised by Manager, IHG or their respective Affiliates;   (ii)           the principal amount secured by such Authorized Mortgage shall not exceed the sum of seventy five percent (75%) (or, if less than four (4) Hotels secure such principal amount, sixty five percent (65%)) of the sum of the fair market value as of the date of the granting of such Authorized Mortgage of the Pledged Hotels and the other properties securing such principal amount;   (iii)          as of the date of the granting of such Authorized Mortgage, the Debt Service Coverage Ratio associated with such loan or debt secured thereby shall not be less than (i)1.4 if fewer than four (4) Hotels secure such loan or other debt or (ii) 1.3 if four (4) or more Hotels secure such loan or other debt; and   (iv)          the holder of such Authorized Mortgage shall execute and deliver to Manager (Manager agreeing to likewise execute and deliver to such holder) a so-called subordination, non-disturbance and attornment agreement which shall provide that:   17 --------------------------------------------------------------------------------   (A)  this Agreement and Manager’s rights hereunder are subject and subordinate to the Authorized Mortgage, the lien thereof, the rights of the holder thereof and to any and all advances made thereunder, interest thereon or costs incurred in connection therewith;   (B)   so long as this Agreement is in full force and effect and there exists no Manager Event of Default, Manager’s rights under this Agreement shall not be disturbed by reason of such subordination or by reason of foreclosure of such Authorized Mortgage or receipt of deed in lieu of foreclosure;   (C)   Manager shall attorn to the holder or the purchaser at any such foreclosure or the grantee of any such deed (each, a “Successor Purchaser”);   (D)  in the event of such attornment, the terms of this Agreement binding on Purchaser and Manager shall continue in full force and effect as a direct agreement between such Successor Purchaser and Manager, upon all the terms, conditions and covenants set forth herein, except that the Successor Purchaser shall not be (1) bound by any payment of Owner’s Priority, Owner’s Percentage Priority or the Residual Distribution in advance of when due; (2) bound by any amendment or modification of this Agreement made after the date that Manager first had written notice of such Authorized Mortgage without the consent of the holder thereof; (3) liable in any way to Manager for any act or omission, neglect or default on the part of Purchaser or Owner under this Agreement; (4) obligated to perform any work or improvements to be done by Purchaser or Owner or to make any advances except for those advances to be made pursuant to Section 5.2(c) from and after the date on which such Successor Purchaser acquired the Hotel(s); or (5) subject to any counterclaim or setoff which theretofore accrued to Manager against Purchaser or Owner;   (E)   In the event of a casualty or condemnation affecting any Pledged Hotel which does not result in the termination of this Agreement with respect to such Pledged Hotel, the net insurance proceeds or Award shall be applied to the restoration of such Hotel as herein provided; and   (F)   Such other terms or are customary for similar agreements.   (B)           IN THE EVENT LESS THAN ALL OF THE HOTELS ARE TO SECURE LOAN OR OTHER DEBT SECURED BY AN AUTHORIZED MORTGAGE, OWNER SHALL HAVE THE RIGHT TO CAUSE THE PLEDGED HOTELS TO BE MANAGED PURSUANT TO A SEPARATE MANAGEMENT AGREEMENT WHICH AGREEMENT SHALL BE FOR A TERM EQUAL TO THE UNEXPIRED PORTION OF THE TERM AND OTHERWISE ON SUBSTANTIALLY THE SAME TERMS OF THIS AGREEMENT EXCEPT AS OTHERWISE PROVIDED HEREIN PROVIDED THAT THE PLEDGED HOTELS IN THE AGGREGATE AND THE REMAINING HOTELS IN THE AGGREGATE SHALL HAVE PRIORITY COVERAGE RATIOS FOR THE 12-MONTH PERIOD ENDING ON THE LAST DAY OF THE MONTH NEXT PRIOR TO THE DATE ON WHICH SUCH AUTHORIZED MORTGAGE IS GRANTED SUCH PRIORITY   18 --------------------------------------------------------------------------------   COVERAGE RATIOS ARE EQUAL TO EACH OTHER OR EQUAL TO, OR GREATER THAN, 1.3. IN CONNECTION WITH ENTERING INTO SUCH SEPARATE MANAGEMENT AGREEMENT, THE PARTIES SHALL MAKE APPROPRIATE ALLOCATIONS OF OWNER’S PRIORITY, AMOUNTS IN THE RESERVE ACCOUNT, THE DEPOSIT (BASED ON EXHIBIT C), THE WORKING CAPITAL, AND ANY OUTSTANDING ADVANCES MADE BY OWNER, MANAGER OR THEIR RESPECTIVE AFFILIATES SO THAT THE OBLIGATIONS ALLOCABLE TO THE HOTELS SUBJECT TO SUCH AUTHORIZED MORTGAGE SHALL NOT BE DUE FROM THE OTHER HOTELS AND VICE VERSA. THE ALLOCATION OF OWNER’S PRIORITY FOR EACH HOTEL SHALL BE PROPORTIONAL TO THE NOI OF SUCH HOTEL FOR THE THEN MOST RECENTLY ENDED TWELVE (12) MONTHS RELATIVE TO THE NOI OF ALL THE OTHER HOTELS FOR SUCH PERIOD. WITHOUT THE CONSENT OF MANAGER, THE HOLDER OF ANY AUTHORIZED MORTGAGE SHALL HAVE THE RIGHT TO ELECT TO BE SUBJECT AND SUBORDINATE TO THIS AGREEMENT, SUCH SUBORDINATION TO BE EFFECTIVE UPON SUCH TERMS AND CONDITIONS AS SUCH HOLDER MAY DIRECT WHICH ARE NOT INCONSISTENT WITH THE PROVISIONS HEREOF.   4.4           SALE OF A HOTEL. IN THE EVENT OF A SALE OR TRANSFER OF ANY HOTEL TO AN AFFILIATE OF PURCHASER, THIS AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT WITHOUT REGARD TO SUCH SALE OR TRANSFER. THE FOLLOWING SHALL APPLY EACH TIME PURCHASER SELLS OR OTHERWISE TRANSFERS LESS THAN ALL OF THE HOTELS OTHER THAN TO AN AFFILIATE:   (A)           SUBJECT TO THE TERMS OF SECTION 4.7 AND THE EXECUTION OR DELIVERY OF A NEW MANAGEMENT AGREEMENT AS PROVIDED BELOW, THIS AGREEMENT WITH RESPECT TO SUCH HOTEL(S) (THE “TRANSFERRED HOTELS”) SHALL BE TERMINATED EFFECTIVE AS OF THE DATE TITLE IS TRANSFERRED TO SUCH TRANSFERRED HOTELS.   (B)           SIMULTANEOUSLY WITH SUCH TERMINATION, MANAGER AND THE TRANSFEREE OF THE TRANSFERRED HOTELS OR OWNER (IF THE LEASE REMAINS IN FULL FORCE AND EFFECT WITH RESPECT TO THE TRANSFERRED HOTELS) OR ANY TENANT UNDER A NEW LEASE WITH RESPECT TO THE TRANSFERRED HOTELS (WHICH NEW LEASE SHALL HAVE A TERM EQUAL TO THE THEN UNEXPIRED TERM OF THE LEASE AND SHALL IMPOSE NO GREATER LIABILITY, RESPONSIBILITY, OR OBLIGATION ON MANAGER THAN THE LEASE) SHALL ENTER INTO A NEW MANAGEMENT AGREEMENT (A “NEW MANAGEMENT AGREEMENT”) WITH MANAGER ON SUBSTANTIALLY THE SAME TERMS AS THIS AGREEMENT EXCEPT AS OTHERWISE PROVIDED HEREIN FOR A TERM EQUAL TO THE UNEXPIRED PORTION OF THE TERM OF THIS AGREEMENT.   (C)           MANAGER, PURCHASER AND THE TRANSFEREE (OR ITS TENANT, ACTING REASONABLY, SHALL ALLOCATE AMOUNTS IN THE RESERVE ACCOUNT, THE DEPOSIT (BASED ON EXHIBIT C) AND THE WORKING CAPITAL BETWEEN THE TRANSFERRED HOTELS AND THE OTHER HOTELS. THE PARTIES SHALL ALSO MAKE REASONABLE ALLOCATIONS WITH RESPECT TO OWNER’S PRIORITY, AND ANY OUTSTANDING ADVANCES MADE BY OWNER, MANAGER OR THEIR RESPECTIVE AFFILIATES. THE ALLOCATION OF OWNER’S PRIORITY FOR EACH HOTEL SHALL BE PROPORTIONAL TO THE NOI OF SUCH HOTEL FOR THE THEN MOST RECENTLY ENDED TWELVE (12) MONTHS RELATIVE TO THE NOI OF ALL THE OTHER HOTELS FOR SUCH PERIOD. AMOUNTS WHICH ARE ALLOCATED TO THE TRANSFERRED HOTELS SHALL BE TRANSFERRED TO THE TRANSFEREE THEREOF TO BE HELD BY MANAGER OR SUCH TRANSFEREE (OR ITS TENANT) PURSUANT TO THE NEW MANAGEMENT AGREEMENT.   (D)           FOLLOWING SUCH SALE OR TRANSFER, OWNER, ITS AFFILIATES AND THE HOTELS WHICH ARE NOT TRANSFERRED HOTELS SHALL HAVE NO RESPONSIBILITIES WITH RESPECT TO AMOUNTS THAT ARE SO   19 --------------------------------------------------------------------------------   TRANSFERRED AND THE TRANSFEREE, ITS TENANT AND THEIR AFFILIATES AND THE TRANSFERRED HOTELS SHALL HAVE NO RESPONSIBILITY WITH RESPECT TO AMOUNTS WHICH ARE NOT SO TRANSFERRED.   (E)           FROM AND AFTER THE CONSUMMATION OF SUCH SALE OR OTHER TRANSFER AND COMPLIANCE WITH THE TERMS HEREOF, THE TERM “HOTELS” AS USED HEREIN SHALL NOT INCLUDE THE TRANSFERRED HOTELS.   (F)            OWNER SHALL BE RESPONSIBLE TO CAUSE ITS AFFILIATES, ANY NEW TENANT AND THE TRANSFEREE TO EXECUTE AND DELIVER THE DOCUMENTS CONTEMPLATED BY THIS SECTION 4.4 TO BE EXECUTED AND DELIVERED BY THEM.   (G)           THE HOTELS WHICH ARE TO BE TRANSFERRED HOTELS IN THE AGGREGATE AND THE REMAINING HOTELS IN THE AGGREGATE SHALL HAVE A PRIORITY COVERAGE RATIOS FOR THE 12-MONTH PERIOD ENDING ON THE LAST DAY OF THE MONTH NEXT PRIOR TO THE DATE OF SUCH TRANSFER WHICH ARE EITHER (I) EQUAL TO EACH OTHER OR (II) EQUAL TO, OR GREATER THAN, 1.3.   (H)           NOT LESS THAN TEN (10) DAYS PRIOR TO COMMENCING TO MARKET ANY HOTEL FOR SALE, PURCHASER (UNLESS IT IS A SUCCESSOR PURCHASER) SHALL SOLICIT FROM MANAGER AN OFFER TO PURCHASE SUCH HOTEL.   4.5           SALE OF ALL THE HOTELS. IF PURCHASER SELLS OR OTHERWISE TRANSFERS ALL OF THE HOTELS TO A SINGLE TRANSFEREE IN A SINGLE TRANSACTION, (A) THE TRANSFEREE SHALL ASSUME PURCHASER’S OBLIGATIONS HEREUNDER AND (B) PURCHASER SHALL BE RELEASED AND RELIEVED FROM ANY AND ALL OBLIGATION HEREUNDER. IN CONNECTION WITH SUCH TRANSFER, OWNER MAY ASSIGN THIS AGREEMENT, TO THE TRANSFEREE OR ITS AFFILIATE, AND PROVIDED THE ASSIGNEE ASSUMES ALL OF OWNER’S OBLIGATIONS HEREUNDER THEREAFTER ACCRUING, OWNER SHALL BE RELEASED AND RELIEVED FROM ALL SUCH OBLIGATIONS.   4.6           THE LEASE. THE LEASE SHALL NOT BE AMENDED OR MODIFIED IN ANY WAY WHICH WOULD MATERIALLY INCREASE MANAGER’S OBLIGATIONS HEREUNDER OR MATERIALLY REDUCE ITS RIGHTS HEREUNDER. IN THE EVENT OF A CONFLICT BETWEEN THE TERMS HEREOF AND THE TERMS OF THE LEASE, THE TERMS HEREOF SHALL GOVERN.   4.7           RESTRICTED SALE. EXCEPT IN CONNECTION WITH A FORECLOSURE OF AN AUTHORIZED MORTGAGE, NEITHER PURCHASER NOR OWNER SHALL TRANSFER ITS INTEREST IN ANY HOTEL DIRECTLY OR INDIRECTLY, TO ANY PERSON WHICH: (I) IS IN CONTROL OF OR CONTROLLED BY PERSONS WHO HAVE BEEN CONVICTED OF FELONIES; (II) IS A COMPETITOR OR AN AFFILIATE OF A COMPETITOR; OR (III) LACKS THE FINANCIAL CAPABILITIES TO PERFORM OWNER’S OBLIGATIONS HEREUNDER.   ARTICLE 5   REQUIRED FUNDS   5.1           WORKING CAPITAL. MANAGER SHALL CONTRIBUTE TO THE WORKING CAPITAL FOR THE HOTELS AN AMOUNT REASONABLY SUFFICIENT TO PAY OPERATING COSTS FOR THE FIRST THIRTY (30) DAYS OF OPERATING OF THE HOTELS FOLLOWING THE EFFECTIVE DATE (THE “INITIAL WORKING CAPITAL”) AND (B) UPON THE EXECUTION AND DELIVERY HEREOF, PAY TO OWNER THE MONTHLY INSTALLMENT OF OWNER’S PRIORITY FOR THE MONTH IN WHICH THE EFFECTIVE DATE OCCURS. PROMPTLY AFTER THE   20 --------------------------------------------------------------------------------   MONTH IN WHICH THE EFFECTIVE DATE OCCURS, THE PARTIES SHALL AGREE ON THE AMOUNT OF THE INITIAL WORKING CAPITAL WHICH MANAGER SO CONTRIBUTED. AFTER THE FIRST THIRTY (30) DAYS OF OPERATING THE HOTELS, UPON WRITTEN NOTICE FROM MANAGER, OWNER SHALL ADVANCE ANY ADDITIONAL FUNDS, OVER AND ABOVE THE INITIAL WORKING CAPITAL, NECESSARY TO PAY OPERATING COSTS (BUT NOT OWNER’S PRIORITY) AS THEY COME DUE. ANY SUCH REQUEST BY MANAGER SHALL BE ACCOMPANIED BY A REASONABLY DETAILED EXPLANATION OF THE REASONS FOR THE REQUEST. ALL FUNDS SO ADVANCED FOR WORKING CAPITAL SHALL BE UTILIZED BY MANAGER TO PAY OPERATING COSTS AS THEY COME DUE. IF OWNER DOES NOT ADVANCE SUCH ADDITIONAL WORKING CAPITAL WITHIN TWO (2) BUSINESS DAYS AFTER NOTICE, MANAGER, AS ITS EXCLUSIVE REMEDY, SHALL HAVE THE RIGHT EITHER TO (I) ADVANCE SUCH ADDITIONAL WORKING CAPITAL OR (II) TERMINATE THIS AGREEMENT ON TEN (10) DAYS’ ADVANCE WRITTEN NOTICE TO OWNER; PROVIDED, HOWEVER, SUCH NOTICE OF TERMINATION SHALL BE VOID AB INITIO IF OWNER ADVANCES THE REQUESTED FUNDS NECESSARY TO PAY OPERATING COSTS PRIOR TO THE END OF THE TENTH (10TH) DAY AFTER THE RECEIPT OF SUCH TERMINATION NOTICE. IF MANAGER FAILS TO EITHER MAKE SUCH ADVANCE OR GIVE NOTICE OF TERMINATION WITHIN TEN (10) DAYS, AFTER THE EXPIRATION OF SUCH TWO (2) BUSINESS DAYS, OWNER MAY ELECT BY WRITTEN NOTICE TO MANAGER TO TERMINATE THIS AGREEMENT, WHICH TERMINATION SHALL BE EFFECTIVE TEN (10) DAYS AFTER THE DATE SUCH NOTICE IS GIVEN. UPON THE EXPIRATION OR EARLIER TERMINATION OF THE TERM, PROVIDED THERE IS NO UNCURED MANAGER DEFAULT, AFTER THE PAYMENT OF ALL OPERATING COSTS AND ALL AMOUNTS OWED TO OWNER, MANAGER SHALL BE ENTITLED TO RETAIN THE INITIAL WORKING CAPITAL.   5.2           RESERVE ACCOUNT.   (A)           MANAGER SHALL TRANSFER FROM THE BANK ACCOUNTS TO THE RESERVE ACCOUNT IN CASH ON OR BEFORE THE 25TH DAY OF EACH FISCAL MONTH, BEGINNING ON AUGUST 25, 2003 AND CONTINUING FOR EACH AND EVERY MONTH DURING THE TERM AN AGGREGATE AMOUNT EQUAL TO THE SUM OF EACH HOTEL’S RESERVE PERCENTAGE OF ITS GROSS REVENUES FOR THE PRIOR FISCAL MONTH. AMOUNTS IN THE RESERVE ACCOUNT ARE TO PAY FOR CAPITAL REPLACEMENTS UNDERTAKEN AFTER THE EFFECTIVE DATE REQUIRED TO MAINTAIN ANY AND ALL OF THE HOTELS IN ACCORDANCE WITH THE OPERATING STANDARDS AND THE BRAND STANDARDS; PROVIDED, HOWEVER, NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NO ADDITIONAL COST OR EXPENSE SHALL BE INCURRED OR PAID IN CONNECTION WITH ANY CAPITAL REPLACEMENTS MADE DURING THE LAST TWO (2) YEARS OF THE TERM TO THE EXTENT ATTRIBUTABLE SOLELY TO COMPLYING WITH THE BRAND STANDARDS. THE AMOUNTS SO PAID INTO THE RESERVE ACCOUNT SHALL BE RECORDED ON THE HOTELS’ BOOKS OF ACCOUNT AS “RESERVE FOR FF&E REPLACEMENTS.”  EXCEPT AS EXPRESSLY PROVIDED HEREIN, ANY EXPENDITURES FOR CAPITAL REPLACEMENTS DURING ANY FISCAL YEAR WHICH HAVE BEEN APPROVED IN THE YEARLY CAPITAL REPLACEMENTS BUDGET MAY BE MADE WITHOUT OWNER’S FURTHER APPROVAL AND, TO THE EXTENT AVAILABLE, MAY BE MADE BY MANAGER FROM THE RESERVE ACCOUNT. ANY AMOUNTS REMAINING IN THE RESERVE ACCOUNT AT THE CLOSE OF EACH FISCAL YEAR WILL BE CARRIED FORWARD AND RETAINED IN THE RESERVE ACCOUNT. ANY AND ALL PORTIONS OF THE HOTELS WHICH ARE SCRAPPED OR REMOVED IN CONNECTION WITH THE MAKING OF ANY MAJOR OR NON-MAJOR REPAIRS, RENOVATIONS, ADDITIONS, ALTERATIONS, IMPROVEMENTS, REMOVALS OR REPLACEMENTS AT THE HOTELS SHALL BE DISPOSED OF BY MANAGER AND ANY NET PROCEEDS THEREOF SHALL BE DEPOSITED IN THE RESERVE ACCOUNT AND NOT INCLUDED IN GROSS REVENUES. IN ADDITION, ANY PROCEEDS FROM THE SALE OF FF&E NO LONGER NECESSARY TO THE OPERATION OF THE HOTELS SHALL BE ADDED TO THE RESERVE ACCOUNT. MANAGER SHALL BE ENTITLED TO USE FUNDS IN THE RESERVE ACCOUNT TO MAKE   21 --------------------------------------------------------------------------------   CAPITAL REPLACEMENTS AT ANY AND ALL OF THE HOTELS REGARDLESS OF THE HOTEL FROM WHICH SUCH FUNDS ORIGINATE.   (B)           MANAGER SHALL BE THE ONLY PARTY ENTITLED TO WITHDRAW FUNDS FROM THE RESERVE ACCOUNT UNTIL A MANAGER DEFAULT SHALL OCCUR.   (C)           IF, AT ANY TIME, THE FUNDS IN THE RESERVE ACCOUNT SHALL BE INSUFFICIENT FOR CAPITAL REPLACEMENTS WHICH ARE SET FORTH IN THE CAPITAL REPLACEMENT BUDGET OR REQUIRED TO COMPLY WITH THE OPERATING STANDARDS, BRAND STANDARDS, INSURANCE REQUIREMENTS OR LEGAL REQUIREMENTS, MANAGER SHALL GIVE OWNER WRITTEN NOTICE THEREOF, WHICH NOTICE SHALL SET FORTH, IN REASONABLE DETAIL, THE NATURE OF THE REQUIRED ACTION, THE ESTIMATED COST THEREOF (INCLUDING THE AMOUNT WHICH IS IN EXCESS OF THE AMOUNT OF FUNDS IN SUCH RESERVE ACCOUNT) AND SUCH OTHER INFORMATION WITH RESPECT THERETO AS OWNER MAY REASONABLY REQUIRE. PROVIDED THAT THERE IS THEN NO UNCURED MANAGER DEFAULT, OWNER SHALL, WITHIN TWENTY (20) BUSINESS DAYS AFTER SUCH NOTICE, DISBURSE (OR CAUSE PURCHASER TO DISBURSE) SUCH REQUIRED FUNDS TO MANAGER FOR DEPOSIT INTO THE RESERVE ACCOUNT. IN SUCH EVENT OWNER’S PRIORITY SHALL BE ADJUSTED AS PROVIDED FOR HEREIN IN THE DEFINITION OF OWNER’S PRIORITY.   (D)           IF OWNER SHALL FAIL TO DISBURSE (OR CAUSE PURCHASER TO DISBURSE) FUNDS TO MANAGER FOR DEPOSIT INTO THE RESERVE ACCOUNT IN VIOLATION OF SECTION 5.2(C), WHICH FAILURE CONTINUES FOR FIVE (5) DAYS AFTER THE GIVING OF NOTICE FROM MANAGER TO OWNER, IN ADDITION TO MANAGER’S OTHER REMEDIES HEREUNDER OR UNDER THE HPT GUARANTY (AS DEFINED IN THE PURCHASE AGREEMENT) MANAGER SHALL BE ENTITLED, BUT NOT OBLIGATED, TO DEPOSIT IN THE RESERVE ACCOUNT THE AMOUNT OF FUNDS WHICH OWNER SO FAILED TO DISBURSE.   (E)           UPON THE EXPIRATION OR EARLIER TERMINATION OF THE TERM, MANAGER SHALL DISBURSE TO OWNER, OR AS OWNER SHALL DIRECT, ALL AMOUNTS REMAINING IN THE RESERVE ACCOUNT AFTER PAYMENTS OF ALL EXPENSES ON ACCOUNT OF CAPITAL REPLACEMENTS INCURRED BY MANAGER DURING THE TERM.   5.3           ADDITIONAL REQUIREMENTS FOR RESERVE. ALL EXPENDITURES FROM THE RESERVE ACCOUNT SHALL BE (AS TO BOTH THE AMOUNT OF EACH SUCH EXPENDITURE AND THE TIMING THEREOF) BOTH REASONABLE AND NECESSARY GIVEN THE OBJECTIVE THAT THE HOTELS WILL BE MAINTAINED AND OPERATED TO A STANDARD COMPARABLE TO COMPETITIVE PROPERTIES AND IN ACCORDANCE WITH THE OPERATING STANDARDS AND THE BRAND STANDARDS.   5.4           OWNERSHIP OF REPLACEMENTS. ALL CAPITAL REPLACEMENTS MADE PURSUANT TO THIS AGREEMENT AND ALL AMOUNTS IN THE RESERVE ACCOUNT, SHALL BE THE PROPERTY OF OWNER OR PURCHASER, AS APPLICABLE, AS PROVIDED UNDER THE LEASE.   5.5           MANAGER RESERVE ADVANCES. MANAGER SHALL HAVE THE RIGHT TO PROPOSE CERTAIN CAPITAL REPLACEMENTS NOT REQUIRED BY THE OPERATING STANDARDS OR THE BRAND STANDARDS WHICH MANAGER REASONABLY BELIEVES WOULD MAXIMIZE THE PROFIT POTENTIAL OF ONE OR MORE OF THE HOTELS. IF OWNER DOES NOT AGREE TO PROVIDE FUNDS FOR THE SAME, MANAGER SHALL HAVE THE RIGHT TO CONTRIBUTE TO THE RESERVE ACCOUNT THE COST OF SAME AND CAUSE SUCH CAPITAL REPLACEMENT TO BE MADE.   22 --------------------------------------------------------------------------------   5.6           NO ADDITIONAL CONTRIBUTIONS. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, OWNER SHALL NOT, UNDER ANY CIRCUMSTANCES, BE REQUIRED TO, OR PROVIDE FUNDS TO, BUILD OR REBUILD ANY IMPROVEMENT AT THE HOTEL, OR TO MAKE ANY REPAIRS, REPLACEMENTS, ALTERATIONS, RESTORATIONS OR RENEWALS OF ANY NATURE OR DESCRIPTION TO THE HOTEL, WHETHER ORDINARY OR EXTRAORDINARY, STRUCTURAL OR NONSTRUCTURAL, FORESEEN OR UNFORESEEN.   ARTICLE 6   BRAND STANDARDS AND MANAGER’S CONTROL   6.1           BRAND STANDARDS. MANAGER SHALL OPERATE EACH HOTEL AS A STAYBRIDGE SUITES HOTEL IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, THE BRAND STANDARDS AND THE OPERATING STANDARDS. MANAGER AND ITS AFFILIATES WHICH OWN THE SYSTEM MARKS AND BRAND STANDARDS RESERVE THE RIGHT TO REVISE AND AMEND THE SYSTEM MARKS OR BRAND STANDARDS FROM TIME TO TIME ON A NON-DISCRIMINATORY BASIS; PROVIDED, HOWEVER, AT ANY TIME WHILE OWNER AND ITS AFFILIATES OWN OR LEASE AT LEAST FIFTY PERCENT (50%) OF THE HOTELS COMPRISING THE BRAND, NO REVISION OR AMENDMENT TO THE BRAND STANDARDS OR SYSTEM MARKS SHALL BE MADE WITHOUT OWNER’S PRIOR WRITTEN APPROVAL, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD, CONDITIONED OR DELAYED AND SHALL BE DEEMED GIVEN IF NO WRITTEN OBJECTION THERETO IS GIVEN BY OWNER WITHIN TWENTY (20) DAYS AFTER RECEIPT OF A REQUEST FOR SUCH APPROVAL GIVEN BY MANAGER. OWNER ALSO AGREES THAT THE HOTEL WILL BE REQUIRED TO PARTICIPATE IN BRAND-WIDE OR AREA PROGRAMS THAT ARE IMPLEMENTED AFTER THE DATE HEREOF FROM TIME TO TIME BY MANAGER OR ITS AFFILIATES WITH RESPECT TO THE BRAND. THE ALLOCABLE COST OF PARTICIPATION IN SUCH PROGRAMS (TO THE EXTENT NOT DUPLICATIVE OF THE SERVICES FOR WHICH THE MANAGEMENT FEE IS BEING PAID, SHALL BE OPERATING COSTS OF THE HOTEL TO THE EXTENT THE SAME ARE CONSISTENT IN ALL MATERIAL RESPECTS WITH THE AMOUNTS FOR THE SAME INCLUDED IN THE APPLICABLE YEARLY BUDGET.   6.2           MANAGER’S CONTROL. SUBJECT TO THE TERMS OF THIS AGREEMENT, MANAGER SHALL HAVE UNINTERRUPTED CONTROL OVER THE OPERATION OF THE HOTEL. OWNER ACKNOWLEDGES THAT UNDER THIS AGREEMENT, OWNER DELEGATES ALL AUTHORITIES AND RESPONSIBILITIES FOR OPERATION OF THE HOTEL TO MANAGER PROVIDED, HOWEVER, MANAGER SHALL NOT BE ENTITLED TO MAKE ANY AGREEMENT OR COMMITMENT BINDING ON OWNER EXCEPT AS HEREIN EXPRESSLY PROVIDED. MANAGER SHALL BE SOLELY RESPONSIBLE FOR DETERMINING ROOM RATES, FOOD AND BEVERAGE MENU PRICES, CHARGES TO GUESTS FOR OTHER HOTEL SERVICES AND THE TERMS OF GUEST OCCUPANCY AND ADMITTANCE TO THE HOTELS, USE OF ROOMS FOR COMMERCIAL PURPOSES, POLICIES RELATING TO ENTERTAINMENT, LABOR POLICIES, PUBLICITY AND PROMOTION ACTIVITIES AND TECHNOLOGY SERVICES AND EQUIPMENT TO BE USED IN THE HOTEL. MANAGER SHALL REVIEW WITH OWNER FROM TIME TO TIME, AND DURING THE ANNUAL REVIEW OF THE YEARLY BUDGET, MATERIAL CHANGES IN POLICIES, PRACTICES AND PROCEDURES AND THEIR EFFECT ON THE FINANCIAL PERFORMANCE OF THE HOTELS.   6.3           ARBITRATION. ANY DISPUTE UNDER THIS ARTICLE 6 SHALL BE RESOLVED BY ARBITRATION.   23 --------------------------------------------------------------------------------   ARTICLE 7   OPERATION OF THE HOTEL   7.1           PERMITS. MANAGER, AS AN OPERATING COST, SHALL OBTAIN AND MAINTAIN IN ITS NAME (OR OWNER’S OR PURCHASER’S NAME TO THE EXTENT THE SAME IS REQUIRED BY APPLICABLE LEGAL REQUIREMENTS)IN FULL FORCE AND EFFECT ALL NECESSARY OPERATING LICENSES AND PERMITS, INCLUDING LIQUOR, BAR, RESTAURANT, SIGN AND HOTEL LICENSES, AS MAY BE REQUIRED FOR THE OPERATION OF THE HOTELS IN ACCORDANCE WITH THIS AGREEMENT, THE BRAND STANDARDS AND THE OPERATING STANDARDS. OWNER AND/OR PURCHASER SHALL REASONABLY COOPERATE WITH MANAGER IN OBTAINING ANY SUCH OPERATING LICENSES OR PERMITS. ANY COSTS OR EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES) INCURRED BY OWNER AND/OR PURCHASER IN CONNECTION THEREWITH SHALL CONSTITUTE OPERATING COSTS. MANAGER WILL USE REASONABLE EFFORTS TO COMPLY WITH ALL LEGAL REQUIREMENTS IMPOSED IN CONNECTION WITH ANY SUCH LICENSES AND PERMITS AND AT ALL TIMES USE COMMERCIALLY REASONABLE EFFORTS TO MANAGE THE HOTELS IN ACCORDANCE WITH, AND CAUSE THE HOTELS TO COMPLY WITH, SUCH LEGAL REQUIREMENTS, ANY OTHER LEGAL REQUIREMENTS AND INSURANCE REQUIREMENTS APPLICABLE TO ANY HOTEL.   7.2           EQUIPMENT AND SUPPLIES. MANAGER SHALL PROCURE PURSUANT TO THE YEARLY BUDGETS ALL SUCH OPERATING SUPPLIES AND OPERATING EQUIPMENT AS MANAGER DEEMS NECESSARY FOR THE NORMAL AND ORDINARY COURSE OF OPERATION OF THE HOTEL IN ACCORDANCE WITH THE BRAND STANDARDS AND OPERATING STANDARDS.   7.3           PERSONNEL.   (A)           ALL PERSONNEL EMPLOYED AT THE HOTELS WILL BE EMPLOYEES OF MANAGER. MANAGER WILL HIRE, SUPERVISE, DIRECT, DISCHARGE AND DETERMINE THE COMPENSATION, OTHER BENEFITS AND TERMS OF EMPLOYMENT OF ALL PERSONNEL WORKING IN THE HOTELS. MANAGER, IN THE EXERCISE OF REASONABLE DISCRETION AND BUSINESS JUDGMENT, WILL BE THE SOLE JUDGE OF THE FITNESS AND QUALIFICATIONS OF SUCH PERSONNEL AND IS VESTED WITH ABSOLUTE DISCRETION IN THE HIRING, SUPERVISING, DIRECTING, DISCHARGING AND DETERMINING THE COMPENSATION, OTHER BENEFITS AND TERMS OF EMPLOYMENT OF SUCH PERSONNEL. IN SUCH DISCRETION, MANAGER MAY ELECT TO STAFF CERTAIN FUNCTIONS AT OFFSITE OR REGIONAL LOCATIONS, OR TO PROVIDE EMPLOYEE BENEFITS ON A BRAND-WIDE OR OTHER MULTI-LOCATION BASIS AND SHALL EQUITABLY ALLOCATE THE EMPLOYEE COSTS AMONG THE HOTELS PARTICIPATING IN SUCH STAFFING OR BENEFITS. OWNER SHALL NOT INTERFERE WITH THE PERFORMANCE OF EMPLOYMENT DUTIES OF, OR GIVE ORDERS OR INSTRUCTIONS TO, ANY PERSONNEL EMPLOYED AT THE HOTEL. EXCEPT AS OTHERWISE PROVIDED HEREIN, OPERATING COSTS WILL INCLUDE ALL EXPENSES, COSTS OR CHARGES WHICH ARE ALLOCABLE TO THE TERM AND ARE RELATED TO OR INCIDENTAL TO ANY ON-SITE PERSONNEL EMPLOYED IN THE OPERATION OF THE HOTELS (INCLUDING, WITHOUT LIMITATION, SALARIES, WAGES, OTHER COMPENSATION, BENEFIT CONTRIBUTIONS AND PREMIUMS, NET OF AMOUNTS PAID BY HOTEL EMPLOYEES; STOP-LOSS INSURANCE PREMIUMS; GROUP HEALTH PLAN BENEFIT PAYMENTS IN EXCESS OF CONTRIBUTION AND PREMIUM AMOUNTS PAID BY HOTEL EMPLOYEES; PAY FOR VACATION, HOLIDAYS, SICK LEAVE AND OTHER LEAVES OF ABSENCE; WORKERS’ COMPENSATION PREMIUMS; WORKERS COMPENSATION BENEFIT PAYMENTS PAID BY MANAGER; REASONABLE AND CUSTOMARY ADMINISTRATIVE FEES AND TAXES; AND SEVERANCE BENEFITS APPLICABLE UNDER MANAGER’S THEN CURRENT HUMAN RESOURCES POLICIES).   (B)           MANAGER SHALL COMPLY WITH ALL LEGAL REQUIREMENTS PERTAINING TO LABOR RELATIONS AND THE PERSONNEL EMPLOYED BY IT PURSUANT TO THIS AGREEMENT. MANAGER SHALL NOT ENTER INTO ANY   24 --------------------------------------------------------------------------------   WRITTEN EMPLOYMENT AGREEMENTS WITH ANY PERSON WHICH PURPORT TO BIND THE OWNER WITHOUT OBTAINING OWNER’S CONSENT, WHICH CONSENT MAY BE WITHHELD IN OWNER’S SOLE AND ABSOLUTE DISCRETION. IF EITHER MANAGER OR OWNER SHALL BE REQUIRED, PURSUANT TO ANY SUCH LEGAL REQUIREMENT, TO RECOGNIZE A LABOR UNION OR TO ENTER INTO COLLECTIVE BARGAINING WITH A LABOR UNION, THE PARTY SO REQUIRED SHALL PROMPTLY NOTIFY THE OTHER. THE TERMS OF THIS SECTION 7.3(B) SHALL SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.   (C)                                  NO EMPLOYEE OF THE HOTELS SHALL RESIDE AT THE HOTELS WITHOUT THE PRIOR WRITTEN APPROVAL OF OWNER. NO PERSON SHALL BE GIVEN GRATUITOUS ACCOMMODATIONS OR SERVICES WITHOUT PRIOR APPROVAL OF OWNER EXCEPT IN ACCORDANCE WITH USUAL PRACTICES OF THE BRAND AND THE HOTEL AND TRAVEL INDUSTRY.   (D)           TO THE EXTENT CONSISTENT WITH THE APPLICABLE YEARLY BUDGET, OPERATING COST MAY INCLUDE UP TO $5,000 PER HOTEL, PER FISCAL YEAR FOR TRAVEL RELATED EXPENSE OF MANAGER’S SENIOR OPERATIONAL PERSONNEL IN CONNECTION WITH THEIR VISITS TO THE HOTEL. SAID $5,000 SHALL BE ADJUSTED EVERY JANUARY 1 STARTING IN 2005 TO REFLECT THE PERCENTAGE CHANGE IN THE CONSUMER PRICE INDEX SINCE THE PRIOR JANUARY 1.   7.4           SALES, MARKETING AND ADVERTISING. MANAGER SHALL AND/OR SHALL CAUSE ITS AFFILIATES TO:   (A)           ADVERTISE AND PROMOTE THE BUSINESS OF THE HOTELS;   (B)           INSTITUTE AND SUPERVISE A SALES AND MARKETING PROGRAM FOR THE HOTELS;   (C)           INCLUDE THE HOTELS IN MANAGER’S AND ITS AFFILIATES’ BRAND RELATED LOCAL, REGIONAL AND WORLDWIDE PROMOTIONAL AND ADVERTISING PROGRAMS;   (D)           REPRESENT THE HOTELS THROUGH MANAGER’S AND ITS AFFILIATES’ WORLDWIDE SALES OFFICES;   (E)            INCLUDE THE HOTELS IN THE HOTELS LOYALTY PROGRAM, PRESENTLY CALLED “PRIORITY CLUB”, INCLUDING, WITHOUT LIMITATION, INCLUSION OF THE HOTELS IN PROMOTIONAL MATERIALS DISTRIBUTED TO PARTICIPANTS OF SUCH PROGRAM;   (F)            COORDINATE THE HOTELS’ PARTICIPATION IN TRAVEL PROGRAMS MARKETED BY AIRLINES, TRAVEL AGENTS AND GOVERNMENT TOURIST DEPARTMENTS WHEN MANAGER DETERMINES SUCH PARTICIPATION TO BE ADVISABLE; AND   (G)           CAUSE THE HOTELS TO PARTICIPATE IN SALES AND PROMOTIONAL CAMPAIGNS AND ACTIVITIES INVOLVING COMPLIMENTARY ROOMS, FOOD AND BEVERAGES TO BONA FIDE TRAVEL AGENTS, TOURIST OFFICIALS AND AIRLINE REPRESENTATIVES WHERE MANAGER HAS DETERMINED THAT SUCH PARTICIPATION IS IN FURTHERANCE OF THE HOTELS’ BUSINESS AND IS CUSTOMARY IN THE TRAVEL INDUSTRY OR IN THE PRACTICES AND POLICIES OF MANAGER.   7.5           RESERVATION AND COMMUNICATION SERVICES. THE HOTELS SHALL BE INCLUDED AS PARTICIPATING HOTELS ON THE RESERVATION SYSTEM OPERATED BY MANAGER, ITS AFFILIATES OR AGENT(S) FOR THE BENEFIT OF STAYBRIDGE SUITES HOTELS FROM AND AFTER THE EFFECTIVE DATE. MANAGER WILL PROVIDE THE FOLLOWING SERVICES TO THE HOTELS THROUGH THE RESERVATION SYSTEM:   25 --------------------------------------------------------------------------------   (A)                                  ACCEPTANCE OF RESERVATIONS FOR THE HOTELS THROUGH THE RESERVATION SYSTEM FROM INDIVIDUAL CUSTOMERS AND GROUPS WHO CONTACT MANAGER (OR ITS AFFILIATES OR AGENTS) DIRECTLY OR THROUGH A REGIONAL RESERVATION OR SALE OFFICE OF MANAGER OR ITS AFFILIATES OR AGENTS;   (B)                                 ACCEPTANCE OF RESERVATIONS FOR THE HOTELS THROUGH OTHER HOTELS IN THE BRAND;   (C)                                  ACCEPTANCE OF RESERVATIONS FOR THE HOTELS THROUGH THE RESERVATION SYSTEMS OF OTHER PROVIDERS IN THE TRAVEL INDUSTRY, INCLUDING, WITHOUT LIMITATION, GLOBAL DISTRIBUTION SYSTEMS AND GENERAL SALES AGENCIES WITH WHICH MANAGER (OR ITS AFFILIATES) MAY HAVE AGREEMENTS FROM TIME TO TIME, WHEREBY THE RESERVATION SYSTEMS OF SUCH PARTIES ARE AVAILABLE FOR COMMUNICATION OF RESERVATIONS TO HOTELS IN THE BRAND;   (D)                                 ACCEPTANCE OF RESERVATIONS FOR THE HOTEL RECEIVED THROUGH ALTERNATIVE COMMUNICATIONS CHANNELS SUCH AS THE INTERNET; AND   (E)                                  ACCESS TO THE HOTELS OF THE COMMUNICATIONS NETWORK USED BY MANAGER (OR ITS AFFILIATES) FOR COMMUNICATION BETWEEN IT AND HOTELS IN THE BRAND.   7.6                                 MAINTENANCE AND REPAIRS. SUBJECT TO THE TERMS HEREOF, MANAGER SHALL PROMPTLY MAKE OR CAUSE TO BE MADE ALL REPAIRS, REPLACEMENTS, CORRECTIONS, MAINTENANCE, ALTERATIONS, IMPROVEMENTS, RENOVATIONS, INSTALLATIONS, REPLACEMENTS, RENEWALS AND ADDITIONS (COLLECTIVELY, “REPAIRS”) OF EVERY KIND AND NATURE, WHETHER INTERIOR OR EXTERIOR, STRUCTURAL OR NONSTRUCTURAL, ORDINARY OR EXTRAORDINARY, FORESEEN OR UNFORESEEN OR ARISING BY REASON OF A CONDITION EXISTING PRIOR TO THE COMMENCEMENT OF THE TERM (CONCEALED OR OTHERWISE) NECESSARY OR APPROPRIATE TO MAINTAIN THE HOTELS INCLUDING ALL PRIVATE ROADWAYS, SIDEWALKS AND CURBS LOCATED THEREON FOR WHICH OWNER, PURCHASER OR A HOTEL HAS RESPONSIBILITY IN GOOD ORDER AND REPAIR, REASONABLE WEAR AND TEAR EXCEPTED (WHETHER OR NOT THE NEED FOR SUCH REPAIRS OCCURS AS A RESULT OF OWNER’S OR MANAGER’S USE, ANY PRIOR USE, THE ELEMENTS OR THE AGE OF THE HOTELS, OR ANY PORTION THEREOF), AND IN CONFORMITY WITH LEGAL REQUIREMENTS, BRAND STANDARDS AND THE OPERATING STANDARDS. ALL REPAIRS SHALL BE MADE IN A GOOD, WORKMANLIKE MANNER, CONSISTENT WITH MANAGER’S AND INDUSTRY STANDARDS FOR LIKE HOTELS IN LIKE LOCALES, IN ACCORDANCE WITH ALL APPLICABLE LEGAL REQUIREMENTS. TO THE EXTENT SUCH REPAIRS CANNOT BE PERFORMED BY MANAGER’S ON-SITE STAFF, MANAGER SHALL ENTITLED TO CAUSE SUCH REPAIRS TO BE PERFORMED BY THIRD PARTIES OR, SUBJECT TO OWNER’S PRIOR APPROVAL, AFFILIATES OF MANAGER ACTING UNDER SEPARATE TECHNICAL SERVICES AGREEMENTS PURSUANT TO SECTION 11.1.   7.7                                 MATERIAL REPAIRS.   (A)                                  EXCEPT AS SET FORTH IN SECTION 7.7(B), PRIOR TO MAKING ANY MATERIAL REPAIR, MANAGER SHALL SUBMIT, TO OWNER IN WRITING, A PROPOSAL SETTING FORTH, IN REASONABLE DETAIL, THE PROPOSED MATERIAL REPAIR AND SHALL PROVIDE TO OWNER SUCH PLANS AND SPECIFICATIONS, AND SUCH PERMITS, LICENSES, CONTRACTS AND SUCH OTHER INFORMATION CONCERNING THE SAME AS OWNER MAY REASONABLY REQUEST. OWNER SHALL HAVE TWENTY (20) BUSINESS DAYS TO APPROVE OR DISAPPROVE ALL MATERIALS SUBMITTED TO OWNER, IN CONNECTION WITH ANY SUCH PROPOSAL; PROVIDED, HOWEVER, (I) OWNER MAY NOT WITHHOLD ITS APPROVAL OF A MATERIAL REPAIR WITH   26 --------------------------------------------------------------------------------   RESPECT TO SUCH ITEMS AS ARE (A) REQUIRED IN ORDER FOR THE HOTELS TO COMPLY WITH BRAND STANDARDS (EXCEPT DURING THE LAST TWO (2) YEARS OF THE TERM AS SET FORTH IN SECTION 5.2(A)) OR OPERATING STANDARDS; OR (B) REQUIRED BY REASON OF OR UNDER ANY INSURANCE REQUIREMENT OR LEGAL REQUIREMENT, OR OTHERWISE REQUIRED FOR THE CONTINUED SAFE AND ORDERLY OPERATION OF EACH HOTEL AND (II) OWNER’S APPROVAL SHALL NOT BE REQUIRED WITH RESPECT TO THE COST OF ANY PROPOSED MATERIAL REPAIR IF THE SAME IS SET FORTH AS A SEPARATE LINE ITEM IN THE THEN APPLICABLE CAPITAL REPLACEMENTS BUDGET. IF OWNER FAILS TO DISAPPROVE OF SUCH MATERIAL REPAIR WITHIN SUCH TWENTY (20) BUSINESS DAYS, OWNER SHALL BE DEEMED TO HAVE APPROVED SAME.   (B)                                 IN THE EVENT THAT A CONDITION SHOULD EXIST IN OR ABOUT THE HOTEL OF AN EMERGENCY NATURE OR IN VIOLATION OF APPLICABLE LEGAL REQUIREMENTS OR INSURANCE REQUIREMENTS, INCLUDING STRUCTURAL CONDITIONS, WHICH REQUIRES IMMEDIATE REPAIR NECESSARY TO PREVENT IMMINENT DANGER OR DAMAGE TO PERSONS OR PROPERTY, MANAGER IS HEREBY AUTHORIZED TO TAKE ALL STEPS AND TO MAKE ALL EXPENDITURES NECESSARY TO REPAIR AND CORRECT ANY SUCH CONDITION, REGARDLESS OF WHETHER PROVISIONS HAVE BEEN MADE IN THE APPLICABLE YEARLY BUDGET FOR ANY SUCH EXPENDITURES OR IF SUFFICIENT FUNDS EXIST IN THE RESERVE ACCOUNTS. UPON THE OCCURRENCE OF SUCH AN EVENT OR CONDITION, MANAGER WILL COMMUNICATE TO OWNER ALL AVAILABLE INFORMATION REGARDING SUCH EVENT OR CONDITION AS SOON AS REASONABLY POSSIBLE AND WILL TAKE REASONABLE STEPS TO OBTAIN OWNER’S APPROVAL BEFORE INCURRING SUCH EXPENSES. EXPENDITURES UNDER THIS SECTION 7.7(B) SHALL BE PAID FROM THE RESERVE ACCOUNT OR OTHERWISE PAID IN ACCORDANCE WITH SECTION 5.2(C) TO THE EXTENT SUCH EXPENDITURE IS PROPERLY CONSIDERED A CAPITAL REPLACEMENT.   (C)                                  NO CAPITAL REPLACEMENT SHALL BE MADE WHICH WOULD TIE-IN OR CONNECT A HOTEL WITH ANY OTHER IMPROVEMENTS ON PROPERTY ADJACENT TO SUCH HOTEL (AND NOT PART OF ITS SITE) INCLUDING, WITHOUT LIMITATION, TIE-INS OF BUILDINGS OR OTHER STRUCTURES OR UTILITIES (OTHER THAN CONNECTIONS TO PUBLIC OR PRIVATE UTILITIES) WITHOUT THE PRIOR WRITTEN APPROVAL OF OWNER, WHICH APPROVAL MAY BE GRANTED OR WITHHELD IN OWNER’ SOLE AND ABSOLUTE DISCRETION.   7.8                                 LIENS; CREDIT. MANAGER SHALL USE COMMERCIALLY REASONABLE EFFORTS TO PREVENT ANY LIENS FROM BEING FILED AGAINST ANY HOTEL WHICH ARISE FROM ANY REPAIRS IN OR TO SUCH HOTELS. MANAGER SHALL USE COMMERCIALLY REASONABLE EFFORTS TO CAUSE THE RELEASE OF ANY SUCH LIENS FROM THE HOTELS. IF ANY SUCH LIEN ARISES AS A RESULT OF OR IN CONNECTION WITH A MANAGER DEFAULT, THEN MANAGER SHALL BEAR THE COST OF OBTAINING THE LIEN RELEASE (EXCLUSIVE OF THE COST OF THE REPAIR TO WHICH IT PERTAINS, UNLESS MANAGER IS OTHERWISE RESPONSIBLE THEREFOR) AND THE SAME SHALL NOT CONSTITUTE AN OPERATING COST. IN NO EVENT SHALL ANY PARTY BORROW MONEY IN THE NAME OF, OR PLEDGE THE CREDIT OF, ANY OTHER PARTY. MANAGER SHALL NOT ALLOW ANY LIEN TO EXIST WITH RESPECT TO ITS INTEREST IN THIS AGREEMENT. MANAGER SHALL NOT FINANCE THE COST OF ANY REPAIR BY THE GRANTING OF A LIEN ON, OR SECURITY INTEREST IN, ANY HOTEL OR MANAGER’S INTEREST THEREIN OR HEREUNDER.   7.9                                 REAL ESTATE AND PERSONAL PROPERTY TAXES. MANAGER SHALL PAY AS OPERATING COSTS, PRIOR TO DELINQUENCY, ALL TAXES AND ASSESSMENTS WHICH MAY BECOME A LIEN ON, OR ARE ASSESSED AGAINST, ANY HOTEL OR ANY COMPONENT THEREOF AND WHICH MAY BE DUE AND PAYABLE FOR THE TERM, UNLESS PAYMENT THEREOF IS BEING CONTESTED BY MANAGER, AS HEREINAFTER PROVIDED, ENFORCEMENT IS STAYED AND THE AMOUNT SO CONTESTED IS ESCROWED   27 --------------------------------------------------------------------------------   OR GUARANTEED IN A FORM SATISFACTORY TO OWNER. OWNER SHALL, PROMPTLY AFTER RECEIPT THEREOF BY OWNER, GIVE MANAGER COPIES OF ALL NOTICES AS TO ALL SUCH TAXES AND ASSESSMENTS.   7.10                           CONTEST. MANAGER SHALL HAVE THE RIGHT IN MANAGER’S OR OWNER’S NAME TO CONTEST OR PROTEST ANY TAX OR ASSESSMENT OR PROPOSED ASSESSMENT WHICH MAY BECOME A LIEN ON, OR BE ASSESSED AGAINST, ANY HOTEL OR ANY COMPONENT THEREOF DUE AND FOR THE TERM OR ANY LEGAL REQUIREMENT PAYABLE BY APPROPRIATE LEGAL PROCEEDINGS, CONDUCTED IN GOOD FAITH AND WITH DUE DILIGENCE PROVIDED THAT (A) SUCH CONTEST SHALL NOT CAUSE PURCHASER OR OWNER TO BE IN DEFAULT UNDER ANY AUTHORIZED MORTGAGE, (B) NO PART OF A HOTEL NOR ANY GROSS REVENUES THEREFROM SHALL BE IN ANY IMMEDIATE DANGER OF SALE, FORFEITURE, ATTACHMENT OR LOSS, AND (C) OWNER AND PURCHASER ARE NOT EXPOSED TO ANY RISK FOR CRIMINAL OR CIVIL LIABILITY.   ARTICLE 8   FISCAL MATTERS   8.1                                 Accounting Matters.   (a)                                  Manager shall maintain books and records reflecting the results of Hotel operations on an accrual basis in accordance with the Uniform System of Accounts and the Accounting Principles. In consideration thereof, Manager shall be paid the accounting fee as provided in Article 8. Owner and Manager and their respective independent accounting firms and representatives will have the right to examine such books and records of the Hotel at any reasonable time and to make and retain copies thereof. Manager shall retain, for at least three (3) years after the expiration of each Fiscal Year, reasonably adequate records showing Gross Revenues and applications thereof for the Hotels for such Fiscal Year (which obligation shall survive termination hereof).   (b)                                 On or before the twenty-fifth (25th) day after the end of each Fiscal Month, Manager shall furnish Owner with a detailed operating statements setting forth the results of operations at the Hotels with respect to such month showing for each Hotel, Gross Revenues, Rooms Revenues, revenue per available room, occupancy percentage and average daily rate, Operating Costs, Operating Profit, the applications and distributions thereof and its Owner’s Percentage Priority together with an Officer’s Certificate. Such statements may be provided electronically to Owner.   (c)                                  Not less than ten (10) days prior to the date on which Owner or any of its Affiliates are required to file audited financial statements with the United States Securities and Exchange Commission (but in all events on or before February 15 of each year), Manager shall deliver to Owner and Purchaser an Officer’s Certificate (the “8.1(c) Statement”) setting forth the totals for each Hotel and for all of the Hotels of Gross Revenues and Operating Costs, the calculation of Owner’s Percentage Priority and the Residual Distribution and deposits to, and expenditures from, the Reserve Account together with an Agreed Upon Procedures Letter with respect thereto. The cost of obtaining such letter shall be an Operating Cost.   28 --------------------------------------------------------------------------------   (d)                                 If any amounts due to Owner as shown in an Officer’s Certificate or audit provided pursuant to Sections 8.1(f) or 17.4 exceed the amounts previously paid with respect thereto to Owner, Manager shall pay such excess to Owner at such time as the Officer’s Certificate or audit is delivered, together with interest at the Interest Rate from the date due. (Any such interest which accrues after the day that is ten (10) Business Days after the date on which the 8.1(c) Statement is delivered and any such interest which results from Manager’s willful understatement of amounts due to Owner shall not be Operating Costs, but shall be paid by Manager.)  If Owner’s Percentage Priority due as shown in an Officer’s Certificate or audit is less than the amount previously paid with respect thereto to Owner, Owner shall be entitled to retain the same but shall credit such overpayment against the next installment of Owner’s Percentage Priority. If any Management Fee due to Manager as shown on an Officer’s Certificate or audit is less than the amount previously paid to Manager on account thereof, Manager shall, within ten (10) Business Days after the date on which such Officer’s Certificate or audit is delivered, deposit the overpayment in the Bank Accounts. If the Residual Distribution due as shown on the Officer’s Certificate or audit is less than the amount previously paid to Owner with respect thereto, Owner shall promptly deposit (or deliver to Manager who will in turn deposit) the overpayment in the Bank Accounts. In no event shall (i) any amount previously deposited in the Reserve Account be withdrawn therefrom pursuant to this Article 8 or (ii) distributions of Owner’s Priority be subject to adjustment.   (e)                                  In addition, Manager shall provide Owner with information relating to the Hotels, Manager and its Affiliates that (i) may be required in order for Owner or its Affiliates to prepare financial statements in accordance with Accounting Principles or to comply with any Legal Requirement including, without limitation, any applicable securities laws and regulations and the United States Securities and Exchange Commission’s interpretation thereof, (ii) may be required for Owner or any of its Affiliates to prepare federal, state or local tax returns, or (iii) is of the type that Manager customarily prepares for other hotel owners or itself.   (f)                                    At Owner’s election and at Owner’s cost except as otherwise provided herein, a certified audit of the Hotels’ operations may be performed annually, and after the Expiration Date, by a nationally recognized, independent certified public accounting firm appointed by Owner. In the event that Owner elects to have such an audit performed, Owner must give notice of its election within twelve (12) months after its receipt of the applicable 8.1(c) Statement. Any dispute concerning the correctness of an audit shall be settled by Arbitration. Manager shall pay the cost of any audit revealing an understatement of Owner’s Percentage Priority and the Residual Distribution by more than three percent (3%) in the aggregate, and such cost shall not be an Operating Cost. In the event that either no notice of audit is given within said twelve (12) months, or no audit is in fact commenced within eighteen (18) months after receipt of the 8.1(c) Statement, such operating statement will constitute the final statement for that Fiscal Year, deemed to have been approved by Owner.   (g)                                 The terms of this Section 8.1 shall survive the expiration or earlier termination of the Term.   29 --------------------------------------------------------------------------------   8.2                                 YEARLY BUDGETS.   (a)                                  Not less than sixty (60) days prior to the first day of each Fiscal Year after the 2003 Fiscal Year, Manager shall submit to Owner for Owner’s approval a proposed Yearly Budget for each Hotel including a proposed Capital Replacements Budget for each Hotel for the ensuing full or partial Fiscal Year, as the case may be. Owner’s approval of the Yearly Budgets and the Capital Replacements Budgets shall not be unreasonably withheld or delayed. If Owner fails to disapprove of a proposed Yearly Budget within thirty (30) days after the submission thereof to Owner for its approval, the same shall be deemed approved. Manager will, from time to time not less often than quarterly, issue periodic forecasts of operating performance to Owner reflecting any significant unanticipated changes, variables or events or describing significant additional unanticipated items of income or expense. Manager will provide Owner with the material data and information utilized in preparing the Yearly Budgets and the Capital Replacements Budgets or any revisions thereof. Manager will not be deemed to have made any guaranty, warranty or representation whatsoever in connection with the Yearly Budgets and the Capital Replacements Budgets, except that the proposed Yearly Budgets, including the Capital Replacements Budgets, reflect Manager’s best professional estimates of the matters they describe. Manager shall use its reasonable efforts, subject to the Operating Standards, to operate and manage the Hotels in accordance with their Yearly Budgets. The Yearly Budgets for the Hotels for 2003 Fiscal Year shall be those most recently delivered by Manager to Owner on or before the Effective Date.   (b)                                 In the event Owner disapproves or raises any objections to the proposed Yearly Budget, or any portion thereof, or any revisions thereto, Owner and Manager shall cooperate with each other in good faith to resolve the disputed or objectionable items. If Owner disapproves of a proposed Yearly Budget, Owner will disapprove on a specific line-by-line basis to the extent reasonably practical. Any dispute with respect to a proposed Yearly Budget which is not resolved by the parties within thirty (30) days after the submission thereof to Owner shall be resolved by Arbitration.   (c)                                  In the event Owner and Manager are not able to resolve the disputed or objectionable matters raised by Owner in regard to a Yearly Budget prior to the commencement of the applicable Fiscal Year, either voluntarily or by means of Arbitration, Manager is authorized to operate the Hotel in accordance with the proposed Yearly Budget; provided, however, that as for disputed budget items, Manager may not expend more than the previous year’s budgeted amount for such item (if any), increased by a percentage equal to the increase in the Consumer Price Index during the last year unless such expenditure is of the type contemplated under Section 7.7(b) or is for an expense (such as real estate taxes, insurance premiums or utilities) which are beyond the Managers reasonable control. For purposes of this section, “increase in the Consumer Price Index during the last year” shall mean the percentage increase in the Consumer Price Index for the twelve (12) month period ending immediately prior to the date of submission of the disputed proposed Yearly Budget.   30 --------------------------------------------------------------------------------   8.3                                 BANK ACCOUNTS.   (a)                                  The revenues of the Hotel shall be deposited into the one or more Bank Accounts. The Bank Accounts will be separate and distinct from any other accounts, reserves or deposits required by this Agreement, and Manager’s designees who are included in the coverage of any required fidelity or similar insurance will be the only parties authorized to draw upon any Bank Account; provided, however, such designees shall only be authorized to draw upon a Bank Account for purposes authorized by the terms of this Agreement.   (b)                                 So long as this Agreement is in full force and effect and there is no uncured Manager Default, Manager shall have exclusive control of the Bank Accounts. Nothing contained herein is to be construed as preventing Manager from maintaining separate payroll accounts or petty cash funds and making payments therefrom as the same may be customary in the hotel business or the Brand Standards.   8.4                                 CONSOLIDATED FINANCIALS. EACH ULTIMATE PARENT OF MANAGER AND EACH GUARANTOR SHALL FURNISH TO OWNER WITHIN TEN (10) DAYS AFTER THE FILING BY SUCH ULTIMATE PARENT OR ANY GUARANTOR OF ANY MATERIAL FILING WITH RESPECT TO THE SECURITIES OF SUCH ULTIMATE PARENT OR SUCH GUARANTOR OR ANY FINANCIAL STATEMENT WITH ANY GOVERNMENTAL AGENCY, QUASI-GOVERNMENTAL AGENCY OR STOCK EXCHANGE, A COPY OF THE SAME; PROVIDED, HOWEVER, IF A GUARANTOR OR ULTIMATE PARENT OF MANAGER IS NOT REQUIRED TO FILE INTERIM AND ANNUAL FINANCIAL STATEMENTS WITH THE SECURITIES AND EXCHANGE COMMISSION OR ITS EQUIVALENT IN THE UNITED KINGDOM SUCH GUARANTOR OR ULTIMATE PARENT SHALL FURNISH THE FOLLOWING STATEMENTS TO OWNER:   (a)                                  Within forty-five (45) days after each interim period for which such Ultimate Parent or Guarantor prepares Consolidated Financials, the Consolidated Financials of such Ultimate Parent or Guarantor for such period accompanied by an Officer’s Certificate; and   (b)                                 within ninety (90) days after each fiscal year of such Ultimate Parent or Guarantor, the Consolidated Financials of such Ultimate Parent or such Guarantor for such fiscal year audited by a firm of independent certified public accountants reasonably satisfactory to Owner accompanied by an Officer’s Certificate.   ARTICLE 9   FEES TO MANAGER   9.1                                 Management Fees. As consideration for the management and operation of the Hotel by Manager, Manager shall earn the following fees, which fees shall be payable as provided in Section 10.1.   (a)                                  The Base Management Fee shall be paid in monthly installments in arrears based on the Gross Revenues of the Hotels for the prior Fiscal Month. The Base Management Fee for any period less than a full twelve (12) month Fiscal Year shall be paid on the basis of Gross Revenues for that period.   31 --------------------------------------------------------------------------------   (b)                                 The Incentive Management Fee shall be paid in monthly installments in arrears. The Incentive Management Fee for any period less than a full twelve (12) month Fiscal Year shall be paid on the basis of Gross Revenues for that period.   9.2                                 Services Fees. Manager shall pay as Operating Costs, usual and customary system fees and assessments on an area-wide basis for the systems of hotels comprising the Brand which currently include a reservation and marketing fee of two and one-half percent (2.5%) of Rooms Revenue, an accounting fee of Fifteen Dollars ($15) per guest room per month and a Priority Club Fee of five percent (5%) of all charges at a Hotel to Priority Club members. Each of the foregoing Services Fees shall be adjusted from time to time to reflect the Hotels’ equitable portion of the Manager’s and its Affiliates’ actual out-of-pocket costs for providing the services to which such fees pertain. Not less frequently than annually, Manager shall provide to Owner financial statements with respect to all fees comparable to the Services Fees collected by Manager and its Affiliates and the applications thereof; provided, however, Manager shall not be obligated to provide such statements with respect to the accounting fee until such time as it has in place the means of producing such statements. Manager covenants, warrants and represents that each hotel in the Brand pays, and shall at all times pay, the same fees for such services and all such fees collected by Manager are, and will be, applied to the cost of providing such services to all hotels in the Brand without profit to Manager or its Affiliates except to the extent that such profit for any year shall be applied to the cost of providing such services in the subsequent year; provided, however, Manager and its Affiliates shall not retain any such profits for an unreasonable period of time. Any disputes under this Section 9.2 shall be resolved by Arbitration.   ARTICLE 10   DISBURSEMENTS   10.1                           Disbursement of Funds. As and when received by Manager or the Hotels, all Gross Revenues from all of the Hotels shall be deposited into the Bank Accounts and applied in the following order of priority to the extent available:   (a)                                  First, to pay all Operating Costs;   (b)                                 Second, to fund the Reserve Account as required by Section 5.2 for the previous Fiscal Month;   (C)                                  THIRD, TO OWNER, ALL ACCRUED BUT UNPAID OWNER’S PRIORITY;   (d)                                 Fourth, to (i) reimburse Manager for any amounts advanced by Manager pursuant to Section 5.2(d) together with interest on the outstanding amounts thereof at the Interest Rate (determined as of the date of the applicable advance) (ii) to pay for Capital Replacements which Owner failed to timely fund pursuant to Section 5.2(c).   32 --------------------------------------------------------------------------------   (e)                                  Fifth, to fund the Reserve Account to the extent that the aggregate amounts previously funded for prior periods is less than the amount required to be funded for such periods pursuant to the terms of Section 5.2;   (f)                                    Sixth, (commencing in 2005) to Owner, all accrued but unpaid Owner’s Percentage Priority;   (g)                                 Seventh, to Manager, interest at the Interest Rate (determined as of the date of the applicable advance) on any outstanding amounts advanced by Manager pursuant to Section 15.2(c).   (h)                                 Eighth, to Manager, any accrued but unpaid Base Management Fee for the previous Fiscal Month but no other period;   (I)                                     NINTH, TO REIMBURSE OWNER FOR ANY ADVANCES MADE BY OWNER TO WORKING CAPITAL;   (j)                                     Tenth, to reimburse Manager for any advances made by Manager to Working Capital in excess of the Initial Working Capital;   (K)                                  ELEVENTH, TO REPLENISH ANY PORTION OF THE DEPOSIT THAT SHALL HAVE BEEN APPLIED TO THE SECURED OBLIGATIONS;   (l)                                     Twelfth, to reimburse the Guarantor for payments made by it on account of the Guaranteed Obligations under the Guaranty provided, however, if the Guarantor shall have Provided Collateral under the Guaranty, then the amount to be reimbursed to the Guarantor under this Section 10.1(l) shall be disbursed to Owner, to be held by Owner as collateral for the Guarantor’s obligations under the Guaranty until the Outstanding Balance (determined as though the disbursement made under this Section 10.1(l) were made to the Guarantor) under the Guaranty does not exceed the sum of (i) the then remaining balance drawable under the Satisfactory Letter of Credit posted under the Guaranty or the balance of the cash deposited by the Guarantor thereunder, plus (ii) proceeds of any such Satisfactory Letter of Credit or cash deposited thereunder, in either case, applied to the Guaranteed Obligations thereunder;   (m)                               Thirteenth, to reimburse Manager for (i) advances made by Manager pursuant to Section 15.2(c) to the extent then due and payable and (ii) other contributions made by it to the Reserve Account other than pursuant to Section 5.2(d);   (n)                                 Fourteenth, to pay Manager accrued but unpaid Base Management Fees for prior Fiscal Months; and   (o)                                 Fifteenth, to Manager, the Incentive Management Fee.   10.2                           Residual Distribution. Simultaneously with the making of each payment of the Incentive Management Fee, the then remaining Gross Revenues will be disbursed to Owner. Except as herein provided, Manager shall have no responsibility to incur Operating Costs or undertake any Capital Replacement except to the extent Manager is   33 --------------------------------------------------------------------------------   REASONABLY ASSURED THAT FUNDS TO PAY SUCH OPERATING COSTS AND FOR SUCH CAPITAL REPLACEMENTS WILL BE TIMELY AVAILABLE.   10.3         Owner’s Priority. Owner’s Priority shall be due and payable in advance in equal monthly installments on the first day of each Fiscal Month, pro-rated for any partial month, regardless of any inadequacy of Gross Revenues or Operating Profits. If any installment of Owner’s Priority is not paid when due, the same shall accrue interest at the Interest Rate. (Such interest shall be payable on demand, shall not be an Operating Cost, and shall be paid by Manager.)  Appropriate adjustments shall be made to reflect any change in Owner’s Priority on account of advances made by Owner or Purchaser on the first Business Day of the month next after the date as of which such change occurs. As installments of Owner’s Priority are to be paid in advance, Manager may advance amounts due on account of a monthly installment of Owner’s Priority for a Fiscal Month and reimburse itself from Operating Profits for such Fiscal Month amounts so advanced; provided, however, if Operating Profits for such Fiscal Month in excess of the amount to be contributed to the Reserve Account pursuant to Section 5.2 are insufficient to make such reimbursements, the amount of such insufficiency shall be deemed an advance to Working Capital, and Manager shall be entitled to the reimbursement thereof only pursuant to Section 10.1(j); provided, however, by notice given to Owner within thirty (30) days after the end of Fiscal Month, Manager may elect to deem the amount of such insufficiency an advance under the Guaranty (and not an advance to Working Capital). If Manager shall so make such election, the amount of such insufficiency shall be reimbursed to the Guarantor as provided in Section 10.1(l). If Owner fails to receive any installment of Owner’s Priority as and when due, Owner may terminate this Agreement on not less than thirty (30) days’ notice; provided, however, such notice shall be void ab initio if such installment together with any interest accrued thereon is paid to Owner prior to the thirtieth (30th) day after such notice is given.   10.4                           Owner’s Percentage Priority. Owner’s Percentage Priority shall be calculated on a Hotel-by-Hotel basis, and shall accrue and be payable in monthly installments to the extent that Gross Revenues year-to-date at any Hotel exceed Gross Revenues for such Hotel for the corresponding period in its Base Year. The installment of Owner’s Percentage Priority for each Fiscal Month shall be due and payable on the twenty fifth (25th) day of the following month.   10.5                           No Interest. Except as expressly provided herein, no interest shall accrue or be payable to either party hereunder on account of any amount owed to such party hereunder.   10.6                           Amounts Outstanding at End of Term. Unless this Agreement is wrongfully terminated by Owner upon the expiration or earlier termination of this Agreement, Manager shall have no claim against Owner, Purchaser or the Hotels for amounts owed to it under this Agreement which have not been paid by reason of the inadequacy of Gross Revenues or Operating Profits.   10.7                           SURVIVAL. THE TERMS OF THIS ARTICLE 10 SHALL SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THE TERM.   34 --------------------------------------------------------------------------------   ARTICLE 11   CERTAIN OTHER SERVICES   11.1                           Optional Services. Owner acknowledges that Manager and its Affiliates sometimes provide separate, optional services which may relate to the Hotels in addition to those which are encompassed by this Agreement. Owner agrees to consider in good faith any proposals presented to it by Manager or any of Manager’s Affiliates for such additional services relative to the Hotels; it being understood, however that this Section shall in no event be construed to require Owner to accept any such proposals.   11.2                           Purchasing. In making purchasing decisions with respect to products and service used in the operation of the Hotels, Manager will exercise reasonable business judgment in accordance with the Operating Standards. Manager shall be entitled to contract with its Affiliates, others in whom Manager or its Affiliates has an ownership interest and others with whom Manager or its Affiliates have contractual relationships to provide goods and/or services to the Hotels’ provided that the prices and/or terms for such goods and/or services are competitive and no worse than the prices and/or terms that such provider charges unrelated third-parties. In determining whether such prices and/or terms are so competitive, they will be compared to the prices and/or terms which are available from comparably qualified providers for goods and/or services of similar quality grouped in reasonable categories, rather than being compared item by item. Subject to the foregoing proviso, the prices charged for such goods or services may include overhead and the allowance of a reasonable return to the provider. Subject to the foregoing proviso, Owner acknowledges and agrees that the providers of such goods and/or services may retain for their own benefit any credits, rebates or commissions received with respect to such purchases. Notwithstanding anything contained herein to the contrary, Manager will act in a manner that enables Owner and the Hotels to gain not less than the same benefits with respect to purchasing as are made available to other hotels of the same category as the Hotels which other hotels are owned or operated by Manager or its Affiliates. Disputes under this Section 11.2 shall be resolved by Arbitration.   ARTICLE 12   SIGNS AND SERVICE MARKS   12.1                           Signs. To the extent not in place on the Effective Date, Manager agrees to erect and install, in accordance with all applicable Legal Requirements, all necessary signs under the Brand Standards.   12.2                           System Marks. It is understood and agreed by Owner that the name Staybridge Suites and all System Marks are the exclusive property of Manager or its Affiliates. Owner agrees and acknowledges the exclusive right of ownership of Manager and its Affiliates to the System Marks and the Reservation System. Except for any rights   35 --------------------------------------------------------------------------------   EXPRESSLY GRANTED TO OWNER IN THIS AGREEMENT, OWNER HEREBY DISCLAIMS ANY RIGHT OR INTEREST THEREIN, REGARDLESS OF THE LEGAL PROTECTION AFFORDED THERETO. EXCEPT FOR ANY RIGHTS EXPRESSLY GRANTED TO OWNER IN THIS AGREEMENT, IN THE EVENT OF TERMINATION OR CANCELLATION OF THIS AGREEMENT, WHETHER AS A RESULT OF A DEFAULT BY MANAGER OR OTHERWISE, OWNER SHALL NOT HOLD ITSELF OUT AS, OR OPERATE THE HOTELS AS, A STAYBRIDGE SUITES HOTELS, AND WILL IMMEDIATELY CEASE USING THE NAME STAYBRIDGE SUITES, AND ALL OTHER SYSTEM MARKS IN CONNECTION WITH THE NAME OR OPERATION OF THE HOTEL AS OF THE EXPIRATION DATE. PROMPTLY AFTER THE EXPIRATION DATE (OR SUCH LATER DATE ON WHICH MANAGER SHALL CEASE TO OPERATE THE HOTELS) AND THE EXPIRATION OF ANY RIGHT GRANTED TO OWNER TO USE THE SYSTEM MARKS, SUBJECT TO THE TERMS OF SECTION 17.4, OWNER SHALL REMOVE ALL SIGNS, FURNISHINGS, PRINTED MATERIAL, EMBLEMS, SLOGANS OR OTHER DISTINGUISHING CHARACTERISTICS WHICH ARE NOW OR HEREAFTER MAY BE CONNECTED OR IDENTIFIED WITH THE BRAND OR RESERVATION SYSTEM. OWNER SHALL NOT USE ANY SYSTEM MARKS OR ANY PART, COMBINATION OR VARIATION THEREOF IN THE NAME OF ANY PARTNERSHIP, CORPORATION OR OTHER BUSINESS ENTITY, NOR ALLOW THE USE THEREOF BY OTHERS.   12.3                           System Mark Litigation.   (a)                                  Manager, IHG and each other Guarantor shall hold Owner and its Affiliates harmless from and indemnify and defend Owner and its Affiliates against any and all costs and expenses incurred by Owner or its Affiliates (including, without limitation, attorneys’ fees reasonably incurred), arising out of the use of System Marks at or in connection with the operation of the Hotels by Owner or its designees pursuant to the terms of this Agreement or by Manager or its Affiliates.   In the event a Hotel, Owner or Manager is the subject of any litigation or action brought by any party seeking to claim rights in or to restrain the use of any System Mark used by Manager in connection with the Hotel, then, provided Owner is a party to such litigation or action and further provided that Manager shall have provided to Owner either a guaranty in form and substance reasonably satisfactory to Owner with respect to Manager’s obligations under Section 12.3(a) or collateral to secure Manager’s obligations under Section 12.3(a) reasonably satisfactory to Owner, the conduct of any suit whether brought by Manager or instituted against Owner and/or Manager shall be under the absolute control of counsel nominated and retained by Manager notwithstanding that Manager may not be a party to such suit.   (b)                                 The Owner shall not bring suit against any user of any System Mark alleging or asserting any claim based on Owner’s right, title or interest as of the Effective Date in any System Mark.   (C)                                  THE TERMS OF THIS SECTION 12.3 SHALL SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.   ARTICLE 13   INSURANCE   13.1                           Insurance Coverage. Unless Owner elects to procure and maintain the insurance required hereunder, as an Operating Cost, which election may be made from time to   36 --------------------------------------------------------------------------------   TIME AND WITHDRAWN FROM TIME TO TIME ON NOT LESS THAN THIRTY (30) DAYS’ NOTICE, TO THE EXTENT COMMERCIALLY AVAILABLE (REGARDLESS OF WHETHER IT IS AVAILABLE ON REASONABLE TERMS) MANAGER SHALL PROCURE AND MAINTAIN AS AN OPERATING COST, AT ALL TIMES DURING THE TERM OR WHILE IT IS IN POSSESSION OF ANY OF THE HOTELS, REASONABLE AND ADEQUATE AMOUNTS OF CASUALTY, LIABILITY AND OTHER USUAL AND CUSTOMARY TYPES OF INSURANCE FOR THE HOTELS AND THEIR OPERATIONS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MANAGER SHALL OBTAIN AND MAINTAIN, WITH INSURANCE COMPANIES OF RECOGNIZED RESPONSIBILITY A MINIMUM OF THE FOLLOWING INSURANCE TO THE EXTENT COMMERCIALLY AVAILABLE (REGARDLESS OF WHETHER IT IS AVAILABLE ON REASONABLE TERMS):   (a)                                  “Special Form” property insurance, including insurance against loss or damage by fire, vandalism and malicious mischief, terrorism (if available on commercially reasonable terms), earthquake, explosion of steam boilers, pressure vessels or other similar apparatus, now or hereafter installed in the Hotels, with equivalent coverage as that provided by the usual extended coverage endorsements, in an amount equal to one hundred percent (100%) of the then full replacement cost of the property requiring replacement (excluding foundations) from time to time, including an increased cost of construction endorsement;   (b)                                 Business interruption and blanket earnings plus extra expense under a rental value insurance policy or endorsement covering risk of loss during the lesser of the first twelve (12) months of reconstruction or the actual reconstruction period necessitated by the occurrence of any of the hazards described in subparagraph (a) above, in such amounts as may be customary for comparable properties managed or leased by Manager or its Affiliates in the surrounding area and in an amount sufficient to prevent Owner or Purchaser from becoming a co-insurer;   (c)                                  Commercial general liability insurance, including bodily injury and property damage (on an occurrence basis and on a 1993 ISO CGL form or on a form customarily maintained by similarly situated hotels, including, without limitation, broad form contractual liability, independent contractor’s hazard and completed operations coverage, aggregate limit as applicable) in an amount not less than Two Million Dollars ($2,000,000) per occurrence and umbrella coverage of all such claims in an amount not less than Fifty Million Dollars ($50,000,000) per occurrence;   (d)                                 Flood (if a Hotel is located in whole or in part within an area identified as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, as amended, or the Flood Disaster Protection Act of 1973, as amended (or any successor acts thereto)) and insurance against such other hazards and in such amounts as may be available under the National Flood Insurance Program and customary for comparable properties in the area;   (e)                                  Worker’s compensation insurance coverage for all persons employed by Manager at the Hotels with statutory limits and otherwise with limits of and provisions in accordance with the requirements of applicable local, state and federal law, and employer’s liability insurance as is customarily carried by similar employers which coverage shall be written by an insurance company of recognized responsibility, as a qualified self-insurer subject   37 --------------------------------------------------------------------------------   TO APPLICABLE STATE REQUIREMENTS AND APPROVALS, OR SPECIFIC TO THE STATE OF TEXAS, AS A NONSUBSCRIBER;   (F)                                    EMPLOYMENT PRACTICES LIABILITY INSURANCE WITH LIMITS OF TWENTY FIVE MILLION DOLLARS ($25,000,000); AND   (g)                                 Such additional insurance as may be required, from time to time by (i) any Legal Requirement, (ii) any holder of an Authorized Mortgage or (iii) which is otherwise reasonably required.   13.2                           INSURANCE POLICIES.   (a)                                  All insurance provided for under this Article 13 must be effected by policies issued by insurance companies of good reputation and of sound financial responsibility and will be subject to Owner’s reasonable approval.   (b)                                 All insurance policies (other than workers’ compensation policies) shall be issued in the name of Purchaser with Manager and Owner and any holder of an Authorized Mortgage being named as additional insureds; provided, however, subject to Owner’s obligations under Article 15, Manager shall not be named as an additional insured on, and shall not have any interest in the proceeds of, any property insurance. Purchaser or the holder of an Authorized Mortgage shall be named loss payee(s) on any property insurance.   (c)                                  The insurance herein required may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Owner or Manager, provided that such blanket policies fulfill the requirements contained herein.   (d)                                 In the event Owner or Manager believes that the then full replacement cost of a Hotel has increased or decreased at any time during the Term, such party, at its own cost, shall have the right to have such full replacement cost redetermined by an independent accredited appraiser approved by the other, which approval shall not be unreasonably withheld or delayed. The party desiring to have the full replacement cost so redetermined shall forthwith, on receipt of such determination by such appraiser, give written notice thereof to the other parties. The determination of such appraiser shall be final and binding on the parties hereto until any subsequent determination under this Section 13.2(d), and the party obligation to maintain insurance hereunder shall forthwith conform the amount of the insurance carried to the amount so determined by the appraiser. Such replacement value determination will not be necessary so long as a Hotel is insured through a blanket replacement value policy.   (e)                                  All insurance policies and endorsements required pursuant to this Article 13 shall be fully paid for, nonassessable and, except for umbrella, worker’s compensation, flood and earthquake coverage, shall be issued by insurance carriers authorized to do business in the state where each Hotel is located, having a general policy holder’s rating of no less than B++ in Best’s latest rating guide.   (f)                                    All such policies shall provide Owner, Manager and any holder of an Authorized Mortgage if required by the same, thirty (30) days’ prior written notice of any material   38 --------------------------------------------------------------------------------   CHANGE OR CANCELLATION OF SUCH POLICY AND THE PROPERTY INSURANCE POLICIES SHALL PROVIDE FOR A WAIVER OF SUBROGATION, TO THE EXTENT AVAILABLE.   13.3                           Insurance Certificates. Manager shall deliver to Owner, Purchaser and any holder of an Authorized Mortgage, certificates of insurance with respect to all policies so procured by it and, in the case of insurance policies about to expire, shall deliver certificates with respect to the renewal thereof. In the event Manager shall fail to effect such insurance as herein required, to pay the premiums therefor, or to deliver, within fifteen (15) days of a request therefor, such certificates, Owner shall have the right, but not the obligation, to acquire such insurance and pay the premiums therefor, which amounts shall be payable to Owner, upon demand, as an Operating Cost, together with interest accrued thereon at the Interest Rate (which interest shall not be an Operating Cost, but shall be paid by Manager) from the date such payment is made until (but excluding) the date repaid.   13.4                           Insurance Proceeds. All proceeds payable by reason of any loss or damage to a Hotel, or any portion thereof (other than the proceeds of any business interruption insurance), shall be paid directly to Purchaser as its interest may appear and all loss adjustments with respect to losses payable to Manager shall require the prior written consent of Purchaser.   13.5                           MANAGER’S INSURANCE PROGRAM.   (a)                                  Manager will obtain quotations for insurance on an annual basis and provide, when available, such quotations to Owner for its approval or rejection. If Owner rejects such quotations, it may obtain such insurance and thereafter Owner shall maintain, as an Operating Cost, the insurance, the quotation for which Owner rejected.   (b)                                 Owner acknowledges that in the event the insurance required hereunder is provided through Manager’s insurance program, to the extent available, the costs and charges therefore will be paid as an Operating Cost without regard to whether such payment is to an Affiliate of Manager and whether that Affiliate receives a profit as a result thereof.   ARTICLE 14   INDEMNIFICATION AND WAIVER OF SUBROGATION   14.1                           Indemnification. Each of the parties hereto shall indemnify, defend and hold harmless the other for, from and against any cost, loss, damage or expense (including, but not limited to, reasonable attorneys fees and all court costs and other expenses of litigation, whether or not taxable under local law) to the extent caused by or arising from: the failure of the indemnifying party to duly and punctually perform any of its obligations owed to the other; or any gross negligence or willful misconduct of the indemnifying party.   14.2                           Waiver of Subrogation. To the fullest extent permitted by law, each of Owner and Manager hereby waives any and all rights of subrogation and right of recovery or cause of action, and agrees to release the other and Purchaser from liability for loss or   39 --------------------------------------------------------------------------------   DAMAGE TO PROPERTY TO THE EXTENT SUCH LOSS OR DAMAGE IS COVERED BY VALID AND COLLECTIBLE INSURANCE IN EFFECT AT THE TIME OF SUCH LOSS OR DAMAGE OR WHICH WOULD HAVE BEEN COVERED IF THE INSURANCE REQUIRED BY THIS AGREEMENT WERE BEING CARRIED; PROVIDED, HOWEVER, THAT SUCH WAIVER SHALL BE OF NO FORCE OR EFFECT IF THE PARTY BENEFITING THEREFROM FAILS TO OBTAIN AND MAINTAIN THE INSURANCE REQUIRED TO BE OBTAINED AND MAINTAINED BY IT. SUCH WAIVERS ARE IN ADDITION TO, AND NOT IN LIMITATION OR DEROGATION OF, ANY OTHER WAIVER OR RELEASE CONTAINED IN THIS AGREEMENT. WRITTEN NOTICE OF THE TERMS OF THE ABOVE WAIVERS SHALL BE GIVEN TO THE INSURANCE CARRIERS OF OWNER AND MANAGER, AND THE INSURANCE POLICIES SHALL BE PROPERLY ENDORSED, IF NECESSARY, TO PREVENT THE INVALIDATION OF SAID POLICIES BY REASON OF SUCH WAIVERS.   14.3                           SURVIVAL. THE TERMS OF THIS ARTICLE 14 SHALL SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.   ARTICLE 15   DAMAGE TO AND DESTRUCTION OF THE HOTEL   15.1                           TERMINATION.   (a)                                  If during the Term any Hotel shall be totally or partially destroyed and the Hotel is thereby rendered Unsuitable for Its Permitted Use, (i) Manager may terminate this Agreement with respect to such Hotel on sixty (60) days’ written notice to Owner, or (ii) Owner may terminate this Agreement with respect to such Hotel by written notice to Manager, whereupon, this Agreement, with respect to such Hotel, shall terminate and Owner or Purchaser shall be entitled to retain the insurance proceeds payable on account of such damage.   (b)                                 Notwithstanding any provisions of Section 15.2 below to the contrary, if damage to or destruction of any Hotel occurs during the last twenty four (24) months of the then Term (after giving effect to any exercised options to extend the same) and if such damage or destruction cannot reasonably be expected to be fully repaired and restored prior to the date that is twelve (12) months prior to the end of such Term, then either Owner or Manager may terminate this Agreement with respect to such Hotel on not less than thirty (30) days’ advance notice.   (c)                                  Upon any termination under this Article 15 or 16, the Owner’s Priority shall be reduced, and provided there is then no uncured Manager Default and the Priority Coverage Ratio for the Hotels (other than such Hotel with respect to which this Agreement has been so terminated) for the prior Fiscal Year is greater than 1.0, Owner shall return to Manager the portion of the Deposit allocable to such terminated Hotel as set forth on Exhibit C. In calculating the reduction in Owner’s Priority, the allocation of Owner’s Priority for each Hotel shall be proportional to the NOI of such Hotel for the then most recently ended twelve (12) months relative to the NOI of all the other Hotels for such period.   (d)                                 Manager hereby waives any statutory rights of termination which may arise by reason of any damage to or destruction of any Hotel.   40 --------------------------------------------------------------------------------   15.2                           RESTORATION.   (a)                                  If during the Term any Hotel is damaged or destroyed by fire, casualty or other cause but is not rendered Unsuitable for Its Permitted Use, Owner shall make the net proceeds of insurance received in connection with such casualty (excluding the proceeds of business interruption or similar insurance which are a portion of Gross Revenues) and any other amount Owner elects to contribute toward restoration available to Manager for restoration of such Hotel subject to customary terms applicable to advances and construction loans (to the extent applicable) and the terms of the Lease and any Authorized Mortgage, and Owner shall make, or shall cause there to be made, all Repairs necessary to restore such Hotel to substantially the same condition as existed prior to such casualty. If Owner elects to retain Manager’s services in connection with such Repairs, the terms of Section 11.1 shall apply.   (b)                                 Any casualty which does not result in a termination of this Agreement with respect to the applicable Hotel shall not excuse the payment of sums due to Owner hereunder with respect to such Hotel.   (c)                                  If the net proceeds of the insurance received in connection with a casualty or an Award received in connection with a Condemnation are insufficient to complete the required Repairs, Owner shall have the right (but not the obligation) to contribute (or cause Purchaser to contribute) the amount of such insufficiency. If Owner elects not to contribute such insufficiency by notice given to Manager within ten (10) Business Days after a notice given by Manager to Owner reasonably detailing the existence of such insufficiency, Manager shall have the right to contribute such insufficiency. If Manager fails to contribute such insufficiency to an account of Owner to be used in completing such Repairs within ten (10) Business Days after Owner’s election, the Hotel subject to such casualty or Condemnation shall be deemed Unsuitable for its Permitted Use and the terms of Section 15.1 or 16.1, as applicable, shall apply. Subject to the terms of Section 10.1, Manager shall be entitled to the return of amounts funded by it under this Section 15.2(c) in equal monthly installments based upon the number of months remaining in the Term after the month in which such advance is made (after giving effect to any then exercised or deemed exercised options to extend).   ARTICLE 16   CONDEMNATION   16.1                           Total Condemnation. If either (x) the whole of a Hotel shall be taken by Condemnation, or (y) a Condemnation of less than the whole of a Hotel renders such Hotel Unsuitable for Its Permitted Use, this Agreement shall terminate with respect to such Hotel and Owner and Purchaser shall seek the Award for their interests in such Hotel as provided in the Lease, which Award shall belong solely to them. In addition, Manager shall have the right to initiate or participate in such proceedings as it deems advisable to recover any damages to which Manager may be entitled; provided, however, that Manager shall be entitled to retain the award or compensation it may obtain through such proceedings which are conducted separately from those of Owner and Purchaser only if such award   41 --------------------------------------------------------------------------------   OR COMPENSATION DOES NOT REDUCE THE AWARD OR COMPENSATION OTHERWISE AVAILABLE TO OWNER AND PURCHASER. IF THIS AGREEMENT IS SO TERMINATED WITH RESPECT TO A HOTEL, OWNER AND PURCHASER SHALL MAKE REASONABLE EFFORTS TO USE THE AWARD TO ACQUIRE A REPLACEMENT PROPERTY PROPOSED BY MANAGER TO WHICH THIS AGREEMENT SHALL BE EXTENDED; PROVIDED, HOWEVER:   (a)                                  Purchaser and Owner shall not be obligated to expend in the aggregate more than the Award in connection with (i) investigating and negotiating to purchase all properties proposed by Manager to be the Replacement Property (including, without limitation, attorneys’ and consultants’ fees and title search and survey costs) and (ii) acquiring a Replacement Property (including, without limitation, the purchase price therefor, title insurance premiums and transfer taxes);   (b)                                 Purchaser and Owner shall have no obligation to acquire any proposed Replacement Property unless the projected NOI thereof and each of every other aspect of the proposed Replacement Property which Purchaser reasonably considers relevant is comparable in Purchaser’s sole judgment in all respect to the Hotel which is being replaced;   (c)                                  Purchaser and Owner shall not be obligated to investigate more than three (3) proposed properties;   (d)                                 Owner’s Priority will be increased by an amount equal to the reduction therein resulting from the termination of this Agreement with respect to the Hotel which is being replaced; and   (e)                                  Purchaser shall not be obligated to acquire any proposed Replacement Property, if Manager and Owner do not reasonably agree upon an appropriate amendment hereto pursuant to which this Agreement will be extended to such property.                                                   If Purchaser decides to acquire a proposed Replacement Property, simultaneously with such acquisition the Lease and this Agreement shall be appropriately amended so as to cover such Replacement Property.   16.2                           Partial Condemnation. In the event of a Condemnation of less than the whole of a Hotel such that such Hotel is not rendered Unsuitable for Its Permitted Use, Owner shall, to the extent of the Award and any additional amounts disbursed by Owner or Purchaser, commence promptly and continue diligently to restore the untaken portion of such Hotel so that such Hotel shall constitute a complete architectural unit of the same general character and condition (as nearly as may be possible under the circumstances) as existed immediately prior to such Condemnation, in full compliance with all Legal Requirements, using the Award made available therefor and any other funds Owner elects to contribute subject to customary terms applicable to advances of construction loans (to the extent applicable). If Owner elects to retain Manager’s services in connection therewith, the terms of Section 11.1 shall apply.   16.3                           Temporary Condemnation. In the event of any temporary Condemnation of a Hotel or Owner’s interest therein, this Agreement shall continue in full force and effect. The   42 --------------------------------------------------------------------------------   ENTIRE AMOUNT OF ANY AWARD MADE FOR SUCH TEMPORARY CONDEMNATION ALLOCABLE TO THE TERM, WHETHER PAID BY WAY OF DAMAGES, RENT OR OTHERWISE, SHALL CONSTITUTE GROSS REVENUES. FOR PURPOSES OF THIS AGREEMENT, A CONDEMNATION SHALL BE DEEMED TO BE TEMPORARY IF THE PERIOD OF SUCH CONDEMNATION IS NOT EXPECTED TO, AND DOES NOT, EXCEED TWELVE (12) MONTHS.   16.4                           Effect of Condemnation. Any condemnation which does not result in a termination of this Agreement in accordance with its terms with respect to the applicable Hotel shall not excuse the payment of sums due to Owner hereunder with respect to such Hotel and this Agreement shall remain in full force and effect as to such Hotel.   ARTICLE 17   DEFAULT AND TERMINATION   17.1                           MANAGER EVENTS OF DEFAULT. EACH OF THE FOLLOWING SHALL CONSTITUTE A “MANAGER EVENT OF DEFAULT:”   (a)                                  The filing by Manager, or the Guarantor of a voluntary petition in bankruptcy or insolvency or a petition for reorganization under any bankruptcy law, or the admission by Manager, or the Guarantor that it is unable to pay its debts as they become due, or the institution of any proceeding by Manager, or the Guarantor for its dissolution or earlier termination.   (b)                                 The consent by Manager, or the Guarantor to an involuntary petition in bankruptcy or the failure to vacate, within ninety (90) days from the date of entry thereof, any order approving an involuntary petition with respect to Manager, or the Guarantor.   (c)                                  The entering of an order, judgment or decree by any court of competent jurisdiction, on the application of a creditor, adjudicating Manager, or the Guarantor as bankrupt or insolvent or approving a petition seeking reorganization or appointing a receiver, trustee, or liquidator of all or a substantial part of Manager’s, or the Guarantor’s assets, and such order, judgment or decree’s continuing unstayed and in effect for an aggregate of sixty (60) days (whether or not consecutive).   (d)                                 The failure of Manager or the Guarantor or any Affiliate of any of them to make any payment required to be made in accordance with the terms of this Agreement or any Transaction Document which failure continues beyond any applicable notice and grace period.   (e)                                  The failure of Manager, its Ultimate Parent, the Collateral Agent or any Guarantor or any Affiliate of any of them to perform, keep or fulfill any of the other covenants, undertakings, obligations or conditions set forth in this Agreement or any Transaction Document on or before the date required for the same, which failure continues for a period of thirty (30) days after receipt of written notice demanding such cure; provided, however, if such failure is susceptible of cure, but such cure cannot be accomplished within said thirty (30) day period, said thirty (30) days shall be extended for so long as is reasonably necessary to effect such cure provided that such cure is commenced within   43 --------------------------------------------------------------------------------   THIRTY (30) DAYS AFTER SUCH NOTICE IS GIVEN AND IS THEREAFTER DILIGENTLY PURSUED TO COMPLETION.   (f)                                    The failure of Manager to maintain insurance coverages required to be maintained by Manager under this Agreement.   (g)                                 The failure by Manager, its Ultimate Parent or any Guarantor to deliver to Owner any financial statement as and when required by the Transaction Documents, which failure continues for a period of ten (10) Business Days after written notice from Owner.   (h)                                 Any representation or warranty made by Manager or any of its Affiliates in this Agreement or any Transaction Document proves to have been false in any material respect on the date when made or deemed made; provided, however, if Manager did not know of such falseness at the time such representation or warranty was made, and the facts or circumstances giving rise to such falseness are susceptible of cure, Manager shall have up to thirty (30) days after notice from Owner to effectuate such cure.   (i)                                     The failure of any Ultimate Parent of Manager or the Guarantor to timely and fully keep and observe any obligations under the Transaction Documents or any other document or instrument executed and delivered in connection herewith to maintain any net worth, unencumbered assets or to deliver any collateral, in all cases, required under the Transaction Documents, which is not cured within ten (10) days after notice from Owner to Manager.   17.2                           Remedies for Manager Defaults. So long as a Manager Event of Default shall be outstanding, Owner shall have (in addition to its other rights and remedies at law, in equity or otherwise) the right to terminate this Agreement. Upon such termination, or if this Agreement is terminated pursuant to Sections 5.1 or 10.3, Owner shall be entitled to liquidated damages. Owner’s right to receive liquidated damages has been agreed to due to the uncertainty, difficulty and/or impossibility of ascertaining the actual damages suffered by Owner. Further, if not for Owner’s right to receive such liquidated damages, Purchaser would not have entered into the Purchase Agreement, Purchaser would not have acquired the Hotels and Owner would not have entered into the Lease. MANAGER HEREBY ACKNOWLEDGES AND AGREES THAT SUCH LIQUIDATED DAMAGES ARE NOT A PENALTY, BUT ARE TO COMPENSATE OWNER AND ITS AFFILIATES FOR THE EXPENSE AND LOST EARNINGS WHICH MAY RESULT FROM ARRANGING SUBSTITUTE MANAGEMENT FOR THE HOTELS AS WELL AS TO COMPENSATE FOR THE RENT OWNER MUST PAY UNDER THE LEASE AND THE PRICE PAID FOR THE HOTELS BY OWNER’S AFFILIATE. Such liquidated damages shall be equal to the sum of (i) the sum of (A) Fifty Million Dollars ($50,000,000) less (B) the aggregate amount paid by the Guarantor under Section 3 of the Guaranty in excess of the aggregate amount reimbursed to the Guarantor pursuant to Section 10.1(l), plus (ii) the outstanding balance of the Deposit. Owner shall be entitled to interest, at the Interest Rate, on such liquidated damages from the date of such termination until the date of payment of such damages and interest. Except with respect to Owner’s rights and remedies for any breach or violations by Manager of the   44 --------------------------------------------------------------------------------   TERMS OF SECTION 17.4, OWNER SHALL LOOK SOLELY TO THE DEPOSIT OR ANY OTHER COLLATERAL HEREAFTER PLEDGED SECURING MANAGER’S OBLIGATIONS HEREUNDER FOR SATISFACTION OF ANY CLAIM OF OWNER AGAINST MANAGER HEREUNDER, PROVIDED, HOWEVER, NOTHING CONTAINED HEREIN IS INTENDED TO, NOR SHALL LIMIT OR REDUCE THE OBLIGATIONS OF THE GUARANTOR UNDER THE GUARANTY OR LIMIT OWNER’S RIGHTS WITH RESPECT THERETO.   17.3                           Remedies for Owner Defaults. In the event Owner fails to perform its obligations hereunder, Manager shall have the right to institute forthwith any and all proceedings permitted by law or equity (provided they are not specifically barred under the terms of this Agreement), including, without limitation, actions for specific performance and/or damages; provided, however, except as may be expressly provided in this Agreement, Manager shall have no right to terminate this Agreement by reason of such a failure by Owner or otherwise. Manager shall be entitled to terminate this Agreement in the event of a violation of the terms of Section 4.7 by Purchaser or Owner. Except as otherwise specifically provided in this Agreement, Manager hereby waives all rights arising from any occurrence whatsoever, which may now or hereafter be conferred upon it by law, (a) to modify, surrender or terminate this Agreement or quit or surrender any Hotel or any portion thereof, or (b) to obtain (i) any abatement, reduction, suspension or deferment of the sums allocable or otherwise payable to Owner or other obligations to be performed by Manager hereunder or (ii) any increase in any amounts payable to Manager hereunder. The obligations of each party hereunder shall be separate and independent covenants and agreements.   17.4                           Post Termination Obligations. Upon expiration or earlier termination of this Agreement for any reason, Owner and Manager shall proceed as follows:   (a)                                  Within sixty (60) days following the effective date of such expiration or earlier termination, Manager will submit to Owner an audited final accounting of the results of Hotel operations and all accounts between Owner and Manager through the effective date of such expiration or earlier termination, the cost of which audit shall be shared equally by Manager and Owner and shall not be an Operating Cost and shall be performed by Ernst & Young or another accounting firm selected by Manager and approved by Owner. Said final accounting will promptly be submitted by Manager to Owner for its approval. Owner shall not unreasonably withhold or delay its approval of the final accounting and any such disapproval shall contain reasonably detailed explanation for disapproval. Within thirty (30) days after delivery of such final accounting, the parties will make appropriate adjustments to any amounts previously paid or due under this Agreement.   (b)                                 On the effective date of such expiration or earlier termination, Manager will deliver to Owner all books and records of the Hotels, provided that Manager may retain copies of any of the same for Manager’s records. Notwithstanding the foregoing, Manager will not be required to deliver to Owner any information or materials (including, without limitation, software, database, manuals and technical information) which are proprietary property of Manager.   45 --------------------------------------------------------------------------------   (c)                                  On the effective date of such expiration or earlier termination, Manager will deliver possession of the Hotels, together with any and all keys or other access devices, to Owner.   (d)                                 On the effective date of such expiration or earlier termination Manager will assign to Owner or its designee, and Owner or such designee will assume, all booking, reservation, service and operating contracts relating exclusively to the occupancy or operation of the Hotels and entered into in the ordinary course of business by Manager in accordance with this Agreement. Owner agrees to indemnify and hold Manager harmless from liability or other obligations under any such agreements relating to acts or occurrences, including Owner’s or such designee’s failure to perform, on or after the effective date of such assignment.   (e)                                  Manager will assign to Owner or its designee any assignable licenses and permits pertaining to the Hotels and will otherwise reasonably cooperate with Owner as may be necessary for the transfer of any and all Hotel licenses and permits to Owner or Owner’s designee.   (f)                                    Manager shall release and transfer to Owner or Purchaser, as applicable, any funds of Owner or Purchaser which are held or controlled by Manager.   (g)                                 Manager shall have the option, to be exercised within thirty (30) days after termination or expiration, to purchase, at their then book value, any FF&E, Operating Equipment or other personal property as may be marked with any System Mark at the Hotels. In the event Manager does not exercise such option, Owner agrees that it will use any such items not so purchased exclusively in connection with the Hotels until they are consumed; provided however, Manager shall not be entitled to purchase FF&E, Operating Equipment or other personal property located at a Hotel which is to be operated under the Brand name or by Manager, until such Hotel shall no longer be so operated.   (h)                                 Owner shall have the right to operate the improvements on the applicable Sites without modifying the structural design of same and without making any Material Repair, notwithstanding the fact that such design or certain features thereof may be proprietary to Manager or its Affiliates and/or protected by trademarks or service marks held by Manager or an Affiliate, provided that such use shall be confined to the applicable Sites. Further, provided that the applicable Hotels then satisfy the Brand Standards (unless the Hotels fail to satisfy such Brand Standards due to a breach hereof by Manager), Owner shall be entitled (but not obligated) to operate such of the Hotels as Owner designates under the Brand name for a period of one (1) year following such termination in consideration for which Owner shall pay the then standard franchise and system fees for the Brand and comply with the other applicable terms and conditions of the form of franchise agreement then being entered into with respect to the Brand.   (i)                                     Manager shall transfer to Owner the telephone numbers used in connection with the operation of the Hotels (but not the Brand generally).   46 --------------------------------------------------------------------------------   (j)                                     Manager shall cooperate with Owner’s or its designees’ efforts to engage employees of the Hotels.   (k)                                  If requested by Owner prior to such expiration or earlier termination of this Agreement in whole or in part, Manager shall continue to manage under the Brand any affected Hotels designated by Owner after such expiration or earlier termination for up to one (1) year, on such reasonable terms (which shall include an agreement to reimburse Manager for its reasonable out-of-pocket costs and expenses, and reasonable administrative costs and a management fee of seven and one-half percent (7.5%) of Gross Revenues as Owner and Manager shall reasonably agree.   The provisions of this Section 17.4 shall survive the expiration or earlier termination of this Agreement.   17.5                           DEPOSIT.   (a)                                  As security for (i) the faithful observance and performance by the Manager of all the terms, covenants and conditions of this Agreements to be observed and performed by the Manager, including, without limitation, the payment of the Owner’s Percentage Priority and the Residual Distribution pursuant to this Agreement, and (ii) the payment to Owner on the first day each month of the installment of Owner’s Priority for such month regardless of the inadequacy of the Gross Revenues or Operating Profit for any month for such purpose (all of the foregoing, collectively, the “Secured Obligations”), Manager has deposited with Owner simultaneously with the execution and delivery hereof the sum of Sixteen Million Eight Hundred Seventy Two Thousand Dollars ($16,872,000) (as the same may be drawn down and replenished from time to time pursuant to this Agreement, the “Deposit”). The Owner shall have the option to elect, in its sole discretion, whether and when to apply funds from the Deposit with respect to any of the Secured Obligations; provided however, Owner shall not apply the Deposit to any Secured Obligation for which the Guarantor is responsible under the Guaranty unless (a) the Guarantor shall have failed to pay any amount due under the Guaranty for a period of five (5) days after notice or (b) an event described in Sections 17.1(a), 17.1(b) or 17.1(c) shall have occurred with respect to the Guarantor.   (b)                                 Upon the expiration of the Term, provided, there is then no uncured Manager Default, the Owner shall return the outstanding balance of the Deposit to Manager. In addition, if the Term is duly extended by Manager beyond the Initial Term, on not less than two (2) years’ prior notice from the Manager to Owner, Owner shall return the outstanding balance of the Deposit to Manager upon the expiration of the Initial Term or the first Renewal Term and its receipt and approval of the statements required to be delivered pursuant to Section 8.1(c) for the last four (4) calendar years of the Initial Term or the Renewal Term, as applicable, which approval shall not be unreasonably withheld, conditioned or delayed provided that:   (i)                                     there is the no uncured Manager Default;   47 --------------------------------------------------------------------------------   (ii)                                  each installment of Owner’s Priority for every month during the Initial Term and, if applicable, the first Renewal Term, shall have been paid together with any interest accrued thereon;   (iii)                               the Priority Coverage Ratio for all of the Hotels in the aggregate for each of the four calendar years prior to the expiration of the Initial Term or first Renewal Term, as applicable, shall be not less than 1.3; and   (iv)                              the Owner’s Priority shall be increased by an amount equal to the aggregate sum of all of the Hotels’ Adjustments to Owner’s Priority set forth on Exhibit C.   (c)                                  Owner may commingle the Deposit with its other funds and any interest earned on account of the Deposit shall be for the benefit of the Owner.   (d)                                 If HPT’s credit rating as of the day that is twelve (12) months before the end of the Term from the Rating Agencies (as defined in the Guarantee) shall be less than BBB-/Baa 3, then during the last twelve (12) months of the Term, provided there is at all times thereafter no uncured Manager Default, Manager shall be entitled to reduce the monthly installments of Owner’s Priority payable by Manager for each of the last twelve (12) months of the Term, by an amount equal to one-twelfth (1/12th) of the then remaining balance of the Deposit and, if Manager makes such election, Owner shall be entitled to retain a portion of the Deposit equal to the amount by which the Owner’s Property is so reduced in the aggregate.   ARTICLE 18   NOTICES   18.1                           PROCEDURE.   (a)                                  Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Agreement shall be deemed adequately given if in writing and the same shall be delivered either by hand, by telecopier with written acknowledgment of receipt (provided if notice is given by telecopier, a copy shall also be sent on the following Business Day by Federal Express or similar expedited commercial carrier), or by Federal Express or similar expedited commercial carrier, addressed to the recipient of the notice, with all freight charges prepaid (if by Federal Express or similar carrier).   (b)                                 All notices required or permitted to be sent hereunder shall be deemed to have been given for all purposes of this Agreement upon the date of acknowledged receipt, in the case of a notice by telecopier, and, in all other cases, upon the date of receipt or refusal, except that whenever under this Agreement a notice is either received on a day which is not a Business Day or is required to be delivered on or before a specific day which is not a Business Day, the day of receipt or required delivery shall automatically be extended to the next Business Day.   48 --------------------------------------------------------------------------------   (C)                                  ALL SUCH NOTICES SHALL BE ADDRESSED AS FOLLOWS:   If to Owner: HPT TRS IHG-1, INC.     c/o Hospitality Properties Trust     400 Centre Street     Newton, Massachusetts 02458     Attn: President     Facsimile: 617/969-5730   with a copy to: Sullivan & Worcester LLP     One Post Office Square     Boston, Massachusetts 02109     Attn: Warren M. Heilbronner, Esq.     Facsimile: 617-338-2880   If to Manager: Intercontinental Hotels Group     Resources, Inc.     c/o Six Continents Hotels, Inc.     3 Ravinia Drive, Suite 100     Atlanta, Georgia 30346     Attn: Vice President of Operations     Facsimile: 770-604-8875   with a copy to: Intercontinental Hotels Group     Resources, Inc.     c/o Six Continents Hotels, Inc.     3 Ravinia Drive, Suite 100     Atlanta, Georgia 30346     Attn: General Counsel - Operations     Facsimile: 770-604-5802   (d)                                 By notice given as herein provided, the parties hereto and their respective successors and assigns shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses effective upon receipt by the other parties of such notice and each shall have the right to specify as its address any other address within the United States of America.   ARTICLE 19   RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS   19.1                           Relationship. Manager shall be the agent of Owner with a limited agency solely for the purpose of operating the Hotels and carrying out ordinary and customary transactions for that purpose. Manager shall not have fiduciary duties to Owner by virtue of this Agreement. Owner and Manager shall not be construed as joint venturers or partners of each other, and neither shall have the power to bind or obligate the other except as set forth in this Agreement. Manager shall not constitute a tenant or subtenant of Owner and this Agreement shall not constitute Owner a franchisee of Manager or of any of Manager’s Affiliates. This Agreement shall not create a franchise or a franchisor/franchisee relationship within the meaning of the Federal Trade Commission   49 --------------------------------------------------------------------------------   ACT, ANY RULE OR REGULATION PROMULGATED, OR ANY OTHER STATE OR FEDERAL LAW, RULE OR REGULATION OR ADMINISTRATIVE OR JUDICIAL DECISION.   19.2                           Further Actions. Each of the parties agrees to execute all contracts, agreements and documents and take all actions necessary to comply with the provisions of this Agreement and the intent hereof.   ARTICLE 20   APPLICABLE LAW   This Agreement shall be interpreted, construed, applied and enforced in accordance with the laws of the State of New York applicable to contracts between residents of New York which are to be performed entirely within New York, regardless of (a) where this Agreement is executed or delivered, (b) where any payment or other performance required by this Agreement is made or required to be made, (c) where any breach of any provision of this Agreement occurs, or any cause of action otherwise accrues, (d) where any action or other proceeding is instituted or pending, (e) the nationality, citizenship, domicile, principal place of business, or jurisdiction of organization or domestication of any party, (f) whether the laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction other than Massachusetts, (g) the location of the Hotels or any applicable Hotel, or (h) any combination of the foregoing.   ARTICLE 21   SUCCESSORS AND ASSIGNS   21.1                           ASSIGNMENT.   (a)                                  Except as expressly provided below, Manager shall not assign, mortgage, pledge, hypothecate or otherwise transfer its interest in all or any portion of this Agreement or any rights arising under this Agreement or suffer or permit such interests or rights to be assigned, transferred, mortgaged, pledged, hypothecated or encumbered, in whole or in part, whether voluntarily, involuntarily or by operation of law, or permit the management of the Hotels by anyone other than Manager or Owner. For purposes of this Section 21.1, an assignment of this Agreement shall be deemed to include any transaction which results in Manager no longer being an Affiliate of Guarantor or pursuant to which all or substantially all of Manager’s assets are transferred to any Person who is not an Affiliate of Guarantor.   (b)                                 Manager shall have the right, without Owner’s consent, to (i) assign its interest in this Agreement (i) to IHG or any Affiliate of IHG provided such assignee satisfies the requirements of Section 24.15, (ii) in connection with a merger, corporate restructuring or consolidation of IHG or a sale of all or substantially all of the assets of IHG and (iii) in connection with a sale of all or substantially all of the assets (including associated management agreements) owned by IHG and its Affiliates relating to the Brand. If Owner and its Affiliates shall own or lease more than fifty percent (50%) of the hotels comprising the Brand, IHG shall not, and Manager shall cause IHG not to, transfer all or substantially all of the assets of IHG relating to the Brand other than to a Person who at   50 --------------------------------------------------------------------------------   ALL TIMES IS AN AFFILIATE OF IHG. AT OWNER’S ELECTION, MANAGER SHALL ASSIGN THIS AGREEMENT TO ANY PERSON WHO IS NOT AN AFFILIATE OF IHG THAT ACQUIRES ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF IHG RELATING TO THE BRAND AND SHALL CAUSE SUCH PERSON TO ASSUME ALL OF MANAGER’S OBLIGATIONS THEREAFTER ACCRUING HEREUNDER.   (c)                                  Owner shall not assign, mortgage, pledge, hypothecate or otherwise transfer its interest in all or any portion of this Agreement or any rights arising under this Agreement without the prior written consent of Manager except (i)in connection with a sale of a Hotel in accordance with the terms of Sections 4.4 and 4.5, (ii) to Purchaser or an Affiliate of Purchaser,(iii) to Manager or an Affiliate of Manager, (iv) to an Affiliate of Owner in a merger, corporate restructuring or consolidation of Purchaser or any of its Affiliates,(v) in connection with the granting of an Authorized Mortgage or (vi) to a Substitute Tenant as provided in Section 4.2; provided, however, in each instance (other than in connection with a collateral assignment) that the assignee hereof assumes all of Owner’s obligation hereunder and under the other Transaction Documents thereafter accruing.   (d)                                 In the event either party consents to an assignment of this Agreement by the other, no further assignment shall be made without the express consent in writing of such party, unless such assignment may otherwise be made without such consent pursuant to the terms of this Agreement. An assignment by Owner of its interest in this Agreement approved or permitted pursuant to the terms hereof shall relieve Owner of its obligations under this Agreement thereafter accruing.   (e)                                  In the event fifty percent (50%) or more of the hotels comprising the Brand cease to be Staybridge Suites hotels and are converted to another brand in a single transaction or a series of related transactions, Owner may elect to require Manager to promptly convert at its own cost and expense (and not as an Operating Cost and without reimbursement from the Reserve Account) the Hotels to the brand of hotels to which such other hotels are converted. In such event, all references herein to “Staybridge Suites” shall be deemed to refer to the trade name of the system of hotels to which the Hotels are to be so converted.   21.2                           Binding Effect. The terms, provisions, covenants, undertakings, agreements, obligations and conditions of this Agreement shall be binding upon and shall inure to the benefit of the successors in interest and the assigns of the parties hereto with the same effect as if mentioned in each instance where the party hereto is named or referred to, except that no assignment, transfer, sale, pledge, encumbrance, mortgage, lease or sublease by or through Owner, as the case may be, in violation of the provisions of this Agreement shall vest any rights in the assignee, transferee, purchaser, secured party, mortgagee, pledgee, lessee, sublessee or occupant.   51 --------------------------------------------------------------------------------   ARTICLE 22   RECORDING   22.1                           Memorandum of Agreement. As of the Effective Date, at the option of Manager, Owner and Manager agree to execute, acknowledge and record a Memorandum of this Agreement in the land records of the states and counties where the Hotels are located, in a form reasonably satisfactory to Manager.   ARTICLE 23   FORCE MAJEURE   23.1                           Operation of Hotel. If at any time during the Term it becomes necessary in Manager’s reasonable opinion to cease or alter operations at any Hotel in order to protect the health, safety and welfare of the guests and/or employees of such Hotel, or such Hotel itself, for reasons of force majeure beyond the control of Manager such as, but not limited to, acts of war, insurrection, civil strife and commotion, labor unrest or acts of God, then in such event Manager may close and cease or alter operation of all or part of such Hotel, reopening and commencing or resuming operation when Manager deems that such may be done without jeopardy to such Hotel, its guests and employees.   23.2                           Extension of Time. Owner and Manager agree that, with respect to any obligation, other than the payment of money, to be performed by a party during the Term, neither party will be liable for failure so to perform when prevented by any occurrence beyond the reasonable control of such party, herein referred to as a “force majeure” including, without limitation, occurrences such as strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, failure of supply or inability, by the exercise of reasonable diligence, to obtain supplies, parts or employees necessary to perform such obligation, or war or other emergency. The time within which such obligation must be performed will be extended for a period of time equivalent to the number of days of delay from such cause.   ARTICLE 24   GENERAL PROVISIONS   24.1                           Trade Area Restriction. Notwithstanding anything to the contrary in this Agreement, neither Manager nor any Affiliate shall acquire, own, manage, operate or open any hotel as a “Staybridge Suite” hotel nor shall Manager or any Affiliate authorize a third party to operate or open any hotel as a “Staybridge Suite” hotel that is within the Restricted Area of any Hotel during its Restricted Period, unless such hotel (a) is owned or leased by Owner or its Affiliate; (b) is owned, operated, managed, franchised or under development on the Effective Date and has been specifically identified in writing at or prior to the time of the execution of the Purchase Agreement; or (c) is part of an acquisition by IHG or its Affiliates of an interest (including an interest as a franchisor) in a chain or group of not less than ten (10) hotels (such acquisition to occur in a single transaction or a series of related transactions). The terms of this Section 24.1 shall apply only to “Staybridge Suites” hotels and shall not in any way restrict the ownership, management, franchising or operation other brands or flags of any hotels owned or operated by Manager or its Affiliates within the Restricted Area.   52 --------------------------------------------------------------------------------   24.2                           ENVIRONMENTAL MATTERS.   (a)                                  Manager shall not store, spill upon, dispose of or transfer to or from any Hotel any Hazardous Substance, except in compliance with all Legal Requirements. Manager shall maintain the Hotels at all times free of any Hazardous Substance (except in compliance with all Legal Requirements). Manager (i) upon receipt of notice or knowledge shall promptly notify Purchaser and Owner in writing of any material change in the nature or extent of Hazardous Substances at any Hotel, (ii) shall file and transmit to Purchaser and Owner a copy of any Community Right to Know report which is required to be filed by the Manager with respect to any Hotel pursuant to SARA Title III or any other Legal Requirements, (iii) shall transmit to Purchaser and Owner copies of any citations, orders, notices or other governmental communications received by Manager with respect thereto (collectively, “Environmental Notice”), which Environmental Notice requires a written response or any action to be taken and/or if such Environmental Notice gives notice of and/or presents a material risk of any material violation of any Legal Requirement and/or presents a material risk of any material cost, expense, loss or damage, (iv) shall observe and comply with all Legal Requirements relating to the use, maintenance and disposal of Hazardous Substances and all orders or directives from any official, court or agency of competent jurisdiction relating to the use or maintenance or requiring the removal, treatment, containment or other disposition thereof, and (v) shall pay or otherwise dispose of any fine, charge or imposition related thereto.   (b)                                 In the event of the discovery of Hazardous Substances other than those maintained in accordance with Legal Requirements on any portion of any Site or in any Hotel during the Term, Manager shall use reasonable efforts promptly (i) clean up and remove from and about such Hotel all Hazardous Substances thereon, if appropriate, (ii) contain and prevent any further release or threat of release of Hazardous Substances on or about such Hotel, and (iii) use good faith efforts to eliminate any further release or threat of release of Hazardous Substances on or about such Hotel, and (iv) otherwise effect a remediation of the problem in accordance with (A) the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as amended; (B) the regulations promulgated thereunder, from time to time; (C) all Federal, state and local laws, rules and regulations (now or hereafter in effect) dealing with the use, generation, treatment, storage, disposal or abatement of Hazardous Substances; and (D) the regulations promulgated thereunder, from time to time (collectively referred to as “Environmental Laws”).   (c)                                  To the extent any service required to be performed under this Section 24.2 or cost incurred under this Section 24.2 is not due to the fault of Manager or is not performed or incurred in the operations of the Hotels in the ordinary course, the same shall be governed by Section 11.1; provided, however, to the extent that Section 11.1 shall apply to such services or costs, Owner shall be entitled to engage a third party to perform such services.   24.3                           Authorization. Owner represents that it has full power and authority to execute this Agreement and to be bound by and perform the terms hereof. Manager represents it   53 --------------------------------------------------------------------------------   HAS FULL POWER AND AUTHORITY TO EXECUTE THIS AGREEMENT AND TO BE BOUND BY AND PERFORM THE TERMS HEREOF. ON REQUEST, EACH SUCH PARTY WILL FURNISH TO THE OTHER EVIDENCE OF SUCH AUTHORITY.   24.4                           Severability. If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or in such case.   24.5                           Merger. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof.   24.6                           Formalities. Any amendment or modification of this Agreement must be in writing signed by all parties hereto. This Agreement may be executed in one or more counterparts, each of which will be deemed an original. The captions for each Article are intended for convenience only.   24.7                           CONSENT TO JURISDICTION; NO JURY TRIAL.   (a)                                  Except as provided in Section 24.19, all actions and proceedings arising out of or in any way relating to this Agreement shall be brought, heard, and determined exclusively in an otherwise appropriate federal or state court located within the State of New York. Except as provided in Section 24.19, the parties hereby (a) submit to the exclusive jurisdiction of any New York federal or state court of otherwise competent jurisdiction for the purpose of any action or proceeding arising out of or relating to this Agreement and (b) voluntarily and irrevocably waive, and agree not to assert by way of motion, defense, or otherwise in any such action or proceeding, any claim or defense that they are not personally subject to the jurisdiction of such a court, that such a court lacks personal jurisdiction over any party or the matter, that the action or proceeding has been brought in an inconvenient or improper forum, that the venue of the action or proceeding is improper, or that this Agreement may not be enforced in or by such a court. To the maximum extent permitted by applicable law, each party consents to service of process by registered mail, return receipt requested, or by any other manner provided by law.   54 --------------------------------------------------------------------------------   (b)                                 To the maximum extent permitted by applicable law, each of the parties hereto waives its rights to trial by jury with respect to this Agreement or matter arising in connection herewith.   24.8                           Performance on Business Days. In the event the date on which performance or payment of any obligation of a party required hereunder is other than a Business Day, the time for payment or performance shall automatically be extended to the first Business Day following such date.   24.9                           Attorneys’ Fees. If any lawsuit or arbitration or other legal proceeding arises in connection with the interpretation or enforcement of this Agreement, the prevailing party therein shall be entitled to receive from the other party the prevailing party’s costs and expenses, including reasonable attorneys’ fees incurred in connection therewith, in preparation therefor and on appeal therefrom, which amounts shall be included in any judgment therein.   24.10                     Section and Other Headings. The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.   24.11                     Documents. Throughout the Term, Owner agrees to furnish Manager copies of all notices relating to real and personal property taxes and insurance statements, all financing documents (including notes and mortgages) relating to the Hotel and such other documents pertaining to the Hotels as Manager may request.   24.12                     No Consequential Damages. Except as may be expressly provided herein, in no event shall either party be liable for any consequential, exemplary or punitive damages suffered by the other as the result of a breach of this Agreement. Time is of the essence with respect to this Agreement.   24.13                     No Political Contributions. Notwithstanding anything contained in this Agreement to the contrary, no money or property of the Hotels shall be paid or used or offered, nor shall Owner or Manager directly or indirectly use or offer, consent or agree to use or offer, any money or property of the Hotels (i) in aid of any political party, committee or organization, (ii) in aid of any corporation, joint stock or other association organized or maintained for political purposes, (iii) in aid of any candidate for political office or nomination for such office, (iv) in connection with any election, (v) for any political purpose whatever, or (vi) for the reimbursement or indemnification of any person for any money or property so used.   24.14                     REIT Qualification. Manager shall, as an Operating Cost, take all actions reasonably requested by Owner or Purchaser as may be necessary to ensure that Purchaser’s rental income from Owner under the Lease qualifies as “rents from real property” pursuant to Sections 856(d)(2), 856(d)(8)(B) and 856(d)(9) of the Code; provided, however, any additional costs or expenses (including internal costs and expenses) incurred by Manager in complying with such a request shall be borne by Owner (and   55 --------------------------------------------------------------------------------   SHALL NOT BE AN OPERATING COST) TO THE EXTENT THE SAME TOGETHER WITH THE COSTS TO MANAGER REFERRED TO IN SECTION 24.16 EXCEEDS $25,000 OVER THE TERM IN THE AGGREGATE.   24.15                     Further Compliance with Section 856(d) of the Code. Throughout the Term (including the Effective Date), the Manager shall qualify as an “eligible independent contractor” as defined in Section 856(d)(9)(A) of the Code. To that end, Manager:   (a)                                  shall not permit wagering activities to be conducted at or in connection with any Hotel by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such Hotel;   (b)                                 shall use reasonable efforts to cause each Hotel to qualify as a “qualified lodging facility” under Section 856(d)(9)(D) of the Code;   (c)                                  shall not own, directly or indirectly or constructively (within the meaning of Section 856(d)(5) of the Code), more than thirty five percent (35%) of the shares of HPT (whether by vote, value or number of shares), and Manager shall otherwise comply with any regulations or other administrative or judicial guidance now or hereafter existing under said Section 856(d)(5) of the Code with respect to such ownership limits; and   (d)                                 shall be actively engaged (or shall, within the meaning of Section 856(d)(9)(F) of the Code, be related to a person that is so actively engaged) in the trade or business of operating “qualified lodging facilities” (defined below) for a person who is not a “related person” within the meaning of Section 856(d)(9)(F) of the Code with respect to HPT or Owner (“Unrelated Persons”). In order to meet this requirement, the Manager agrees that it (or any “related person” with respect to Manager within the meaning of Section 856(d)(9)(F) of the Code) (i) shall derive at least ten percent (10%) of both its revenue and profit from operating “qualified lodging facilities” for Unrelated Persons and (ii) shall comply with any regulations or other administrative or judicial guidance under Section 856(d)(9) of the Code with respect to the amount of hotel management business with Unrelated Persons that is necessary to qualify as an “eligible independent contractor” within the meaning of such Code Section.   (e)                                  A “qualified lodging facility” is defined in Section 856(d)(9)(D) of the Code and means a “lodging facility” (defined below), unless wagering activities are conducted at or in connection with such facility by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such facility. A “lodging facility” is a hotel, motel or other establishment more than one-half of the dwelling units in which are used on a transient basis, and includes customary amenities and facilities operated as part of, or associated with, the lodging facility so long as such amenities and facilities are customary for other properties of a comparable size and class owned by other owners unrelated to HPT.   24.16                     Adverse Regulatory Event. In the event of an Adverse Regulatory Event arising from or in connection with this Agreement, Owner and Manager shall work together in good faith to amend this Agreement to eliminate the impact of such Adverse Regulatory Effect; provided, however, Manager shall have no obligation to materially reduce its   56 --------------------------------------------------------------------------------   RIGHTS OR MATERIALLY INCREASE ITS OBLIGATION UNDER THIS AGREEMENT, ALL TAKEN AS A WHOLE, OR TO BEAR ANY COSTS OR EXPENSES (INCLUDING INTERNAL COSTS AND EXPENSES) IN EXCESS OF $25,000 IN THE AGGREGATE OVER THE TERM UNDER SECTION 24.14 AND THIS SECTION 24.16. FOR PURPOSES OF THIS AGREEMENT, THE TERM “ADVERSE REGULATORY EFFECT” MEANS ANY TIME THAT A LAW, STATUTE, ORDINANCE, CODE, RULE OR REGULATION IMPOSES (OR COULD IMPOSE IN OWNER’S REASONABLE OPINION) ANY MATERIAL THREAT TO HPT’S STATUS AS A “REAL ESTATE INVESTMENT TRUST” UNDER THE CODE OR TO THE TREATMENT OF AMOUNTS PAID TO SUCH PURCHASER AS “RENTS FROM REAL PROPERTY” UNDER SECTION 856(D) OF THE CODE. EACH OF MANAGER AND OWNER SHALL INFORM THE OTHER OF ANY ADVERSE REGULATORY EVENT OF WHICH IT IS AWARE AND WHICH IT BELIEVES LIKELY TO IMPAIR COMPLIANCE OF ANY OF THE HOTELS WITH RESPECT TO THE AFOREMENTIONED SECTIONS OF THE CODE.   24.17                     Commercial Leases. Manager shall not enter into any sublease with respect to any Hotel (or any part thereof) unless the same has been approved by Purchaser in its sole and absolute discretion; provided, however, Manager may sublease or grant concessions or licenses to shops or any other space at a Hotel subject to the following terms and conditions: (a) subleases and concessions are for newsstand, gift shop, parking garage, heath club, restaurant, bar or commissary purposes or similar concessions; (b) such subleases and concessions do not have a term in excess of lesser of five (5) years or the remaining Term under this Agreement; (c) such subleases and concessions do not demise, (i) in the aggregate, in excess of Two Thousand (2,000) square feet of any Hotel, or (ii) for any single sublease, in excess of Five Hundred (500) square feet of any Hotel; (d) any such sublease, license or concession to an Affiliate of a Manager shall be on terms consistent with those that would be reached through arms-length negotiation; (e) for so long as Purchaser or any Affiliate of Purchaser shall seek to qualify as a real estate investment trust under the Code, anything contained in this Agreement to the contrary notwithstanding, Manager shall not sublet or otherwise enter into any agreement with respect to a Hotel on any basis such that in the opinion of the Owner the rental or other fees to be paid by any sublessee thereunder would be based, in whole or in part, on either (i) the income or profits derived by the business activities of such sublessee, or (ii) any other formula such that any portion of such sublease rental would fail to qualify as “rents from real property” within the meaning of Section 865(d) of the Internal Revenue Code of 1986, as amended, or any similar or successor provision thereto; (f) such lease or concession will not violate or affect any Legal Requirement or Insurance Requirement; (g) Manager shall obtain or cause the subtenant to obtain such additional insurance coverage applicable to the activities to be conducted in such subleased space as Owner and any mortgagee under an Authorized Mortgage may reasonably require; and (b) not less than twenty (20) days prior to the date on which Manager proposes to enter into any sublease or concession, Manager shall provide a copy thereof to Owner.   24.18                     Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING PURCHASER, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT, AND MANAGER HEREBY AGREES THAT, THE NAME “HPT IHG PROPERTIES TRUST” REFERS TO THE TRUSTEES UNDER THE DECLARATION   57 --------------------------------------------------------------------------------   COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF PURCHASER SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, PURCHASER. ALL PERSONS DEALING WITH PURCHASER, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF PURCHASER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.   24.19                     ARBITRATION.   (a)                                  Whenever in this Agreement it is provided that a dispute is to be resolved by an Arbitration, such dispute shall be finally resolved pursuant to an arbitration before a panel of three (3) arbitrators who will conduct the arbitration proceeding in accordance with the provisions of this Agreement and the rules of the American Arbitration Association. Unless otherwise mutually agreed by Owner and Manager, the arbitration proceedings will be conducted in New York, New York. All arbitrators appointed by or on behalf of either party shall be independent persons with recognized expertise in the operation of hotels of similar size and class as the Hotels with not less than five (5) years’ experience in the hotel industry. The party desiring arbitration will give written notice to that effect to the other party, specifying in such notice the name, address and professional qualifications of the person designated as arbitrator on its behalf. Within fifteen (15) days after service of such notice, the other party will give written notice to the party desiring such arbitration specifying the name, address and professional qualifications of the person designated to act as arbitrator on its behalf. The two arbitrators will, within fifteen (15) days thereafter, select a third, neutral arbitrator. As soon as possible after the selection of the third arbitrator, and no later than fifteen (15) days thereafter, the parties will submit their positions on each disputed item in writing to the three arbitrators. The decision of the arbitrators so chosen shall be given within a period of twenty (20) days after the appointment of such third arbitrator. The arbitrators must, by majority vote, agree upon and approve the substantive position of either Owner or Manager with respect to each disputed item, and are not authorized to agree upon or impose any other substantive position which has not been presented to the arbitrators by Manager or Owner. It is the intention of the parties that the Arbitrator’s rule only on the substantive positions submitted to them by the parties and the Arbitrators are not authorized to render rulings which are a compromise as to any such substantive position. A decision in which any two (2) arbitrators so appointed and acting hereunder concur in writing with respect to each disputed item shall in all cases be binding and conclusive upon Owner and Manager and a copy of said decision shall be forwarded to the parties. The parties request that the Arbitrator assess the costs and expenses of the Arbitration and their fees against the parties based on a finding as to which parties substantive positions were not upheld. Otherwise the fees and expenses of the arbitration will be treated as an Operating Cost unless otherwise determined by the arbitrators.   (b)                                 If the party receiving a request for Arbitration fails to appoint its arbitrator within the time above specified, or if the two arbitrators so selected cannot agree on the selection of the third arbitrator within the time above specified, then either party, on behalf of both   58 --------------------------------------------------------------------------------   PARTIES, MAY REQUEST SUCH APPOINTMENT OF SUCH SECOND OR THIRD ARBITRATOR, AS THE CASE MAY BE, BY APPLICATION TO ANY JUDGE OF ANY COURT IN NEW YORK COUNTY, NEW YORK OF COMPETENT JURISDICTION UPON TEN (10) DAYS’ PRIOR WRITTEN NOTICE TO THE OTHER PARTY OF SUCH INTENT.   (c)                                  If there shall be a dispute with respect to whether a party has unreasonably withheld, conditioned or delayed its consent with respect to a matter for which such party has agreed herein not to unreasonably withhold its consent, such dispute shall be resolved by Arbitration.   (d)                                 Any disputes under Sections 2.1 or 7.6 shall be resolved by Arbitration; provided, however, notwithstanding the foregoing, Owner shall be entitled to seek and obtain injunctive and other equitable relief if it believes there has been a breach of Manager’s obligation under either of said Sections.   24.20                     Estoppel Certificates. Each party to this Agreement shall at any time and from time to time, upon not less than fifteen (15) days’ prior notice from the other party, execute, acknowledge and deliver to such other party, or to any third party specified by such other party, a statement in writing:  (a) certifying that this Agreement is unmodified and in full force and effect (or if there have been modifications, that the same, as modified, is in full force and effect and stating the modifications); (b) stating whether or not to the best knowledge of the certifying party (i) there is a continuing default by the non-certifying party in the performance or observance of any covenant, agreement or condition contained in this Agreement, or (ii) there shall have occurred any event which, with the giving of notice or passage of time or both, would become such a default, and, if so, specifying each such default or occurrence of which the certifying party may have knowledge; (c) stating the date to which distributions of Operating Profits have been made; and (d) stating such other information as the non-certifying party may reasonably request. Such statement shall be binding upon the certifying party and may be relied upon by the non-certifying party and/or such third party specified by the non-certifying party as aforesaid, including, without limitation its and its Affiliates’ lenders and any prospective purchaser or mortgagee of any Hotel.   24.21                     CONFIDENTIALITY.   (a)                                  The parties hereto agree that the matters set forth in this Agreement and the information provided pursuant to the terms hereof are strictly confidential and each party will make every effort to ensure that the information is not disclosed to any outside person or entities (including the press) without the prior written consent of the other party except may be required by law and as may be reasonably necessary to obtain licenses, permits, and other public approvals necessary for the refurbishment or operation of the Hotels, or in connection with financing, proposed financing, sale or proposed sale.   (b)                                 No reference to Manager or to any of its Affiliates will be made in any prospectus, private placement memorandum, offering circular or offering documentation related thereto (collectively referred to as the “Prospectus”), issued by Owner or any of its Affiliates, which is designated to interest potential investors in a Hotel, unless Manager   59 --------------------------------------------------------------------------------   (c)                                  has previously received a copy of all such references. However, regardless of whether Manager does or does not so receive a copy of all such references, neither Manager nor any of its Affiliates will be deemed a sponsor of the offering described in the Prospectus, nor will it have any responsibility for the Prospectus, and the Prospectus will so state. Unless Manager agrees in advance, the Prospectus will not include any trademark, symbols, logos or designs of Manager or any of its Affiliates.   24.22                     Hotel Warranties. Manager shall be entitled to enforce in the name of Owner any warranties held by Owner with respect to the Hotels or any portion thereof.   60 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement effective as of the day and year first above written.     OWNER:       HPT TRS IHG-1, INC.           By:  /s/ John G. Murray     Name:  John G. Murray     Title:  Vice President             MANAGER:           INTERCONTINENTAL HOTELS GROUP RESOURCES, INC.       By:  /s/ Robert G. Gunkel     Name: Robert G. Gunkel     Title: Vice President     61 --------------------------------------------------------------------------------   Purchaser in consideration of good and valuable consideration, joins in the foregoing Agreement to evidence its agreement to be bound by the terms of Sections 4.1 through and including 4.7 and Articles 15 and 16 thereof subject to the terms of Section 24.18.     PURCHASER:       HPT IHG PROPERTIES TRUST           By:  /s/ John G. Murray     Name: John G. Murray     Title:  President         Date of Execution: July 1, 2003   62 --------------------------------------------------------------------------------   THE FOLLOWING EXHIBITS HAVE BEEN OMITTED AND WILL BE SUPPLEMENTALLY FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST:   Exhibit   Document       A     The Sites         B     Opening Dates         C     Allocations         D     Restricted Area   A-1 --------------------------------------------------------------------------------

Exhibit 10.4 Graham Option Agreement NOVASTAR RESOURCES LTD. SECOND AMENDED AND RESTATED 2006 STOCK PLAN NOTICE OF GRANT Capitalized but otherwise undefined terms in this Notice of Grant and the attached Stock Option Agreement shall have the same defined meanings as in the Second Amended and Restated 2006 Stock Plan (the “Plan”). Name: THOMAS GRAHAM, JR.  Address:    c/o Novastar Resources Ltd.,         8300 Greensboro Drive, Suite 800,          McLean, VA 22102             You have been granted an option (the “Option”) to purchase Common Stock of the Corporation, subject to the terms and conditions of the Plan and the attached Stock Option Agreement, as follows: Date of Grant:    July 27, 2006                Vesting Commencement Date:    July 27, 2006                Option Price per Share:    $ 0.49                            Total Number of Shares Granted:    1,500,000                     Total Option Price:    $ 735,000                      Type of Option:    Incentive Stock Option  Term/Expiration Date:    Ten (10) years after Date of Grant     Vesting Schedule: The Option shall vest, in whole or in part, in accordance with the following schedule:   The Option shall vest with respect to 1/36 of the Total Number of Shares Granted (as specified above) on the Vesting Commencement Date and shall thereafter vest 1/36 on the first day of each month until all shares underlying the Option have vested. The Option shall immediately and automatically vest in full upon the termination of the Optionee’s employment by the Company without Cause. For purposes of this Notice of Grant, the term “Cause” shall have the meaning given in the Employment Agreement, between the Optionee and the Company, of even date herewith.   -------------------------------------------------------------------------------- NOVASTAR RESOURCES LTD. SECOND AMENDED AND RESTATED 2006 STOCK PLAN STOCK OPTION AGREEMENT   This STOCK OPTION AGREEMENT (“Agreement”), dated as of the 27th day of July, 2006 is made by and between NOVASTAR RESOURCES LTD., a Nevada corporation (the “Corporation”), and THOMAS GRAHAM, JR. (the “Optionee,” which term as used herein shall be deemed to include any successor to the Optionee by will or by the laws of descent and distribution, unless the context shall otherwise require).   BACKGROUND   Pursuant to the Corporation’s Second Amended and Restated 2006 Stock Plan (the “Plan”), the Corporation, acting through the Committee of the Board of Directors (if a committee has been formed to administer the Plan) or its entire Board of Directors (if no such committee has been formed) responsible for administering the Plan (in either case, referred to herein as the “Committee”), approved the issuance to the Optionee, effective as of the date set forth above, of a stock option to purchase shares of Common Stock of the Corporation at the price (the “Option Price”) set forth in the attached Notice of Grant (which is expressly incorporated herein and made a part hereof, the “Notice of Grant”), upon the terms and conditions hereinafter set forth.   NOW, THEREFORE, in consideration of the mutual premises and undertakings hereinafter set forth, the parties hereto agree as follows:   1.  Option; Option Price. On behalf of the Corporation, the Committee hereby grants to the Optionee the option (the “Option”) to purchase, subject to the terms and conditions of this Agreement and the Plan (which is incorporated by reference herein and which in all cases shall control in the event of any conflict with the terms, definitions and provisions of this Agreement), that number of shares of Common Stock of the Corporation set forth in the Notice of Grant, at an exercise price per share equal to the Option Price as is set forth in the Notice of Grant (the “Optioned Shares”). If designated in the Notice of Grant as an “incentive stock option,” the Option is intended to qualify for Federal income tax purposes as an “incentive stock option” within the meaning of Section 422 of the Code. A copy of the Plan as in effect on the date hereof has been supplied to the Optionee, and the Optionee hereby acknowledges receipt thereof.   2.  Term. The term (the “Option Term”) of the Option shall commence on the date of this Agreement and shall expire on the Expiration Date set forth in the Notice of Grant unless such Option shall theretofore have been terminated in accordance with the terms of the Notice of Grant, this Agreement or of the Plan.   3.  Time of Exercise.   (a)  Unless accelerated in the discretion of the Committee or as otherwise provided herein, the Option shall become exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant. Subject to the provisions of Sections 5 and 8 hereof, shares as to which the Option becomes exercisable pursuant to the foregoing provisions may be purchased at any time thereafter prior to the expiration or termination of the Option.   --------------------------------------------------------------------------------   (b)  Anything contained in this Agreement to the contrary notwithstanding, to the extent the Option is intended to be an Incentive Stock Option, the Option shall not be exercisable as an Incentive Stock Option, and shall be treated as a Non-Statutory Option, to the extent that the aggregate Fair Market Value on the date hereof of all stock with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under the Plan and all other plans of the Corporation, its parent and its subsidiaries, if any) exceeds $100,000.   4.  Termination of Option.   (a)   The Optionee may exercise the Option (but only to the extent the Option was exercisable at the time of termination of the Optionee’s employment with the Corporation, its parent or any of its subsidiaries) at any time within three (3) months following the termination of the Optionee’s employment with the Corporation, its parent or any of its subsidiaries, but not later than the scheduled expiration date. If the termination of the Optionee’s employment is for cause or is otherwise attributable to a breach by the Optionee of an employment, non-competition, non-disclosure or other material agreement, the Option shall expire immediately upon such termination. If the Optionee is a natural person who dies while in employment with the Corporation, its parent or any of its subsidiaries, this option may be exercised, to the extent of the number of shares with respect to which the Optionee could have exercised it on the date of his death, by his estate, personal representative or beneficiary to whom this option has been assigned pursuant to Section 9 of the Plan, at any time within the twelve (12) month period following the date of death. If the Optionee is a natural person whose employment with the Corporation, its parent or any of its subsidiaries is terminated by reason of his disability, this Option may be exercised, to the extent of the number of shares with respect to which the Optionee could have exercised it on the date the employment was terminated, at any time within the twelve (12) month period following the date of such termination, but not later than the scheduled expiration date. At the expiration of such three (3) or twelve (12) month period or the scheduled expiration date, whichever is the earlier, this Option shall terminate and the only rights hereunder shall be those as to which the Option was properly exercised before such termination.   (b)  Anything contained herein to the contrary notwithstanding, the Option shall not be affected by any change of duties or position of the Optionee (including a transfer to or from the Corporation, its parent or any of its subsidiaries) so long as the Optionee continues in a Business Relationship with the Corporation, its parent or any of its subsidiaries.   5.  Procedure for Exercise.   (a)  The Option may be exercised, from time to time, in whole or in part (but for the purchase of whole shares only), by delivery of a written notice in the form attached as Exhibit A hereto (the “Notice”) from the Optionee to the Secretary of the Corporation, which Notice shall:   2 --------------------------------------------------------------------------------   (i)  state that the Optionee elects to exercise the Option;   (ii)  state the number of shares with respect to which the Option is being exercised (the “Optioned Shares”);   (iii)  state the method of payment for the Optioned Shares pursuant to Section 5(b);   (iv)  state the date upon which the Optionee desires to consummate the purchase of the Optioned Shares (which date must be prior to the termination of such Option and no later than 30 days from the delivery of such Notice);   (v)  include any representations of the Optionee required under Section 8(b);   (vi)  if the Option shall be exercised in accordance with Section 9 of the Plan by any person other than the Optionee, include evidence to the satisfaction of the Committee of the right of such person to exercise the Option; and   (b)  Payment of the Option Price for the Optioned Shares shall be made either (i) by delivery of cash or a check to the order of the Corporation in an amount equal to the Option Price, (ii) if approved by the Committee, by delivery to the Corporation of shares of Common Stock of the Corporation having a Fair Market Value on the date of exercise equal in amount to the Option Price of the options being exercised, (iii) by any other means which the Board of Directors determines are consistent with the purpose of the Plan and with applicable laws and regulations (including, without limitation, the provisions of Rule 16b-3 and Regulation T promulgated by the Federal Reserve Board), or (iv) by any combination of such methods of payment. Notwithstanding any provisions herein to the contrary, if the Fair Market Value of one share of Common Stock of the Corporation is greater than the Option Price (at the date of calculation as set forth below), in lieu of paying the Option Price in cash, the Optionee may elect to receive shares equal to the value (as determined below) of the Optioned Shares by delivering notice of such election to the Corporation in which event the Corporation shall issue to the Optionee a number of shares of Common Stock computed using the following formula:   X = Y(A-B)         A                      Where   X  =  the number of shares of Common Stock to be issued to the Optionee                    Y = the number of Optioned Shares         A = the Fair Market Value of one share of Common Stock (at the date of such calculation)                   B  =  Option Price (as adjusted to the date of such calculation)    (c)  The Corporation shall issue a stock certificate in the name of the Optionee (or such other person exercising the Option in accordance with the provisions of Section 9 of the Plan) for the Optioned Shares as soon as practicable after receipt of the Notice and payment of the aggregate Option Price for such shares.   3 --------------------------------------------------------------------------------   6.  No Rights as a Stockholder. The Optionee shall not have any privileges of a stockholder of the Corporation with respect to any Optioned Shares until the date of issuance of a stock certificate pursuant to Section 5(c).   7.   Adjustments. The Plan contains provisions covering the treatment of options in a number of contingencies such as stock splits and mergers. Provisions in the Plan for adjustment with respect to stock subject to options and the related provisions with respect to successors to the business of the Corporation are hereby made applicable hereunder and are incorporated herein by reference. In general, the Optionee should not assume that options would survive the acquisition of the Corporation.   8.  Additional Provisions Related to Exercise.   (a)  The Option shall be exercisable only on such date or dates and during such period and for such number of shares of Common Stock as are set forth in this Agreement.   (b)  To exercise the Option, the Optionee shall follow the procedures set forth in Section 5 hereof. Upon the exercise of the Option at a time when there is not in effect a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), relating to the shares of Common Stock issuable upon exercise of the Option, the Committee in its discretion may, as a condition to the exercise of the Option, require the Optionee (i) to execute an Investment Representation Statement substantially in the form set forth in Exhibit B hereto and (ii) to make such other representations and warranties as are deemed appropriate by counsel to the Corporation.   (c)  Stock certificates representing shares of Common Stock acquired upon the exercise of Options that have not been registered under the Securities Act shall, if required by the Committee, bear an appropriate restrictive legend referring to the Securities Act. No shares of Common Stock shall be issued and delivered upon the exercise of the Option unless and until the Corporation and/or the Optionee shall have complied with all applicable Federal or state registration, listing and/or qualification requirements and all other requirements of law or of any regulatory agencies having jurisdiction.   9.   No Evidence of Employment or Service. Nothing contained in the Plan or this Agreement shall confer upon the Optionee any right to continue in employment with the Corporation, its parent or any of its subsidiaries or interfere in any way with the right of the Corporation, its parent or its subsidiaries (subject to the terms of any separate agreement to the contrary) to terminate the Optionee’s employment or to increase or decrease the Optionee’s compensation at any time.   10.  Restriction on Transfer. The Option may not be transferred, pledged, assigned, hypothecated or otherwise disposed of in any way by the Optionee, except by will or by the laws of descent and distribution, and may be exercised during the lifetime of the Optionee only by the Optionee. If the Optionee dies, the Option shall thereafter be exercisable, during the period specified in Section 4, by his executors or administrators to the full extent to which the Option was exercisable by the Optionee at the time of his death. The Option shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof, and the levy of any execution, attachment or similar process upon the Option, shall be null and void and without effect. The words “transfer” and “dispose” include without limitation the making of any sale, exchange, assignment, gift, security interest, pledge or other encumbrance, or any contract therefor, any voting trust or other agreement or arrangement with respect to the transfer of any interest, beneficial or otherwise, in the Option, the creation of any other claim thereto or any other transfer or disposition whatsoever, whether voluntary or involuntary, affecting the right, title, interest or possession with respect to the Option.   4 --------------------------------------------------------------------------------   11.  Specific Performance. Optionee expressly agrees that the Corporation will be irreparably damaged if the provisions of this Agreement and the Plan are not specifically enforced. Upon a breach or threatened breach of the terms, covenants and/or conditions of this Agreement or the Plan by the Optionee, the Corporation shall, in addition to all other remedies, be entitled to a temporary or permanent injunction, without showing any actual damage, and/or decree for specific performance, in accordance with the provisions hereof and thereof. The Board of Directors shall have the power to determine what constitutes a breach or threatened breach of this Agreement or the Plan. Any such determinations shall be final and conclusive and binding upon the Optionee.   12.  Disqualifying Dispositions. To the extent the Option is intended to be an Incentive Stock Option, and if the Optioned Shares are disposed of within two years following the date of this Agreement or one year following the issuance thereof to the Optionee (a “Disqualifying Disposition”), the Optionee shall, immediately prior to such Disqualifying Disposition, notify the Corporation in writing of the date and terms of such Disqualifying Disposition and provide such other information regarding the Disqualifying Disposition as the Corporation may reasonably require.   13.  Notices. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if (i) personally delivered or sent by telecopy, (ii) sent by nationally-recognized overnight courier or (iii) sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:   if to the Optionee, to the address (or telecopy number) set forth on the Notice of Grant; and if to the Corporation, to its principal executive office as specified in any report filed by the Corporation with the Securities and Exchange Commission or to such address as the Corporation may have specified to the Optionee in writing, Attention: Corporate Secretary.   or to such other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. Any such communication shall be deemed to have been given (i) when delivered, if personally delivered, or when telecopied, if telecopied, (ii) on the first Business Day (as hereinafter defined) after dispatch, if sent by nationally-recognized overnight courier and (iii) on the third Business Day following the date on which the piece of mail containing such communication is posted, if sent by mail. As used herein, “Business Day” means a day that is not a Saturday, Sunday or a day on which banking institutions in the city to which the notice or communication is to be sent are not required to be open.   5 --------------------------------------------------------------------------------   14.  No Waiver. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature.   15.  Optionee Undertaking. The Optionee hereby agrees to take whatever additional actions and execute whatever additional documents the Corporation may in its reasonable judgment deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on the Optionee pursuant to the express provisions of this Agreement.   16.  Modification of Rights. The rights of the Optionee are subject to modification and termination in certain events as provided in this Agreement and the Plan.   17.  Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Nevada applicable to contracts made and to be wholly performed therein, without giving effect to its conflicts of laws principles.   18.  Counterparts; Facsimile Execution. 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. Facsimile execution and delivery of this Agreement is legal, valid and binding execution and delivery for all purposes.   19.  Entire Agreement. This Agreement (including the Notice of Grant) and the Plan, and, upon execution, the Notice and Investment Representation Statement, constitute the entire agreement between the parties with respect to the subject matter hereof, and supersede all previously written or oral negotiations, commitments, representations and agreements with respect thereto.   20.  Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.   21.  WAIVER OF JURY TRIAL. THE OPTIONEE HEREBY EXPRESSLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN. [Signature Page Follows]   -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement as of the date first written above.         NOVASTAR RESOURCES LTD.               By:   /s/ Seth Grae                                            Seth Grae   President and Chief Executive Officer         OPTIONEE:               By:   /s/ Thomas Graham, Jr.                             Thomas Graham, Jr.       [Signature Page to Option Agreement] -------------------------------------------------------------------------------- NOTE RE: EXHIBITS EXHIBITS A AND B ARE TO BE SIGNED WHEN OPTIONS ARE EXERCISED, NOT WHEN OPTION AGREEMENT IS SIGNED. -------------------------------------------------------------------------------- EXHIBIT A NOVASTAR RESOURCES LTD. AMENDED AND RESTATED 2006 STOCK PLAN EXERCISE NOTICE Novastar Resources Ltd. Attention: Chief Executive Officer 1. Exercise of Option. Effective as of today, _______________________, 20__ , the undersigned (the “Optionee”) hereby elects to exercise the Optionee’s option to purchase ________________ shares of the Common Stock (the “Shares”) of Novastar Resources Ltd. (the “Corporation”) under and pursuant to the Amended and Restated 2006 Stock Plan (the “Plan”) and the Stock Option Agreement dated July 27, 2006 (the “Stock Option Agreement”), with the purchase of the Shares to be consummated on ______________ ___, ____ (the “Effective Date”), which date is prior to the termination of the Option and no later than 30 days from the date of delivery of this Notice. 2. Representations of the Optionee. The Optionee acknowledges that the Optionee has received, read and understood the Plan and the Stock Option Agreement and agrees to abide by and be bound by their terms and conditions. 3. Rights as Shareholder; Shares Subject to Stockholders Agreement. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Corporation or of a duly authorized transfer agent of the Corporation), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Corporation shall issue (or cause to be issued) such stock certificate promptly after the Effective Date, provided the applicable price has been paid and the required documents have been received. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as otherwise provided in the Plan. Unless waived by the Corporation in writing, the Shares shall automatically become subject to the terms and conditions of any stockholders agreement or similar agreement to which a majority of the outstanding capital stock of the Corporation is subject at the time of exercise and the Optionee shall sign as a condition to the issuance of the Shares such joinder agreement, signature pages or other documents in order to evidence the Optionee’s agreement to be so bound. 4. Tax Consultation. The Optionee understands that the Optionee may suffer adverse tax consequences as a result of the Optionee’s purchase or disposition of the Shares. The Optionee represents that the Optionee has consulted with any tax consultants the Optionee deems advisable in connection with the purchase or disposition of the Shares and that the Optionee is not relying on the Corporation for any tax advice. 5. Successors and Assigns. The Corporation may assign any of its rights under the Stock Option Agreement to single or multiple assignees (who may be stockholders, officers, directors, employees or consultants of the Corporation), and this Agreement shall inure to the benefit of the successors and assigns of the Corporation. Subject to the restrictions on transfer set forth in the Stock Option Agreement, this Agreement shall be binding upon the Optionee and his or her heirs, executors, administrators, successors and assigns.   -------------------------------------------------------------------------------- 6. Interpretation. Any dispute regarding the interpretations of this Agreement shall be submitted by the Optionee or by the Corporation forthwith to the Committee, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Committee shall be final and binding on the Corporation and on the Optionee. 7. Governing Laws: Severability. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and to be wholly performed therein, without giving effect to its conflicts of laws principles. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. 8. Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given if given in the manner specified in the Stock Option Agreement. 9. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement. 10. Delivery of Payment. The Optionee herewith delivers to the Corporation the full Option Price for the Shares. 11. Entire Agreement. The Plan, the Notice of Grant, and the Stock Option Agreement are incorporated herein by reference. This Agreement, the Plan, the Notice of Grant, the Stock Option Agreement, and the Investment Representation Statement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Corporation and the Optionee with respect to the subject matter hereof.     Submitted by:    Accepted by:        OPTIONEE:    NOVASTAR RESOURCES LTD.                  By:_____________________________  ___________________________      THOMAS GRAHAM, JR.    Its:______________________________        -------------------------------------------------------------------------------- EXHIBIT B NOVASTAR RESOURCES LTD. AMENDED AND RESTATED 2006 STOCK PLAN INVESTMENT REPRESENTATION STATEMENT   OPTIONEE  : ___________________________________          CORPORATION  :  NOVASTAR RESOURCES LTD.            ECURITYS  :  Common Stock            AMOUNT    ___________________________________            DATE    ___________________________________      In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Corporation the following: (a) The Optionee is aware of the Corporation’s business affairs and financial condition and has acquired sufficient information about the Corporation to reach an informed and knowledgeable decision to acquire the Securities. The Optionee is acquiring these Securities for investment for the Optionee’s own account only and not with a view to, or for resale in connection with, a “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”). (b) The Optionee acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Optionee’s investment intent as expressed herein. In this connection, the Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if the Optionee’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. The Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. The Optionee further acknowledges and understands that the Corporation is under no obligation to register the Securities. The Optionee understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Corporation and other legends required under the applicable state or federal securities laws. Signature of Optionee: _____________________________ THOMAS GRAHAM, JR. Date:__________________     --------------------------------------------------------------------------------

Exhibit 10.37 June 19, 2006 Dear Pat: I am pleased to extend to you an offer to join Vignette Corporation (“Vignette” or “the Company”) as our Chief Financial Officer, starting on July 17, 2006. In this capacity, you will perform the duties, undertake the responsibilities and exercise the authority as customary for persons situated in a similar executive capacity. You will report directly to me, and you will promote the business of the Company on a full time basis. Your compensation will include the following:     •   A bi-weekly salary of $9,615.39 (which when calculated on an annual basis equals $250,000.00);     •   Eligibility for bonus in the Executive Performance Bonus Plan (“Bonus Plan”) targeted at $125,000 annually. This bonus is paid out semi-annually based on the attainment of individual and company performance goals set forth in the Bonus Plan. Payment of the bonus may not occur if the performance goals set forth in the Bonus Plan are not satisfied;     •   Eligibility for you and your family to participate in all of the benefits provided to Vignette’s employees and executives;     •   You will be entitled to four (4) weeks of annual vacation per year under the Company’s vacation policy;     •   You shall be entitled to indemnification by the Company in accordance with the Company’s by-laws and implementing Board resolutions in effect on the date of this letter agreement, or if more favorable to you, the provisions of such by-laws in effect at the time indemnification is requested;     •   The Company shall include you as an additional insured under its directors and officers’ liability insurance which shall be maintained (or replaced by an insurance policy not materially less favorable to you) by the Company during your employment with the Company, and for at least twelve (12) months after your employment terminates (to the extent your employment is not terminated by the Company for Cause); and     •   Reimbursement of up to $1500 in legal fees actually incurred in reviewing the terms of this offer of employment. -------------------------------------------------------------------------------- Patrick Kelly    Page 2 Subject to you joining Vignette Corporation, you will receive 100,000 stock options through the Vignette Corporation Stock Option Plan with a four year vesting schedule, with twenty five percent of the shares vesting on the first anniversary date of the grant, and an additional 6.25% of this grant vesting quarterly thereafter. In addition, 25,000 shares of restricted stock through the Vignette Corporation Stock Option Plan will be granted which will vest as follows: 5,000 shares will vest on the first anniversary of the grant date, 5,000 shares will vest on the second anniversary of the grant date and the remaining 15,000 shares will vest on the third anniversary of the grant date. The grant date shall be no later than July 28, 2006. Your grants will be subject to the terms of a separate Stock Option Agreement and offer which will be provided to you after approval by the Compensation Committee of Vignette’s Board of Directors. Should your employment with Vignette be terminated without “Cause” or for “Good Reason,” you will receive severance payments in the equivalent of twelve months of salary, with payment contingent upon execution of a Separation Agreement approved by Vignette, which will include appropriate releases, and restrictive covenants of not more than twelve (12) months. Your severance payments shall not be reduced whether or not you obtain subsequent employment. In the event that you are terminated without “Cause” or for “Good Reason”, during the first 12 months of your employment with the Company, you will receive a guaranteed payment of 50% of your target Executive Performance Bonus in addition to the 12 months of salary outlined above, subject to the same requirement for an appropriate Separation Agreement. These severance payments will be made in substantially equal amounts paid out over twelve (12) months and pursuant to the Company’s normal payroll cycles. “Cause” for purposes of this Agreement shall be defined as your termination as a direct result of any of the following events which remains uncured after 15 days from the date of notice of such breach is provided to you or which cannot by its nature be cured: (a) material misconduct that results in material harm to the business of the Company; (b) material and repeated failure to perform duties assigned by the CEO or the Board of Directors, which failure is not a result of a disability and results in material harm to the business of the Company; or (c) any material breach of the Company’s policies or of the Proprietary Inventions Agreement which results in material harm to the business of the Company. “Good Reason” for purposes of this Agreement shall be defined as your resignation as a direct result of any of the following events: (i) a decrease in your Base Salary as set forth in this agreement of more than ten percent (10%); (ii) a substantial reduction in your job duties, position or title; (iii) any material breach by the Company of any provision of this Agreement, which breach is not cured within fifteen (15) days following written notice of such breach from you; (iv) the occurrence of a Change of Control (as defined below) of the Company; or (v) any relocation of the Company’s headquarters office more than twenty-five (25) miles from its site as of the date of this letter. Change of Control for purposes of this Letter Agreement shall be defined as (x) -------------------------------------------------------------------------------- Patrick Kelly    Page 3 the acquisition of fifty percent (50%) or more of the beneficial ownership interests, or fifty percent (50%) or more of the voting power, of the Company, either directly or indirectly, in one or a series of related transactions, by merger, purchase or otherwise, by any person or group of persons acting in concert (including, without limitation, any one or more individuals, corporations, partnerships, trusts, limited liability companies or other entities); (y) the disposition or transfer, whether by sale, merger, consolidation, reorganization, recapitalization, redemption, liquidation or any other transaction, of fifty percent (50%) or more by value of the assets of the Company in one or a series of related or unrelated transactions over time. This offer of employment is contingent upon your execution of this Letter, Employment Application, PRSI Background Check, and satisfaction of the requirements of an I-9 Employment Eligibility Verification Form. Please understand that employment remains “at will”, and neither this letter nor the Stock Option Plan create an employment contract with you. I am looking forward to having you as a member of the Vignette team.   Sincerely, /s/ Michael A. Aviles Michael A. Aviles President and Chief Executive Officer Vignette Corporation   EMPLOYEE ACCEPTANCE     The signing of this letter acknowledges the acceptance of the offer contained herein: /s/ T. Patrick Kelly     6/19/2006 Employee Signature     Date /s/ T. Patrick Kelly       Print Name    

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Exhibit 10.13   LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF CARBONTRONICS, LLC   THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT (this “Agreement”) is made and entered into as of January 29, 1998, by and among C.C. Pace Capital, L.L.C. (“C.C. Pace Capital”), a Delaware limited liability company, Carbon Resources, Inc., a Delaware corporation (“Carbon Resources”), Meridian Energy Corporation, a Massachusetts corporation (“Meridian Energy”), Meridian Investments, Inc., a Massachusetts corporation (“Meridian Investments”), and Coal Investors, LLC, a Delaware limited liability company (“Coal Investors”).   WHEREAS, the parties formed Carbontronics, LLC (the “Company”) as a Delaware limited liability company on January 6, 1998 by filing a certificate of formation pursuant to the Limited Liability Company Act of 1992 of the State of Delaware; and   WHEREAS, this Agreement is being entered into by the Members in order to set forth in their entirety the terms and conditions with respect to the operation of the Company.   NOW, THEREFORE, in consideration of the mutual covenants, rights and obligations set forth herein and other good and valuable consideration, the receipt, adequacy and sufficiency of which each Member hereby acknowledges, the Members, intending to be legally bound, hereby agree as follows:   ARTICLE I DEFINITIONS   Section 1.1 Unless otherwise defined herein, capitalized terms used throughout this Agreement shall have the respective meanings set forth below:   “Act” means the Delaware Limited Liability Company Act of 1992, and any successor statute, as the same may be amended from time to time.   “Adjusted Capital Account Deficit” means with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant fiscal year, after giving effect to (i) credit to such Capital Account of any amounts which such Member is obligated to restore pursuant to any provisions of this Agreement or is deemed to be obligated to restore pursuant to Treasury Regulations §§ 1.704-2(g)(1) and 1.704-2(i)(5), and (ii) debit to such Capital Account of the items described in Treasury Regulations §§ 1.704-1(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulations § 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. -------------------------------------------------------------------------------- “Agreement” means this Limited Liability Company Operating Agreement of Carbontronics, LLC, dated as of January     , 1998, as the same may be amended, modified or supplemented from time to time.   “Capital Account” means, with respect to each Member, the capital account maintained for such Member pursuant to Section 4.2 hereof.   “Capital Contribution” means, with respect to each Member, the initial contribution made by such Member as set forth on Exhibit A hereto and each additional contribution, if any, made by such Member to the capital of the Company.   “Certificate” has the meaning set forth in Section 2.1 hereof.   “Code” means the United States Internal Revenue Code of 1986, and any successor statute, as amended from time to time.   “Company” means Carbontronics, LLC, a Delaware limited liability company.   “Dispose,” “Disposing,” or “Disposition” means a sale, assignment, transfer, exchange, mortgage, pledge, grant of a security interest or other disposition or encumbrance (including, without limitation, by operation of law, but excluding any transfer occurring as a result of a technical dissolution), or the acts thereof.   “Entity” means any corporation, limited liability company, partnership, limited partnership, joint venture, trust, estate or other entity. All references to an Entity shall be deemed to include its successors and assigns, to the extent such succession or assignment is not restricted herein or by the Act.   “Initial Loan” shall mean the loan from Trans Pacific Stores, Ltd. as evidenced by a Promissory Note, dated January     , 1998.   “Management Committee” shall mean the committee, which shall act by majority vote unless otherwise stated herein, consisting of Timothy F. Sutherland (or other person designated by C. C. Pace Capital, L.L.C.), Frederick J. Murrell (or other person designated by Carbon Resources, Inc.), and Douglas E. Miller (or other person designated by Meridian Energy, Meridian Investments and Coal Investors, LLC).   “Member” or “Members” means any Person that has been admitted as a Member pursuant to the terms hereof.   “Member Nonrecourse Debt Minimum Gain” shall have the meaning set forth in Treas. Reg. § 1.704-(i)(2) (determined by substituting “Member” for “partner” as used therein).   “Member Nonrecourse Deductions” shall have the meaning set forth in Treas. Reg. §§ 1.704-2(i)(1) and 1.704-2(i)(2) (substituting “Member” for “partner” as used therein). -------------------------------------------------------------------------------- “Member’s Percentage” means the percentage equaling the ratio of (a) the Membership Interest of the Member for whom the percentage is calculated, divided by (b) the sum of the Membership Interests of all the Members in the Company.   “Membership Interest” means the ownership interest of a Member in the Company, which shall be expressed as a percentage, which ownership interest includes, without limitation, a Member’s share of the Income and Loss of the Company and a Member’s rights to receive distributions of assets (liquidating or otherwise) and allocations according to such Member’s Percentage, and a Member’s right to receive information and to consent to or approve such actions or omissions of the Company or another Member with respect to which the consent or approval of such Member is required.   “Minimum Gain” has the meaning set forth in Treas. Reg. § 1.704-2(d). Minimum Gain shall be computed separately for each Member in a manner consistent with the Treasury Regulations under Code Section 704(b).   “Nonrecourse Deductions” has the meaning set forth in Treas. Reg. § 1.704-2(b)(1).   “Person” means any natural Person or Entity.   “Profits” or “Losses” means, for each fiscal year or part thereof, the Company’s taxable income or loss for such year determined in accordance with Code § 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss) with the following adjustments: (i) any income of the Company that is exempt from U.S. federal income tax shall be added to such taxable income or loss; and (ii) any expenditures of the Company described in Code § 705(a)(2)(B) or treated as such pursuant to Treasury Regulation § 1.704-l(b)(2)(iv)(i) shall be subtracted from such taxable income or loss.   “Tax Matters Partner” has the meaning set forth in Section 7.1 hereof.   “Transferee” has the meaning set forth in Section 4.3(i) hereof.   “Transferor” has the meaning set forth in Section 4.3(i) hereof.   “Treasury Regulations” or “Treas. Reg.” means the regulations promulgated by the United States Department of the Treasury with respect to the Code, or corresponding provisions of future regulations as such regulations may be amended from time to time.   “Working Capital Loan” has the meaning set forth in Section 5.1 hereof.   Section 1.2 Construction. (a) As used herein, the singular shall include the plural and all references herein to one gender shall include the others, as the context requires. -------------------------------------------------------------------------------- (b) Unless otherwise expressly provided, all references to “Articles,” “Sections,” “Exhibits,” “Appendices” or “Annexes” are to Articles, Sections, Exhibits, Appendices or Annexes of this Agreement.   (c) Unless otherwise provided herein all references herein to the consent, approval or agreement of the Members shall mean the consent, approval or agreement of the Members holding a majority of the Membership Interest.   (d) The headings and captions are used in this Agreement for convenience only and shall not be considered when determining the meaning of any provisions of this Agreement.   ARTICLE II FORMATION; OFFICES; TERM   Section 2.1 Formation of the Company. The Members hereby agree to continue the Delaware limited liability Company known as “Carbontronics, LLC” formed on January 6, 1998 by the filing of a certificate of formation (the “Certificate”) under and pursuant to Section 18-201 of the Act and the filing of a copy of the Certificate in the Office of the Secretary of State of Delaware.   Section 2.2 Name. The name of the Company is “ Carbontronics, LLC” or such other name as the Members may determine from time to time and all Company business shall be conducted in such name or such other names that comply with applicable law and as the Members may designate from time to time.   Section 2.3 Registered Agent; Principal Office in the United States; Other Offices. The registered office of the Company in the State of Delaware shall be the initial registered office designated in the Certificate or such other office (which need not be a place of business of the Company) as the Members may designate from time to time in the manner provided by law. The registered agent of the Company in the State of Delaware shall be the initial registered agent designated in the Certificate or such other Person or Persons as the Members may designate from time to time in the manner provided by law. The location of the principal place of business of the Company shall be c/o Meridian Energy Corporation, 1266 Furnace Brook Parkway, Quincy, MA 02169, or such other location within or without the United States as the Members may designate from time to time, and the Company shall maintain at such location such records and other information as is described in paragraph (a) of Section 18-305 of the Act. The Company shall have such other offices within or without the United States as the Members may determine.   Section 2.4 Purpose. The purpose of the Company is to acquire by purchase or by contribution membership interests in one or more of (i) PC Kentucky Synthetic Fuel #1, L.L.C., (ii) PC Illinois Synthetic Fuel #2, L.L.C., (iii) PC Kentucky Synthetic Fuel #3, L.L.C., and (iv) PC Kentucky Synthetic Fuel #4, L.L.C., to incur or assume debts and obligations in connection therewith, to hold and deal with each such membership interest, to sell, transfer or -------------------------------------------------------------------------------- otherwise dispose of each of such membership interests, and to collect sales proceeds and other amounts paid to the Company and pay and otherwise satisfy obligations of the Company or assumed by the Company. This Agreement shall not be amended to provide for any additional purposes except with the written consent of all Members.   Section 2.5 Term. The term of the Company commenced on January 6, 1998 and shall continue until terminated in accordance with the terms hereof.   Section 2.6 No Partnership Intended. Other than for purposes of determining the status of the Company under the Code and the Treasury Regulations and under any applicable State, municipal or other income tax law or regulation, the Members intend that the Company not be a partnership, limited partnership or joint venture and this Agreement shall not be construed to suggest otherwise; provided, however, that if the courts of any jurisdiction having jurisdiction over the Company or any of its properties do not recognize the Company as a limited liability company, for purposes of any action or suit to which the Company is a party or to which its properties are subject or for any other purpose, the Members intend that the Company is a limited partnership in such jurisdiction and shall promptly take such steps as are necessary to reflect such intention.   ARTICLE III MEMBERS; OWNERSHIP; DISPOSITION OF INTERESTS   Section 3.1 Members; Membership Interests. The Members of the Company are C.C. Pace Capital, Carbon Resources, Meridian Energy, Meridian Investments, and Coal Investors, each of which is hereby admitted to the Company, and any other Entity as may be properly admitted as a Member pursuant to the terms hereof. The Membership Percentage of each party hereto shall be as shown on Exhibit A attached hereto.   Section 3.2 Property. All property owned by the Company, whether real or personal, tangible or intangible, and wherever located, shall be deemed to be owned by the Company as an entity, and no Member, individually, shall have any ownership of such property. The Company may hold its property in its own name or in the name of a nominee, which may be one of the Members or an affiliate thereof, or any trustee or agent designated by the Members.   Section 3.3 Disposition of Membership Interests. (a) No Membership Interest may be Disposed of, in whole or in part, without the prior written consent of all of the Members, which consent may be withheld by any such Member in its sole discretion.   (b) The Person to which a Membership Interest is sold, assigned, transferred or exchanged shall have no right to be admitted as a Member of the Company unless (i) the Membership Interest is sold, assigned, transferred or exchanged by a Member who was properly admitted as such pursuant to the terms hereof, (ii) each Member effecting the sale, assignment, transfer or exchange and the Person to whom the Membership Interest is sold, assigned, transferred or exchanged executes and delivers a document to the other Members containing a -------------------------------------------------------------------------------- representation and warranty by each Member effecting such sale, assignment, transfer or exchange and the Person to which such Membership Interest is sold, assigned, transferred or exchanged to the effect that such sale, assignment, transfer or exchange was made in accordance with all laws and regulations, including securities laws, applicable to such Member or Person, as appropriate, and (iii) all of the requirements of Section 3.3(c) hereof are satisfied with respect to such admission.   (c) Subject to the provisio in Section 3.3(a) above, a Person to whom a Membership Interest is sold, assigned, transferred or exchanged shall be admitted as a Member of the Company if (i) all of the existing Members consent to such admission, which consent may be withheld by any such Member in its sole discretion, and (ii) the Members receive a document setting forth (A) the notice and payment address and facsimile number of the Person to be admitted to the Company as a Member, (B) the written acceptance by such Person of all the terms and provisions of this Agreement, (C) an agreement by such Person to perform and discharge timely all of the obligations and liabilities in respect of the Membership Interest being obtained, (D) a power of attorney in the form of Section 9.1 hereof executed by such Person and (E) the effective date of the sale, assignment, transfer or exchange.   Section 3.4 Admission of Additional Members. Additional Persons may be admitted as Members in the Company, without the sale, assignment, transfer or exchange by an existing Member of all or any part of its Membership Interest, only with the consent of all of the existing Members, which consent may be withheld by any such Member in its sole discretion, and upon the making of such Capital Contribution, if any, as all of the existing Members shall require from such Person. In such event, the Member’s Percentage of the existing and the additional Member or Members shall be adjusted or assigned, as the case may be, in accordance with the written agreement of all Members including the additional Member or Members.   Section 3.5 Liability of Members. No Member shall have any personal liability for any obligation of the Company, whether such obligations arise in contract, tort or otherwise, except to the extent that any such obligations are expressly assumed in writing by such Member.   Section 3.6 Resignation or Withdrawal of Members. A Member does not have the right or power to resign or withdraw from the Company as a Member unless an additional Member or Members have been properly admitted in accordance with Section 3.3 or 3.4 hereof such that there are at all times a minimum of two Members in the Company.   ARTICLE IV CAPITAL CONTRIBUTIONS AND ACCOUNTS   Section 4.1 Capital Contributions. (a) The Members shall make their initial respective Capital Contributions as set forth in Exhibit A and, thereafter, except with respect to any additional Members as provided in Section 3.4, no Member shall have any obligation to contribute to the capital of the Company. Upon making its initial Capital Contribution, as -------------------------------------------------------------------------------- provided in Exhibit A and as provided under the terms of Section 3.4 with respect to any additional Members, each Member shall be entitled to its Membership Interest in the Company.   (b) Except as may be required by law or upon dissolution of the Company, or in respect of any negative balance resulting from a withdrawal of capital or a distribution in contravention of this Agreement, at no time during the term of the Company shall a Member with a negative balance in its Capital Account have any obligation to the Company or to the other Members to restore such negative balance.   Section 4.2 Capital Accounts. Each Member’s Capital Account shall be maintained on the books of the Company for each Member and the balance of each Member’s Capital Account shall be initially equal to such Member’s capital contribution set forth in Section 4.1(a) hereof, and shall be (i) increased by (A) the aggregate amount of such Member’s additional Capital Contributions to the Company, (B) the fair market value of property contributed by such Member to the Company after the date hereof, net of liabilities secured by such property that the Company is considered to assume or take subject to under § 752 of the Code, and (C) Profits and items of income and gain allocated to such Member in accordance with its Membership Interest, and (ii) shall be decreased by (A) cash distributions to such Member from the Company, (B) the fair market value of property distributed in kind to such Member, net of liabilities secured by such property that such Member is deemed to assume or take subject to under Code § 752, and (C) Losses and items of loss or deduction allocated to such Member in accordance with its Membership Interest. The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with § 1.704-1(b) of Treasury Regulations pursuant to the Code and shall be interpreted and applied in a manner consistent with such regulation. To the extent such provisions are inconsistent with such regulations or are incomplete with respect thereto, the Capital Accounts of the Members shall be maintained in accordance with such regulations.   Section 4.3 Allocation of Profits and Losses. (a) Profits and Losses of the Company for each fiscal year shall be allocated pro rata to the Members according to each Member’s Percentage.   (b) Every item of income, gain, loss, deduction, credit or tax preference entering into the computation of Profits and Losses, or applicable to the period during which such Profits or Losses were recognized, shall be considered allocated to each Member in the same proportion as Profits or Losses are allocated to such Members.   (c) [Intentionally Omitted].   (d) Distributions to the Members shall be shared pro rata according to each Member’s Percentage. Unless each of the Members otherwise agrees to the contrary, all net cash flow available for distribution shall be distributed to the Members promptly following the end of each fiscal quarter of the Company. Immediately prior to a distribution of property other than cash, the Capital Accounts shall be adjusted as provided in Treasury Regulation § 1.704-1(b)(2)(iv)(f). -------------------------------------------------------------------------------- (e) Nonrecourse Deductions for any fiscal year or other period shall be specifically allocated to the Members in the same proportion as net Profits and net Losses are allocated under Section 4.3 hereof in such year. Any Member Nonrecourse Deductions for any fiscal year or other period shall be specifically allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Deductions, attributed in accordance with Treas. Reg. § 1.704-2(i). In order to comply with the “minimum gain chargeback” requirements of Treas. Reg. §§ 1.704-2(f)(l) and 1.704-2(i)(4), and notwithstanding any other provision of this Agreement to the contrary, in the event there is a net decrease in a Member’s share of Minimum Gain and/or Member Nonrecourse Debt Minimum Gain during a Company taxable year, such Member shall be allocated items of income and gain for that year (and if necessary, other years) as required by and in accordance with Treas. Reg. §§ 1.704-2(f)(l) and 1.704-2(i)(4) before any other allocation is made. It is the intent of the parties hereto that any allocation pursuant to this Section 4.3(e) shall constitute a “minimum gain chargeback” under Treas. Reg. §§ 1.704-2(f) and 1.704-2(i)(4).   (f) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code § 734(b) or Code § 743(b) is required, pursuant to Treasury Regulations § 1.704-1 (b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to Treasury Regulations § 1.704-l(b)(2)(iv)(m).   (g) The allocation of Profits and Losses, pursuant to this Section 4.3, shall not result in any Member having an Adjusted Capital Account Deficit at the end of any fiscal year.   (h) In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulations §§ 1.704-l(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5), or 1.7O4-l(b)(2)(ii)(d)(6), items of Company gross income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section 4.3(h) shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit after making all other allocations provided for hereunder on the basis that the allocation provisions of this Section 4.3(h) are of no force or effect and such allocation does not create or increase an Adjusted Capital Account Deficit of any other Member.   (i) If a Membership Interest has been Disposed of during a fiscal year, distributions and allocations shall be made, as among the party or parties Disposing of the Membership Interest (the “Transferor(s)”) and the party or parties to whom the Membership Interest is Disposed (the “Transferee(s)”), to the Person owning the Membership Interest on the date of the distribution. Profits, Losses and items allocated under this Section 4.3 (other than income or loss from a capital event) shall be allocated by the number of days each Person held the Membership Interest (except if the Transferor and the Transferee agree to the contrary and so advise the other Members in -------------------------------------------------------------------------------- writing within 10 days after the end of the fiscal year in which the assignment occurs) and Profits or Losses from any capital event shall be allocated to the holder of the Membership Interest on the day the capital event occurred during such fiscal year.   (j) In connection with any distribution, whether upon winding up of the Company or otherwise and whether or not it shall constitute a return of capital, no Member shall have the right to demand or receive property other than cash, although the liquidator may distribute property other than cash. No Member shall have priority over any other Member either as to the return of its Capital Contribution or as to allocation of Profits or Losses of the Company.   (k) If any Company property has a book value different from its adjusted tax basis to the Company for U.S. federal income tax purposes (whether by reason of the contribution of such property to the Company, the revaluation of such property hereunder, or otherwise), allocations of taxable income, gain, loss and deductions under this Section 4.3(k) with respect to such asset shall take account of any variation between the adjusted tax basis of such asset for federal income tax purposes and its book value in the same manner as under Code Section 704(c) or the principle set forth in Treasury Regulation § 1.704-l(b)(2)(iv)(g), as the case may be. Each item of income, gain, loss, deduction and credit and all other items governed by Code § 702(a) shall be allocated among the Members in proportion to the allocation of Profits, Losses and other items to such Members hereunder, provided that any gain recognized from any Disposition of a Company asset which is treated as ordinary income because it is attributable to the recapture of any depreciation or amortization shall be allocated among the Members in the same ratio as the prior allocations of Profits, Losses or other items which include such depreciation or amortization, but not in excess of the gain otherwise allocable to each such Member. Except as set forth in this Section 4.3(k), allocations for tax purposes of items of income, gain, loss and deduction, and credits and basis therefor, shall be made in the same manner as allocations for book purposes as set forth in Section 4.3(a) hereof. Allocations pursuant to this Section 4.3(k) are solely for purposes of federal, state and local income taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement.   ARTICLE V WORKING CAPITAL LOANS   Section 5.1 Working Capital Loans. (a) The Management Committee may from time to time, but not more frequently than once in any calendar month, request each Member to make a working capital loan (each a “Working Capital Loan”) to the Company. Such request shall specify the amount requested, the date such Working Capital Loan shall be made and the Entity or account (which may be an account maintained by the Company) to which the proceeds thereof shall be paid, and shall further state that the proceeds of the Working Capital Loan will be utilized to pay only authorized expenses of the Company. Upon the receipt of an authorized request for a Working Capital Loan, each Member may, but shall not be obligated to, fund their respective portions of such Working Capital Loan pro rata with their respective Membership Interests. Should any Member decline to fund its portion of a request for a Working Capital -------------------------------------------------------------------------------- Loan, then the Members funding their respective portions of the Working Capital Loan shall have the right, but not the obligation, to fund the non-funding Member’s portion of the Working Capital Loan on a pro rata basis in accordance with their Membership Percentages (or in such other amounts as such Members may determine).   (b) Interest shall accrue on the outstanding principal balance of the Working Capital Loans at a variable rate per annum equal to London Interbank Offered Rate (“LIBOR”) in effect from time to time, plus 300 basis points. The initial interest rate shall be based on LIBOR in effect on the first banking day of the month in which such Working Capital Loan is requested. Any change in the interest rate for Working Capital Loans resulting from a change in LIBOR shall be effective on the first banking day of the first month following the month in which such change occurs. Interest on Working Capital Loans shall be compounded monthly. Interest and principal on Working Capital Loans shall be payable out of available net cash flow of the Company on the first banking day of each month prior to any payments of principal and interest in respect of Development Loans and to any distributions to Members. After payment of all interest then due on outstanding Working Capital Loans, remaining available net cash flow shall be applied to repay the outstanding principal amount of Working Capital Loans.   ARTICLE VI MANAGEMENT AND OPERATION; INDEMNITIES   Section 6.1 Management by Members. Except for situations in which or actions as to which this Agreement specifically reserves to an individual Member the exclusive authority to act or to grant or withhold consent or approval of an action, or which require unanimous-consent of the Management Committee, the Management Committee by a majority vote shall have full, complete, and exclusive authority to manage and control the business, affairs, and properties of the Company, to make all decisions regarding the same and to perform all other acts or activities customary or incident to the management of the Company’s business. In addition to the powers now or hereafter granted to the Management Committee of a limited liability company under applicable law or which are granted to the Management Committee under any other provision of this Agreement, but subject to the limitations contained herein, the Management Committee shall have full power and authority to do all things deemed necessary or desirable by such Management Committee, in such Management Committee’s sole discretion, to conduct the business of the Company in the name of the Company including, without limitation:     (a) subject to Section 2.4, the determination of the business activities in which the Company will participate;     (b) the making of expenditures, the borrowing of money, the guaranteeing of indebtedness and other liabilities, the issuance of evidences of indebtedness, and the incurring of any obligations it deems necessary or advisable for the conduct of the business activities of the Company; --------------------------------------------------------------------------------   (c) the acquisition, Disposition, mortgage, pledge, encumbrance, hypothecation, or exchange of any or all of the assets of the Company;     (d) the use of the assets of the Company (including, without limitation, cash on hand) for any purpose it sees fit, including, without limitation, the financing of operations of the Company, the lending of funds to other Persons, the repayment of obligations of the Company, the conduct of additional Company business activities and the acquisition of properties and other assets:     (e) the negotiation and execution on terms deemed desirable to the Company and the performance of any contracts, conveyances or other instruments that it considers useful or necessary to the conduct of Company business activities or the implementation of its powers under this Agreement;     (f) the distribution of cash or other assets of the Company;     (g) the selection and dismissal of employees and outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring;     (h) the maintenance of such insurance for the benefit of the Company as it deems necessary;     (i) the formation of any limited or general partnerships, joint ventures, corporations, or other relationships that it deems desirable, and the contribution to such partnerships, joint ventures or corporations of assets and properties of the Company; and     (j) the control of any matters affecting the rights and obligations of the Company, including the conduct of litigation and the incurring of legal expenses and the settlement of claims and litigation.     (k) the making of any loans, guaranties or extensions of credit;     (l) the making of any capital expenditure or acquiring of assets for the Company, not to exceed $100,000 for any single capital expenditure, acquisition, expansion or modification or $25,000 in the aggregate for any series of capital expenditures, acquisitions, expansions or modifications, excluding however any payment relating to replacement or repair in the ordinary course of business;     (m) the making of any expenditure for the acquisition by or on behalf of the Company of any interest in real property (whether by lease, purchase or otherwise). -------------------------------------------------------------------------------- Section 6.2 Administrative Powers, Authority and Obligations of Meridian Energy. (a) Until such time as the Management Committee advises Meridian Energy in writing of the determination to withdraw the authority granted in this Section 6.2, Meridian Energy, in its capacity as a Member, and in addition to the other rights and duties of the Management Committee set forth herein, and subject to any limitations contained in the Act, applicable laws, and Sections 6.1, 6.2(c) and 6.3 or any other provision hereof, shall be responsible for administration of the day-to-day affairs of the Company and shall be authorized to do on behalf of the Company all things which, in its reasonable judgment, are necessary, proper or desirable to carry out such responsibility, including but not limited to the right, power and authority from time to time to do the following:     (i) To cause to be paid all amounts due and payable by the Company to any Person and to collect all amounts due to the Company;     (ii) To pay any and all fees and to make any and all expenditures, not to exceed $100,000 in each instance or $1,000,000 in the aggregate in any year, which it deems necessary or appropriate in connection with the organization of the Company, the Disposition of Membership Interests, the management of the affairs of the Company, and the carrying out of its obligations and responsibilities under this Agreement and the Act, and to enforce all rights of the Company;     (iii) To enter into, execute, acknowledge and deliver any and all contracts, agreements or other instruments necessary or appropriate to carry on the business of the Company as set forth herein;     (iv) To cause to be paid any and all taxes, charges and assessments that may be levied, assessed or imposed upon any of the assets of the Company, unless the same are contested in good faith by the Members or, at the direction of the Members, by it;     (v) To file all applications by the Company for, or accept, necessary permits, licenses and other governmental approvals, or any amendment to or withdrawal or termination of such applications or governmental approvals;     (vi) To establish and maintain one or more accounts for and in the name of the Company in such financial institutions as it may from time to time designate, subject to Section 7.5 hereof;     (vii) To cause to be made the payments in respect of Working Capital Loans under Section 5.1 hereof and periodic distributions to the Members required by and in accordance with the provisions of this Agreement and to provide an accurate accounting thereof to each Member at the time of each such payment and distribution; --------------------------------------------------------------------------------   (viii)   With respect to all of its obligations, powers and responsibilities under this Section 6.2, to execute and deliver, for and on behalf of the Company, such notes and other evidences of indebtedness, contracts, agreements, assignments, deeds, leases, loan agreements, mortgages, deeds of trust and other security instruments and agreements as it is authorized to execute and deliver pursuant to this Section 6.2(a) or which the Members deem proper, all on such terms and conditions as it or the Members, as the case may be, deems proper;     (ix) To borrow the Initial Loan;     (x) Upon the closing of its Initial Loan, the Company shall pay C.C. Pace Capital and Meridian Energy for their payments to Carbontec Energy Corporation for amounts due under the Carbontec Sub-License Agreement.   (b) So long as Meridian Energy maintains the administrative powers granted under this Section 6.2, Meridian Energy, in its capacity as a Member, shall:     (i) take all actions which may be necessary or appropriate for continuing the Company’s valid existence as a limited liability company under the laws of the State and of each other jurisdiction in which such existence is necessary to enable the Company to conduct the business in which it is engaged;     (ii) devote to the Company such time as may be necessary for the proper performance of its duties hereunder;     (iii) prepare or cause to be prepared and file on or before the due date (or any extensions thereof) any and all federal, state or local tax returns required to be filed by the Company, and cause the Company to pay any taxes payable by the Company; and     (iv) cause the Company to maintain liability and casualty insurance in amounts and with coverages consistent with prudent commercial standards and with insurers of recognized responsibility, with each such policy naming each Member as an additional insured.   (c) Unless the Management Committee, by unanimous vote, have approved in writing any of the following actions proposed to be taken by Meridian Energy pursuant to the authority granted to it pursuant to this Section 6.2, Meridian Energy shall not have the authority to take any of the following actions:     (i) during the course of any calendar year, sell, lease, abandon, mortgage or pledge, or otherwise dispose of, in a transaction or series of transactions, two and one-half percent (2.5%) or more of the then fair market value of the assets of the Company (except for the sale of other assets which are --------------------------------------------------------------------------------   replaced by assets of an equivalent or greater value or have become obsolete or of no further value to the operation of the Company and except in connection with any security interest granted in all or any portion of the Company’s assets pursuant to the terms of any loan agreement or other instrument approved by all the Members), or merge or consolidate the Company with any other Person;     (ii) enter into any agreement with a term greater than one year if the cost or value of the goods or services to be acquired by the Company pursuant thereto could reasonably be expected to exceed an aggregate of $100,000 per year, other than agreements made in the ordinary course of the Company’s business and other than agreements which are expressly consented to in advance by all of the Members;     (iii) terminate or dissolve or wind up the Company;     (iv) commence a voluntary proceeding in bankruptcy in the name of the Company or make a general assignment for the benefit of creditors;     (v) possess any assets of the Company, or assign or transfer rights in specific assets of the Company to itself or for other than a Company purpose;     (vi) confess a judgment against the Company which makes it impossible to carry on the business of the Company, or otherwise settle or compromise any action, suit or claim requiring the payment by the Company of any amount in excess of $10,000; provided, however, that Pace Capital shall have no authority to settle any such action, suit or claim that admits any criminal violation or material allegation of wrongdoing or misconduct;     (vii) admit a substitute Member or additional Member except in accordance with the provisions of Section 3.4 hereof;     (viii)   cause the Company to make a loan to it or any of its affiliates;     (ix) transact any business with any Member or any affiliate thereof for goods or services, except where such transaction is effectuated on terms not less favorable to the Company than would be available in a bona fide arms-length transaction with a Person that is not a Member or an affiliate thereof;     (x) conduct or carry on the business of the Company through any entity other than the Company; --------------------------------------------------------------------------------   (xi) elect to be governed by any amendment to the Act or by a succeeding or successor statute of a State governing limited liability companies;     (xii) select or modify the terms of employment of the managing director of the Company; or     (xiii)   make any expenditure for the acquisition by or on behalf of the Company to acquire any membership or other ownership interest or right in any other Person (whether by purchase, option, or otherwise).   Section 6.3 Unanimous Decisions. Notwithstanding any other provisions of this Agreement to the contrary, the following decisions or actions shall require the unanimous consent of the Members:   (a) To enter into any business activity or undertaking other than those purposes set forth in Section 2.4 of this Agreement;   (b) Other than repayment for or work associated with the Initial Loan, to pay salaries or fees directly or indirectly to any Member or any affiliate or employee of a Member;   (c) To sell or otherwise Dispose of all or substantially all of the assets of the Company;   (d) Upon the Disposition of one or more of the Project Companies or the assets of one or more of the Project Companies, to incur any liability or costs which would reduce by more than $100,000 per year the amount of proceeds to be distributed to the Members;   (e) To amend this Agreement in any manner;   (f) To transfer any Membership Interest or add any member;   (g) To perform any act that would subject the Members to liability in any jurisdiction beyond the limits of each Member’s Membership Interest; and   (h) To refrain from performing any act if such failure would subject the Members to liability in any jurisdiction beyond the limits of each Member’s Membership Interest.   Section 6.4 Indemnities. (a) No Member, in its capacity as such, shall be liable, responsible or accountable in damages or otherwise to the Company or to any successor, assignee or transferee thereof for any act or omission performed or omitted by it in good faith pursuant to authority granted to it by this Agreement and in a manner reasonably believed by it to be within the scope of authority granted to it by this Agreement and in the best interests of the Company.   (b) The Members do not guarantee, and shall not be liable for, the return of all or any portion of the Capital Contribution of any Member or the payment of any distributions to any -------------------------------------------------------------------------------- Member (or any assignee, successor or transferee thereof), it being expressly agreed that any such return of all or any portion of a Capital Contribution or payment of distributions shall be made solely from the assets of the Company (which shall not include any right of contribution from the Members) in accordance with this Agreement.   (c) The Company shall indemnify, defend and hold harmless (i) each Member, as such, and (ii) any of the Company’s agents, employees, advisors and consultants, in their respective capacities as such, from and against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees and expenses) arising out of or in defense of any demands, claims or lawsuits (derivative and otherwise) against the Company or such other Person, in or as a result of or relating to its capacity, actions or omissions or an affiliate thereof or as an officer, director, employee or controlling Person of any of them, or as an officer, manager, agent, employee, advisor or consultant of the Company, concerning the business or activities undertaken on behalf of the Company; provided, however, that there shall be no indemnification hereunder to the extent that the acts or omissions of the Members or such other Person (x) were not taken or made in accordance with the standard set forth in Section 6.4(a) hereof, (y) constitute gross negligence, intentional misconduct or fraud, or (z) have violated such other standard of conduct as under applicable law prevents indemnification hereunder.   (d) The Members and any other Person indemnified by the Company pursuant to Section 6.4(c) hereof shall be entitled to receive, upon request, advances to cover the costs of defending any claim or action against such Person; provided, however, that such advances shall be repaid to the Company, with interest, to the extent the actions or omissions of such Member or other Person are found by a court of competent jurisdiction upon entry of a final judgment not to have been taken or made in accordance with the standard set forth in Section 6.4(a) hereof or constitute gross negligence, intentional misconduct or fraud. All rights of the Members and others to indemnification hereunder shall survive the dissolution of the Company and the removal, dissolution or insolvency of any of the Members or the death, retirement, removal, dissolution, incompetency or insolvency of an agent, employee, advisor, consultant or other indemnifiable Person, provided that a claim for indemnification hereunder is made by or on behalf of the Person seeking such indemnification prior to the time distribution in liquidation of the assets of the Company is made.   (e) If the Company is made a party to any claim, dispute or litigation or otherwise incurs any loss, liability, damage, cost or expense by reason of the breach of the standard set forth in Section 6.4(a) hereof or due to an act or omission constituting gross negligence, intentional misconduct or fraud by any Member or such other Person as has been indemnified under Section 6.4(c) hereof, such Member or other Person shall indemnify and reimburse the Company for all loss, liability, damage, cost and expense incurred thereby (including reasonable attorney’s fees and expenses); provided, however, that such Member or other Person shall have been found by a court of competent jurisdiction upon entry of a final judgment to have violated such standard or taken such act or made such omission.   (f) The liability of the Company under this Section 6.4 is limited to the assets of the Company. -------------------------------------------------------------------------------- ARTICLE VII TAX MATTERS   Section 7.1 Tax Returns; Tax Matters Partner. (a) The Company shall file a partnership tax return in the United States at the end of each fiscal year and for tax purposes it is the intent of the Members that the Company be taxed as a partnership in the United States for U.S. federal, state, and local tax purposes. The Members shall appoint one Member to be the “Tax Matters Partner” for U.S. federal income tax purposes pursuant to Section 6231 of the Code with respect to all taxable years of the Company. The Tax Matters Partner shall prepare or cause to be prepared all tax returns required of the Company.   (b) The Tax Matters Partner shall, to the extent permitted by applicable law and regulations, and upon obtaining any necessary approval of the United States Commissioner of Internal Revenue, elect to use such methods of depreciation, and make all other U.S. federal income tax elections in such manner, as it determines to be most favorable to the Members. The Tax Matters Partner shall at the Company’s expense defend all tax audits and litigation with respect to the Company’s tax returns, and shall not undertake any act which would cause the books, records, or tax returns of the Company or the Members to be inconsistent with such acts, elections and steps taken by the Company.   (c) The Tax Matters Partner shall, upon the written request of any Member, cause the Company to file an election under Code Section 754 and the Treasury Regulations thereunder to adjust the basis of the Company’s assets under Code Section 734(b) or 743(b) and a corresponding election under the applicable sections of U.S. state and local law.   Section 7.2 Accounting of Profits and Losses. The Company shall maintain its books and records and shall determine all items of Profits and Losses and distributions on an accrual basis in accordance with principles applicable in determining taxable income or loss for federal income tax purposes for partnerships and consistent with accounting methods used by the Company in determining taxable income or loss for U.S. federal income tax purposes. The Company shall also keep all other records necessary or convenient to record the Company’s business and affairs and sufficient to record the determination and allocation of all Profits, Losses, distributions and other amounts as may be provided for herein.   Section 7.3 Financial Statements. Within one hundred twenty (120) days after the end of each fiscal year, there shall be prepared and delivered to each Member a financial statement for the Company consisting of the following: (a) income statements and balance sheets for such fiscal year showing separately the computation of Profits or Losses; (b) the amount of the distributions to the Members and the effect of such distributions on the balance sheet of the Company and the Capital Accounts of each Member; and (c) a report setting forth in sufficient detail all such information and data with respect to the business transactions effected by or involving the Company during such fiscal year as shall enable each Member to prepare all its tax returns in accordance with all relevant laws, rules and regulations then prevailing. -------------------------------------------------------------------------------- Section 7.4 Books and Records. The books and records of the Company shall be available to each Member or its representatives for inspection and audit upon reasonable notice during normal business hours at the principal office of the Company. The Company shall cause the auditors to cooperate in such inspection and audit and to provide any of their work papers requested in connection therewith.   Section 7.5 Bank Accounts. The operating bank accounts of the Company shall be maintained in such bank or banks as may be designated and withdrawals from said accounts shall be made as the Members shall determine. The funds of the Company shall be deposited in such account or accounts as are designated by the Members. The Members may, at their discretion, deposit funds of the Company in a central disbursing account maintained by or in the name of one of the Members in which funds of other Persons are also deposited, provided that at all times books of account are maintained which show the amount of funds of the Company on deposit in such account and interest accrued with respect to such funds as credited to the Company.   Section 7.6 Fiscal Year. The fiscal year of the Company shall end on the 31st day of December of each calendar year.   ARTICLE VIII DISSOLUTION AND WINDING-UP   Section 8.1 Events of Dissolution. The Company shall be dissolved and its affairs shall be wound up upon the first to occur of any of the following:   (a) the written consent of all Members; or   (b) the entry of a decree of judicial dissolution under Section 18-802 of the Act.   Section 8.2 Distribution of Assets. Upon the occurrence of one of the events set forth in Section 8.1 hereof, the remaining Members of the Company shall appoint one or more liquidator(s) and the liquidator(s) shall distribute the assets of the Company in the following order of priority:   first, payments of, or adequate provision for, the debts and obligations of the Company to its creditors, including sales commissions and other expenses incident to any sale of the assets of the Company;   second, establishment of such reserves as the remaining Members or the liquidator may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company;   third, payment of loans to the Company by a Member, pro rata, according to the relative amounts of such unpaid loans; -------------------------------------------------------------------------------- third, payment of loans to the Company by a Member, pro rata, according to the relative amounts of such unpaid loans;   fourth, the balance, if any, of the assets of the Company to the Members having positive Capital Accounts pro rata in accordance with their relative respective positive Capital Accounts after taking into account the allocation of all Profits or Losses allocated pursuant to this Agreement for the fiscal year(s) in which the Company is liquidated; and   fifth, the balance, if any, of the assets of the Company to the Members pro rata in accordance with their respective Member’s Percentages.   The reserves established pursuant to provision “second” above shall be paid over to a bank or other financial institution, to be held in escrow for the purpose of paying any such contingent or unforeseen liabilities or obligations and, at the expiration of such period as the remaining Members or the liquidator deems advisable, such reserves shall be distributed to the Members or their assigns in the priority set forth in provisions “third” through “fifth” above.   Section 8.3 In-Kind Distributions. The liquidator(s) may make distributions of the Company’s assets in kind. The choice of which, if any, Company assets are to be distributed in kind shall be within the sole discretion of the liquidator(s) and shall be binding upon all Members. The costs of liquidation shall be borne as a Company expense. Until final distribution, the liquidator(s) shall continue to operate the Company properties with all the power and authority of the Members. With respect to any assets distributed in kind, such assets shall be deemed to have been sold at fair market value for purposes of applying the Profit and Loss provisions of this Agreement.   ARTICLE IX MISCELLANEOUS   Section 9.1 Power of Attorney. Each Member, by execution of this Agreement or a counterpart hereof, irrevocably constitutes and appoints Carbon Resources, with full power of substitution, its agent and attorney-in-fact in its name, place and stead to make, execute, swear to, verify, acknowledge, amend, file, record, deliver and publish (a) any certificate of limited liability company or amendments to any certificate of limited liability company required to be filed by or on behalf of the Company pursuant to the Act, (b) a counterpart of any amendment to this Agreement for the purpose of substituting as a Member an assignee or assignees of a Member or for the purpose of admitting a Transferee or an additional Member, (c) a counterpart of this Agreement for the purpose of filing or recording such counterpart, if necessary, in any jurisdiction in which the Company may own property or transact business, (d) all certificates and other instruments necessary to qualify or continue the Company as a limited liability company in the jurisdictions where the Company may own property or transact business, (e) any other instrument which is now or which may hereafter be required by law to be filed by or on behalf of the Company which does not increase the obligations of any Member, and (f) any other certificates -------------------------------------------------------------------------------- or instrument necessary, advisable or appropriate to conduct the business and affairs of the Company which do not increase the obligations of any Member. The power of attorney granted by this Section 9.1 is irrevocable and shall survive the assignment or transfer by any Member of all or any part of its interest in the Company (including its Membership Interest) and, being coupled with an interest, shall survive the incapacity or other legal disability of each such Member. Any Person dealing with the Company may, without further inquiry, conclusively presume and rely upon the fact that any certificate or instrument described in this Section 9.1 and executed by such agent and attorney-in-fact is authorized, valid and binding.   Section 9.2 Notices. Except as otherwise expressly provided in this Agreement, all notices, demands, requests, or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be given either (a) in person, (b) by United States mail, certified or registered, return receipt requested, postage prepaid, (c) by prepaid telegram, telex, cable, telecopy, or similar means (with signed confirmed copy to follow by mail in the same manner as prescribed by clause (a) or (b) above), or (d) by expedited delivery service (charges prepaid) with proof of delivery, to the parties at the addresses shown on Exhibit A.   Section 9.3 Amendment. This Agreement may be changed, modified or amended only by an instrument in writing duly executed by all the Members.   Section 9.4 Partition. Each of the Members hereby irrevocably waives, to the extent it may lawfully do so, any right that such Member may have to maintain any action for partition with respect to the Company property.   Section 9.5 Waivers and Modifications. (a) This Agreement constitutes the entire agreement of the Members with respect to the subject matter hereof and supersedes any and all prior and contemporaneous contracts, understandings, negotiations and agreements with respect to the Company and the subject matter hereof, whether oral or written.   (b) Any waiver or consent, express, implied or deemed, to or of any breach or default by any Person in the performance by that Person of its obligations with respect to the Company or any action inconsistent with this Agreement is not a consent or waiver to or of any other breach or default in the performance by that Person of the same or any other obligations of that Person with respect to the Company or any other such action. Failure on the part of a Person to complain of any act of any Person or to declare any Person in default with respect to the Company, irrespective of how long that failure continues, does not constitute a waiver by that Person of its rights with respect to that Person or its rights with respect to that default until the applicable statute of limitations period has lapsed. All waivers and consents hereunder shall be in writing and shall be delivered to the other Members in the manner set forth in Section 9.2 hereof. A Member may grant or withhold any waiver or consent in its absolute sole discretion.   Section 9.6 Severability. Every provision in this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of this Agreement. If any -------------------------------------------------------------------------------- provision of this Agreement or the application thereof to any Person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other Persons or circumstances is not affected thereby, and that provision shall be enforced to the greatest extent permitted by law.   Section 9.7 No Third-Party Beneficiaries. Subject to the restrictions set forth in Section 3.3 hereof, this Agreement is binding on and inures to the benefit of the Members and their respective heirs, legal representatives, successors and assigns. Nothing in this Agreement shall provide any benefit to any third party or entitle any third party to any claim, cause of action, remedy or right of any kind, it being the intent of the Members that this Agreement shall not be construed as a third-party beneficiary contract.   Section 9.8 GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION.   Section 9.9 Further Assurances. In connection with this Agreement and the transactions contemplated hereby, each Member shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Agreement and those transactions.   Section 9.10 Arbitration. The Members agree that any claim or controversy arising hereunder, which the Members are unable to resolve in good faith, shall be finally resolved and settled exclusively by arbitration in the Washington, D.C. area by a panel of three (3) arbitrators under the American Arbitration Association’s Commercial Arbitration Rules then in effect. The arbitrators shall have authority to enter an award which includes injunctive relief or specific performance; provided, however, the arbitrators shall have no authority to award punitive or exemplary damages against any Member.   Section 9.11 Recourse. The sole recourse of the Company or any Member for performance of the obligations of a particular Member hereunder shall be against such Member and its assets and not against any assets or property of any present or future shareholder, officer, employee, servant, executive, director, agent, authorized representative or affiliate of such Member.   Section 9.12 Counterparts. This Agreement may be executed in multiple counterparts with the same effect as if both signing Members had signed the same document. All counterparts shall be construed together and constitute the same instrument.   Section 9.13 Attorneys’ Fees. Should any Member employ an attorney for the purpose of enforcing this Agreement in any lawful arbitral or judicial proceeding, the prevailing Member shall be entitled to receive from the other Party reimbursement for all attorney’s fees and -------------------------------------------------------------------------------- costs. A “Prevailing Party” means a Party prevailing on all material issues in dispute as determined by the trier of fact.   IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have executed this Agreement as of the date first set forth above.   C.C. PACE CAPITAL, L.L.C. By Its Members: C.C. PACE RESOURCES, INC. By:   /s/ Thomas E. Hirsch II     Name: Thomas E. Hirsch II     Title: Senior Vice President CHELSEA VIRGINIA, L.L.C. By:   /s/ James R. Treptow     Name: James R. Treptow     Title: Managing Member CARBON RESOURCES, INC. By:   /s/ Frederick J. Murrell     Name: Frederick J. Murrell     Title: President MERIDIAN ENERGY CORPORATION By:   /s/ Douglas E. Miller     Name: Douglas E. Miller     Title: President -------------------------------------------------------------------------------- MERIDIAN INVESTMENTS, INC. By:   /s/ John F. Boc     Name: John F. Boc     Title: President COAL INVESTORS, L.L.C. By Its Members: QUINCE ASSOCIATES By:   /s/ John P. Hill, Jr.     Name: John P. Hill, Jr.     Title: President /s/ John F. Boc John F. Boc /s/ John P. Casey John P. Casey /s/ John P. McDonough John P. McDonough -------------------------------------------------------------------------------- EXHIBIT A   Member --------------------------------------------------------------------------------    Member’s Percentage --------------------------------------------------------------------------------     Amount of Capital Contributions -------------------------------------------------------------------------------- C.C. Pace Capital, L.L.C. 4401 Fair Lakes Court Suite 400 Fairfax, Virginia 22033    25 %   $ 250.00 Carbon Resources, Inc. 111 3rd Ave., West Suite 140 Bradenton, FL 34205    25 %   $ 250.00 Meridian Energy Corporation 1266 Furnace Brook Parkway Quincy, Massachusetts 02169    17 %   $ 170.00 Meridian Investments, Inc. 1266 Furnace Brook Parkway Quincy, Massachusetts 02169    8 %   $ 80.00 Coal Investors, LLC c/o 1266 Furnace Brook Parkway Quincy, Massachusetts 02169    25 %   $ 250.00 -------------------------------------------------------------------------------- CARBONTRONICS, LLC   Amendment to Operating Agreement Admitting Subscriber as a Member   THIS AMENDMENT (“Amendment”) to the Operating Agreement of Carbontronics, LLC, a Delaware limited liability company (the “Company”), is made this          day of February, 1998, by and among C.C. Pace Capital, L.L.C., a Delaware limited liability company, Carbon Resources, Inc., a Delaware corporation, Meridian Energy Corporation, a Massachusetts corporation, Meridian Investments, Inc., a Massachusetts corporation, and Coal Investors, LLC, a Delaware limited liability company (each a “Member” and collectively the “Members”), and Gencor Industries, Inc. (the “Subscriber”).   The Members are parties to an Operating Agreement for the Company dated February 3, 1998 (the “Operating Agreement”). Any terms used in this Amendment which are defined in the Operating Agreement and are not defined herein shall have the meanings assigned to them in the Operating Agreement. The Subscriber has acquired an interest in the Company from the Company, and the remaining Members have agreed to admit the Subscriber as a Member and to modify the Operating Agreement as set forth herein.   NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties agree as follows:   1. Admission of Subscriber. The Subscriber is hereby admitted as a Member.   2. Amendment of Operating Agreement. The Operating Agreement is hereby amended by deleting Exhibit A in its entirety and replacing it with Exhibit A attached hereto. Except as specifically set forth herein, the Operating Agreement is hereby ratified and affirmed. -------------------------------------------------------------------------------- 3. Consent to Agreement by Subscriber. The Subscriber hereby consents to and agrees to be bound by all the terms of the Operating Agreement, as amended by this Amendment.   4. Conflicting Terms. Wherever the terms and conditions of this Amendment and the terms and conditions of the Operating Agreement conflict, the terms of this Amendment shall be deemed to supersede the conflicting terms of the Operating Agreement.   5. Authorized Person. The Members authorize John F. Boc to execute such agreements and certificates in the Company’s name and on behalf of the Company as necessary or proper to effectuate the transactions contemplated hereby.   IN WITNESS WHEREOF, the parties have executed this Amendment under seal as of the day and year first above written.   C.C. PACE CAPITAL, L.L.C. By Its Members:     C.C. PACE RESOURCES, INC.     By:             Name:   Timothy F. Sutherland         Title:   President     CHELSEA VIRGINIA, L.L.C.     By:             Name:   James R. Treptow         Title:   Managing Director   2 -------------------------------------------------------------------------------- CARBON RESOURCES, INC. By:   /s/ Frederick J. Murrell     Name:   Frederick J. Murrell     Title:   President MERIDIAN ENERGY CORPORATION By:   /s/ Douglas E. Miller     Name:   Douglas E. Miller     Title:   President MERIDIAN INVESTMENTS, INC. By:   /s/ John F. Boc     Name:   John F. Boc     Title:   President COAL INVESTORS, LLC By Its Member:     /s/ John F. Boc     John F. Boc GENCOR INDUSTRIES, INC. By:   /s/ John F. Boc     Name:         Title:       3 -------------------------------------------------------------------------------- EXHIBIT A   Member --------------------------------------------------------------------------------    Member’s Percentage --------------------------------------------------------------------------------     Amount of Capital Contributions -------------------------------------------------------------------------------- C.C. Pace Capital, L.L.C. 4401 Fair Lakes Court Suite 400 Fairfax, Virginia 22033    20 %   $ 250.00 Carbon Resources, Inc. 111 3rd Ave., West Suite 140 Bradenton, FL 34205    20 %   $ 250.00 Meridian Energy Corporation 1266 Furnace Brook Parkway Quincy, Massachusetts 02169    13.6 %   $ 170.00 Meridian Investments, Inc. 1266 Furnace Brook Parkway Quincy, Massachusetts 02169    6.4 %   $ 80.00 Coal Investors, LLC c/o Meridian Energy Corporation 1266 Furnace Brook Parkway Quincy, Massachusetts 02169    20 %   $ 250.00 Gencor Industries, Inc. 5201 N. Orange Blossom Trail Orlando, FL 32810    20 %         CONSIDERATION FROM LETTER AGREEMENT DATED 1/10/98 -------------------------------------------------------------------------------- SUBSCRIPTION AGREEMENT   February 20, 1998   Carbontronics, LLC c/o Meridian Energy Corporation 1266 Furnace Brook Parkway Quincy, MA 02169   Gentlemen:   The undersigned hereby offers to purchase a 20% interest (the “Interest”) in Carbontronics, LLC (the “Company”), a Delaware limited liability company, including a 20% interest in the profits, losses, distributions and capital of the Company, in exchange for the consideration listed in a letter agreement between the Company and the undersigned dated January 10, 1998.   This offer is made on the following terms:   1. The undersigned understands that the Interest is being issued without registration under the Securities Act of 1933, as amended (the “Act”), and under any applicable state securities law, pursuant to an exemption from registration contained in the Act and any applicable state securities law. The undersigned acknowledges that these exemptions only exempt the issuance of the Interest by the Company to the undersigned and not any sale or other disposition of the Interest, or any part thereof, by the undersigned.   2. The undersigned represents to the Company that the Interest is being acquired for private investment for its own account with no intention of distribution to others. The undersigned has no contract, undertaking, agreement or arrangement with any person to sell, transfer or otherwise distribute to any person, or to have any such person sell, transfer or otherwise distribute for the undersigned, the Interest, and the undersigned is not presently engaged, nor does the undersigned plan to engage within the presently foreseeable future, in any discussion with any person relative to such sale, transfer or other distribution of the Interest, or any part thereof.   3. The undersigned acknowledges that it has received no general solicitation or general advertising regarding the Interest.   4. The undersigned represents to the Company that it has such knowledge and experience of financial and business matters that it is capable of evaluating the merits and risks of a purchase of the Interest. Further, the undersigned represents to the Company that it has the ability to bear the economic risk of the Interest indefinitely, understanding that it has not been registered under the Act or any applicable state securities law, and that the undersigned can afford a complete loss on the purchase of the Interest. -------------------------------------------------------------------------------- 5. The undersigned acknowledges that there has been made available to it, during the course of the transaction and prior to the sale, the opportunity to ask questions of, and receive answers from the Company or any person acting on its behalf concerning the terms and conditions of the purchase and sale of the Interest, and to obtain any additional information, to the extent possessed by the Company (or to the extent it could have been acquired by the Company without unreasonable efforts or expense) necessary to verify the accuracy of the information received by the undersigned. The undersigned has received all the information, both written and oral, that it desires.   6. The undersigned hereby consents that any certificate representing the Interest may contain a legend setting forth appropriate restrictions, including but not limited to (i) stating that the Interest is not registered under the Act or any applicable state securities law, and (ii) reciting that transfer thereof is restricted.   7. The undersigned understands that the terms of this Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and upon the undersigned and its successors and assigns, and the undersigned consents to all the terms thereof.   IN WITNESS WHEREOF, this offer has been duly executed under seal the day and year first above written.   GENCOR INDUSTRIES, INC. By:         Name:     Title:     5201 N. Orange Blossom Trail Orlando, FL 32810   The foregoing offer is hereby accepted as of February     , 1998.   CARBONTRONICS, LLC By:            Name: John F. Boc     Title: Authorized Person   2

ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT is made as of the 1st day of October, 2006 between CorCell, Inc., a Delaware corporation (the “Seller”) and Cord Blood America, Inc., a Florida corporation (the “Buyer”). BACKGROUND A. The Seller is engaged in the business of retrieving and storing cord blood samples for individuals. The Buyer desires to purchase and the Seller desires to sell, the assets used in the retrieval of cord blood samples only (the “Acquired Business”). The Seller shall retain all Existing Samples and associated client Contracts. B. The Seller desires to sell to the Buyer, and the Buyer desires to purchase from the Seller, the Acquired Assets of Seller on the terms and conditions hereinafter set forth. C. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in Section 15 hereof. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties hereto agree as follows: AGREEMENT 1. SALE AND PURCHASE OF ASSETS.   (a) Sale and Purchase of Assets.  The Seller shall sell, assign, transfer, convey and deliver to the Purchaser, at the Closing, good and valid title to the Acquired Assets, free and clear of any Encumbrances, on the terms and subject to the conditions set forth in this Agreement.  For purposes of this Agreement, “Acquired Assets” means: (i) rights to use the sterile and closed connection processing techniques or standards, as currently employed at Bergen Community Blood Services on behalf of Seller pursuant to a license agreement, in the form to be agreed upon by the parties hereto, that provides for a one-time only royalty fee paid to Vita 34 AG, a German corporation (“Vita 34”) and an affiliate of Seller, equal to the amount of 0.5% of the collection revenues only, excluding storage revenues, from each new customer agreement entered into by Buyer after the Closing Date (the “License Agreement”); (ii) An amount in cash equal to the amount of the Customer Deposits from Payment Plan account (estimated to be approximately $80,000 as August 31, 2006) as of the Closing Date representing revenues received as prepayments for processing and storage, but where such services have not yet been performed; - 1 - -------------------------------------------------------------------------------- (iii) the Seller’s website, including without limitation, its domain name (www.corcell.com) and all software codes, licenses and documentation relating in any manner to the website; (iv) copies of all Records; (v) all trademarks, trade names, software, know-how, intellectual property rights and proprietary assets owned or used by Seller; and (vi) the Acquired Assets set forth on Schedule 1(a) hereto. (b) Excluded Assets.  Notwithstanding anything herein to the contrary, all the assets of the Seller not specifically included in the Acquired Assets (the “Excluded Assets”) shall not be sold or transferred hereunder, shall be excluded from the definition of Acquired Assets and shall remain the property of the Seller.  The Excluded Assets shall include, but are not limited to, the following:: (i) All cash and accounts receivable of Seller at Closing; (ii) All revenues to be collected from clients for services rendered on or before the Closing Date as reflected in the Accrued Revenue Under Payment Plan account (estimated to be approximately $121,000 as of August 31, 2006) as of the Closing Date, which amounts shall be paid to Seller as collected by Buyer. (iii) The Existing Samples and the related Contracts of the Seller with each of the clients with respect to the Existing Samples ; (iv) The Real Property Lease; and (v) The minute books, stock books and accounting records of Seller. (c) The sale of the Assets as herein contemplated shall be effected by such bills of sale, endorsements, assignments, drafts, checks, deeds and other instruments of transfer, conveyance and assignment as shall be necessary or appropriate to transfer, convey and assign the Acquired Assets to Buyer on the Closing Date as contemplated by this Agreement and as shall be reasonably requested by Buyer. (d) Seller shall, at any time and from time to time after the Closing Date, execute and deliver such further instruments of transfer and conveyance and do all such further acts as may be reasonably requested by Buyer to transfer, convey, assign and deliver to Buyer, or to aid and assist Buyer in collecting and reducing to possession, any and all of the Acquired Assets, or to vest in Buyer good, valid and marketable title to the Acquired Assets. (e) Subject to any confidentiality obligations or applicable privileges (including, without limitation, the attorney-client privilege), for a period of three (3) years after the Closing 2 -------------------------------------------------------------------------------- Date, at reasonable times and upon reasonable notice, Seller and its authorized representatives shall have, and Buyer shall afford Seller and its Representatives Records conveyed to Buyer hereunder for tax purposes or in connection with claims related to Excluded Assets and Excluded Liabilities only, and Buyer and its Representatives shall have, and Seller shall afford Buyer and its Representatives, access to any minute books, stock books and similar corporate records and accounting records retained by Seller pursuant to Section 1(b) of this Agreement. (f) Effective upon the Closing Date, Seller hereby irrevocably constitutes and appoints Buyer, its successors and assigns, the true and lawful attorney of Seller with full power of substitution, in the name of Buyer, or in the name of Seller, on behalf of and for the benefit of Buyer, to collect all items being transferred, conveyed and assigned to Buyer as part of the Acquired Assets, to institute and prosecute, in the name of Seller, or otherwise, all proceedings which Buyer may deem proper in order to collect, assert or enforce any claim, right or title of any kind in or to the Acquired Assets, and to do all such other acts in relation thereto as Buyer may deem advisable.  Seller agrees that the foregoing powers are coupled with an interest and shall be irrevocable by Seller directly or indirectly by the dissolution or liquidation of Seller or in any manner or for any reason.   (g) Sales Taxes.  The Seller shall bear and pay one hundred percent (100%) of any sales taxes, use taxes, transfer taxes, documentary charges, recording fees or similar taxes, charges, fees or expenses that may become payable in connection with the sale and transfer of the Acquired Assets to the Buyer.  The parties hereto shall cooperate with each other and use commercially reasonable efforts to minimize any of the aforementioned Taxes, charges, fees or expenses including but not limited to the transfer of all software by remote electronic transmission. 2. ASSUMPTION OF LIABILITIES (a) Subject to the performance by the parties hereto of their respective obligations hereunder, on the Closing Date, simultaneously with the sale, conveyance and assignment of the Acquired Assets by Seller to Buyer, Buyer shall assume and shall pay or cause to be paid or otherwise discharged when due, subject to the limitations contained herein, any obligations or liabilities associated with or related to the Acquired Assets and the liabilities and obligations listed on Schedule 2 only (collectively, the “Assumed Obligations”). (b) Buyer shall not assume any liabilities or obligations of Seller whatsoever (the “Excluded Liabilities”) other than the Assumed Obligations, including, without limitation, any liability arising directly or indirectly out of the PharmaStem Litigation, any other litigation against the Seller or the Real Property Lease. 3. PURCHASE PRICE. (a) In consideration of the transfer, conveyance and assignment of the Acquired Assets, and the assumption of the Assumed Obligations, Buyer shall pay a purchase price (the “Purchase Price”) in cash  to Seller at Closing equal to One Dollar ($1.00. 3 -------------------------------------------------------------------------------- (b) The Purchase Price together with the Assumed Obligations, shall be allocated among the Assets as set forth on Schedule 3(b).  Each of Seller and Buyer shall file Forms 8594 with the Internal Revenue Service consistent with such allocation. 4. CLOSING; CLOSING DATE. (a) The closing of the transactions contemplated by this Agreement (the “Closing”) shall be effective as of October1, 2006 and shall take place on October 10, 2006, unless extended by mutual agreement of the parties hereto (the “Closing Date”) at 10:00 a.m. local time at the offices of Dilworth Paxson LLP, 3200 Mellon Bank Center, 1735 Market Street, Philadelphia, Pennsylvania 19103, or such other time and place that are mutually acceptable to the Seller and the Buyer. (b) At the Closing: (i) the Seller shall execute and deliver a Bill of Sale, in the form of Exhibit A attached hereto (the “Bill of Sale”);   (ii) the Buyer shall pay the Purchase Price to the Seller; (iii) the Buyer and Seller shall execute and deliver a general Assignment and Assumption Agreement in the form of Exhibit B attached hereto (the “Assignment and Assumption Agreement”); (iv) the Buyer and Seller shall execute and deliver a Trademark Assignment Agreement in the form of Exhibit C attached hereto (the “Trademark Assignment Agreement”); and (v) the Buyer and Seller shall execute and deliver an Existing Samples Purchase Agreement in the form of Exhibit D attached hereto (the “Existing Samples Purchase Agreement”) (c) Post-Closing Transfers.  Following the Closing, the parties shall cooperate with each other to identify any assets that were not designated as part of the Acquired Assets at the Closing but which are necessary to conduct the Acquired Business as currently being conducted by the Seller, but excluding the Real Property Lease (the “Nontransferred Assets”).  To the extent any Nontransferred Assets are identified and the Seller is legally and contractually permitted to transfer such assets, the Seller shall, at no cost to the Buyer, promptly take all actions to transfer such Nontransferred Assets to the Buyer.  In the event the Seller is required to obtain the consent or approval of any Person prior to the transfer of any Nontransferred Asset, then the Seller shall, at its own expense, use its commercially reasonable efforts to promptly obtain such approval or consent, and upon obtaining such approval or consent, shall promptly transfer such Nontransferred Asset to the Buyer.  In the event the Seller is unable to obtain such approval or consent, then the Seller and the Buyer shall discuss in good faith an appropriate resolution for the transfer of the economic benefit of such Nontransferred Asset to the Buyer.   4 -------------------------------------------------------------------------------- (d) Post-Closing Funds.  If, following the Closing, (i) the Seller receives any payment or proceeds with respect to any Acquired Asset sold hereunder, the Seller shall promptly remit the proceeds or payments to the Buyer, and (ii) the Buyer receives any payment or proceeds with respect to any Excluded Assets, the Buyer shall promptly remit the proceeds or payments to the Seller. (e) Other Post-Closing Adjustments.  On each of the first 6 monthly anniversary dates after the Closing Date, the parties shall exchange any information required for them to pay to each other the amounts of any assets or expenses the respective amounts of which were not ascertainable as of the Closing Date, and which are properly attributable to the other party. 5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents and warrants to the Buyer as follows, except as set forth in the disclosure schedules delivered by the Seller to the Buyer concurrently with the execution of this Agreement (“Schedules”) (it being agreed that disclosure in the Schedules with respect to any particular section of the Agreement shall be deemed disclosure with respect to another section of the Agreement only to the extent the applicability of such disclosure to the subject matter of such other section is reasonably clear or apparent from a reading of such disclosure in the Schedules in conjunction with such other section of the Agreement): (a) Organization of Seller.  The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  The Seller has all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now being conducted.  The Seller is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified or licensed and in good standing, individually or in the aggregate, would not have a Material Adverse Effect on the Seller. (b) Intentionally Omitted. (c) Authority and Enforceability of Agreements.  The Seller has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly authorized and executed by the Seller and constitutes the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereinafter in effect, relating to creditors' rights generally and to general principles of equity. (d) Consents.  Except as set forth in Schedule 5(d), neither the execution and delivery of this Agreement by the Seller nor the consummation by the Seller of the transactions contemplated by this Agreement will require any Consent of, any Governmental Body or other Person. 5 -------------------------------------------------------------------------------- (e) Non-Contravention.  The execution and delivery of this Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby will not (i) violate any provision of any statute, law, regulation, rule, injunction, judgment, order, decree, ruling or other restriction of any Governmental Body to which the Seller is subject, (ii) contravene or result in a violation of any corporate charter document or by-law of the Seller, (iii) conflict with or result in any violation or breach of any of the terms, conditions or provisions of, or constitute a default under any Contract, or result in the creation of any Encumbrance upon, or (iv) give any Person the right to (a) declare a default or exercise any remedy under any Contract, (b) accelerate the maturity or performance of any Contract, or (c) cancel, terminate or materially modify any Contract.   (f) Corporate Documents.  True and correct copies of the Certificate of Incorporation and Bylaws of the Seller, as currently in effect, have been furnished to the Buyer. (g) Corporate Identification.  Within the past five years, the Seller has not done any business under, or been known by, any name other than its current names. (h) Intellectual Property.  The Seller owns or is licensed to use all trademarks, trade names, assumed names, service marks, logos, patents, copyrights (including those relating to operating and applications computer software and data bases), trade secrets, technology, know-how and information and data processes which are material to the Acquired Business as heretofore conducted by the Seller (collectively, the “Proprietary Rights”) free and clear of all Encumbrances.  Schedule 5(h) sets forth a list of all material Proprietary Rights and indicates which are owned and which are licensed by the Seller.  To the knowledge of the Seller, no Proprietary Rights used by the Seller in connection with the Acquired Business conflict with or infringe upon any proprietary rights of any other Person, except as set forth on Schedule 5(h).  To the knowledge of the Seller, the Proprietary Rights are valid and enforceable and no Person is infringing on or violating the Proprietary Rights owned or used by the Seller nor are there any challenges or disputes or unresolved issues with respect to any Proprietary Rights owned by the Seller, except as set forth on Schedule 5(h). (i) Investments.  The Seller has no subsidiaries and owns no stock or other equity interest in any other Person. The Seller is not a partner in any partnership or joint venture with any other Person. (j) Financial Information.  The Seller has previously furnished to the Buyer audited balance sheets of the Seller as of December 31, 2003, December 31, 2004 and December 31, 2005, and audited income statements, statements of retained earnings and statements of cash flow of the Seller for the fiscal years ending on such dates (herein collectively referred to as the “Financial Statements”), and the unaudited balance sheet of the Seller as of June 30, 2006 and the unaudited income statement of the Seller for the period then ended on such date (the “Interim Statements”).  The Financial Statements and the Interim Statements were prepared from the books and records of the Seller, which books and records accurately reflect in all material respects the accounts and transactions recorded therein. The Financial Statements were 6 -------------------------------------------------------------------------------- prepared in accordance with generally accepted accounting principles applied consistently throughout the periods covered and fairly present the financial condition and results of operations of the Seller as of the dates and for the periods indicated. (k) Undisclosed Liabilities.  The Seller has no liabilities of a type required by generally accepted accounting principles to be reflected on a balance sheet (including the footnotes thereto), except (i) as reflected in the December 31, 2005 Financial Statements or the Interim Statements, (ii) as incurred in the Ordinary Course of Business since June 30, 2006 through the Closing Date, as set forth in Schedule 5(k). (l) Absence of Changes or Events.  Since June 30, 2006, except as set forth in Schedule 5(l) hereto or as specifically permitted or contemplated by this Agreement: (i) there has not been any change in, and no event has occurred that could reasonably be expected to have a Material Adverse Effect on the Acquired Business or that adversely affects the Acquired Assets or Assumed Obligations in any material respect; (ii) there has not been any loss, damage or destruction to, or any interruption in the use of, any of the Acquired Assets or Assumed Obligations in any material respect; (iii) the Seller has not sold or otherwise transferred, or leased, or licensed, any material portion of the assets used in the Acquired Business to any other Person; except for non-exclusive, non-transferable licenses to software granted in the Ordinary Course of Business and except for sales of inventory in the Ordinary Course of Business; (iv) no material Contract related to, or necessary to the conduct of, the Acquired Business or Assumed Obligations has been amended or terminated; (v) the Seller has not caused any of the Acquired Assets or Assumed Obligations to become subject to any Encumbrances; (vi) except as contemplated by the Transaction Documents, the Seller has not entered into any transaction or taken any other action, in each case related to the Acquired Business outside the Ordinary Course of Business; and (vii) the Seller has not agreed (in writing or otherwise) to take any of the actions referred to in clauses “(i)” through “(vi)” above. (m) Litigation and Claims.  There is no Proceeding pending or, to the Knowledge of the Seller, threatened against the Seller or any of its properties or rights, nor any judgment, order, injunction or decree before any court or other Governmental Body, that might result in any Material Adverse Effect on the Acquired Business, the Acquired Assets or the Assumed Obligations or which questions the validity of this Agreement or the transactions contemplated hereby, except as set forth in Schedule 5(m) hereto. There is no Order to which the Seller, or any of the Acquired Assets or Assumed Obligations, is subject; and none of the Affiliates of the 7 -------------------------------------------------------------------------------- Seller is subject to any Order that relates to the Acquired Business, Acquired Assets or Assumed Obligations. (n) Performance Of Services.  There is no Proceeding pending or, to the Knowledge of the Seller, being threatened against the Seller relating to any services performed by the Seller in connection with the Acquired Business, and, to the Knowledge of the Seller, there is no reasonable basis for the assertion of any such claim, except as set forth on Schedule 5(n) hereto. (o) Tax Matters. (i) For purposes of this Agreement, the term “Taxes” means all federal, state, local, foreign, and other net income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, stamp severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, or assessments, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto, and the term “Tax” means any one of the foregoing Taxes. The term “Tax Returns” means all returns, declarations, reports, statements, and other documents required to be filed in respect of Taxes and the term “Tax Return” means any one of the foregoing returns.  The term “Code” means the Internal Revenue Code of 1986, as amended.  All citations to the Code or the regulations promulgated thereunder shall include any amendments or any substitute or successor provisions thereto. (ii) The Seller has filed all Tax Returns that it was required to file, except Tax Returns for the Seller’s fiscal years ended December 31, 2004 and 2005..  All such Tax Returns were correct and complete in all material respects.  All Taxes of the Seller shown on any Tax Return have been paid or are reflected on the December 31, 2005 Financial Statements or the Interim Statements in accordance with generally accepted accounting principles. There are no liens for Taxes (other than for Taxes not yet due or payable) upon any of the assets of the Seller.  The Seller is not currently the beneficiary of any extension of time within which to file any Tax Return which has continuing effect. (iii) There is no material dispute or claim concerning any Tax liability of any of the Seller and no such dispute or claim has been raised by any taxing authority. (iv) Except for Tax Returns not yet filed, the Seller has delivered or made available to the Buyer correct and complete copies of all income Tax Returns, examination reports, and statements of deficiencies assessed against, or agreed to by any of the Seller since December 31, 2002.  The Seller has not waived any statute of limitations in respect of Taxes which has continuing effect or agreed to any extension of time with respect to a Tax assessment or deficiency which has continuing effect. (v) The Seller is not a party to any tax allocation or sharing agreement. (p) Assets; Title and Related Matters.   8 -------------------------------------------------------------------------------- (i) None of the Acquired Assets is subject to any Encumbrances (including tax-related Encumbrances).  At the Closing Date, the Seller will transfer to the Buyer good and marketable title to all Acquired Assets, free and clear of any Encumbrances. (ii) As of the Closing Date, no Affiliate of the Seller will own, control or have custody of any Acquired Asset. (iii) Except as contemplated by the Transaction Documents, neither the Seller nor any of its Affiliates has any agreement, absolute or contingent, written or oral, with any other Person to effect any Acquisition Transaction or to sell or otherwise transfer any of the Acquired Assets, except for non-exclusive, non-transferable licenses to software granted in the Ordinary Course of Business. (q) Contracts.  Schedule 5(q) hereto lists all Contracts relating to the Acquired Business (collectively, “Acquired Business Contracts”) to which the Seller is a party or by which the Seller and the Acquired Assets are bound, other than any Acquired Business Contract (i) that was entered into by the Seller in the Ordinary Course of Business, and (ii) as to which the total payments due to or from the Seller over the term thereof (or upon early termination by the Seller) do not exceed $5,000.  The Seller has delivered to the Buyer accurate and complete copies of all Acquired Business Contracts listed on Schedule 5(q) hereto in connection with Buyer’s diligence.  With respect to each Acquired Business Contract listed on Schedule 5(q) hereto, except as indicated on such Schedule: (i) such Acquired Business Contract is valid and in full force and effect; the Seller is not in material default under such Acquired Business Contract and, to the knowledge of the Seller, no other party to such Acquired Business Contract is in material default thereunder, and there is no condition or basis known to the Seller for any claim of a material default by any party thereto or event which with notice, lapse of time or both would constitute a material default; (ii) no consent of any other Person is needed in order that such Acquired Business Contract continue in full force and effect following the consummation of the transactions contemplated by this Agreement; (iii) neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in any breach or acceleration of, or constitute a default under, any such Acquired Business Contract; and (iv) no such Acquired Business Contract contains a covenant not to compete, an exclusivity provision in favor of any other party to the Seller’s Contract, or a change of control provision. (r) Insurance.  A list of all insurance policies or binders maintained by the Seller is set forth in Schedule 5(r) hereto.  Such policies and binders are valid and enforceable and in full force and effect, and except as set forth in Schedule 5(r) the Seller is not in default with respect 9 -------------------------------------------------------------------------------- to any material provision contained in any such policy or binder and has not failed to give any notice or present any claim under any such policy or binder in due and timely fashion. There are no outstanding unpaid claims under any such policy or binder. The Seller has not received a notice of cancellation or non-renewal of any such policy or binder. (s) Labor Matters.  The Seller has not engaged in any unfair labor practice of any nature with respect to the Acquired Business.  There has not been any slowdown, work stoppage, labor dispute or union organizing activity, or any similar activity or dispute, affecting the Acquired Business.  To the Knowledge of the Seller, no officer, employee or consultant of the Seller is obligated under any Contract or subject to any Order or Legal Requirement that would interfere with the Acquired Business as currently conducted.  To Seller’s Knowledge, neither the execution nor delivery of this Agreement, nor the carrying on of the Seller’s business as presently conducted nor any activity of such officers, employees or consultants in connection with the carrying on of the Seller’s business as presently conducted, will conflict with or result in a breach of the terms, conditions or provisions of, constitute a default under, or trigger a condition precedent to any rights under any Contract or other agreement under which any of such officers, employees or consultants is now bound. (t) Borrowing and Lending.  Except for loans from its parent corporation, the Seller has not, as either lender or borrower, entered into any Contract relating to lines of credit, loans or other extensions of credit or agreements therefor of any kind.  A copy of each of such Contract has been furnished to the Buyer. (u) Environmental and Health and Safety Matters.  Neither the Seller nor, to knowledge of the Seller, any prior owner or tenant of the real property underlying (i) the Real Property Lease or (ii) any real property lease for prior premises occupied or used by the Seller has made, caused or contributed to any release of any Hazardous Material into the environment nor are any Hazardous Materials in, on, over or under the real property underlying the Real Property Lease.  The Acquired Business conducted by the Seller does not involve the generation, transportation, treatment, storage or disposal of Hazardous Materials. The Seller has never received any notice or other communication (in writing or otherwise) from any Governmental Body or other Person regarding any actual, alleged, possible or potential liability arising from or relating to the presence, generation, manufacture, production, transportation, importation, use, treatment, refinement, processing, handling, storage, discharge, release, emission or disposal of any Hazardous Material.  No Person has ever commenced or threatened to commence any contribution action or other Proceeding against the Seller in connection with any such actual, alleged, possible or potential liability; and no event has occurred, and no condition or circumstance exists, that may directly or indirectly give rise to, or result in the Seller becoming subject to, any such liability.  The Seller is not in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its Knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation.   10 -------------------------------------------------------------------------------- (v) Real Property.  The lease of the Seller’s office located at 1717 Arch Street, Suite 1410, Philadelphia, Pennsylvania 19103 a complete and accurate copy of which have been provided to the Buyer (the “Real Property Lease”), is the only lease or sublease for real property to which the Seller is a party or which cover premises used in the Acquired Business.  The Real Property Lease is valid, binding and in full force and effect, all rent and other sums and charges payable by the Seller thereunder are current and no notice of a default or termination under any Real Property Lease has been given or received by the Seller, and, to the knowledge of the Seller, no event has occurred which would, with the giving of notice or the passage of time or both or otherwise, constitute a material default.  Except for the Real Property Lease, the Seller has no real property rights or interests, whether owned or leased, or any liability for any prior real estate leases. (w) Compliance with Laws.  The Seller is in full compliance with each Legal Requirement that is applicable to it or to the conduct of its business or the ownership or use of any of its assets, except to the extent any such noncompliance could not reasonably be expected to have a Material Adverse Effect on the Acquired Business.  No event has occurred, and no condition or circumstance exists, that could (with or without notice or lapse of time) constitute or result directly or indirectly in a violation by the Seller of, or a failure on the part of the Seller to comply with, any Legal Requirement, except to the extent any such noncompliance could not reasonably be expected to have a Material Adverse Effect on the Acquired Business.  The Seller has not received any written notice or other written communication, or any other written information, or to the Knowledge of the Seller, any oral notice, communication or other information, at any time, from any Governmental Body or any other Person regarding (i) any actual, alleged, possible or potential violation of, or failure to comply with, any Legal Requirement, or (ii) any actual, alleged, possible or potential obligation on the part of the Seller to undertake, or to bear all or any portion of the cost of, any cleanup or any remedial, corrective or response action of any nature.  To the Knowledge of the Seller, no Governmental Body has proposed or is considering any Legal Requirement that, if adopted or otherwise put into effect, (i) may have a Material Adverse Effect on the Acquired Business, or (ii) may have the effect of preventing, delaying, making illegal or otherwise interfering with the consummation of the transactions contemplated by this Agreement. (x) Brokers.  No broker, finder, agent or similar intermediary has acted for or on behalf of the Seller in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, agent or similar intermediary is entitled to any broker’s, finder’s or similar fee or other commission in connection therewith based on any agreement, arrangement or understanding with the Seller or any action taken by the Seller. (y) Governmental Authority.  Schedule 5(y) hereto identifies: each Governmental Authorization that is held by the Seller and is related to the conduct of the Acquired Business.  The Seller has delivered to the Buyer accurate and complete copies of all of the Governmental Authorizations identified in Schedule 5(y), including all renewals thereof and all amendments thereto.  Each Governmental Authorization identified or required to be identified in Schedule 5(y) hereto is valid and in full force and effect.  The Seller is and has at all times been in full 11 -------------------------------------------------------------------------------- compliance with all of the terms and requirements of each Governmental Authorization identified or required to be identified in Schedule 5(y) hereto, except to the extent any such noncompliance could not reasonably be expected to have a Material Adverse Effect on the Seller.  To the Knowledge of the Seller, no event has occurred, and no condition or circumstance exists, that might (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any Governmental Authorization identified or required to be identified in Schedule 5(y) hereto, or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, termination or modification in any material respect of any Governmental Authorization identified or required to be identified in Schedule 5(y) hereto.  The Seller has not received any written notice or other written communication (from any Governmental Body or any other Person regarding (A) any actual, alleged, possible or potential violation of or failure to comply with any term or requirement of any Governmental Authorization primarily related to the Acquired Business, or (B) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination or modification in any material respect of any Governmental Authorization primarily related to the Acquired Business.  The Governmental Authorizations identified in Schedule 5(y) hereto constitute all of the Governmental Authorizations necessary (i) to enable the Seller to conduct the Acquired Business in the manner in which such business is currently being conducted, and (ii) to permit the Seller to own and use the assets related to the Acquired Business in the manner in which they are currently owned or used. (z) Affiliate Transactions.  No Affiliate of the Seller:  (a) has any direct or indirect interest of any nature in any of the Acquired Assets; (b) is competing with the Acquired Business; (c) has any claim or right against the Acquired Assets.  To the Knowledge of the Seller, no event has occurred, and no condition or circumstance exists, that could (with or without notice or lapse of time) give rise to or serve as a basis for any claim or right in favor of any Affiliate of the Seller against the Acquired Assets. (aa) Sufficiency of Assets.  The Acquired Assets constitute all the assets, properties, rights and goodwill necessary to carry on the Acquired Business as currently conducted by the Seller, except that the Seller’s contract for processing any samples retrieved is not being transferred to Buyer, and no licenses issued by any governmental authority are being transferred to Buyer. (bb) Bulk Transfer Laws.  Seller has satisfied all obligations pursuant to any bulk transfer law or similar legal requirement in connection with any of the Transactions. (cc) Access to Information; Evaluation of Transaction.  The Seller and its Representatives have had full and complete access to all records and information relating to the Buyer; have had the opportunity to ask all questions of and receive all answers from the Buyer and its officers and directors that the Seller and its Representatives have deemed necessary and material for an evaluation of the merits and risks of its sale of the Acquired Assets; and have had an opportunity to obtain additional information to the extent deemed necessary or advisable by 12 -------------------------------------------------------------------------------- the Seller and its Representatives in order to verify the accuracy of the information obtained.  The Seller has sufficient knowledge, experience and sophistication in financial and business matters, and is capable of evaluating the merits and risks of its sale of the Acquired Assets and of making an informed investment decision with respect thereto. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES.  EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 5, THE SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE SELLER OR THE BUSINESS, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. 6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. Buyer hereby represents and warrants to the Seller as follows: (a) Organization.  The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. The Buyer has all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now being conducted.  The Buyer is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified or licensed and in good standing, individually or in the aggregate, would not have a Material Adverse Effect on the Buyer. (b) Authority and Enforceability of Agreements.  The Buyer has all requisite corporate power and authority to execute and deliver the Transaction Documents and to consummate the transactions contemplated thereby. The Transaction Documents have been duly authorized by all necessary corporate action of the Buyer.  The Transaction Documents have been duly executed and delivered by the Buyer and constitute the valid and binding obligation of the Buyer enforceable against the Buyer in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, nor or hereinafter in effect,  relating to creditors' rights generally and to general principles of equity. (c) Consents.  Neither the execution and delivery of the Transaction Documents by the Buyer nor the consummation by the Buyer of the transactions contemplated thereby will require the Consent of any Governmental Body or other Person. (d) No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Buyer and the consummation by the Buyer of the transactions contemplated hereby will not (i) result in a violation of the Articles of Incorporation, any certificate of designations of any outstanding series of preferred stock of the Buyer or the By-laws or (ii) conflict with or constitute a default (or an event which with notice or lapse of time or both would 13 -------------------------------------------------------------------------------- become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Buyer or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of The National Association of Securities Dealers Inc.'s OTC Bulletin Board on which the common stock of Buyer is quoted) applicable to the Buyer or any of its subsidiaries or by which any property or asset of the Buyer or any of its subsidiaries is bound or affected.  Neither the Buyer nor its subsidiaries is in violation of any term of or in default under its Articles of Incorporation or By-laws or their organizational charter or by-laws, respectively, or any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Buyer or its subsidiaries.  The business of the Buyer and its subsidiaries is not being conducted, and shall not be conducted in violation of any material law, ordinance, or regulation of any governmental entity.  Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state securities laws, the Buyer 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 or contemplated by this Agreement or the Registration Rights Agreement in accordance with the terms hereof or thereof.  All consents, authorizations, orders, filings and registrations which the Buyer is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.  The Buyer and its subsidiaries are unaware of any facts or circumstance, which might give rise to any of the foregoing. (e) Absence of Litigation.  There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Buyer or any of the Buyer's subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have a material adverse effect on the transactions contemplated hereby (ii) adversely affect the validity or enforceability of, or the authority or ability of the Buyer to perform its obligations under, this Agreement or any of the documents contemplated herein, or (iii) have a material adverse effect on the business, operations, properties, financial condition or results of operations of the Buyer and its subsidiaries taken as a whole.   (f) Brokers.  No broker, finder, agent or similar intermediary has acted for or on behalf of the Buyer in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, agent or similar intermediary is entitled to any broker’s, finder’s or similar fee or other commission in connection therewith based on any agreement, arrangement or understanding with the Buyer or any action taken by the Buyer. (g) Access to Information; Evaluation of Transaction.  The Buyer and its Representatives have had full and complete access to all records and information relating to the Seller and the Acquired Business; have had the opportunity to ask all questions of and receive all answers from the Seller and its officers and directors concerning the Seller and the Acquired Business that the Buyer and its Representatives have deemed necessary and material for an 14 -------------------------------------------------------------------------------- evaluation of the merits and risks of its purchase of the Acquired Assets; and have had an opportunity to obtain additional information to the extent deemed necessary or advisable by the Buyer and its Representatives in order to verify the accuracy of the information obtained.  The Buyer has sufficient knowledge, experience and sophistication in financial and business matters, and is capable of evaluating the merits and risks of its purchase of the Acquired Assets and of making an informed investment decision with respect thereto. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES.  EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 6, THE BUYER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE BUYER OR ITS BUSINESS, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED 7. PRE-CLOSING COVENANTS OF THE SELLER. (a) Access and Investigation.  During the Pre-Closing Period: (a) the Seller will provide the Buyer with access, during normal business hours and upon reasonable advance notice, and in a manner so as not to interfere with its normal business operations, to all premises, properties, personnel, books, records, tax returns, work papers and other documents and information relating to the Seller and the Acquired Business; and (b) the Seller will provide the Buyer with such copies of such books, records, tax returns, work papers and other documents and information relating to the Seller and the Acquired Business as the Buyer may reasonably request.  All documents and information obtained pursuant to this Section 7(a) shall be treated by the Buyer as confidential information that is subject to the terms of the Confidentiality Agreement dated as of [__________], 2006 (the “Confidentiality Agreement”) between the Seller and the Buyer. (b) Operation of Business.  During the Pre-Closing Period, the Seller will carry on the Acquired Business in the ordinary course of business consistent with the manner in which the Acquired Business has previously been conducted, pay its debts and Taxes when due and pay and perform its other obligations when due, and, to the extent consistent with the Acquired Business, use commercially reasonable best efforts consistent with past practice and policies to preserve intact the present business of the Seller, preserve its relationships with customers, suppliers, licensors, licensees, and others having business dealings with the Seller, and keep available the services of its present officers and key employees; provided, however, that in no event shall the foregoing be construed as obligating the Seller to pay retention bonuses or similar compensation to any officers or employees, other than pursuant to Seller’s agreements with its employees as of the date of this Agreement.  Without limiting the generality of the foregoing, during the Pre-Closing Period, except as otherwise approved in writing by the Buyer: (i) the Seller conducts its operations exclusively in the Ordinary Course of Business and in substantially the same manner as such operations have been conducted prior to the date of this Agreement; 15 -------------------------------------------------------------------------------- (ii) the Seller will not incur or assume any material liability outside the Ordinary Course of Business; (iii) the Seller will not establish or adopt any plan, program, practice, contract or other arrangement providing for compensation, severance, termination pay, deferred compensation, bonus, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind or pay any bonus or make any profit sharing or similar payment to, or increase the amount of the wages, salary, commissions, fees, fringe benefits or other compensation or remuneration payable to, any of its directors, officers, employees or independent contractors; and (iv) the Seller will not enter into any transaction or take any other action of the type referred to in Section 5(l) hereof. (c) Efforts to Close.  The Seller will use commercially reasonable best efforts to take all action and to do all things necessary, proper, or advisable in order to fulfill and perform its obligations under this Agreement and to consummate and make effective the transactions contemplated by this Agreement (including the satisfaction, but not the waiver, of the closing conditions set forth in Section 11 hereof). (d) Filings and Consents.  During the Pre-Closing Period, the Seller will cooperate with the Buyer and prepare and make available such documents and take such other actions as the Buyer may reasonably request in connection with obtaining any Consent that the Buyer is required or elects to make, give or obtain.   (e) Notification.  During the Pre-Closing Period, the Seller shall promptly notify the Buyer in writing of, and shall subsequently keep such other party updated on a current basis regarding: (a) the discovery of any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement and that caused or constitutes a Breach of any representation or warranty made in this Agreement; (b) any event, condition, fact or circumstance that occurs, arises or exists after the date of this Agreement and that would cause or constitute a Breach of any representation or warranty made in this Agreement if (i) such representation or warranty had been made as of the time of the occurrence, existence or discovery of such event, condition, fact or circumstance, or (ii) such event, condition, fact or circumstance had occurred, arisen or existed on or prior to the date of this Agreement; (c) any Breach of any covenant or obligation; and (d) any event, condition, fact or circumstance that could reasonably be expected to make the timely satisfaction of any of the conditions to close set forth in this Agreement impossible or unlikely. (f) No Solicitation. During the period beginning on the date hereof and ending on the earlier of the date when the Existing Samples Purchase Agreement expires or closing occurs thereunder, the Seller will not, directly or indirectly: (i) solicit or encourage the initiation of any inquiry or offer, or submission of a proposal from any Person (other than the Buyer) relating to a possible Acquisition Transaction; (ii) consider, engage or participate in any discussions or negotiations or enter into any agreement, understanding or arrangement with, or provide any non 16 -------------------------------------------------------------------------------- public information to, any Person (other than the Buyer) relating to or in connection with a possible Acquisition Transaction; or (iii) consider, entertain or accept any proposal or offer from any Person (other than the Buyer) relating to a possible Acquisition Transaction.   8. PRE-CLOSING COVENANTS OF THE BUYER. (a) Efforts to Close.  The Buyer will use commercially reasonable best efforts to take all actions and to do all things necessary, proper, or advisable in order to fulfill and perform the Buyer’s obligations under this Agreement and to consummate and make effective the transactions contemplated by this Agreement (including the satisfaction, but not the waiver, of the closing conditions set forth in Section 10 hereof). (b) Filings and Consents.  During the Pre-Closing Period, the Buyer will cooperate with the Seller and prepare and make available such documents and take such other actions as the Seller may reasonably request in connection with any Consent that the Seller is required or elects to make, give or obtain.   (c) Notice of Breach.  During the Pre-Closing Period, the Buyer shall promptly notify the Seller in writing of, and shall subsequently keep such other party updated on a current basis regarding: (a) the discovery of any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement and that caused or constitutes a Breach of any representation or warranty made in this Agreement; (b) any event, condition, fact or circumstance that occurs, arises or exists after the date of this Agreement and that would cause or constitute a Breach of any representation or warranty made in this Agreement if (i) such representation or warranty had been made as of the time of the occurrence, existence or discovery of such event, condition, fact or circumstance, or (ii) such event, condition, fact or circumstance had occurred, arisen or existed on or prior to the date of this Agreement; (c) any Breach of any covenant or obligation; and (d) any event, condition, fact or circumstance that could reasonably be expected to make the timely satisfaction of any of the conditions to close set forth in this Agreement impossible or unlikely.   9. OTHER AGREEMENTS; FURTHER ACTIONS (a) The Seller shall, and shall cause its Affiliates to, reasonably cooperate with the Buyer in its efforts to continue and maintain for the benefit of the Purchaser those business relationships of Seller existing prior to the Closing Date and part of the Acquired Business, including relationships with lessors, licensors, customers, suppliers, providers, payers, vendors and others.  Neither the Seller nor any of its Affiliates or its or their officers, employees or Representatives shall take any action after the Closing Date which could reasonably be expected to diminish the value of the Acquired Assets or interfere with the customers or operations of the Acquired Business, and neither the Seller nor any of its Affiliates will satisfy any of the Excluded Liabilities in a manner reasonably likely to be detrimental to such relationships, individually or as a whole. 17 -------------------------------------------------------------------------------- (b) The Seller and the Buyer will cooperate in good faith in connection with the filing of Tax Returns, any audit or Proceeding with respect to Taxes and in connection with any other Proceeding in each case relating to the Acquired Assets or the Acquired Business, as and to the extent reasonably requested by the Buyer or the Seller.  Such cooperation shall include (1) the retention and (upon a party’s request) the provision of records and information which are reasonably relevant to the preparation of Tax Returns or to any such Proceeding and (2) making relevant employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.  The Seller and the Buyer shall (1) retain all Records with respect to Tax matters pertinent to the Acquired Assets relating to any period beginning before the Closing Date until the expiration of all relevant statues of limitations (and, to the extent notified by the Seller or the Buyer, any extensions thereof), and abide by all record retention agreements entered into with any Governmental Authority with respect to Taxes (with respect to agreements of another party, to the extent notified thereof) and (2) give the other parties to this Agreement reasonable written notice prior to transferring, destroying or discarding any such Records. (c) During the Pre-Closing Period, the Seller will exercise its commercially reasonable efforts to transfer to the Purchaser any relevant customer relationships primarily related to the Acquired Business.   (d) Confidentiality.  Each party and their respective Representatives will hold, and will cause its consultants and advisers to hold, in confidence all Confidential Information  furnished to it by or on behalf of the other party in connection with the transactions contemplated by this Agreement as follows:   (i) Except as permitted by subparagraph (ii) below, each party agrees that it will not, without prior written consent of the other party, disclose or use for its own benefit any Confidential Information of the other party. (ii) Notwithstanding the provisions of subsection (i) above, each of the parties shall be permitted to: (A) Disclose Confidential Information of the other party to its officers, directors, employees, lenders, counsel, accountants and other agents, but only to the extent reasonably necessary in order for such party to perform its obligations and exercise its rights and remedies under the Transaction Documents, and such party shall take all such action as shall be necessary or desirable in order to ensure that each of such persons maintains the confidentiality of any Confidential Information that is so disclosed; and (B) Disclose Confidential Information of the other party to the extent, but only to the extent, required by law; provided that prior to making any disclosure pursuant to this section, the party required to make such disclosure (the “Disclosing Party”) shall notify the other party (the “Affected Party”) of the same, and the Affected Party shall have the right to participate with the Disclosing Party in determining the amount and type of Confidential 18 -------------------------------------------------------------------------------- Information of the Affected Party, if any, which must be disclosed in order to comply with applicable laws. (iii) The Buyer and the Seller acknowledge and agree that each party would be irreparably damaged in the event that any of the provisions of this section are not performed by the other in accordance with their specific terms or are otherwise breached.  Accordingly, it is agreed that each party shall be entitled to an injunction or injunctions to prevent a Breach of this section by the other and shall have the right to specifically enforce this section and the terms and provisions hereof against the other, in addition to any other remedy to which such party may be entitled at law or in equity. (e) Access to Records After the Closing.  Except as may be reasonably appropriate to ensure compliance with respect to any applicable Legal Requirements (including, without limitation, any applicable antitrust regulations), and subject to any confidentiality obligations or applicable privileges (including, without limitation, the attorney-client privilege), for a period of three years after the Closing Date, the Seller and its Representatives, on the one hand, and the Buyer and its Representatives, on the other hand, shall have reasonable access, during normal business hours and at the expense of the party seeking access, to any reasonably available business records to the extent that such access may be reasonably required, in the case of the Seller in connection with matters relating to the operation of the Acquired Business prior to the Closing Date, and, in the case of the Buyer, in connection with the Acquired Assets and Assumed Obligations subsequent to the Closing Date; provided, however, that the requesting party shall only be entitled to such Records upon the execution of a customary confidentiality agreement. (f) Public Announcements.  The Buyer and the Seller will consult with each other as to the form, substance and timing of the initial press release or other initial public statement relating to this Agreement, or any of the Transactions, and no such initial statement will be made by one without the written consent of the other, which consent will not be unreasonably withheld or delayed; provided that each may make such disclosures as are necessary to comply with any Legal Requirement or the request of any Governmental Body after making good faith efforts under the circumstances to consult in advance with the other.  Notwithstanding the foregoing, the parties shall agree to a joint press release upon the execution of this Agreement. (g)  Handling Fee. Until the earlier of the closing under or termination of the Existing Samples Purchase Agreement, Seller shall pay a monthly fee to Buyer equal to Twelve Thousand Dollars ($12,000) in arrears for (i) handling, processing and forwarding payments of storage fees by clients of Seller related to Existing Samples, which fees shall be immediately forwarded to Seller by Buyer upon receipt and (ii) providing accounting services of up to forty (40) business days to Seller, to be performed by Antonio Lafferty, the former Controller of Seller and an employee of Buyer after the Closing (with the days of such service eto be at Seller’s sole discretion). 19 -------------------------------------------------------------------------------- (h) Severance Payments to Employees. In the event that Buyer terminates without cause any Employee listed on Schedule 10(h) prior to March 31, 2007, each of Seller and Buyer shall pay fifty percent (50%) of any severance payments due to such employee, but Seller shall not be liable for severance payments to any such employee in excess of fifty percent (50%) of the amount for which Seller would have otherwise been obligated if it had terminated such employees prior to the Closing. (i) Existing Samples Purchase Agreement. In the event that on or before March 31, 2007 Buyer shall obtain adequate financing therefor on terms and conditions satisfactory to Buyer, each of Buyer and Seller shall close the purchase of  the Existing Samples Purchase Agreement, which is simultaneously herewith being executed and delivered by Buyer and Seller. Buyer shall use its commercially reasonable best efforts to obtain the necessary financing for such purpose. Buyer shall keep Seller informed on a weekly basis as to Buyer’s efforts and progress in obtaining such financing.  Closing of the purchase and sale pursuant to the Existing Samples Purchase Agreement shall occur within five business days after the closing of such financing. 10. CONDITIONS TO OBLIGATION OF THE BUYER TO CLOSE. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction, or the written waiver thereof by the Buyer, of the following conditions: (a) Representations and Warranties.  The representations and warranties of the Seller set forth in Section 5 hereof shall be true and correct (determined without regard to any Material Adverse Effect or other materiality qualifier therein) as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (unless such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct as of such earlier date), except to the extent that the failure of such representations and warranties to be true and correct would not have, individually or in the aggregate, a Material Adverse Effect on the Seller or the Acquired Business or Acquired Assets, or a Material Adverse Effect on the ability of the Seller to consummate the transactions contemplated hereby. (b) Performance of Obligations.  The Seller shall have performed and complied with in all material respects all of its agreements and covenants under this Agreement through the Closing. (c) Legal Proceedings. No Proceeding shall be pending wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prohibit 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 adversely and materially the right of the Buyer to own the Acquired Assets; and no such injunction, judgment, order, decree, ruling or charge shall be in effect. (d) Intentionally Omitted. 20 -------------------------------------------------------------------------------- (e) Intentionally Omitted (f) No Material Adverse Effect.  There shall not have occurred a Material Adverse Effect on the Seller since the date of this Agreement. (g) Intentionally Omitted. (h) Employment Agreements.  The employees of the Seller listed on Schedule 10(h) hereto shall have executed and delivered to the Buyer employment agreements in substantially the form attached hereto as Exhibit E(the “Employment Agreements”). (i) Non-Competition Agreement.  Seller and its sole shareholder shall have executed and delivered to the Buyer a non-competition agreement in substantially the form attached hereto as Exhibit F(the “Non-Competition Agreement”). (j) Transfer and Sales Taxes.  The Seller shall have paid, or made arrangements to pay, all sales taxes, use taxes, filing fees and similar taxes, fees, charges and expenses required to be paid as a result of the transfer of the Acquired Assets to the Buyer. (k) Bill of Sale.  The Seller shall have executed and delivered to the Buyer the Bill of Sale. (l) Assignment and Assumption Agreement.  The Seller shall have executed and delivered to the Buyer the Assignment and Assumption Agreement. (m) Trademark Assignment Agreement. The Seller shall have executed and delivered to the Buyer the Trademark Assignment Agreement. (n) License Agreement.  Vita 34 and the parties hereto shall have executed the License Agreement. (o) Existing Samples Purchase Agreement. Buyer shall have executed and delivered to Seller the Existing Samples Purchase Agreement. 11. CONDITIONS TO OBLIGATION OF THE SELLER TO CLOSE.   The obligation of the Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction, or the written waiver thereof by the Seller, of the following conditions: (a) Representations and Warranties.  The representations and warranties of the Buyer set forth in Section 6 hereof shall be true and correct (determined without regard to any Material Adverse Effect or other materiality qualifier therein) as of the date of this Agreement and at and as of the Closing Date as though made on and as of the Closing Date (unless such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct as 21 -------------------------------------------------------------------------------- of such earlier date), except to the extent that the failure of such representations and warranties to be true and correct would not have, individually or in the aggregate, a Material Adverse Effect on the ability of the Buyer to consummate the transactions contemplated by this Agreement. (b) Performance of Obligations.  The Buyer shall have performed and complied with in all material respects all of its agreements and covenants under this Agreement through the Closing. (c) Legal Proceedings.  No Proceeding shall be pending wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prohibit consummation of any of the transactions contemplated by this Agreement, or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation; and no such injunction, judgment, order, decree, ruling or charge shall be in effect. (d) Intentionally Omitted. (e) Intentionally Omitted. (f) Intentionally Omitted. (g) Employment Agreements.  The Buyer shall have executed and delivered the Employment Agreements to those employees of the Seller listed on Schedule 10(h) hereto, and shall have provided written offers of employment to all other employees of Seller on terms and conditions substantially equivalent to those currently provided by Seller to such employees, which written offers of employment shall require all of such employees to waive any rights to severance payments any such employee may have against Seller. (h) Office Sublease.  Buyer shall have entered into a sublease with Seller with respect to Seller’s office space located at 1717 Arch Street, Suite 1410, Philadelphia, PA, pursuant to which Buyer shall sublease 5,000 square feet for one year (the “Sublease”), on substantially the terms and conditions identical to the terms and conditions contained in the Real Property Lease, except that no rent shall be due or payable for the earlier of the first six months under such Sublease or the date that closing occurs under the Existing Samples Agreement. The Sublease shall be renewable annually, at Buyer’s option, for so long as the Prime Lease remains in effect, except that the Sublease shall provide that at anytime on at least 120 days prior written notice, the Sublease may be terminated by Seller, and Buyer shall vacate such office space. The Sublease shall automatically terminate at any time that the Real Property Lease terminates for any reason, and the Seller shall have no obligation to maintain the Real Property Lease for any specific period of time. (i) Assignment and Assumption Agreement.  The Buyer shall have executed and delivered to the Seller the Assignment and Assumption Agreement. (j) Trademark Assignment Agreement. The Buyer shall have executed and delivered to the Seller the Trademark Assignment Agreement. 22 -------------------------------------------------------------------------------- (k) Existing Samples Purchase Agreement. Seller shall have executed and delivered to Buyer the Existing Samples Purchase Agreement. 12. INDEMNIFICATION. (a) Indemnification by the Seller.  Subject to the limitations set forth in this Section 11, the Seller shall indemnify and hold harmless the Buyer and its successors and assigns, and their respective directors, officers, employees, agents and representatives (collectively, the “Buyer Indemnitees”), from and against any and all actions, suits, claims, demands, debts, liabilities, obligations, losses, damages, costs and expenses, including reasonable attorney’s fees and court costs (the “Losses”), arising out of or caused by, any of all of the following: (i) Any Breach of any representation, warranty or covenant made by the Seller in Section 5 of this Agreement or in any Transaction Document, which representation, warranty and covenant shall survive for a period of three (3) years following the Closing Date; (ii) All Excluded Liabilities, including the Real Property Lease; and (iii) Any failure of Seller to observe or perform any covenant or obligation required to be observed or performed by it under this Agreement or any other Transaction Document. (b) Indemnification by the Buyer.  The Buyer shall indemnify and hold harmless the Seller, and its directors, officers, employees, agents and representatives (collectively, the “Seller Indemnitees”), from and against any and all Losses, directly arising out of or directly caused by any failure of the Buyer to observe or perform any covenant or obligation required to be observed or performed by it hereunder and pursuant to the Assumed Obligations. (c) Indemnification Procedures.  With respect to each event, occurrence, claim or matter (“Indemnification Matter”) as to which any Buyer Indemnitee or any Seller Indemnitee, as the case may be (in either case, referred to collectively as the “Indemnitee”) is entitled to indemnification from the Seller Indemnitors or the Buyer Indemnitors, as the case may be  (in either case referred to collectively as the “Indemnitor”), under this Section 12: (i) The Indemnitee shall give the Indemnitor written notice (the “Indemnification Notice”) of the assertion or commencement of any claim, demand, action or other proceeding against the Indemnitee promptly after the Indemnitee obtains knowledge thereof; provided, however, that any failure on the part of the Indemnitee to so notify the Indemnitor shall not limit any of the obligations of the Indemnitor under this Section 12, except to the extent such failure materially prejudices the defense of such claim, demand, action or other proceeding.  The Indemnification Notice shall set forth the nature of the Indemnification Matter and the amount demanded or claimed in connection therewith, to the extent such information is known to the Indemnitee, together with copies of any written documents regarding the Indemnification Matter. 23 -------------------------------------------------------------------------------- (ii) If a third party claim, demand, action or other proceeding is involved, then, upon receipt of the Indemnification Notice, the Indemnitor shall, at its expense and through counsel of its choice, assume and have sole control over the litigation, defense or settlement (the “Defense”) of the Indemnification Matter; provided, however, that (a) the Indemnitee may, at its option and expense and through counsel of its choice, participate in (but not control) the Defense; (b) the Indemnitor shall not consent to any judgment, or agree to any settlement (without the Indemnitee’s prior written consent, which consent may not be unreasonably withheld) that would result in the imposition of a consent order, injunction or decree which would restrict the future activity or conduct of the Indemnitee or Affiliate thereof or if such judgment or settlement would not include an unconditional release of the other party for any liability arising out of such claim, demand, action or other proceeding.  In any event, the Indemnitor and the Indemnitee shall fully cooperate with each other in connection with the Defense, including without limitation by furnishing all available documentary or other evidence as is reasonably requested by the other. (iii) Subject to Section 12(e) and 12(f) hereof, all amounts owed by the Indemnitor to the Indemnitee, if any, shall be paid in full within thirty (30) days after the date of a final non-appealable judgment determining the amount owed or after the execution and delivery of a final settlement agreement specifying the amount owed. (d) Limits on Indemnification.  The liability of the Seller for indemnification under this Section 12 shall be limited as follows: (i) No amount shall be payable by the Seller for indemnification under this Section 12 unless and until the aggregate amount otherwise payable by the Seller under this Section 12 exceeds $10,000 (the “Basket”), in which event the Seller shall pay all amounts payable by it under this Section 12 from and above the amount of such Basket. (ii) The Seller shall have no liability under this Section 12 with respect to any Indemnification Matter unless the Indemnitee gives an Indemnification Notice with respect thereto within three (3) years after the Closing Date. (e) Liability of the Seller Limited.  Notwithstanding anything to the contrary contained in this Agreement, any other Transaction Document or any other document, any claim against the Seller for indemnification under this Section 12 shall be limited to the Purchase Price provided, however, that the Sellers’ liability shall not be limited to the Purchase Price in respect of any claims with respect to any and all Losses arising out of or relating to fraud, intentional misrepresentation or the Excluded Liabilities, including, but not limited to the PharmaStem Litigation, any other litigation against Seller related to the Pre-Closing Period and the Real Property Lease. (f) Calculation of Losses. The amount of the Losses relating to an Indemnification Matter shall not include any punitive or special damages (except to the extent that a third party seeks punitive or special damages against an Indemnitee). 24 -------------------------------------------------------------------------------- (g) Non-Exclusive Remedy.  The parties acknowledge and agree that the indemnification provisions in this Section 12 shall not be the exclusive remedy of the parties in respect of any claims (including without limitation claims for any Breach of any representations, warranties, covenants or other obligations) with respect to any and all Losses arising out of or relating to this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby; provided, however, that monetary damages shall be limited to the Purchase Price; provided, further, that the monetary damages shall not be limited to the Purchase Price in respect of any claims with respect to any and all Losses arising out of or relating to fraud, intentional misrepresentation or the Excluded Liabilities, including, but not limited to the PharmaStem Litigation and the Real Property Lease. (h) Character of Indemnity Payments.  The parties agree to treat any indemnity payments made under this Section 12 as adjustments to the Purchase Price. (i) Survival.  The provisions of this Section 12 shall survive for a period of three (3) years following the Closing Date. 13. TERMINATION.      (a) Termination of Agreement.  This Agreement may be terminated as provided below: (i) The Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) The Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing if (A) the representations and warranties of the Seller are not true and correct in all respects (determined without regard to any materiality or material adverse effect qualifier therein) at and as of the date hereof or as of a subsequent date as if made on a subsequent date (unless such representations and warranties expressly relate to an earlier date, in which case they are not true and correct as of such earlier date), (B) the Buyer has given written notice to the Seller of such Breach, and (C) such Breach has continued without cure for a period of thirty (30) days thereafter, in which case the date in Section 13(a)(v) below shall be extended by such 30 days; (iii) The Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing if (A) the representations and warranties of the Buyer are not true and correct in all respects (determined without regard to any materiality qualifier therein) at and as of the date hereof or as of a subsequent date as if made on a subsequent date (unless such representations and warranties expressly relate to an earlier date, in which case they are not true and correct as of such earlier date), (B) the Seller has given written notice to the Buyer of such Breach, and (C) such Breach has continued without cure for a period of thirty (30) days thereafter, in which case the date in Section 13(a)(v) below shall be extended by such 30 days; 25 -------------------------------------------------------------------------------- (iv) Either the Buyer or the Seller may terminate this Agreement at any time prior to the Closing if a court of competent jurisdiction or other Governmental Body shall have issued a final and nonappealable order, decree or ruling, or shall have taken any other action, where the result would have the effect of (A) permanently restraining, enjoining or otherwise prohibiting the acquisition of the Assets or making the consummation of the transactions contemplated by this Agreement illegal; provided, however, that a party shall not be permitted to terminate this Agreement pursuant to this Section 13(a)(iv) if the issuance of such order, decree or ruling or the taking of such action is attributable to the failure of such party to perform in any material respect any covenant or obligation required to be performed by such party under this Agreement at or prior to the Closing; (v) Either the Buyer or the Seller may terminate this Agreement at any time prior to the Closing if the Closing shall not have occurred on or prior to October 2, 2006 (other than as a result of any failure on the part of the terminating party to comply with or perform its covenants and obligations under this Agreement in all material respects). (b) Termination Procedures.  If either party wishes to terminate this Agreement pursuant to this Section 13, then Buyer or Seller, as the case may be, shall deliver to the other party a written notice stating that it is terminating this Agreement and setting forth a brief description of the basis on which they are terminating this Agreement. (c) Effect of Termination; Termination Fee. If any party terminates this Agreement pursuant to Section 13 above, all rights and obligations of the parties hereunder shall terminate without any liability of any party to any other party. 14. MISCELLANEOUS PROVISIONS. (a) Further Assurances. Each party hereto shall execute and/or cause to be delivered to each other party hereto such instruments and other documents, and shall take such other actions, as such other party may reasonably request (prior to, at or after the Closing) for the purpose of carrying out or evidencing any of the Transactions. (b) Entire Agreement.  This Agreement (including the Exhibits and Schedules hereto) and the other Transaction Documents [and the Letter of Intent] set forth all of the representations, warranties, covenants, agreements, conditions and understandings among the parties hereto with respect to the subject matter hereof, and supersede all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, with respect thereto. (c) Notices.  Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received when delivered (by hand, by registered mail (return receipt requested), by courier or express delivery service or by confirmed facsimile) to the address or facsimile telephone number set forth beneath the name of such party below (or to such other 26 -------------------------------------------------------------------------------- address or facsimile telephone number as such party shall have specified in a written notice given to the other parties hereto): If to the Seller: CorCell, Inc. 1717 Arch Street Suite 1410 Philadelphia, PA 19103 with a copy to: Vita 34 International AG Deutscher Platz 5a 04103 Leipzig, Germany Facsimile No.: ______________________; and Dilworth Paxson LLP 3200 The Mellon Bank Center 1735 Market Street Philadelphia, PA 19103 Attention: Paul W. Baskowsky, Esquire Facsimile No.: 215-575-7200 If to the Buyer: Cord Blood America, Inc. 9000 Sunset Boulevard, Suite 400 Los Angeles, CA  90069 Facsimile No.: 888-882-2673 with a copy to: Cooley Godward LLP 4401 Eastgate Mall San Diego, CA  92121 Attention:  Julie Robinson, Esquire Facsimile No.: 858-550-6420 (d) Successors and Assigns; Parties in Interest. (i) This Agreement shall be binding upon: the Seller and their respective successors and assigns, if any; and the Buyer and its successors and assigns, if any.  This Agreement shall inure to the benefit of: the Seller and the Seller Indemnitees, the Buyer; the 27 -------------------------------------------------------------------------------- Buyer Indemnitees; and the respective personal representatives, heirs, successors and assigns, if any, of the foregoing. (ii) The Buyer may assign any or all of its rights under this Agreement, in whole or in part, to any Affiliate of the Buyer upon notice to, but without obtaining the consent of, the Seller; provided, however, that no such assignment shall cause the Buyer to be released from its continuing obligations or liabilities under this Agreement.  The Seller shall not be permitted to assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the Buyer, which shall not be unreasonably withheld. (iii) Except for the provisions of Section 12 (with respect to the Indemnified Parties), none of the provisions of this Agreement is intended to provide any rights or remedies to any Person other than the parties to this Agreement and their respective personal representatives, heirs, successors and assigns, if any.  Without limiting the generality of the foregoing, (i) no employee of the Seller or of the Buyer shall have any rights under this Agreement or under any of the other Transaction Documents, and (ii) no creditor of the Seller or of the Buyer shall have any rights under this Agreement or any of the other Transaction Documents. (e) Amendments; Waivers. (i) This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of the Buyer and Seller. (ii) No failure on the part of any Person to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any Person in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. (iii) No Person shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Person; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given. (f) Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without giving effect to the conflict of laws principles thereof. (g) Captions.  The captions of the various sections and subsections of this Agreement have been inserted for convenience of reference only and shall not be used to interpret or construe the meaning of the terms and provisions hereof. 28 -------------------------------------------------------------------------------- (h) 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.  If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties hereto agree that the court making such determination shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified.  In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term. (i) Counterparts; Facsimile Signature.  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.  A facsimile of a signature shall be binding on the parties hereto. (j) Expenses.  Whether or not the transactions contemplated hereby are consummated, subject to the indemnification obligations under Section 12 hereof, the Seller shall pay all costs and expenses incurred by or on behalf of the Seller, respectively, and the Buyer shall pay all costs and expenses incurred by or on behalf of the Buyer, in connection with this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby, including, without limiting the generality of the foregoing, any and all fees and expenses of its own financial consultants, accountants and counsel.   (k) Arbitration.  Any claim or dispute arising out of or related to this Agreement (including unresolved disputes arising from an objection to a claim made in an Indemnification Notice, but excluding disputes arising under any other Transaction Document), the interpretation, making performance, Breach or termination thereof, shall be finally and exclusively settled by binding arbitration.  The arbitration shall be made in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association, and such arbitration shall be conducted by an arbitrator chosen by mutual agreement of the Buyer and the Seller; failing such agreement, the arbitration shall be conducted, by three independent arbitrators, one chosen by the Buyer and one chosen by the Seller, with such two arbitrators mutually selecting a third arbitrator, and any decision of two of such arbitrators shall be binding; provided, however, if such arbitrators fail to agree on a third arbitrator within twenty (20) calendar days, either the Buyer or the Seller may make written application to Judicial Arbitration and Mediation Services (“JAMS”), for the appointment of a single arbitrator (the “JAMS Arbitrator”) to resolve the dispute by arbitration.  At the request of JAMS, the parties involved in the dispute shall meet with JAMS at its offices in the applicable city designated above within ten (10) calendar days of such request to discuss the dispute and the qualifications and experience which each party respectively believes the JAMS Arbitrator should have; provided, however, that the selection of 29 -------------------------------------------------------------------------------- the JAMS Arbitrator shall be the exclusive decision of JAMS and shall be made within thirty (30) days of the written application to JAMS.  The arbitrator(s) shall have the authority to grant any equitable and legal remedies that would be available in any judicial proceeding to resolve the dispute.  Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  Each of the parties to any such arbitration shall pay its or his own costs and expenses (including counsel fees) of any such arbitration.  The parties hereto expressly waive all rights whatsoever to file an appeal against or otherwise to challenge any award by the arbitrator(s) hereunder; provided that, the foregoing shall not limit the rights of any party to bring a proceeding in any applicable jurisdiction to conform, enforce or enter judgment upon such award (and the rights of the other party, if such proceeding is brought, to contest such confirmation, enforcement or entry of judgment). (l) Construction. (i) For purposes of this Agreement, whenever the context requires:  the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include the masculine and feminine genders. (ii) The parties hereto agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement. (iii) As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.” (iv) Except as otherwise indicated, all references in this Agreement to “Sections” and “Exhibits” are intended to refer to Sections of this Agreement and Exhibits to this Agreement. (m) Remedies Cumulative; Specific Performance.  The rights and remedies of the parties hereto shall be cumulative and not alternative, and the parties hereto agree that: (a) in the event of any Breach or threatened Breach by any party hereto of any covenant, obligation or other provision set forth in this Agreement, the other party shall be entitled (in addition to any other remedy that may be available to it) to (i) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision, and (ii) an injunction restraining such Breach or threatened Breach; and (b) neither such other party nor any other Indemnitee shall be required to provide any bond or other security in connection with any such decree, order or injunction or in connection with any related action or Proceeding. 15. DEFINITIONS.    As used in this Agreement: 30 -------------------------------------------------------------------------------- “Acquired Assets” shall have the meaning set forth in Section 1(a) of this Agreement. “Acquired Business” shall meaning set forth in the Background section of this Agreement. “Acquired Business Contract” shall have the meaning set forth in Section 5(q) of this Agreement. “Acquisition Transaction” shall mean any transaction involving: (i) the sale, license, disposition or acquisition of all or substantially all of the assets or Acquired Business of the Seller; (ii) the issuance, disposition or acquisition of (i) any capital stock or other equity security of the Seller (other than common stock issued to employees of the Seller, upon exercise of stock options or otherwise, in routine transactions in accordance with the Seller’s past practices), (ii) any option, call, warrant or right (whether or not immediately exercisable) to acquire any capital stock or other equity security of the Seller (other than stock options granted to employees of the Seller in routine transactions in accordance with the Seller’s past practices), or (iii) any security, instrument or obligation that is or may become convertible into or exchangeable for any capital stock or other equity security of the Seller; or (iii) any merger, consolidation, business combination, reorganization or similar transaction involving the Seller. “Affiliate” shall mean, with respect to a Person, any Person controlling, controlled by or under common control with such Person.  For the purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. “Agreement” shall mean this Asset Purchase Agreement (including the Schedules hereto), as it may be amended from time to time. “Affected Party” shall have the meaning set forth in Section (9)(d)(ii)(B) of this Agreement. “Assignment and Assumption Agreement” shall have the meaning set forth in Section 4(b)(iii) of this Agreement. “Assumed Obligations” shall have the meaning set forth in Section 2(a) of this Agreement. “Basket” shall have the meaning set forth in Section 12(d)(i) of this Agreement. 31 -------------------------------------------------------------------------------- “Bill of Sale” shall have the meaning set forth in Section 4(b)(i) of this Agreement. “Board” shall have the meaning set forth in Section 8(h) of this Agreement. “Breach”  There shall be deemed to be a “Breach” of a representation, warranty, covenant, obligation or other provision if there is or has been any inaccuracy in or breach (including any inadvertent or innocent breach) of, or any failure (including any inadvertent failure) to comply with or perform, such representation, warranty, covenant, obligation or other provision.  “Buyer Indemnitees” shall have the meaning set forth in Section 12(a) of this Agreement.  “Closing” shall have the meaning set forth in Section 4(a) of this Agreement. “Closing Date” shall have the meaning set forth in Section 4(a) of this Agreement. “Code” shall mean the Internal Revenue Code of 1986, as amended. “Confidential Information” shall mean all information concerning or related to the business, operations, financial condition or prospects of such party or any of its Affiliates, regardless of the form in which such information appears and whether or not such information has been reduced to a tangible form, and shall specifically include (i) all information regarding the officers, directors, employees, equity holders, customers, suppliers, distributors, sales representatives and licensees of such party and its Affiliates, in each case whether present or prospective, (ii) all inventions, discoveries, trade secrets, processes, techniques, methods, formulae, ideas and know-how of such party and its Affiliates, (iii) all financial statements, audit reports, budgets and business plans or forecasts of such party and its Affiliates and (iv) all information concerning or related to the transactions contemplated hereby; provided that the Confirmation Information of a party shall not include (a) information which is or becomes generally known to the public through no act or omission of the receiving party and (b) information which has been or hereafter is lawfully obtained by the receiving party from a source other than the party to which such Confidential Information belongs (or any of its Affiliates or their respective officers, directors, employees, equity holders or agents) so long as, in the case of information obtained from a third party, such third party was or is not, directly or indirectly, subject to an obligation of confidentiality owed to the party to whom such Confidential Information belongs or any of its Affiliates at the time such Confidential Information was or is disclosed to the other party. “Confidentiality Agreement” shall have the meaning set forth in Section 7(a) of this Agreement. “Consent” shall mean any approval, consent, ratification, permission, waiver, authorization, filing, registration or notification (including any Governmental Authorization).   32 -------------------------------------------------------------------------------- “Contract” shall mean any written, oral, implied or other agreement, contract, understanding, arrangement, instrument, note, guaranty, indemnity, representation, warranty, deed, assignment, power of attorney, certificate, purchase order, work order, insurance policy, benefit plan, commitment, covenant, assurance or undertaking of any nature. “Defense” shall have the meaning set forth in Section 12(c)(ii) of this Agreement. “Disclosing Party” shall have the meaning set forth in Section 9(d)(ii)(B) of this Agreement. “Due Diligence Investigation” shall have the meaning set forth in Section 13(d) of this Agreement. “Existing Samples” shall mean all existing umbilical cord blood samples of the Seller, which equals approximately 11,000 samples under annual renewal contracts, and the related contracts. “Excluded Assets” shall have the meaning set forth in Section 1(b) of the Agreement. “Excluded Liabilities” shall have the meaning set forth in Section 2(b) of this Agreement.  “Employment Agreement” shall have the meaning set forth in Section 10(h) of this Agreement. “Financial Statements” shall have the meaning set forth in Section 5(j) of this Agreement. “Governmental Authorization” shall mean any: (a) permit, license, certificate, franchise, concession, approval, consent, ratification, permission, clearance, confirmation, endorsement, waiver, certification, designation, rating, registration, qualification or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement; or (b) right under any Contract with any Governmental Body. “Governmental Body” shall mean any: (a) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or other entity and any court or other tribunal); (d) multi-national organization or body; or (e) individual, body or other entity exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature. “Hazardous Material” shall mean (a) materials which are listed or otherwise defined as “hazardous” or “toxic” under any applicable local, state, federal and/or foreign laws and 33 -------------------------------------------------------------------------------- regulations that govern the existence and/or remedy of contamination on property, the protection of the environment from contamination, the control of hazardous wastes, or other activities involving hazardous substances, including building materials, or (b) any petroleum products or nuclear materials. “Indemnification Matter” shall have the meaning set forth in Section 12(c) of this Agreement. “Indemnification Notice” shall have the meaning set forth in Section 12(c)(i) of this Agreement. “Indemnitee” shall have the meaning set forth in Section 12(c) of this Agreement. “Indemnitor” shall have the meaning set forth in Section 12(c) of this Agreement. “Interim Statements” shall have the meaning set forth in Section 5(j) of this Agreement. “JAMS” and “JAMS Arbitrator” shall have the meanings set forth in Section 14(k) of this Agreement. “Knowledge” Seller shall be deemed to have “knowledge” of a particular fact or other matter if any current or former employee employed by the Seller within the twelve (12) months preceding the date hereof has knowledge of such fact or other matter. “Legal Requirement” shall mean any federal, state, local, municipal, foreign or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, edict, decree, proclamation, treaty, convention, rule, regulation, ruling, directive, pronouncement, requirement, specification, determination, decision, opinion or interpretation issued, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by or under the authority of any Governmental Body.  “License Agreement” shall have the meaning set forth in Section 1(a)(iii) of this Agreement. “Losses” shall have the meaning set forth in Section 12(a) of this Agreement. “Material Adverse Effect”: an event, violation, inaccuracy, circumstance or other matter will be deemed to have a “Material Adverse Effect” on the Acquired Business if such event, violation, inaccuracy, circumstance or other matter (considered together with all other matters that would constitute exceptions to the representations and warranties set forth in the Agreement but for the presence of “Material Adverse Effect” or other materiality qualifications, or any similar qualifications, in such representations and warranties) had or could reasonably be expected to have or give rise to a material adverse effect on (i) the business, condition, assets, liabilities, prospects, operations or financial performance of the Acquired Business, (ii) the ability of the Buyer to use the Acquired Assets after the Closing, or (iii) the ability of the Seller 34 -------------------------------------------------------------------------------- to consummate the transactions contemplated by any of the Transaction Documents or to perform any of its obligations under this Agreement prior to the Termination Date.  An event, violation, inaccuracy, circumstance or other matter will be deemed to have a “Material Adverse Effect” on the Buyer if such event, violation, inaccuracy, circumstance or other matter (considered together with all other matters that would constitute exceptions to the representations and warranties set forth in the Agreement but for the presence of “Material Adverse Effect” or other materiality qualifications, or any similar qualifications, in such representations and warranties) had or could reasonably be expected to have or give rise to a material adverse effect on the ability of the Buyer to consummate the transactions contemplated by any of the Transaction Documents or to perform any of its obligations under this Agreement prior to the Termination Date.  Notwithstanding the foregoing, in no event shall any of the following, alone or in combination, be deemed to constitute, nor shall any of the following be taken into account in determining whether there has been or will be, a Material Adverse Effect on the Acquired Business or the Buyer: (i) any change resulting from compliance with the terms and conditions of the Transaction Documents; or (ii) any change or effect that results or arises from changes affecting the United States or general worldwide economic or capital market conditions. “Nontransferred Assets” shall have the meaning set forth in Section 4(c) of this Agreement. “Non-Competition Agreement” shall have the meaning set forth in Section 10(i) of this Agreement. “Order” shall mean any: (a) order, judgment, injunction, edict, decree, ruling, pronouncement, determination, decision, opinion, verdict, sentence, subpoena, writ or award issued, made, entered, rendered or otherwise put into effect by or under the authority of any court, administrative agency or other Governmental Body or any arbitrator or arbitration panel; or (b) Contract with any Governmental Body entered into in connection with any Proceeding. “Ordinary Course of Business”: an action taken by or on behalf of the Seller shall not be deemed to have been taken in the “Ordinary Course of Business” unless such action is recurring in nature, is consistent with the past practices of the Seller in the conduct of the Acquired Business and is taken in the ordinary course of the normal day-to-day operations of the Acquired Business. “Person” shall mean any individual, corporation, partnership, limited liability company, joint venture, estate, trust, cooperative, foundation, firm or other enterprise, association, “PharmaStem Litigation” shall mean all litigation involving the Seller and PharmaStem Therapeutics, Inc., including, but not limited to the patent litigation in the U.S. District Court (District of Delaware) (MDL 1660) and all appeals of prior related litigation pending in the U.S. Court of Appeals for the Federal Circuit at Numbers 05-1490 and 05-1551. 35 -------------------------------------------------------------------------------- “Pre-Closing Period” shall mean the period commencing on the date of the Agreement through the earlier of the Closing Date or the termination of this Agreement in accordance with the terms hereof. “Proceeding” shall mean any claim, action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding and any informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or any arbitrator or arbitration panel. “Proprietary Rights” shall have the meaning set forth in Section 5(h) of this Agreement. “Purchase Price” shall have the meaning set forth in Section 3(a) of this Agreement. “Real Property Lease” shall have the meaning set forth in Section 5(v) of this Agreement. “Records” shall mean: all records, original documents, files and papers of the Seller or any of its Affiliates necessary for the conduct of the Acquired Business, whether in hard copy or electronic format, in the possession or control of the Seller or its Affiliates at the Closing Date related to customer or prospective customer files or lists, inventory records, copies of sales and sales promotional data, copies of advertising materials, customer lists, cost and pricing information, supplier lists and any other similar records. “Representative” shall mean officers, directors, employees, agents, attorneys, accountants, advisors and representatives. “Schedules” shall have the meaning set forth in Section 5 of this Agreement. “Seller Indemnitees” shall have the meaning set forth in Section 12(b) of this Agreement. “Sublease” shall have the meaning set forth in Section 11(h) of this Agreement. “Tax”, “Taxes” and “Tax Returns” shall have the meanings set forth in Section 5(o)(i) of this Agreement. “Trademark Assignment Agreement” shall have the meaning set forth in Section 4(b)(iv) of this Agreement. “Transaction Documents” shall mean: (a) this Agreement; (b) the Bill of Sale; (c) the Assignment and Assumption Agreement; (d) the Trademark Assignment Agreement; (e) the Employment Agreements and (f) the Non-Competition Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 36 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the date first set forth above. SELLER:   CORCELL, INC., a Delaware corporation       By: /s/ Marcia A. Laleman   Name: Marcia A. Laleman   Title: President BUYER:   CORD BLOOD AMERICA, INC., a Florida corporation       By: /s/ Matthew Schissler   Name: Matthew Schissler   Title: Chairman and Chief Executive Officer 37 -------------------------------------------------------------------------------- EXHIBITS Exhibit A - Form of Bill of Sale Exhibit B - Form of Assignment and Assumption Agreement Exhibit C - Form of Trademark Assignment Agreement Exhibit D - Existing Samples Purchase Agreement Exhibit E - Form of  Employment Agreements Exhibit F - Form of Non-Competition Agreement 38 -------------------------------------------------------------------------------- EXHIBIT A FORM OF BILL OF SALE 39 -------------------------------------------------------------------------------- EXHIBIT B FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT 40 -------------------------------------------------------------------------------- EXHIBIT C FORM OF TRADEMARK ASSIGNMENT AGREEMENT 41 -------------------------------------------------------------------------------- EXHIBIT D EXISTING SAMPLES PURCHASE AGREEMENT 42 -------------------------------------------------------------------------------- EXHIBIT E FORM OF EMPLOYMENT AGREEMENT 43 -------------------------------------------------------------------------------- EXHIBIT F FORM OF NON-COMPETITION AGREEMENT 44

Exhibit 10.9 June 15, 2005 David J. Webster 101 S. Hanley Road, Suite 400 St. Louis, MO 63105 Dear Dave: Reference is hereby made to that certain Amended and Restated Executive Employment Agreement dated as of January 31, 2003 by and among Viasystems Group, Inc. (“Group” and, together with its subsidiaries parties thereto, “Viasystems”) and David J. Webster (“Employee”). Group is currently exploring the sale of the wire harness division (the “Division”). In connection therewith, Employee and Wire Harness Industries, Inc. entered into an agreement (the “Harness Agreement”) dated as of June _15_, 2005. Upon the completion of the sale of the Division, the Harness Agreement becomes effective. In good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Employee and Viasystems agree as follows: 1. Employment Agreement Payout. Upon completion of the sale of the Division, Viasystems’ obligation under the terms and conditions of the Employment Agreement (other than Sections 2(d) and (e) which shall survive) shall terminate in exchange for the payment by Viasystems to Employee of an amount equal to the product of (a) one half of the purchase price multiple (based on the Division’s adjusted 2004 stand alone EBITDA and the gross sale price) received by Viasystems and (b) Employee’s current annual salary and bonus opportunity under the Employment Agreement less Employee’s annual salary and bonus under the Harness Agreement. 2. Transaction Bonus. In the event the sale of the Division is consummated, Employee shall be entitled to receive a transaction bonus determined based on the gross proceeds received in connection with such sale of the Division. Such transaction bonus shall be determined as a percentage of Employee’s base salary ($470,000) as follows (pro rated for amounts between the following threshold amounts):   Gross Proceeds (Millions) Transaction Bonus (% of Annual Base Salary) $275 25% 300 50% 325 75% 340 100% 350 125% 375 175% 400 200% The aggregate transaction bonus determined in accordance with the preceding provisions will be payable by the Company on the date the sale of the Division is consummated. Notwithstanding the foregoing, the Employee shall only be entitled to receive the applicable transaction bonus payment if the Employee is employed by the Division on the designated date for such payment, provided that such payment shall nonetheless be payable to the Employee if the Employee was previously terminated by the Company other than for Cause (as defined in the Harness Agreement) or the Employee terminates his employment for Good Reason (as defined in the Harness Agreement). For purposes of the foregoing, “gross proceeds” shall mean the sum of (1) the cash purchase price paid by the acquirer, (2) the fair value, as determined in good faith by the board of directors of the Parent, of any noncash consideration paid by the acquirer, and (3) the sum of all indebtedness for borrowed money of the Division assumed by the acquirer. Gross proceeds shall not be reduced or offset by any fees incurred by any third party retained by the Company or an affiliate of the Company to render professional services related to the Division sale process.   Very truly yours,       By: /s/ David M. Sindelar   Name: David M. Sindelar   Title: Chief Executive Officer Acknowledged and accepted as of the date first written above /s/ David J. Webster   David J. Webster  

Exhibit 10.(tt) AGREEMENT TO RESOLVE OUTSTANDING FRANCHISE ISSUES This Agreement To Resolve Outstanding Franchise Issues (“Agreement”) is made and entered into between TXU Electric Delivery Company (“Electric Delivery”) and the Steering Committee of Cities Served by TXU Electric Delivery Company on behalf of all cities listed on Exhibit A to this Agreement (“Cities”), hereinafter referred to jointly herein as “Signatories.” The cities listed on Exhibit A to this Agreement are hereinafter referred to as “Member Cities.” WHEREAS, several Member Cities have expressed concern about the increasing cost and complexity of managing utilities in public rights-of-way and the desire to receive increased compensation from utilities for their use of such rights-of-way; WHEREAS, several Member Cities who receive their franchise fee payments from Electric Delivery on a prospective yearly basis have expressed interest in transitioning to prospective quarterly payments; WHEREAS, the Signatories desire to resolve outstanding issues related to franchises; and WHEREAS, after extensive negotiations, the Signatories have reached a resolution of those issues. NOW, THEREFORE, the Signatories, through their undersigned representatives, hereby agree to the following: 1. The Signatories agree that this Agreement shall become effective only upon the execution of this Agreement and of the Extension and Modification of Settlement Agreement between the Signatories dated January 27, 2006. The effectiveness of this Agreement shall be accomplished pursuant to the terms of paragraphs 4 and 19 of the Extension and Modification Settlement Agreement. 2. To recognize the increasing cost and complexity of managing utilities in public rights-of-way, Electric Delivery agrees to increase the franchise fee factor for each Member City on January 1, 2006, by 2%. The franchise fee factor is the amount per kilowatt hour which is multiplied times the number of kilowatt hours of electricity delivered by Electric Delivery to each retail customer whose consuming facility’s point of delivery is located within the Member City’s municipal boundaries. Electric Delivery will also increase the franchise fee factor to be paid in the Member Cities an additional 1% on January 1, 2007, on January 1, 2008, and on January 1, 2009, for a total potential increase of 5% above the franchise fee factor in effect on December 31, 2005. Exhibit B to this Agreement reflects the franchise fee factors in effect for all Member Cities in 2005, and the increased franchise fee factors for Member Cities provided by this paragraph for 2006, 2007, 2008, and 2009. 3. Electric Delivery’s obligation to increase its franchise fee payments to reflect the increased franchise fee factors described in paragraph 2 ceases on the date upon which: (1) Electric Delivery is called in for a rate case by any municipality; (2) a proceeding concerning Electric Delivery’s rates is initiated under Subchapters C or D of the Public Utility Regulatory   Page 1 -------------------------------------------------------------------------------- Act, Tex. Util. Code Title 2 (“PURA”) Chapter 36; (3) a proceeding affecting Electric Delivery’s rates is initiated as a result of a settlement; or (4) legislation becomes effective that modifies the franchise fee authorized by the PURA. 4. The Signatories agree that if the Public Utility Commission of Texas denies recovery in Electric Delivery’s rates of the fees associated with the increased franchise fee factors described in paragraph 2, then the franchise fee factors immediately revert to the franchise fee factors in effect on December 31, 2005. Electric Delivery will not seek to impose a refund or credit obligation on Member Cities for franchise fees already paid under the increased franchise fee factors. 5. Electric Delivery agrees to amend its existing franchise agreements with those Member Cities who receive their annual franchise fee payments from Electric Delivery on a prospective basis, and who wish to receive franchise fee payments on a quarterly basis, to reflect the following points. Implementation of this amendment will be at each eligible Member City’s option. Exhibit C is a list of Member Cities who are eligible to take advantage of this provision. For the purposes of this Agreement, “privilege period” is the period during which Electric Delivery will have the right to use the public rights-of-way to deliver electricity to a retail customer. “Basis period” is the period during which kWh delivered to each retail customer whose consuming facility’s point of delivery is located within the Member City’s municipal boundaries is used for the payment calculation.     (a.) In calendar year 2006, the annual payment to be made by Electric Delivery to the eligible Member Cities will be paid in full on the date required by the applicable franchise agreement.     (b.) Electric Delivery agrees to amend the franchise of eligible Member Cities to make quarterly payments on a prospective basis in lieu of the annual prospective payments as follows:     (i.) A quarterly payment schedule will be established with the first quarterly payment due three months after the 2006 annual payment date in the existing franchise.     (ii.) If the franchise amendment reflecting this Agreement is not effective prior to the first quarterly payment date, Electric Delivery will pay any quarterly payments due within 30 days of the effective date of the amendment. Subsequent payments will be made in accordance with the schedule established in the franchise amendment.     (iii.) The basis period used in determining the first quarterly payment will be the three-month period immediately following the end of the basis period designated in the existing franchise agreement that corresponds to the last annual payment made in 2006. The basis period used in determining each subsequent quarterly payment will be the subsequent three-month period.   Page 2 --------------------------------------------------------------------------------   (iv.) The privilege period covered by the first quarterly payment will be the three-month period immediately following the end of the privilege period designated in the existing franchise agreement that corresponds to the last annual payment made in 2006. The privilege period for each subsequent quarterly payment will be the subsequent three-month period.     (c.) For an eligible Member City that chooses to amend its franchise agreement with Electric Delivery in this manner, Electric Delivery will cease to make annual franchise fee payments after December 31, 2006.     (d.) In no instance will Electric Delivery agree to payment provisions that would require payment for the same privilege period twice.     (e.) The franchise amendment must extend the term of the amended franchise agreement for at least five years beyond its current expiration date.     (f.) Since the quarterly franchise payments will correspond to a privilege period that is more than 12 months beyond the date of the payment, no franchise payments will be made during the final year of the franchise term unless the franchise is extended as set out herein. The amended franchise agreement will include a provision allowing Electric Delivery to elect to make one or more quarterly payments during the final year of the franchise term that will prepay in full the corresponding number of quarterly franchise periods that extend beyond what would otherwise be the term of the franchise agreement. The amended franchise agreement will include a provision requiring that any subsequent franchise agreement must recognize that any quarterly payments made during the final year of the amended franchise agreement term constitute full payment for the relevant quarterly franchise periods.     (g.) Unless the existing franchise agreement is due to expire within 12 months of the date this Agreement is ratified, no other changes to the franchise will be included as part of this franchise amendment. If the existing franchise agreement is due to expire within 12 months of the date this Agreement is ratified, the parties’ ability to negotiate other provisions of the franchise at the time the franchise is amended to accommodate this Agreement is not so limited. 6. Each person executing this Agreement represents that he or she is authorized to sign this Agreement on behalf of the party represented. 7. The Signatories expressly acknowledge and agree that oral and written statements made by any party or its representative during the course of the negotiations that led to this Agreement cannot be used or portrayed as an admission or concession of any sort and shall not be admissible as evidence in any proceeding in any forum.   Page 3 -------------------------------------------------------------------------------- Executed on this the 27th day of January, 2006, by the Signatories hereto, by and through their undersigned duly authorized representatives.   TXU Electric Delivery Company     Steering Committee of Cities Served by TXU Electric Delivery Company on behalf of all cities listed on Exhibit A to this Agreement By:   /s/ David T. Gill     By:   /s/ Jay Doegey Its:   Vice President     Its:   Chair   Page 4 -------------------------------------------------------------------------------- Exhibit A City of Addison City of Allen City of Alvarado City of Andrews City of Archer City City of Arlington City of Belton City of Benbrook City of Big Spring City of Breckenridge City of Bridgeport City of Brownwood City of Buffalo City of Burkburnett City of Burleson City of Caddo Mills City of Cameron City of Canton City of Carrollton City of Celina City of Centerville City of Cleburne City of Colleyville City of Collinsville City of Comanche City of Corinth City of Crowley City of Dallas City of Dalworthington Gardens City of DeLeon City of Denison City of Early City of Eastland City of Edgecliff Village City of Euless City of Farmers Branch City of Flower Mound City of Forest Hill City of Fort Worth City of Frisco City of Frost City of Glenn Heights City of Grand Prairie City of Granger City of Grapevine City of Gunter City of Harker Heights City of Heath City of Henrietta City of Hewitt City of Highland Park City of Honey Grove City of Howe City of Hurst City of Hutto City of Irving City of Jolly City of Josephine City of Justin City of Kaufman City of Keller City of Kerens City of Lakeside City of Lamesa City of Lindale City of Little River Academy City of Malakoff City of Mansfield City of McKinney City of Midland City of Murphy City of Murchison City of New Chapel Hill City of North Richland Hills City of O’Donnell City of Oak Leaf City of Oak Point City of Odessa City of Ovilla City of Palestine City of Pantego City of Paris City of Plano City of Ranger City of Rhome City of Richardson City of Richland Hills City of Roanoke City of Robinson City of Rockwall City of Rosser City of Rowlett City of Sherman City of Snyder City of Southlake City of Sulphur Springs City of Sunnyvale City of Sweetwater City of Temple City of The Colony City of Tyler City of University Park City of Venus City of Waco City of Watauga City of White Settlement City of Wichita Falls City of Woodway -------------------------------------------------------------------------------- Exhibit B   Steering Committee Cities Franchise Factor Increases #    City Name    Factor    2006 Factor + 2%    2007 Factor + 3%    2008 Factor + 4%    2009 Factor + 5% 1    Addison    0.002544    0.002595    0.002620    0.002646    0.002671 2    Allen    0.002794    0.002850    0.002878    0.002906    0.002934 3    Alvarado    0.003096    0.003158    0.003189    0.003220    0.003251 4    Andrews    0.003145    0.003208    0.003239    0.003271    0.003302 5    Archer City    0.003274    0.003339    0.003372    0.003405    0.003438 6    Arlington    0.002766    0.002821    0.002849    0.002877    0.002904 7    Belton    0.003115    0.003177    0.003208    0.003240    0.003271 8    Benbrook    0.003002    0.003062    0.003092    0.003122    0.003152 9    Big Spring    0.002670    0.002723    0.002750    0.002777    0.002804 10    Breckenridge    0.002251    0.002296    0.002319    0.002341    0.002364 11    Bridgeport    0.002547    0.002598    0.002623    0.002649    0.002674 12    Brownwood    0.003069    0.003130    0.003161    0.003192    0.003222 13    Buffalo    0.003133    0.003196    0.003227    0.003258    0.003290 14    Burkburnett    0.003003    0.003063    0.003093    0.003123    0.003153 15    Burleson    0.002976    0.003036    0.003065    0.003095    0.003125 16    Caddo Mills    0.003418    0.003486    0.003521    0.003555    0.003589 17    Cameron    0.002873    0.002930    0.002959    0.002988    0.003017 18    Canton    0.003216    0.003280    0.003312    0.003345    0.003377 19    Carrollton    0.002695    0.002749    0.002776    0.002803    0.002830 20    Celina    0.003200    0.003264    0.003296    0.003328    0.003360 21    Centerville    0.003150    0.003213    0.003245    0.003276    0.003308 22    Cleburne    0.002354    0.002401    0.002425    0.002448    0.002472 23    Colleyville    0.002984    0.003044    0.003074    0.003103    0.003133 24    Collinsville    0.003212    0.003276    0.003308    0.003340    0.003373 25    Comanche    0.003203    0.003267    0.003299    0.003331    0.003363 26    Corinth    0.002901    0.002959    0.002988    0.003017    0.003046 27    Crowley    0.003095    0.003157    0.003188    0.003219    0.003250 28    Dallas    0.002622    0.002674    0.002701    0.002727    0.002753 29    Dalworthington Gardens    0.003023    0.003083    0.003114    0.003144    0.003174 30    De Leon    0.003280    0.003346    0.003378    0.003411    0.003444 31    Denison    0.002766    0.002821    0.002849    0.002877    0.002904 32    Early    0.003221    0.003285    0.003318    0.003350    0.003382 33    Eastland    0.003148    0.003211    0.003242    0.003274    0.003305 34    Edgecliff Village    0.002796    0.002852    0.002880    0.002908    0.002936 35    Euless    0.002971    0.003030    0.003060    0.003090    0.003120 36    Farmers Branch    0.002452    0.002501    0.002526    0.002550    0.002575 37    Flower Mound    0.003031    0.003092    0.003122    0.003152    0.003183 38    Forest Hill    0.002915    0.002973    0.003002    0.003032    0.003061 39    Fort Worth    0.002651    0.002704    0.002731    0.002757    0.002784 40    Frisco    0.002964    0.003023    0.003053    0.003083    0.003112 41    Frost    0.003336    0.003403    0.003436    0.003469    0.003503 42    Glenn Heights    0.003110    0.003172    0.003203    0.003234    0.003266 43    Grand Prairie    0.002651    0.002704    0.002731    0.002757    0.002784 44    Granger    0.003392    0.003460    0.003494    0.003528    0.003562 45    Grapevine    0.002545    0.002596    0.002621    0.002647    0.002672 46    Gunter    0.003103    0.003165    0.003196    0.003227    0.003258 47    Harker Heights    0.003099    0.003161    0.003192    0.003223    0.003254 48    Heath    0.003072    0.003133    0.003164    0.003195    0.003226 49    Henrietta    0.003226    0.003291    0.003323    0.003355    0.003387 50    Hewitt    0.003060    0.003121    0.003152    0.003182    0.003213 51    Highland Park    0.002885    0.002943    0.002972    0.003000    0.003029 52    Honey Grove    0.003388    0.003456    0.003490    0.003524    0.003557 53    Howe    0.003245    0.003310    0.003342    0.003375    0.003407 54    Hurst    0.002979    0.003039    0.003068    0.003098    0.003128 -------------------------------------------------------------------------------- Exhibit B   #    City Name    Factor    2006 Factor + 2%    2007 Factor + 3%    2008 Factor + 4%    2009 Factor + 5% 55    Hutto    0.003395    0.003463    0.003497    0.003531    0.003565 56    Irving    0.002650    0.002703    0.002730    0.002756    0.002783 57    Jolly    0.002967    0.003026    0.003056    0.003086    0.003115 58    Josephine    0.003221    0.003285    0.003318    0.003350    0.003382 59    Justin    0.003243    0.003308    0.003340    0.003373    0.003405 60    Kaufman    0.003029    0.003090    0.003120    0.003150    0.003180 61    Keller    0.003061    0.003122    0.003153    0.003183    0.003214 62    Kerens    0.003312    0.003378    0.003411    0.003444    0.003478 63    Lakeside    0.003168    0.003231    0.003263    0.003295    0.003326 64    Lamesa    0.003045    0.003106    0.003136    0.003167    0.003197 65    Lindale    0.002999    0.003059    0.003089    0.003119    0.003149 66    Little River-Academy    0.003156    0.003219    0.003251    0.003282    0.003314 67    Malakoff    0.002847    0.002904    0.002932    0.002961    0.002989 68    Mansfield    0.002834    0.002891    0.002919    0.002947    0.002976 69    Mckinney    0.002728    0.002783    0.002810    0.002837    0.002864 70    Midland    0.002944    0.003003    0.003032    0.003062    0.003091 71    Milford    0.003383    0.003451    0.003484    0.003518    0.003552 72    Murchison    0.003351    0.003418    0.003452    0.003485    0.003519 73    Murphy    0.003078    0.003140    0.003170    0.003201    0.003232 74    New Chapel Hill    0.003156    0.003219    0.003251    0.003282    0.003314 75    North Richland Hills    0.002837    0.002894    0.002922    0.002950    0.002979 76    O Donnell    0.003332    0.003399    0.003432    0.003465    0.003499 77    Oak Leaf    0.002965    0.003024    0.003054    0.003084    0.003113 78    Oak Point    0.003078    0.003140    0.003170    0.003201    0.003232 79    Odessa    0.003046    0.003107    0.003137    0.003168    0.003198 80    Ovilla    0.003038    0.003099    0.003129    0.003160    0.003190 81    Palestine    0.003017    0.003077    0.003108    0.003138    0.003168 82    Pantego    0.003210    0.003274    0.003306    0.003338    0.003371 83    Paris    0.002407    0.002455    0.002479    0.002503    0.002527 84    Plano    0.002730    0.002785    0.002812    0.002839    0.002867 85    Ranger    0.003232    0.003297    0.003329    0.003361    0.003394 86    Rhome    0.003180    0.003244    0.003275    0.003307    0.003339 87    Richardson    0.002608    0.002660    0.002686    0.002712    0.002738 88    Richland Hills    0.003094    0.003156    0.003187    0.003218    0.003249 89    Roanoke    0.003167    0.003230    0.003262    0.003294    0.003325 90    Robinson    0.003119    0.003181    0.003213    0.003244    0.003275 91    Rockwall    0.002813    0.002869    0.002897    0.002926    0.002954 92    Rosser    0.003258    0.003323    0.003356    0.003388    0.003421 93    Rowlett    0.003068    0.003129    0.003160    0.003191    0.003221 94    Sherman    0.002281    0.002327    0.002349    0.002372    0.002395 95    Snyder    0.003173    0.003236    0.003268    0.003300    0.003332 96    Southlake    0.003031    0.003092    0.003122    0.003152    0.003183 97    Sulphur Springs    0.002767    0.002822    0.002850    0.002878    0.002905 98    Sunnyvale    0.002433    0.002482    0.002506    0.002530    0.002555 99    Sweetwater    0.003100    0.003162    0.003193    0.003224    0.003255 100    Temple    0.002526    0.002577    0.002602    0.002627    0.002652 101    The Colony    0.002978    0.003038    0.003067    0.003097    0.003127 102    Tyler    0.002648    0.002701    0.002727    0.002754    0.002780 103    University Park    0.002792    0.002848    0.002876    0.002904    0.002932 104    Venus    0.003313    0.003379    0.003412    0.003446    0.003479 105    Waco    0.002630    0.002683    0.002709    0.002735    0.002762 106    Watauga    0.002968    0.003027    0.003057    0.003087    0.003116 107    White Settlement    0.002952    0.003011    0.003041    0.003070    0.003100 108    Wichita Falls    0.002841    0.002898    0.002926    0.002955    0.002983 109    Woodway    0.002692    0.002746    0.002773    0.002800    0.002827 -------------------------------------------------------------------------------- Exhibit C City of Addison City of Allen City of Alvarado City of Andrews City of Archer City City of Belton City of Benbrook City of Big Spring City of Breckenridge City of Bridgeport City of Brownwood City of Burkburnett City of Colleyville City of Corinth City of Crowley City of Dalworthington Gardens City of DeLeon City of Denison City of Early City of Eastland City of Edgecliff Village City of Euless City of Farmers Branch City of Flower Mound City of Forest Hill City of Glenn Heights City of Grand Prairie City of Granger City of Grapevine City of Heath City of Henrietta City of Hewitt City of Honey Grove City of Irving City of Jolly City of Josephine City of Justin City of Lakeside City of Lamesa City of Little River Academy City of Malakoff City of Mansfield City of McKinney City of Midland City of Murchison City of Murphy City of New Chapel Hill City of North Richland Hills City of O’Donnell City of Oak Leaf City of Oak Point City of Odessa City of Ovilla City of Pantego City of Paris City of Plano City of Rhome City of Richland Hills City of Roanoke City of Robinson City of Rosser City of Rowlett City of Snyder City of Southlake City of Sunnyvale City of Sweetwater City of Temple City of The Colony City of Watauga City of White Settlement City of Wichita Falls City of Woodway

FHAMS 2006-FA6   MORTGAGE LOAN PURCHASE AGREEMENT   THIS MORTGAGE LOAN PURCHASE AGREEMENT dated as of September 29, 2006 by and between FIRST HORIZON HOME LOAN CORPORATION, a Kansas corporation (the “Seller”), and FIRST HORIZON ASSET SECURITIES INC. (the “Purchaser”).   WHEREAS, the Seller owns certain Mortgage Loans (as hereinafter defined) which Mortgage Loans are more particularly listed and described in Schedule A attached hereto and made a part hereof.   WHEREAS, the Seller and the Purchaser wish to set forth the terms pursuant to which the Mortgage Loans, excluding the servicing rights thereto, are to be sold by the Seller to the Purchaser.   WHEREAS, the Seller will simultaneously transfer the servicing rights for the Mortgage Loans to First Tennessee Mortgage Services, Inc. (“FTMSI”) pursuant to the Servicing Rights Transfer and Subservicing Agreement (as hereinafter defined).   WHEREAS, the Purchaser will engage FTMSI to service the Mortgage Loans pursuant to the Servicing Agreement (as hereinafter defined).   NOW, THEREFORE, in consideration of the foregoing, other good and valuable consideration, and the mutual terms and covenants contained herein, the parties hereto agree as follows:   ARTICLE I  Definitions   Agreement: This Mortgage Loan Purchase Agreement, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.   Alternative Title Product: Any one of the following: (i) Lien Protection Insurance issued by Integrated Loan Services or ATM Corporation of America, (ii) a Mortgage Lien Report issued by EPN Solutions/ACRAnet, (iii) a Property Plus Report issued by Rapid Refinance Service through SharperLending.com, or (iv) such other alternative title insurance product that the Seller utilizes in connection with its then current underwriting criteria. Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a day on which banking institutions in the City of Dallas, the State of Texas or New York City is located are authorized or obligated by law or executive order to be closed.   Closing Date: September 29, 2006   Code: The Internal Revenue Code of 1986, including any successor or amendatory provisions.   Cooperative Corporation: The entity that holds title (fee or an acceptable leasehold estate) to the real property and improvements constituting the Cooperative Property and which governs the Cooperative Property, which Cooperative Corporation must qualify as a Cooperative Housing Corporation under Section 216 of the Code.   --------------------------------------------------------------------------------     Coop Shares: Shares issued by a Cooperative Corporation.   Cooperative Loan: Any Mortgage Loan secured by Coop Shares and a Proprietary Lease.   Cooperative Property: The real property and improvements owned by the Cooperative Corporation, including the allocation of individual dwelling units to the holders of the Coop Shares of the Cooperative Corporation.   Cooperative Unit: A single family dwelling located in a Cooperative Property.   Custodian: First Tennessee Bank National Association, and its successors and assigns, as custodian under the Custodial Agreement dated as of September 29, 2006 by and among The Bank of New York, as trustee, First Horizon Home Loan Corporation, as master servicer, and the Custodian.   Cut-Off Date: September 1, 2006.   Cut-off Date Principal Balance: As to any Mortgage Loan, the Stated Principal Balance thereof as of the close of business on the Cut-off Date.   Debt Service Reduction: With respect to any Mortgage Loan, a reduction by a court of competent jurisdiction in a proceeding under the Bankruptcy Code in the Scheduled Payment for such Mortgage Loan which became final and non-appealable, except such a reduction resulting from a Deficient Valuation or any reduction that results in a permanent forgiveness of principal.   Deficient Valuation: With respect to any Mortgage Loan, a valuation by a court of competent jurisdiction of the Mortgaged Property in an amount less than the then-outstanding indebtedness under the Mortgage Loan, or any reduction in the amount of principal to be paid in connection with any Scheduled Payment that results in a permanent forgiveness of principal, which valuation or reduction results from an order of such court which is final and non-appealable in a proceeding under the United States Bankruptcy Reform Act of 1978, as amended.   Delay Delivery Mortgage Loans: The Mortgage Loans for which all or a portion of a related Mortgage File is not delivered to the Trustee or to the Custodian on its behalf on the Closing Date. The number of Delay Delivery Mortgage Loans shall not exceed 25% of the aggregate number of Mortgage Loans as of the Closing Date.   Deleted Mortgage Loan: As defined in Section 4.1(c) hereof.   Determination Date: The earlier of (i) the third Business Day after the 15th day of each month, and (ii) the second Business Day prior to the 25th day of each month, or if such 25th day is not a Business Day, the next succeeding Business Day.   GAAP: Generally accepted accounting principles as in effect from time to time in the United States of America. -2- --------------------------------------------------------------------------------     Insurance Proceeds: Proceeds paid by an insurer pursuant to any insurance policy, including all riders and endorsements thereto in effect, including any replacement policy or policies, in each case other than any amount included in such Insurance Proceeds in respect of expenses covered by such insurance policy.   Liquidation Proceeds: Amounts, including Insurance Proceeds, received in connection with the partial or complete liquidation of defaulted Mortgage Loans, whether through trustee’s sale, foreclosure sale or otherwise or amounts received in connection with any condemnation or partial release of a Mortgaged Property.   MERS: Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.   MERS Mortgage Loan: Any Mortgage Loan registered with MERS on the MERS System.   MERS® System: The system of recording transfers of mortgages electronically maintained by MERS.   MIN: The Mortgage Identification Number for any MERS Mortgage Loan.   MOM Loan: Any Mortgage Loan as to which MERS is acting as mortgagee, solely as nominee for the originator of such Mortgage Loan and its successors and assigns.   Mortgage: The mortgage, deed of trust or other instrument creating a first lien on the property securing a Mortgage Note.   Mortgage File: The mortgage documents listed in Section 3.1 pertaining to a particular Mortgage Loan and any additional documents required to be added to the Mortgage File pursuant to this Agreement.   Mortgage Loans: The mortgage loans transferred, sold and conveyed by the Seller to the Purchaser, pursuant to this Agreement.   Mortgage Loan Purchase Price: With respect to any Mortgage Loan required to be purchased by the Seller pursuant to Section 4.1(c) hereof, an amount equal to the sum of (i) 100% of the unpaid principal balance of the Mortgage Loan on the date of such purchase, and (ii) accrued interest thereon at the applicable Mortgage Rate from the date through which interest was last paid by the Mortgagor to the first day in the month in which the Mortgage Loan Purchase Price is to be distributed to the Purchaser or its designees.   Mortgage Note: The original executed note or other evidence of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.   Mortgage Rate: The annual rate of interest borne by a Mortgage Note from time to time, net of any insurance premium charged by the mortgagee to obtain or maintain any primary insurance policy. -3- --------------------------------------------------------------------------------     Mortgaged Property: The underlying property securing a Mortgage Loan, which, with respect to a Cooperative Loan, is the related Coop Shares and Proprietary Lease.   Mortgagor: The obligor(s) on a Mortgage Note.   Principal Prepayment: Any payment of principal by a Mortgagor on a Mortgage Loan that is received in advance of its scheduled Due Date and is not accompanied by an amount representing scheduled interest due on any date or dates in any month or months subsequent to the month of prepayment.   Proprietary Lease: With respect to any Cooperative Unit, a lease or occupancy agreement between a Cooperative Corporation and a holder of related Coop Shares.   Purchase Price: $487,325,581.72   Purchaser: First Horizon Asset Securities Inc., in its capacity as purchaser of the Mortgage Loans from the Seller pursuant to this Agreement.   Recognition Agreement: With respect to any Cooperative Loan, an agreement between the Cooperative Corporation and the originator of such Mortgage Loan which establishes the rights of such originator in the Cooperative Property.   Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due on the first day of the month allocable to principal and/or interest on such Mortgage Loan which, unless otherwise specified herein, shall give effect to any related Debt Service Reduction and any Deficient Valuation that affects the amount of the monthly payment due on such Mortgage Loan.   Security Agreement: The security agreement with respect to a Cooperative Loan.   Seller: First Horizon Home Loan Corporation, a Kansas corporation, and its successors and assigns, in its capacity as seller of the Mortgage Loans.   Servicing Agreement: The servicing agreement, dated as of November 26, 2002 by and between First Horizon Asset Securities Inc. and its assigns, as owner, and First Tennessee Mortgage Services, Inc., as servicer.   Servicing Rights Transfer and Subservicing Agreement: The servicing rights transfer and subservicing agreement, dated as of November 26, 2002 by and between First Horizon Home Loan Corporation, as transferor and subservicer, and First Tennessee Mortgage Services, Inc., as transferee and servicer.   Stated Principal Balance: As to any Mortgage Loan, the unpaid principal balance of such Mortgage Loan as specified in the amortization schedule at the time relating thereto (before any adjustment to such amortization schedule by reason of any moratorium or similar waiver or grace period) after giving effect to any previous partial Principal Prepayments and Liquidation Proceeds allocable to principal (other than with respect to any Liquidated Mortgage Loan) and to the payment of principal due on such date and irrespective of any delinquency in payment by the related Mortgagor. -4- --------------------------------------------------------------------------------     Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for a Deleted Mortgage Loan which must, on the date of such substitution, (i) have a Stated Principal Balance, after deduction of the principal portion of the Scheduled Payment due in the month of substitution, not in excess of, and not more than 10% less than the Stated Principal Balance of the Deleted Mortgage Loan; (ii) have a Mortgage Rate not lower than the Mortgage Rate of the Deleted Mortgage Loan; (iii) have a maximum mortgage rate not more than 1% per annum higher or lower than the maximum mortgage rate of the Deleted Mortgage Loan; (iv) have a minimum mortgage rate specified in its related Mortgage Note not more than 1% per annum higher or lower than the minimum mortgage rate of the Deleted Mortgage Loan; (v) have the same mortgage index, reset period and periodic rate as the Deleted Mortgage Loan and a gross margin not more than 1% per annum higher or lower than that of the Deleted Mortgage Loan (vi) be accruing interest at a rate no lower than and not more than 1% per annum higher than, that of the Deleted Mortgage Loan; (vii) have a loan-to-value ratio no higher than that of the Deleted Mortgage Loan; (viii) have a remaining term to maturity no greater than (and not more than one year less than that of) the Deleted Mortgage Loan; (ix) not be a Cooperative Loan unless the Deleted Mortgage Loan was a Cooperative Loan and (x) comply with each representation and warranty set forth in Schedule B hereto.   Trustee: The Bank of New York and its successors and, if a successor trustee is appointed hereunder, such successor.   ARTICLE II  Purchase and Sale   Section 2.1  Purchase Price. In consideration for the payment to it of the Purchase Price on the Closing Date, pursuant to written instructions delivered by the Seller to the Purchaser on the Closing Date, the Seller does hereby transfer, sell and convey to the Purchaser on the Closing Date, but with effect from the Cut-off Date, (i) all right, title and interest of the Seller in the Mortgage Loans, excluding the servicing rights thereto, and all property securing such Mortgage Loans, including all interest and principal received or receivable by the Seller with respect to the Mortgage Loans on or after the Cut-off Date and all interest and principal payments on the Mortgage Loans received on or prior to the Cut-off Date in respect of installments of interest and principal due thereafter, but not including payments of principal and interest due and payable on the Mortgage Loans on or before the Cut-off Date, and (ii) all proceeds from the foregoing. Items (i) and (ii) in the preceding sentence are herein referred to collectively as “Mortgage Assets.”   Section 2.2  Timing. The sale of the Mortgage Assets hereunder shall take place on the Closing Date.   ARTICLE III Conveyance and Delivery   Section 3.1  Delivery of Mortgage Files. In connection with the transfer and assignment set forth in Section 2.1 above, the Seller has delivered or caused to be delivered to the Trustee or to the Custodian on its behalf (or, in the case of the Delay Delivery Mortgage Loans, will deliver or cause to be delivered to the Trustee or to the Custodian on its behalf within thirty (30) days following the Closing Date) the following documents or instruments with respect to each Mortgage Loan so assigned (collectively, the “Mortgage Files”):   -5- --------------------------------------------------------------------------------       (a)   (1) the original Mortgage Note endorsed by manual or facsimile signature in blank in the following form: “Pay to the order of ________________, without recourse,” with all intervening endorsements showing a complete chain of endorsement from the originator to the Person endorsing the Mortgage Note (each such endorsement being sufficient to transfer all right, title and interest of the party so endorsing, as noteholder or assignee thereof, in and to that Mortgage Note); or      (2) with respect to any Lost Mortgage Note, a lost note affidavit from the Seller stating that the original Mortgage Note was lost or destroyed, together with a copy of such Mortgage Note;   (b)   except as provided below and for each Mortgage Loan that is not a MERS Mortgage Loan, the original recorded Mortgage or a copy of such Mortgage certified by the Seller as being a true and complete copy of the Mortgage, and in the case of each MERS Mortgage Loan, the original Mortgage, noting the presence of the MIN of the Mortgage Loans and either language indicating that the Mortgage Loan is a MOM Loan if the Mortgage Loan is a MOM Loan or if the Mortgage Loan was not a MOM Loan at origination, the original Mortgage and the assignment thereof to MERS, with evidence of recording indicated thereon, or a copy of the Mortgage certified by the public recording office in which such Mortgage has been recorded;   (c)   a duly executed assignment of the Mortgage in blank (which may be included in a blanket assignment or assignments), together with, except as provided below, all interim recorded assignments of such mortgage (each such assignment, when duly and validly completed, to be in recordable form and sufficient to effect the assignment of and transfer to the assignee thereof, under the Mortgage to which the assignment relates); provided that, if the related Mortgage has not been returned from the applicable public recording office, such assignment of the Mortgage may exclude the information to be provided by the recording office;   (d)   the original or copies of each assumption, modification, written assurance or substitution agreement, if any;   (e)   either the original or duplicate original title policy (including all riders thereto) with respect to the related Mortgaged Property, if available, provided that the title policy (including all riders thereto) will be delivered as soon as it becomes available, and if the title policy is not available, and to the extent required pursuant to the second paragraph below or otherwise in connection with the rating of the Certificates, a written commitment or interim binder or preliminary report of the title issued by the title insurance or escrow company with respect to the Mortgaged Property, or, in lieu thereof, an Alternative Title Product; and   -6- --------------------------------------------------------------------------------     (f)   in the case of a Cooperative Loan, the originals of the following documents or instruments:   (1)  The Coop Shares, together with a stock power in blank;   (2)  The executed Security Agreement;   (3)  The executed Proprietary Lease;   (4)  The executed Recognition Agreement;   (5)  The executed UCC-1 financing statement with evidence of recording thereon which have been filed in all places required to perfect the Seller’s interest in the Coop Shares and the Proprietary Lease; and   (6)  Executed UCC-3 financing statements or other appropriate UCC financing statements required by state law, evidencing a complete and unbroken line from the mortgagee to the Trustee with evidence of recording thereon (or in a form suitable for recordation).   In the event that in connection with any Mortgage Loan that is not a MERS Mortgage Loan the Seller cannot deliver (i) the original recorded Mortgage or (ii) all interim recorded assignments satisfying the requirements of clause (b) or (c) above, respectively, concurrently with the execution and delivery hereof because such document or documents have not been returned from the applicable public recording office, the Seller shall promptly deliver or cause to be delivered to the Trustee or the Custodian on its behalf such original Mortgage or such interim assignment, as the case may be, with evidence of recording indicated thereon upon receipt thereof from the public recording office, or a copy thereof, certified, if appropriate, by the relevant recording office, but in no event shall any such delivery of the original Mortgage and each such interim assignment or a copy thereof, certified, if appropriate, by the relevant recording office, be made later than one year following the Closing Date; provided, however, in the event the Seller is unable to deliver or cause to be delivered by such date each Mortgage and each such interim assignment by reason of the fact that any such documents have not been returned by the appropriate recording office, or, in the case of each such interim assignment, because the related Mortgage has not been returned by the appropriate recording office, the Seller shall deliver or cause to be delivered such documents to the Trustee or the Custodian on its behalf as promptly as possible upon receipt thereof and, in any event, within 720 days following the Closing Date; provided, further, however, that the Seller shall not be required to provide an original or duplicate lender’s title policy (together with all riders thereto) if the Seller delivers an Alternative Title Product in lieu thereof. The Seller shall forward or cause to be forwarded to the Trustee or the Custodian on its behalf (i) from time to time additional original documents evidencing an assumption or modification of a Mortgage Loan and (ii) any other documents required to be delivered by the Seller to the Trustee. In the event that the original Mortgage is not delivered and in connection with the payment in full of the related Mortgage Loan and the public recording office requires the presentation of a “lost instruments affidavit and indemnity” or any equivalent document, because only a copy of the Mortgage can be delivered with the instrument of satisfaction or reconveyance, the Seller shall execute and deliver or cause to be executed and delivered such a document to the public recording office. In the case where a public recording office retains the original recorded Mortgage or in the case where a Mortgage is lost after recordation in a public recording office, the Seller shall deliver or cause to be delivered to the Trustee or the Custodian on its behalf a copy of such Mortgage certified by such public recording office to be a true and complete copy of the original recorded Mortgage. -7- --------------------------------------------------------------------------------     In addition, in the event that in connection with any Mortgage Loan the Seller cannot deliver or cause to be delivered the original or duplicate original lender’s title policy (together with all riders thereto), satisfying the requirements of clause (v) above, concurrently with the execution and delivery hereof because the related Mortgage has not been returned from the applicable public recording office, the Seller shall promptly deliver or cause to be delivered to the Trustee or the Custodian on its behalf such original or duplicate original lender’s title policy (together with all riders thereto) upon receipt thereof from the applicable title insurer, but in no event shall any such delivery of the original or duplicate original lender’s title policy be made later than one year following the Closing Date; provided, however, in the event the Seller is unable to deliver or cause to be delivered by such date the original or duplicate original lender’s title policy (together with all riders thereto) because the related Mortgage has not been returned by the appropriate recording office, the Seller shall deliver or cause to be delivered such documents to the Trustee or the Custodian on its behalf as promptly as possible upon receipt thereof and, in any event, within 720 days following the Closing Date.   Notwithstanding anything to the contrary in this Agreement, within thirty days after the Closing Date, the Seller shall either (i) deliver or cause to be delivered to the Trustee or the Custodian on its behalf the Mortgage File as required pursuant to this Section 3.1 for each Delay Delivery Mortgage Loan or (ii) (A) substitute or cause to be substituted a Substitute Mortgage Loan for the Delay Delivery Mortgage Loan or (B) repurchase or cause to be repurchased the Delay Delivery Mortgage Loan, which substitution or repurchase shall be accomplished in the manner and subject to the conditions set forth in Section 4.1 (treating each Delay Delivery Mortgage Loan as a Deleted Mortgage Loan for purposes of such Section 4.1), provided, however, that if the Seller fails to deliver a Mortgage File for any Delay Delivery Mortgage Loan within the thirty-day period provided in the prior sentence, the Seller shall use its best reasonable efforts to effect or cause to be effected a substitution, rather than a repurchase of, such Deleted Mortgage Loan and provided further that the cure period provided for in Section 4.1 hereof shall not apply to the initial delivery of the Mortgage File for such Delay Delivery Mortgage Loan, but rather the Seller shall have five (5) Business Days to cure or cause to be cured such failure to deliver.   ARTICLE IV Representations and Warranties   Section 4.1  Representations and Warranties of the Seller»   . (a) The Seller hereby represents and warrants to the Purchaser, as of the date of execution and delivery hereof, that:   (1)  The Seller is duly organized as a Kansas corporation and is validly existing and in good standing under the laws of the State of Kansas and is duly authorized and qualified to transact any and all business contemplated by this Agreement to be conducted by the Seller in any state in which a Mortgaged Property is located or is otherwise not required under applicable law to effect such qualification and, in any event, is in compliance with the doing business laws of any such state, to the extent necessary to ensure its ability to enforce each Mortgage Loan and to perform any of its other obligations under this Agreement in accordance with the terms thereof. -8- --------------------------------------------------------------------------------     (2)  The Seller has the full corporate power and authority to sell each Mortgage Loan, and to execute, deliver and perform, and to enter into and consummate the transactions contemplated by this Agreement and has duly authorized by all necessary corporate action on the part of the Seller the execution, delivery and performance of this Agreement; and this Agreement, assuming the due authorization, execution and delivery thereof by the other parties thereto, constitutes a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except that (a) the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, receivership and other similar laws relating to creditors’ rights generally and (b) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.   (3)  The execution and delivery of this Agreement by the Seller, the sale of the Mortgage Loans by the Seller under this Agreement, the consummation of any other of the transactions contemplated by this Agreement, and the fulfillment of or compliance with the terms thereof are in the ordinary course of business of the Seller and will not (a) result in a material breach of any term or provision of the charter or by-laws of the Seller or (b) materially conflict with, result in a material breach, violation or acceleration of, or result in a material default under, the terms of any other material agreement or instrument to which the Seller is a party or by which it may be bound, or (c) constitute a material violation of any statute, order or regulation applicable to the Seller of any court, regulatory body, administrative agency or governmental body having jurisdiction over the Seller; and the Seller is not in breach or violation of any material indenture or other material agreement or instrument, or in violation of any statute, order or regulation of any court, regulatory body, administrative agency or governmental body having jurisdiction over it which breach or violation may materially impair the Seller’s ability to perform or meet any of its obligations under this Agreement.   (4)  No litigation is pending or, to the best of the Seller’s knowledge, threatened against the Seller that would prohibit the execution or delivery of, or performance under, this Agreement by the Seller.   (5)  The Seller is a member of MERS in good standing, and will comply in all material respects with the rules and procedures of MERS in connection with the servicing of the MERS Mortgage Loans for as long as such Mortgage Loans are registered with MERS.   -9- --------------------------------------------------------------------------------     (b)   The Seller hereby makes the representations and warranties set forth in Schedule B hereto to the Purchaser, as of the Closing Date, or if so specified therein, as of the Cut-off Date.   (c)    Upon discovery by either of the parties hereto of a breach of a representation or warranty made pursuant to Schedule B hereto that materially and adversely affects the interests of the Purchaser in any Mortgage Loan, the party discovering such breach shall give prompt notice thereof to the other party. The Seller hereby covenants that within 90 days of the earlier of its discovery or its receipt of written notice from the Purchaser of a breach of any representation or warranty made pursuant to Schedule B hereto which materially and adversely affects the interests of the Purchaser in any Mortgage Loan, it shall cure such breach in all material respects, and if such breach is not so cured, shall, (i) if such 90-day period expires prior to the second anniversary of the Closing Date, remove such Mortgage Loan (a “Deleted Mortgage Loan”) from the pools of mortgages listed on Schedule B hereto and substitute in its place a Substitute Mortgage Loan, in the manner and subject to the conditions set forth in this Section; or (ii) repurchase the affected Mortgage Loan or Mortgage Loans from the Purchaser at the Mortgage Loan Purchase Price in the manner set forth below. With respect to the representations and warranties described in this Section which are made to the best of the Seller’s knowledge, if it is discovered by either the Seller or the Purchaser that the substance of such representation and warranty is inaccurate and such inaccuracy materially and adversely affects the value of the related Mortgage Loan or the interests of the Purchaser therein, notwithstanding the Seller’s lack of knowledge with respect to the substance of such representation or warranty, such inaccuracy shall be deemed a breach of the applicable representation or warranty.   With respect to any Substitute Mortgage Loan or Loans, the Seller shall deliver to the Trustee or to the Custodian on its behalf the Mortgage Note, the Mortgage, the related assignment of the Mortgage, and such other documents and agreements as are required by Section 3.1, with the Mortgage Note endorsed and the Mortgage assigned as required by Section 3.1. No substitution is permitted to be made in any calendar month after the Determination Date for such month. Scheduled Payments due with respect to Substitute Mortgage Loans in the month of substitution will be retained by the Seller. Upon such substitution, the Substitute Mortgage Loan or Loans shall be subject to the terms of this Agreement in all respects, and the Seller shall be deemed to have made with respect to such Substitute Mortgage Loan or Loans, as of the date of substitution, the representations and warranties made pursuant to Schedule B hereto with respect to such Mortgage Loan.   It is understood and agreed that the obligation under this Agreement of the Seller to cure, repurchase or replace any Mortgage Loan as to which a breach has occurred and is continuing shall constitute the sole remedy against the Seller respecting such breach available to the Purchaser on its behalf.   The representations and warranties contained in this Agreement shall not be construed as a warranty or guaranty by the Seller as to the future payments by any Mortgagor.   -10- --------------------------------------------------------------------------------     It is understood and agreed that the representations and warranties set forth in this Section 4.1 shall survive the sale of the Mortgage Loans to the Purchaser hereunder.   ARTICLE V  Miscellaneous   Section 5.1  Transfer Intended as Sale. It is the express intent of the parties hereto that the conveyance of the Mortgage Loans by the Seller to the Purchaser be, and be construed as, an absolute sale thereof in accordance with GAAP and for regulatory purposes. It is, further, not the intention of the parties that such conveyances be deemed a pledge thereof by the Seller to the Purchaser. However, in the event that, notwithstanding the intent of the parties, the Mortgage Loans are held to be the property of the Seller or the Purchaser, respectively, or if for any other reason this Agreement is held or deemed to create a security interest in such assets, then (i) this Agreement shall be deemed to be a security agreement within the meaning of the Uniform Commercial Code of the State of Texas and (ii) the conveyance of the Mortgage Loans provided for in this Agreement shall be deemed to be an assignment and a grant by the Seller to the Purchaser of a security interest in all of the Mortgage Loans, whether now owned or hereafter acquired.   The Seller and the Purchaser shall, to the extent consistent with this Agreement, take such actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of the Agreement. The Seller and the Purchaser shall arrange for filing any Uniform Commercial Code continuation statements in connection with any security interest granted hereby.   Section 5.2  Seller’s Consent to Assignment. The Seller hereby acknowledges the Purchaser’s right to assign, transfer and convey all of the Purchaser’s rights under this Agreement to a third party and that the representations and warranties made by the Seller to the Purchaser pursuant to this Agreement will, in the case of such assignment, transfer and conveyance, be for the benefit of such third party. The Seller hereby consents to such assignment, transfer and conveyance.   Section 5.3  Specific Performance. Either party or its assignees may enforce specific performance of this Agreement.   Section 5.4  Notices. All notices, demands and requests that may be given or that are required to be given hereunder shall be sent by United States certified mail, postage prepaid, return receipt requested, to the parties at their respective addresses as follows:   If to     the Purchaser: 4000 Horizon Way     Irving, Texas 75063     Attn: Larry P. Cole         If to the Seller: 4000 Horizon Way     Irving, Texas 75063     Attn: Larry P. Cole -11- --------------------------------------------------------------------------------   Section 5.5  Choice of Law. This Agreement shall be construed in accordance with and governed by the substantive laws of the State of Texas applicable to agreements made and to be performed in the State of Texas and the obligations, rights and remedies of the parties hereto shall be determined in accordance with such laws.   [remainder of page intentionally left blank] -12- --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the Purchaser and the Seller have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the 29th day of September, 2006.         FIRST HORIZON HOME LOAN CORPORATION, as Seller             By:     -------------------------------------------------------------------------------- Terry McCoy Executive Vice President                FIRST HORIZON ASSET SECURITIES INC., as Purchaser             By:     -------------------------------------------------------------------------------- Alfred Chang Vice President --------------------------------------------------------------------------------   SCHEDULE A   [Available Upon Request From Trustee] --------------------------------------------------------------------------------   SCHEDULE B   Representations and Warranties as to the Mortgage Loans   First Horizon Home Loan Corporation (the “Seller”) hereby makes the representations and warranties set forth in this Schedule B on which First Horizon Asset Securities Inc. (the “Purchaser”) relies in accepting the Mortgage Loans. Such representations and warranties speak as of the execution and delivery of the Mortgage Loan Purchase Agreement, dated as of September 29, 2006 (the “MLPA”), between First Horizon Home Loan Corporation, as seller, and the Purchaser and as of the Closing Date, or if so specified herein, as of the Cut-off Date or date of origination of the Mortgage Loans, but shall survive the sale, transfer, and assignment of the Mortgage Loans to the Purchaser and any subsequent sale, transfer and assignment by the Purchaser to a third party. Capitalized terms used but not otherwise defined in this Schedule B shall have the meanings ascribed thereto in the MLPA or the Pooling and Servicing Agreement, dated as of September 1, 2006, between First Horizon Asset Securities Inc., as depositor, First Horizon Home Loan Corporation, as master servicer, and The Bank of New York, as trustee.   (1)   The information set forth on Schedule A to the MLPA, with respect to each Mortgage Loan is true and correct in all material respects as of the Closing Date.   (2)   Each Mortgage is a valid and enforceable first lien on the Mortgaged Property subject only to (a) the lien of nondelinquent current real property taxes and assessments and liens or interests arising under or as a result of any federal, state or local law, regulation or ordinance relating to hazardous wastes or hazardous substances and, if the related Mortgaged Property is a unit in a condominium project or Planned Unit Development, any lien for common charges permitted by statute or homeowner association fees, (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of such Mortgage, such exceptions appearing of record being generally acceptable to mortgage lending institutions in the area wherein the related Mortgaged Property is located or specifically reflected in the appraisal made in connection with the origination of the related Mortgage Loan, and (c) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by such Mortgage.   (3)   Immediately prior to the assignment of the Mortgage Loans to the Purchaser, the Seller had good title to, and was the sole owner of, each Mortgage Loan free and clear of any pledge, lien, encumbrance or security interest and had full right and authority, subject to no interest or participation of, or agreement with, any other party, to sell and assign the same pursuant to this Agreement.   (4)   As of the date of origination of each Mortgage Loan, there was no delinquent tax or assessment lien against the related Mortgaged Property.   B-1 --------------------------------------------------------------------------------     (5)   There is no valid offset, defense or counterclaim to any Mortgage Note or Mortgage, including the obligation of the Mortgagor to pay the unpaid principal of or interest on such Mortgage Note.   (6)   There are no mechanics’ liens or claims for work, labor or material affecting any Mortgaged Property which are or may be a lien prior to, or equal with, the lien of such Mortgage, except those which are insured against by the title insurance policy referred to in item (11) below.   (7)   To the best of the Seller’s knowledge, no Mortgaged Property has been materially damaged by water, fire, earthquake, windstorm, flood, tornado or similar casualty (excluding casualty from the presence of hazardous wastes or hazardous substances, as to which the Seller makes no representation) so as to affect adversely the value of the related Mortgaged Property as security for such Mortgage Loan. With respect to the representations and warranties contained within this item (7) that are made to the knowledge or the best knowledge of the Seller or as to which the Seller has no knowledge, if it is discovered that the substance of any such representation and warranty is inaccurate and the inaccuracy materially and adversely affects the value of the related Mortgage Loan, or the interest therein of the Purchaser, then notwithstanding the Seller’s lack of knowledge with respect to the substance of such representation and warranty being inaccurate at the time the representation and warranty was made, such inaccuracy shall be deemed a breach of the applicable representation and warranty and the Seller shall take such action described in Section 4.1(c) of this Agreement in respect of such Mortgage Loan.   (8)   Each Mortgage Loan at origination complied in all material respects with applicable local, state and federal laws, including, without limitation, usury, equal credit opportunity, real estate settlement procedures, truth-in-lending and disclosure laws and specifically applicable predatory and abusive lending laws.   (9)   No Mortgage Loan is a “high cost loan” as defined by the specific applicable predatory and abusive lending laws.   (10)   Except as reflected in a written document contained in the related Mortgage File, the Seller has not modified the Mortgage in any material respect; satisfied, cancelled or subordinated such Mortgage in whole or in part; released the related Mortgaged Property in whole or in part from the lien of such Mortgage; or executed any instrument of release, cancellation, modification or satisfaction with respect thereto.   (11)   A lender’s policy of title insurance together with a condominium endorsement and extended coverage endorsement, if applicable, in an amount at least equal to the Cut-off Date Principal Balance of each such Mortgage Loan or a commitment (binder) to issue the same was effective on the date of the origination of each Mortgage Loan, each such policy is valid and remains in full force and effect, or, in lieu thereof, an Alternative Title Product.   B-2 --------------------------------------------------------------------------------     (12)   To the best of the Seller’s knowledge, all of the improvements which were included for the purpose of determining the appraised value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of such property, and no improvements on adjoining properties encroach upon the Mortgaged Property, unless such failure to be wholly within such boundaries and restriction lines or such encroachment, as the case may be, does not have a material effect on the value of such Mortgaged Property.   (13)   To the best of the Seller’s knowledge, as of the date of origination of each Mortgage Loan, no improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning law or regulation unless such violation would not have a material adverse effect on the value of the related Mortgaged Property. To the best of the Seller’s knowledge, all inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities, unless the lack thereof would not have a material adverse effect on the value of such Mortgaged Property.   (14)   The Mortgage Note and the related Mortgage are genuine, and each is the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms and under applicable law.   (15)   The proceeds of the Mortgage Loans have been fully disbursed and there is no requirement for future advances thereunder.   (16)   The related Mortgage contains customary and enforceable provisions which render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security, including, (i) in the case of a Mortgage designated as a deed of trust, by trustee’s sale, and (ii) otherwise by judicial foreclosure.   (17)   With respect to each Mortgage constituting a deed of trust, a trustee, duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in such Mortgage, and no fees or expenses are or will become payable by the holder of the Mortgage to the trustee under the deed of trust, except in connection with a trustee’s sale after default by the Mortgagor.   (18)   As of the Closing Date, the improvements upon each Mortgaged Property are covered by a valid and existing hazard insurance policy with a generally acceptable carrier that provides for fire and extended coverage and coverage for such other hazards as are customarily required by institutional single family mortgage lenders in the area where the Mortgaged Property is located, and the Seller has received no notice that any premiums due and payable thereon have not been paid; the Mortgage obligates the Mortgagor thereunder to maintain all such insurance including flood insurance at the Mortgagor’s cost and expense. Anything to the contrary in this item (18) notwithstanding, no breach of this item (18) shall be deemed to give rise to any obligation of the Seller to repurchase or substitute for such affected Mortgage Loan or Loans so long as the Seller maintains a blanket policy.   B-3 --------------------------------------------------------------------------------     (19)   If at the time of origination of each Mortgage Loan, the related Mortgaged Property was in an area then identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, a flood insurance policy in a form meeting the then-current requirements of the Flood Insurance Administration is in effect with respect to such Mortgaged Property with a generally acceptable carrier.   (20)   To the best of the Seller’s knowledge, there is no proceeding pending or threatened for the total or partial condemnation of any Mortgaged Property, nor is such a proceeding currently occurring.   (21)   To best of the Seller’s knowledge, there is no material event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material non-monetary default, breach, violation or event of acceleration under the Mortgage or the related Mortgage Note; and the Seller has not waived any material non-monetary default, breach, violation or event of acceleration.   (22)   Any leasehold estate securing a Mortgage Loan has a stated term at least as long as the term of the related Mortgage Loan.   (23)   Each Mortgage Loan was selected from among the outstanding fixed-rate one- to four-family mortgage loans in the Seller’s portfolio at the Closing Date as to which the representations and warranties made with respect to the Mortgage Loans set forth in this Schedule B can be made. No such selection was made in a manner intended to adversely affect the interests of the Certificateholders.   (24)   The Mortgage Loans provide for the full amortization of the amount financed over a series of monthly payments.   (25)   At origination, substantially all of the Mortgage Loans in Pool I, Pool II and Pool III had stated terms to maturity of 30 years, between 20 and 30 years, and between 10 and 15 years, respectively.   (26)   Scheduled monthly payments made by the Mortgagors on the Mortgage Loans either earlier or later than their Due Dates will not affect the amortization schedule or the relative application of the payments to principal and interest.   (27)   Approximately 2.66%, 1.54% and 2.48% of the mortgage loans in Pool I, Pool II, and Pool III respectively, contain a prepayment penalty pricing option. The Mortgagors may prepay all the other Mortgage Loans at any time without penalty.   B-4 --------------------------------------------------------------------------------     (28)   17.40% of the Mortgage Loans in Pool I, 19.13% of the Mortgage Loans in Pool II, and 17.08% of the Mortgage Loans in Pool III are jumbo mortgage loans that have Stated Principal Balances at origination that exceed the then applicable limitations for purchase by Fannie Mae and Freddie Mac.   (29)   Each Mortgage Loan in Pool I was originated on or after February 27, 2006. Each Mortgage Loan in Pool II was originated on or after July 26, 2004. Each Mortgage Loan in Pool III was originated on or after March 21, 2006.   (30)   The latest stated maturity date of any Mortgage Loan in Pool I is October 1, 2036, and the earliest is March 1, 2036. The latest stated maturity date of any Mortgage Loan in Pool II is October 1, 2036, and the earliest is July 1, 2026. The latest stated maturity date of any Mortgage Loan in Pool III is October 1, 2021 and the earliest is July 1, 2016.   (31)   No Mortgage Loan was delinquent more than 30 days as of the Cut-off Date.   (32)   No Mortgage Loan had a Loan-to-Value Ratio at origination of more than 95%. Generally, each Mortgage Loan with a Loan-to-Value Ratio at origination of greater than 80% is covered by a Primary Insurance Policy issued by a mortgage insurance company that is acceptable to Fannie Mae or Freddie Mac.   (33)   Each Mortgage Loan constitutes a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code.   (34)   No Mortgage Loan is a “high cost loan” as defined by the specific applicable local, state or federal predatory and abusive lending laws. In addition, no Mortgage Loan is a “High Cost Loan” or a “Covered Loan”, as applicable (as such terms are defined in the then current Standard & Poor’s LEVELSâ Glossary which is now Version 5.7 Revised, Appendix E) and no Mortgage Loan originated on or after October 1, 2002 through March 6, 2003 is governed by the Georgia Fair Lending Act.   (35)   Appraisal form 1004 or form 2055 with an interior inspection for first lien mortgage loans has been obtained for all related mortgaged properties, other than condominiums, investment properties, two to four unit properties and exempt properties, for which appraisal form 1004 or form 2055 has not been obtained.   Appraisal form 704, 2065 or 2055 with an exterior only inspection for junior lien mortgages combined with first lien mortgages (including home equity lines of credit) has been obtained for all related mortgaged properties, other than condominiums, investment properties, two to four unit properties and exempt properties, for which appraisal form 1004 or form 2055 has not been obtained. Appraisal form 704, 2065 or 2055 with an exterior only inspection for all other junior lien mortgages has been obtained for all related mortgaged properties, other than those related mortgaged properties that qualify for an Automated Valuation Model.   B-5 --------------------------------------------------------------------------------  

Exhibit 10.7   $850,000,000   CREDIT AGREEMENT   Dated as of January 26, 2006   among   AMC ENTERTAINMENT INC. GRUPO CINEMEX, S.A. DE C.V. and CADENA MEXICANA DE EXHIBICIÓN, S.A. DE C.V. as Borrowers   and   THE LENDERS AND ISSUERS PARTY HERETO   and   CITICORP NORTH AMERICA, INC. as Administrative Agent   and   BANCO NACIONAL DE MEXICO, S.A., INTEGRANTE DEL GRUPO FINANCIERO BANAMEX as Mexican Facility Agent   * * *   J.P. MORGAN SECURITIES INC. as Syndication Agent   CREDIT SUISSE SECURITIES (USA) LLC BANK OF AMERICA, N.A. and GENERAL ELECTRIC CAPITAL CORPORATION as Co-Documentation Agents     CITIGROUP GLOBAL MARKETS INC. J.P. MORGAN SECURITIES INC. Joint Book Managers and Joint Lead Arrangers     WEIL, GOTSHAL & MANGES LLP 767 FIFTH AVENUE NEW YORK, NEW YORK  10153-0119   --------------------------------------------------------------------------------   TABLE OF CONTENTS   ARTICLE I DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS 1       Section 1.1 Defined Terms 1 Section 1.2 Computation of Time Periods 44 Section 1.3 Accounting Terms and Principles 44 Section 1.4 Conversion of Foreign Currencies 45 Section 1.5 Certain Terms 45       ARTICLE II THE FACILITIES 46       Section 2.1 The Commitments 46 Section 2.2 Borrowing Procedures 48 Section 2.3 Swing Loans 50 Section 2.4 Letters of Credit 52 Section 2.5 Reduction and Termination of the Commitments 57 Section 2.6 Repayment of Loans 58 Section 2.7 Evidence of Debt 59 Section 2.8 Optional Prepayments 60 Section 2.9 Mandatory Prepayments 61 Section 2.10 Interest 62 Section 2.11 Conversion/Continuation Option 63 Section 2.12 Fees 64 Section 2.13 Payments and Computations 65 Section 2.14 Special Provisions Governing Eurodollar Rate Loans and Peso TIIE Rate Loans 68 Section 2.15 Capital Adequacy 70 Section 2.16 Taxes 70 Section 2.17 Substitution of Lenders 73 Section 2.18 Special Provisions Governing Peso Loans 74       ARTICLE III CONDITIONS TO LOANS AND LETTERS OF CREDIT 76       Section 3.1 Conditions Precedent to Initial Loans and Letters of Credit 76 Section 3.2 Conditions Precedent to Each Loan and Letter of Credit 79 Section 3.3 Determinations of Initial Borrowing Conditions 81 Section 3.4 Conditions Precedent to Each Facility Increase 81       ARTICLE IV REPRESENTATIONS AND WARRANTIES 82       Section 4.1 Corporate Existence; Compliance with Law 82 Section 4.2 Corporate Power; Authorization; Enforceable Obligations 83 Section 4.3 Subsidiaries; Borrower Information 84 Section 4.4 Financial Statements 84 Section 4.5 Material Adverse Change 85 Section 4.6 Solvency 85 Section 4.7 Litigation 85 Section 4.8 Taxes 85   i --------------------------------------------------------------------------------       Page       Section 4.9 Full Disclosure 86 Section 4.10 Margin Regulations 86 Section 4.11 No Burdensome Restrictions; No Defaults 86 Section 4.12 Investment Company Act 87 Section 4.13 Use of Proceeds 87 Section 4.14 Insurance 87 Section 4.15 Labor Matters 87 Section 4.16 ERISA 88 Section 4.17 Environmental Matters 88 Section 4.18 Intellectual Property 89 Section 4.19 Title; Real Property 89 Section 4.20 Related Documents 90 Section 4.21 New Subordinated Notes 91       ARTICLE V FINANCIAL COVENANT 91       ARTICLE VI REPORTING COVENANTS 91       Section 6.1 Financial Statements 91 Section 6.2 Default Notices 92 Section 6.3 Litigation 93 Section 6.4 SEC Filings; Press Releases 93 Section 6.5 Labor Relations 93 Section 6.6 Tax Returns 93 Section 6.7 Insurance 93 Section 6.8 ERISA Matters 94 Section 6.9 Environmental Matters 94 Section 6.10 Other Information 95       ARTICLE VII AFFIRMATIVE COVENANTS 95       Section 7.1 Preservation of Corporate Existence, Etc 95 Section 7.2 Compliance with Laws, Etc 95 Section 7.3 Conduct of Business 95 Section 7.4 Payment of Taxes, Etc 96 Section 7.5 Maintenance of Insurance 96 Section 7.6 Access 96 Section 7.7 Keeping of Books 96 Section 7.8 Maintenance of Properties, Etc 97 Section 7.9 Application of Proceeds 97 Section 7.10 Environmental 97 Section 7.11 Additional Collateral and Guaranties 97 Section 7.12 Cash Collateral Accounts 99 Section 7.13 Designation of Unrestricted Subsidiaries 100 Section 7.14 Post-Closing Matters 100   ii --------------------------------------------------------------------------------       Page       ARTICLE VIII  NEGATIVE COVENANTS 100       Section 8.1 Indebtedness 101 Section 8.2 Liens, Etc 103 Section 8.3 Investments 106 Section 8.4 Sale of Assets 108 Section 8.5 Restricted Payments 109 Section 8.6 Restriction on Fundamental Changes 111 Section 8.7 Change in Nature of Business 111 Section 8.8 Transactions with Affiliates 111 Section 8.9 Limitations on Restrictions on Subsidiary Distributions; No New Negative Pledge 113 Section 8.10 Modification of Related Documents 113 Section 8.11 Modification of Debt Agreements 114 Section 8.12 Modification of Constituent Documents 114 Section 8.13 Accounting Changes; Fiscal Year 114 Section 8.14 Margin Regulations 114 Section 8.15 No Speculative Transactions 114 Section 8.16 Designation of Senior Debt 114       ARTICLE IX EVENTS OF DEFAULT 115       Section 9.1 Events of Default 115 Section 9.2 Remedies 117 Section 9.3 Actions in Respect of Letters of Credit 117 Section 9.4 Rescission 118       ARTICLE X THE AGENTS 118       Section 10.1 Authorization and Action 118 Section 10.2 Agent’s Reliance, Etc 119 Section 10.3 Posting of Approved Electronic Communications 119 Section 10.4 The Agents Individually 120 Section 10.5 Lender Credit Decision 121 Section 10.6 Indemnification 121 Section 10.7 Successor Agents 121 Section 10.8 Concerning the Collateral and the Collateral Documents 122 Section 10.9 Collateral Matters Relating to Related Obligations 123       ARTICLE XI MISCELLANEOUS 124       Section 11.1 Amendments, Waivers, Etc 124 Section 11.2 Assignments and Participations 126 Section 11.3 Costs and Expenses 130 Section 11.4 Indemnities 131 Section 11.5 Limitation of Liability 132 Section 11.6 Right of Set-off 133 Section 11.7 Sharing of Payments, Etc 133 Section 11.8 Notices, Etc 134 Section 11.9 No Waiver; Remedies 137   iii --------------------------------------------------------------------------------       Page       Section 11.10 Binding Effect 137 Section 11.11 Governing Law 137 Section 11.12 Submission to Jurisdiction; Service of Process 137 Section 11.13 Waiver of Jury Trial 138 Section 11.14 Marshaling; Payments Set Aside 138 Section 11.15 Section Titles 139 Section 11.16 Execution in Counterparts 139 Section 11.17 Entire Agreement 139 Section 11.18 Confidentiality 139 Section 11.19 Patriot Act Notice. 140 Section 11.20 Designated Senior Debt 140   iv --------------------------------------------------------------------------------   Schedules   Schedule I – Commitments Schedule II – Applicable Lending Offices and Addresses for Notices Schedule 1.1 – Mortgaged Real Property Schedule 2.4 – Existing Letters of Credit Schedule 3.1(a) – Opinion Jurisdictions Schedule 4.2 – Consents Schedule 4.3(a) – Ownership of Subsidiaries Schedule 4.3(b) – Borrower Information Schedule 4.7 – Litigation Schedule 4.14 – Insurance Schedule 4.15 – Labor Matters Schedule 4.16 – List of Plans Schedule 4.17 – Environmental Matters Schedule 4.19 – Real Property Schedule 7.14 – Post-Closing Matters Schedule 8.1 – Existing Indebtedness Schedule 8.2 – Existing Liens Schedule 8.3 – Existing Investments Schedule 8.4(g) – Asset Sales Schedule 8.8 – Transactions with Affiliates Schedule 8.9 – Limitations on Restrictions on Subsidiary Distributions   Exhibits   Exhibit A – Form of Assignment and Acceptance Exhibit B-1 – Form of Revolving Dollar Note Exhibit B-2 – Form of Peso Loan Note Exhibit B-3 – Form of Term Loan Note Exhibit C – Form of Notice of Borrowing Exhibit D – Form of Swing Loan Request Exhibit E – Form of Letter of Credit Request Exhibit F – Form of Notice of Conversion or Continuation Exhibit G – Form of Opinion of counsel for the Loan Parties Exhibit H – Form of Guaranty Exhibit I – Form of Pledge and Security Agreement Exhibit J – Form of Compliance Certificate   v --------------------------------------------------------------------------------   CREDIT AGREEMENT, dated as of January 26, 2006, among AMC ENTERTAINMENT INC., a Delaware corporation (the “Company”), GRUPO CINEMEX, S.A. DE C.V., a corporation organized under the laws of Mexico (“Grupo Cinemex”), CADENA MEXICANA DE EXHIBICIÓN, S.A. DE C.V., a corporation organized under the laws of Mexico (“Cadena” and, together with Grupo Cinemex, the “Mexican Borrowers”), the Lenders and the Issuers, CITICORP NORTH AMERICA, INC. (“Citicorp”), as agent for the Lenders and the Issuers and as agent for the Secured Parties under the Collateral Documents (in such capacity, the “Administrative Agent”), and BANCO NACIONAL DE MEXICO, S.A., INTEGRANTE DEL GRUPO FINANCIERO BANAMEX (“Banamex”), as agent for the Lenders under the Mexican Facility (in such capacity, the “Mexican Facility Agent”).   W I T N E S S E T H:   WHEREAS, the Borrowers have requested that the Lenders and Issuers make available for the purposes specified in this Agreement a term loan, revolving credit and letter of credit facility; and   WHEREAS, the Lenders and Issuers are willing to make available to the Borrowers such term loan, revolving credit and letter of credit facility upon the terms and subject to the conditions set forth herein;   NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained herein, the parties hereto hereby agree as follows:   ARTICLE I DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS   Section 1.1            Defined Terms   As used in this Agreement, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):   “Account” has the meaning given to such term in the UCC.   “Agent” means each of the Administrative Agent and the Mexican Facility Agent.   “Administrative Agent” has the meaning specified in the preamble to this Agreement.   “Affected Lender” has the meaning specified in Section 2.17 (Substitution of Lenders).   “Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling or that is controlled by or is under common control with such Person.  For the purposes of this definition, “control” means the possession of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.   --------------------------------------------------------------------------------   “Agent Affiliate” has the meaning specified in Section 10.3 (Posting of Approved Electronic Communications).   “Agreement” means this Credit Agreement.   “Alternative Currency” means any lawful currency other than Dollars that is freely transferable into Dollars.   “Annualized EBITDA” means, with respect to any Person, the Consolidated EBITDA of such Person as of the last day of any Fiscal Quarter (computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters), adjusted as follows: Consolidated EBITDA during any applicable period that is attributable to (a) a division, product line, a particular theatre, a particular screen or other facility used for operations of such Person, which was closed for business or disposed of during a Fiscal Quarter (excluding any theatre closed in the ordinary course of business within 120 days of lease expiration), (b) any Annualized Theatre opened or any Person, business or particular theatre acquired by the Company or a Subsidiary during a Fiscal Quarter, (c) any cost savings initiative or (d) any designation of a Subsidiary as an Unrestricted Subsidiary or an Unrestricted Subsidiary as a Subsidiary, in each case, shall be determined on a Pro Forma Basis.   “Annualized EBITDA Ratio” means, as of any date of determination, on a Pro Forma Basis, the ratio of (a) Annualized EBITDA for the Company and its Subsidiaries for the four most recent Fiscal Quarters ended immediately preceding the date of such determination to (b) Consolidated Interest Expense of the Company and its Subsidiaries for the four most recent Fiscal Quarters ended immediately preceding the date of such determination for which financial statements are available.   “Annualized Theatre” means, for any period, with respect to any Person and its Subsidiaries, any newly constructed theatre identified to the Administrative Agent that has completed at least one full Fiscal Quarter of operations, but less than four full Fiscal Quarters of operations and that is owned by such Person or one of its Subsidiaries.   “Applicable Lending Office” means, with respect to each Lender, its Domestic Lending Office in the case of a Base Rate Loan, its Eurodollar Lending Office in the case of a Eurodollar Rate Loan and its Mexican Lending Office in the case of a Peso Loan.   “Applicable Margin” means (a) during the period commencing on the Closing Date and ending on the first Business Day after the receipt by the Administrative Agent of the Financial Statements for the first full Fiscal Quarter ending after the Closing Date required to be delivered pursuant to Section 6.1(a) or (b) (Financial Statements), as applicable, (i) with respect to Revolving Dollar Loans maintained as (A) Base Rate Loans, a rate equal to 0.75% per annum and (B) Eurodollar Rate Loans, a rate equal to 1.75% per annum, (ii) with respect to Peso Loans maintained as (A) Peso TIIE Rate Loans, a rate equal to 1.75% per annum and (B) Peso Base Rate Loans, a rate equal to 1.75% per annum, and (iii) with respect to Term Loans maintained as (A) Base Rate Loans, a rate equal to 1.125% per annum and (B) Eurodollar Rate Loans, a rate equal to 2.125% per annum, and (b) thereafter, as of any date of determination, a per annum rate equal to the rate set forth below opposite the applicable type of Loan and the then applicable Net Senior Secured Leverage Ratio (determined on the last day of the most recent Fiscal Quarter for which Financial Statements have been delivered pursuant to Section 6.1(a) or (b) (Financial Statements)) set forth below:   2 --------------------------------------------------------------------------------       BASE RATE LOANS   EURODOLLAR RATE LOANS   PESO LOANS   NET SENIOR SECURED LEVERAGE RATIO   REVOLVING LOANS   TERM LOANS   REVOLVING LOANS   TERM LOANS   PESO TIIE RATE LOANS   PESO BASE RATE LOANS   Greater than 0.75 to 1.0   0.75 % 1.125 % 1.75 % 2.125 % 1.75 % 1.75 % Less than or equal to 0.75 to 1.0   0.50 % 1.00 % 1.50 % 2.00 % 1.50 % 1.50 %   Changes in the Applicable Margin resulting from a change in the Net Senior Secured Leverage Ratio on the last day of any subsequent Fiscal Quarter shall become effective as to all Revolving Loans and Term Loans upon delivery by the Company to the Administrative Agent of new Financial Statements pursuant to Section 6.1(a) or (b) (Financial Statements), as applicable.  Notwithstanding anything to the contrary set forth in this Agreement (including the then effective Net Senior Secured Leverage Ratio), if the Company shall fail to deliver such Financial Statements within any of the time periods specified in Section 6.1(a) or (b) (Financial Statements), the Applicable Margin from and including the 46th day after the end of such Fiscal Quarter or the 91st day after the end of such Fiscal Year, as the case may be, to but not including the date the Company delivers to the Administrative Agent such Financial Statements shall equal the highest possible Applicable Margin provided for by this definition.   “Applicable Unused Commitment Fee Rate” means (a) during the period commencing on the Closing Date and ending on the first Business Day after the receipt by the Administrative Agent of the Financial Statements for the first full Fiscal Quarter ending after the Closing Date required to be delivered pursuant to Section 6.1(a) or (b) (Financial Statements), as applicable, 0.375% per annum and (b) thereafter, as of any date of determination, a per annum rate equal to the rate set forth below opposite the then applicable Net Senior Secured Leverage Ratio (determined on the last day of the most recent Fiscal Quarter for which Financial Statements have been delivered pursuant to Section 6.1(a) or (b) (Financial Statements)) set forth below:   NET SENIOR SECURED LEVERAGE RATIO   APPLICABLE UNUSED COMMITMENT FEE RATE   Greater than 0.75 to 1.0   0.375 % Less than or equal to 0.75 to 1.0   0.250 %   Changes in the Applicable Unused Commitment Fee Rate resulting from a change in the Net Senior Secured Leverage Ratio on the last day of any subsequent Fiscal Quarter shall become effective upon delivery by the Company to the Administrative Agent of new Financial Statements pursuant to Section 6.1(a) or (b) (Financial Statements), as applicable.  Notwithstanding anything to the contrary set forth in this Agreement (including the then effective Net Senior Secured Leverage Ratio), if the Company shall fail to deliver such Financial Statements within any of the time periods specified in Section 6.1(a) or (b) (Financial Statements), the Applicable Unused Commitment Fee Rate from and including the 46th day after the end of such Fiscal Quarter or the 91st day after the end of such Fiscal Year, as the case may be, to but not including the date the Company delivers to the Administrative Agent such Financial Statements shall equal the highest possible Applicable Unused Commitment Fee Rate provided for in this definition.   “Apollo” means Apollo Management V, L.P., a Delaware limited partnership.   “Apollo Group” means (i) Apollo; (ii) the Apollo Holders; and (iii) any Affiliate of Apollo (including the Apollo Holders).   3 --------------------------------------------------------------------------------   “Apollo Holders” means (i) Apollo Investment Fund V, L.P. (“AIF V”), Apollo Overseas Partners V, LP. (“AOP V”), Apollo Netherlands Partners V (A), L.P. (“Apollo Netherlands A”), Apollo Netherlands Partners V (B), L.P. (“Apollo Netherlands B”), and Apollo German Partners V GmbH & Co KG (“Apollo German Partners”) and (ii) any other partnership or entity affiliated with and managed by Apollo or its Affiliates to which AIF V, AOP V, Apollo Netherlands A, Apollo Netherlands B or Apollo German Partners assigns any of their respective interests in the Company.   “Approved Electronic Communications” means each notice, demand, communication, information, document and other material that any Loan Party is obligated to, or otherwise chooses to, provide to the Administrative Agent pursuant to any Loan Document or the transactions contemplated therein, including (a) any supplement to the Guaranty, any joinder to the Pledge and Security Agreement and any other written Contractual Obligation delivered or required to be delivered in respect of any Loan Document or the transactions contemplated therein and (b) any Financial Statement, financial and other report, notice, request, certificate and other information material; provided, however, that, “Approved Electronic Communication” shall exclude (i) any Notice of Borrowing, Letter of Credit Request, Swing Loan Request, Notice of Conversion or Continuation, and any other notice, demand, communication, information, document and other material relating to a request for a new, or a conversion of an existing, Borrowing, (ii) any notice pursuant to Section 2.8 (Optional Prepayments) and Section 2.9 (Mandatory Prepayments) and any other notice relating to the payment of any principal or other amount due under any Loan Document prior to the scheduled date therefor, (iii) all notices of any Default or Event of Default and (iv) any notice, demand, communication, information, document and other material required to be delivered to satisfy any of the conditions set forth in Article III (Conditions to Loans and Letters of Credit) or Section 2.4(a) (Letters of Credit) or any other condition to any Borrowing or other extension of credit hereunder or any condition precedent to the effectiveness of this Agreement.   “Approved Electronic Platform” has the meaning specified in Section 10.3 (Posting of Approved Electronic Communications).   “Approved Fund” means any Fund that is advised or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or Affiliate of an entity that administers or manages a Lender.   “Arrangers” means Citigroup Global Markets Inc. and J.P. Morgan Securities Inc., in their capacities as joint book managers and joint lead arrangers.   “Asset Sale” has the meaning specified in Section 8.4 (Sale of Assets).   “Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit A (Form of Assignment and Acceptance).   “Available Amount” means, with respect to any Person, at any time, an amount equal to the amount of “Restricted Payments” (as defined in the New Subordinated Note Indenture) the Company would be permitted to make under Section 4.06(A)(iii)(a), (b) and (c) of the New Subordinated Note Indenture, such covenant contained in the New Subordinated Note Indenture and all other terms of the New Subordinated Note Indenture to which reference is made in such section, together with all related definitions and ancillary provisions, being hereby   4 --------------------------------------------------------------------------------   incorporated into this Agreement by this reference as though specifically set forth in this definition; provided, however, that for purposes of this Agreement, (a) with respect to Section 4.06(A)(iii)(a) of the New Subordinated Note Indenture, the “Restricted Payments Computation Period” (as defined in the New Subordinated Note Indenture) shall be deemed to have commenced on January 1, 2006, (b) with respect to Section 4.06(A)(iii)(b) of the New Subordinated Note Indenture, the aggregate net proceeds received by the Company shall be calculated commencing January 1, 2006 and shall exclude any net proceeds received in connection with the Merger, (c) with respect to Section 4.06(A)(iii)(c) of the New Subordinated Note Indenture, the aggregate net proceeds received by the Company shall be calculated commencing January 1, 2006 and (d) any defined terms used in the New Subordinated Note Indenture that have equivalent meanings in this Agreement or any other Loan Document shall have such meaning so that the covenant made to the Trustee (as defined in the New Subordinated Note Indenture) for the benefit of the Holders (as defined in the New Subordinated Note Indenture) set forth in Section 4.06(A)(iii)(a), (b) and (c) of the New Subordinated Note Indenture runs to the benefit of the Lenders under this Agreement; provided, further, that when used in this definition, the defined term “New Subordinated Note Indenture” means the New Subordinated Note Indenture, as in effect on the Closing Date and without giving effect to any amendments, waivers or modifications thereto, or any termination, repayment, defeasance, redemption, repurchase, or expiration thereof, in each case unless separately expressly consented to in accordance with Section 11.1 (Amendments, Waivers, Etc.).   “Available Credit” means, at any time, (a) the then effective Revolving Credit Commitments minus (b) the aggregate Revolving Credit Outstandings at such time.   “Bain Capital Group” means (i) Bain Capital Holdings (Loews) I, L.P., (ii) Bain Capital AIV (Loews) II, L.P. and (iii) any Affiliates of Bain Capital Holdings (Loews) I, L.P. and Bain Capital AIV (Loews) II, L.P.   “Banamex” has the meaning specified in the preamble to this Agreement.   “Bankruptcy Code” means title 11, United States Code.   “Base Rate” means, for any period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall be equal at all times to the higher of the following:   (a)            the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank’s base rate; and   (b)           0.5% per annum plus the Federal Funds Rate.   “Base Rate Loan” means any Dollar Swing Loan or any other Loan during any period in which it bears interest based on the Base Rate.   “Borrower” means each of the Company and the Mexican Borrowers.   “Borrowing” means a Revolving Credit Borrowing or a Term Loan Borrowing.   “Business Day” means a day of the year on which banks are not required or authorized to close in New York City and, if the applicable Business Day relates to notices,   5 --------------------------------------------------------------------------------   determinations, fundings and payments in connection with (a) the Eurodollar Rate or any Eurodollar Rate Loans, a day on which dealings in Dollar deposits are also carried on in the London interbank market and (b) the Peso Base Rate, the Peso TIIE Rate or any Peso Loan, a day of the year on which banks are not required or authorized to close in Mexico City.   “Cadena” has the meaning specified in the preamble to this Agreement.   “Capital Expenditures” means, for any Person for any period, the aggregate of amounts that would be reflected as additions to property, plant or equipment on a Consolidated balance sheet of such Person and its Subsidiaries prepared in accordance with GAAP, excluding interest capitalized during construction.   “Capital Lease” means, with respect to any Person, any lease of, or other arrangement conveying the right to use, property by such Person as lessee that would be classified or accounted for as a capital lease on a balance sheet of such Person prepared in conformity with GAAP.   “Capital Lease Obligation” means, with respect to any Person as of any date, the capitalized amount as of such date of all Consolidated obligations of such Person or any of its Subsidiaries under Capital Leases (excluding any operating leases entered into by the Company or its Subsidiaries after May 21, 1998 and required to be reflected on a consolidated balance sheet pursuant to EITF 97-10).   “Carlyle Group” means (i) TC Group, L.L.C., (ii) Carlyle Partners III Loews, L.P., (iii) CP II Coinvestment, L.P. and (iv) any Affiliates of TC Group, L.L.C., Carlyle Partners III Loews, L.P. and CP II Coinvestment, L.P.   “Cash Collateral Account” means any Deposit Account or Securities Account that is (a) established by the Administrative Agent from time to time in its sole discretion to receive cash and Cash Equivalents (or purchase cash or Cash Equivalents with funds received) from the Loan Parties or Persons acting on their behalf pursuant to the Loan Documents, (b) with such depositaries and securities intermediaries as the Administrative Agent may determine in its sole discretion, (c) in the name of the Administrative Agent (although such account may also have words referring to any Borrower and the account’s purpose), (d) under the control of the Administrative Agent and (e) in the case of a Securities Account, with respect to which the Administrative Agent shall be the Entitlement Holder and the only Person authorized to give Entitlement Orders with respect thereto.   “Cash Equivalents” means at any time: (a) any evidence of Indebtedness with a maturity of twelve months or less issued or directly and fully guaranteed or insured by the United States or guaranteed by a government that is a member of the Organization for Economic Cooperation and Development (“OECD Country”) or any agency, instrumentality, state or political subdivision thereof which is rated “A-” or better by S&P; (b) certificates of deposit, time deposits, eurodollar time deposits, overnight bank deposits or bankers’ acceptances with a maturity of twelve months or less of, or dollar deposits in, any financial institution that is a member of the Federal Reserve System or an applicable central bank of an OECD Country having a combined capital and surplus and undivided profits of not less than $500,000,000; (c) commercial paper with a maturity of twelve months or less rated at least “A-1” (or its equivalent) by S&P or at least “P-1” (or its equivalent) by Moody’s; (d) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally   6 --------------------------------------------------------------------------------   guaranteed by the government of the United States or issued by any agency thereof and backed by the full faith and credit of the government of the United States, in each case maturing within one year from the date of acquisition, provided that the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency; (e) qualified purchaser funds regulated by the exemption provided by Section 3(c)(7) of the Investment Company Act of 1940, as amended, which funds possess a “AAA” rating from at least two nationally recognized agencies and provide daily liquidity; (f) money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (e) of this definition; and (g) instruments equivalent to those referred to in clauses (a) through (f) above denominated in Pesos, Euros or any other foreign currency comparable in credit quality and tenor to those referred to above and customarily used by corporations for cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by any Subsidiary organized in such jurisdiction.   “Cash Management Document” means any certificate, agreement or other document executed by any Loan Party in respect of the Cash Management Obligations of any Loan Party.   “Cash Management Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of such Person in respect of cash management services (including treasury, depository, overdraft, credit or debit card, electronic funds transfer and other cash management arrangements) provided after the date hereof (regardless of whether these or similar services were provided prior to the date hereof by the Administrative Agent, any Lender or any Affiliate of any of them) by the Administrative Agent, any Lender or any Affiliate of any of them in connection with this Agreement or any Loan Document (other than Cash Management Documents), including obligations for the payment of fees, interest, charges, expenses, attorneys’ fees and disbursements in connection therewith.   “Change of Control” means the occurrence of any of the following:   (a) the Permitted Holders ceasing to have the power, directly or indirectly, to vote or direct the voting of a majority of the Voting Stock of Holdings (or, at any time after the consummation of a Qualifying IPO of the Company, the Company); provided, however, that the occurrence of the foregoing event shall not be deemed a Change of Control if (i) at any time prior to the consummation of a Qualifying IPO of Holdings or the Company, and for any reason whatever, (A) the Permitted Holders otherwise have the right, directly or indirectly, to designate (and do so designate) a majority of the board of directors of Holdings or (B) the Permitted Holders own, directly or indirectly, of record and beneficially an amount of Voting Stock of Holdings equal to an amount more than forty percent (40%) of the amount of Voting Stock of Holdings owned, directly or indirectly, by the Permitted Holders of record and beneficially as of the Closing Date and such ownership by the Permitted Holders represents the largest single block of Voting Stock of Holdings held by any Person or related group for purposes of Section 13(d) of the Securities Exchange Act of 1934, or (ii) at any time after the consummation of a Qualifying IPO of Holdings or the Company, and for any reason whatsoever, (A) no “person” or “group” (as such terms are used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person and its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), excluding the Permitted Holders, shall   7 --------------------------------------------------------------------------------   become the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under such Act), directly or indirectly, of more than the greater of (x) thirty-five percent (35%) of the outstanding Voting Stock of Holdings or the Company, as applicable, and (y) the percentage of the then outstanding Voting Stock of Holdings or the Company, as applicable, owned, directly or indirectly, beneficially by the Permitted Holders, and (B) during any period of twelve (12) consecutive months, the board of directors of Holdings or the Company, as applicable, shall consist of a majority of the Continuing Directors; or   (b)           any “Change of Control” (or any comparable term) as defined in any Indenture (other than the Holdings Senior Note Indenture), the aggregate outstanding principal amount of which is in excess of $25,000,000; or   (c)           at any time prior to the consummation of a Qualifying IPO of the Company, the Company ceasing to be a direct wholly owned Subsidiary of Holdings.   “Citibank” means Citibank, N.A., a national banking association.   “Citicorp” has the meaning specified in the preamble to this Agreement.   “Closing Date” means the first date on which any Loan is made or any Letter of Credit is Issued or deemed Issued pursuant to Section 2.4(k) (Letters of Credit).   “Code” means the U.S. Internal Revenue Code of 1986, as amended.   “Co-Documentation Agents” means Credit Suisse Securities (USA) LLC, Bank of America, N.A. and General Electric Capital Corporation, in their capacities as co-documentation agents.   “Co-Investors” means Weston Presidio Capital IV, L.P., WPC Entrepreneur Fund II, L.P., SSB Capital Partners (Master Fund) I, L.P., Caisse de Depot et Placement du Quebec, Co-Investment Partners, L.P., CSFB Strategic Partners Holdings II, L.P., CSFB Strategic Partners Parallel Holdings II, L.P., CSFB Credit Opportunities Fund (Employee), L.P., CSFB Credit Opportunities Fund (Helios), L.P., Credit Suisse Anlagestiftung, Pearl Holding Limited, Partners Group Private Equity Performance Holding Limited, Vega Invest (Guernsey) Limited, Alpinvest Partners CS Investments 2003 C.V., Alpinvest Partners Later Stage Co-Investments Custodian II B.V., Alpinvest Partners Later Stage Co-Investments Custodian IIA B.V. and Screen Investors 2004, LLC and their respective Affiliates.   “Collateral” means all property and interests in property and proceeds thereof now owned or hereafter acquired by any Loan Party in or upon which a Lien is granted under any Collateral Document.   “Collateral Documents” means the Pledge and Security Agreement, the Mortgages, the Foreign Pledge Agreements and any other document executed and delivered by a Loan Party granting a Lien on any of its property to secure payment of the Secured Obligations.   “Commitment” means, with respect to any Lender, such Lender’s Revolving Credit Commitment, if any, such Lender’s Peso Commitment, if any, and such Lender’s Term Loan Commitment, if any, and “Commitments” means the aggregate Revolving Credit Commitments, Peso Commitments and Term Loan Commitments of all Lenders.   8 --------------------------------------------------------------------------------   “Company” has the meaning specified in the preamble to this Agreement.   “Company’s Accountants” means any of (i) PriceWaterhouseCoopers LLP, (ii) Ernst & Young LLP, KPMG LLP or Deloitte & Touche LLP or (iii) any other independent nationally-recognized public accountants selected by the Company and reasonably acceptable to the Administrative Agent.    “Compliance Certificate” has the meaning specified in Section 6.1(c) (Financial Statements).   “Consolidated” means, with respect to any Person, the consolidation of accounts of such Person and its Subsidiaries in accordance with GAAP.   “Consolidated Cash Taxes” means, with respect to the Company for any period, the Consolidated income, franchise and similar taxes, as determined in accordance with GAAP, to the extent the same are payable in cash with respect to such period (including to the extent applicable in respect of tax liabilities incurred in a prior period, including prior to the Closing Date).   “Consolidated Current Assets” means, with respect to any Person at any date, the total Consolidated current assets (other than cash and Cash Equivalents and current deferred tax assets) of such Person and its Subsidiaries at such date.   “Consolidated Current Liabilities” means, with respect to any Person at any date, all liabilities of such Person and its Subsidiaries at such date that should be classified as current liabilities on a Consolidated balance sheet of such Person and its Subsidiaries, but excluding, in the case of the Company the sum of (a) the principal amount of any current portion of long-term Indebtedness, (b) (without duplication of clause (a) above) the then outstanding principal amount of the Loans, (c) the principal amount of any short-term Indebtedness and (d) current deferred tax liabilities.   “Consolidated EBITDA” means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period increased (to the extent deducted in determining Consolidated Net Income) by the sum (without duplication) of: (i) all income taxes of such Person and its Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary gains or losses), franchise and capital and similar taxes, and any tax distributions made to Holdings in respect of consolidated, combined, unitary or affiliated returns and to pay franchise and capital taxes and other fees, taxes and expenses to maintain its corporate existence (net of comparable tax credits); (ii) interest expense of such Person and its Subsidiaries for such period (net of interest income); (iii) depreciation expense of such Person and its Subsidiaries for such period; (iv) amortization expense of such Person and its Subsidiaries for such period including amortization of capitalized debt issuance costs; (v) any call premium (or original issue discount) expenses (cash and non-cash) associated with the call or repurchases of Indebtedness; (vi) letter of credit fees and annual agency fees paid to the Administrative Agent; (vii) cash expense incurred in connection with any permitted investment, any equity issuance or debt issuance (in each case, whether or not consummated); (viii) to the extent actually reimbursed, expenses incurred to the extent covered by indemnification provisions in any agreement in connection with a Permitted Acquisition; (ix) to the extent covered by insurance under which the insurer has been properly notified and has not denied or contested coverage, expenses with respect to liability or casualty events or business   9 --------------------------------------------------------------------------------   interruption; (x) management, monitoring, consulting and advisory fees, related expenses, any other fees and expenses (or any accruals relating to such fees and related expenses) and any one-time termination fees in respect of a change of control or Qualifying IPO and related indemnities and reasonable out of pocket expenses, in each case, as permitted under this Agreement to be paid to the Permitted Holders; (xi) fees and expenses in connection with refinancings of Indebtedness permitted under this Agreement, including charges attributable to the write-off debt discount and the write-off of deferred financing fees; (xii)(A) non-recurring cash facilities relocation and consolidation costs and (B) other non-recurring fees, cash charges and other non-recurring cash expenses (including restructuring charges and severance costs), whether incurred prior to or after the Closing Date; (xiii) non-cash straight line rent operating lease adjustments reducing Consolidated Net Income, less any such adjustments increasing Consolidated Net Income, in each case as required under GAAP; (xiv) any other non-cash charges and expenses of such Person and its Subsidiaries for such period (including non-cash expenses recognized in accordance with SFAS No. 106); (xv) costs incurred in connection with the closing or disposition of any theatre or screen within a theatre during any applicable period; (xvi) costs incurred in connection with any newly opened theatre, any theatre newly acquired from other than an Affiliate and unconsummated theatre acquisitions from other than an Affiliate (but not to exceed $6,000,000 for any single unconsummated theatre acquisition), all as determined in accordance with GAAP; and (xvii) fees, expenses and other costs incurred in connection with the Transactions and the Prior Transactions, all determined on a Consolidated basis in accordance with GAAP, plus unrealized losses and minus unrealized gains in respect of Hedging Contracts, all as determined in accordance with GAAP; provided, however, that, in the case of the Company, the “Consolidated EBITDA” for the Fiscal Quarter ended on or around September 30, 2005 shall be deemed to equal $88,536,000.   “Consolidated Interest Expense” means, with respect to any Person for any period, without duplication, (i) the sum of (a) the interest expense of such Person and its Subsidiaries for such period as determined on a Consolidated basis in accordance with GAAP consistently applied, but excluding, to the extent included in interest expense, (A) amortization of fees and expenses associated with the consummation of the Transactions, (B) annual agency fees paid to the Administrative Agent, (C) costs associated with obtaining or terminating Hedging Contracts, (D) amortization of fees and expenses associated with any permitted investment, equity issuance or debt issuance (whether or not consummated), (E) pay-in-kind interest expense or other noncash interest expense (including as a result of the effects of purchase accounting) and (F) any payments made in respect of operating leases entered into by the Company or its Subsidiaries after May 21, 1998 and required to be reflected on a Consolidated balance sheet pursuant to EITF 97-10 and (b) the aggregate amount of the interest component of Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Subsidiaries during such period as determined on a Consolidated basis in accordance with GAAP consistently applied, less (ii) the interest income (exclusive of deferred financing fees) of such Person and its Subsidiaries for such period as determined on a Consolidated basis in accordance with GAAP consistently applied, and with respect to clauses (i) and (ii), only to the extent the same are paid or payable (or received or receivable) in cash with respect to such period; provided, however, that, Consolidated Interest Expense shall be calculated after giving effect to any payments made by such Person minus any payments received by such Person in respect of Hedging Contracts.   “Consolidated Net Income” means, with respect to any Person, for any period, the Consolidated net income (or loss) of such Person and its Subsidiaries for such period as   10 --------------------------------------------------------------------------------   determined in accordance with GAAP, adjusted, to the extent included in calculating such net income, by excluding (A) all after-tax extraordinary gains or losses (net of reasonable fees and expenses relating to the transaction giving rise thereto), (B) the cumulative effect of a change in accounting principles as well as any current period impact of new accounting pronouncements including those related to purchase accounting, (C) any net after-tax gains or losses attributable to the early extinguishment of Indebtedness, (D) any non-cash income or charges resulting from mark-to-market accounting under Statement of Financial Accounting Standard No. 52 – Foreign Currency Translation relating to indebtedness denominated in foreign currencies, (E) any non-cash impairment charges resulting from the application of Statement of Financial Accounting Standards No. 142 – Goodwill and Other Intangibles and No. 144 – Accounting for the Impairment or Disposal of Long-Lived Assets and the amortization of intangibles including arising pursuant to Statement of Financial Accounting Standards No. 141 – Business Combinations, (F) inventory purchase accounting adjustments and amortization, impairment and other non-cash charges (including asset revaluations) resulting from purchase accounting adjustments with respect to the Merger or any Permitted Acquisition, (G) non-cash compensation charges, including any such charges arising from stock options, restricted stock grants, SARs or other equity – incentive programs, reasonable cash compensation charges related to any SARs linked to the performance of Grupo Cinemex and its Subsidiaries and granted to or for management of the Company with direct oversight responsibility for the operations of Grupo Cinemex or management of or senior consultants to Grupo Cinemex or its Subsidiaries, reasonable customary cash charges resulting from purchase accounting to the extent such charges represent sales bonuses to management, and cash charges related to retention, signing or completion bonuses in connection with the Transactions, any Permitted Acquisition or any Asset Sale, (H) non-cash losses from Joint Ventures and non-cash minority interest reductions, (I) gains or losses incurred in connection with Asset Sales other than those in the ordinary course of business and (J) any expenses related to the Transactions; provided, however, that there shall be included the deferred revenue eliminated as a consequence of the application of purchase accounting adjustments due to the Transactions or any Permitted Acquisition for the fiscal periods that such revenue would otherwise have been recognized.   “Constituent Documents” means, with respect to any Person, (a) the articles of incorporation, certificate of incorporation, constitution or certificate of formation (or the equivalent organizational documents) of such Person, (b) the by-laws or operating agreement (or the equivalent governing documents) of such Person and (c) any document setting forth the manner of election or duties of the directors or managing members of such Person (if any) and the designation, amount or relative rights, limitations and preferences of any class or series of such Person’s Stock.   “Contaminant” means any material, substance or waste that is classified or regulated under any Environmental Law as hazardous, toxic, a contaminant or a pollutant or by other words of similar meaning, including any petroleum or petroleum-derived substance or waste, asbestos and polychlorinated biphenyls.   “Continuing Directors” shall mean the directors of Holdings (or the Company after a Qualifying IPO of the Company) on the Closing Date, as elected or appointed after giving effect to the Merger and the other transactions contemplated hereby, and each other director, if, in each case, such other director’s nomination for election to the board of directors of Holdings (or the Company after a Qualifying IPO of the Company) is recommended by a majority of the then Continuing Directors or such other director receives the vote of the Permitted Holders in his or   11 --------------------------------------------------------------------------------   her election by the stockholders of Holdings (or the Company after a Qualifying IPO of the Company).   “Contractual Obligation” of any Person means any obligation, agreement, undertaking or similar provision of any Security issued by such Person or of any agreement, undertaking, contract, lease, indenture, mortgage, deed of trust or other instrument (excluding a Loan Document) to which such Person is a party or by which it or any of its property is bound.   “Corporate Chart” means a corporate organizational chart, list or other similar document in each case in form reasonably acceptable to the Administrative Agent and setting forth, for each Person that is a Loan Party, that is subject to Section 7.11 (Additional Collateral and Guaranties) or that is a Subsidiary of any of them, (a) the full legal name of such Person (and any trade name, fictitious name or other name such Person may have had or operated under), (b) the jurisdiction of organization, the organizational number (if any) and the tax identification number (if any) of such Person, (c) the location of such Person’s chief executive office (or sole place of business) and (d) the number of shares of each class of such Person’s Stock authorized (if applicable), the number outstanding as of the date of delivery and the number and percentage of such outstanding shares for each such class owned (directly or indirectly) by any Loan Party or any Subsidiary of any of them.   “Debt Issuance” means the incurrence of Indebtedness of the type specified in clause (a) or (b) of the definition of “Indebtedness” by the Company or any of its Subsidiaries.   “Default” means any event that, with the passing of time or the giving of notice or both, would become an Event of Default.   “Deferred Prepayment Amount” means, with respect to any Net Cash Proceeds of any Deferred Prepayment Event, the portion of such Net Cash Proceeds subject to a Deferred Prepayment Notice.   “Deferred Prepayment Date” means, with respect to any Net Cash Proceeds of any Deferred Prepayment Event, the earlier of (a) the date occurring 365 days after such Deferred Prepayment Event or, if a definitive letter of intent or agreement has been executed during such 365 day period with respect to the reinvestment of such Net Cash Proceeds, the date occurring six months after the date of such letter of intent or agreement, as the case may be, and (b) the date that is five Business Days after the date on which the Company shall have notified the Administrative Agent of (i) the Company’s determination not to reinvest in assets useful in the Company’s or a Subsidiary’s business or (ii) the determination by the applicable Subsidiary of the Company not to repay the applicable Indebtedness with all or any portion of the relevant Deferred Prepayment Amount for such Net Cash Proceeds.   “Deferred Prepayment Event” means any Asset Sale or Property Loss Event in respect of which the Company has delivered a Deferred Prepayment Notice.   “Deferred Prepayment Notice” means a written notice executed by a Responsible Officer of the Company stating that no Default or Event of Default has occurred and is continuing and that the Company (directly or indirectly through one of its Subsidiaries) intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or Property Loss Event to acquire, upgrade, improve, repair or replace assets useful in its or one of its Subsidiaries’ businesses.   12 --------------------------------------------------------------------------------   “Deposit Account” has the meaning given to such term in the UCC.   “Disclosure Documents” means, collectively, the Confidential Information Memorandum dated January 2006 and all other confidential information memoranda and related written materials prepared in connection with the syndication of the Facilities.   “Dispose” or “Disposition” has the meaning specified in Section 8.4 (Sale of Assets).   “Disqualified Stock” means with respect to any Person, any Stock that, by its terms (or by the terms of any Security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is exchangeable for Indebtedness of such Person, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the Term Loan Maturity Date.   “Documentary Letter of Credit” means any Letter of Credit that is drawable upon presentation of documents evidencing the sale or shipment of goods purchased by the Company or any of its Subsidiaries in the ordinary course of its business.   “Dollar” and the sign “$” each mean the lawful money of the United States of America.   “Dollar Equivalent” of any amount means, at the time of determination thereof, (a) if such amount is expressed in Dollars, such amount, (b) if such amount is expressed in Pesos, the equivalent of such amount in Dollars determined by using the Peso Spot Rate, (c) if such amount is expressed in any other Alternative Currency, the equivalent of such amount in Dollars determined by using the rate of exchange quoted by Citibank in New York, New York at 11:00 a.m. (New York time) on the date of determination (or, if such date is not a Business Day, the last Business Day prior thereto) to prime banks in New York for the spot purchase in the New York foreign exchange market of such amount of Dollars with such Alternative Currency and (d) if such amount is denominated in any other currency, the equivalent of such amount in Dollars as determined by the Administrative Agent using any method of determination it deems appropriate.    “Dollar Swing Loan” has the meaning specified in Section 2.3 (Swing Loans).   “Dollar Swing Lender” means Citicorp or any other Revolving Credit Lender that becomes the Administrative Agent or agrees, with the approval of the Administrative Agent and the Company, to act as the Dollar Swing Lender hereunder, in each case in its capacity, as the Dollar Swing Lender hereunder.   “Dollar Swing Loan Sublimit” means $20,000,000.   “Domestic Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Domestic Lending Office” opposite its name on Schedule II (Applicable Lending Offices and Addresses for Notices) or on the Assignment and Acceptance by which it became a Lender or such other office of such Lender as such Lender may from time to time specify to the Company and the Administrative Agent.   13 --------------------------------------------------------------------------------   “Domestic Person” means any “United States person” under and as defined in Section 770l(a)(30) of the Code.   “Domestic Loan Party” means any Loan Party organized under the laws of any state of the United States of America or the District of Columbia.   “Domestic Subsidiary” means any Subsidiary of the Company organized under the laws of any state of the United States of America or the District of Columbia.   “Eligible Assignee” means (a) a Lender or an Affiliate or Approved Fund of any Lender, (b) a commercial bank having total assets whose Dollar Equivalent exceeds $5,000,000,000, (c) a finance company, insurance company or any other financial institution or Fund, in each case reasonably acceptable to the Administrative Agent and regularly engaged in making, purchasing or investing in loans and having a net worth, determined in accordance with GAAP, whose Dollar Equivalent exceeds $250,000,000 (or, to the extent net worth is less than such amount, a finance company, insurance company, other financial institution or Fund, reasonably acceptable to the Administrative Agent and the Company) or (d) a savings and loan association or savings bank organized under the laws of the United States or any State thereof having a net worth, determined in accordance with GAAP, whose Dollar Equivalent exceeds $250,000,000; provided, however, that the Persons designated by the Company in writing to the Administrative Agent on or prior to the Closing Date shall not be deemed an “Eligible Assignee.”   “Entitlement Holder” has the meaning given to such term in the UCC.   “Entitlement Order” has the meaning given to such term in the UCC.   “Environmental Laws” means all applicable Requirements of Law now or hereafter in effect and as amended or supplemented from time to time, relating to pollution or the protection of human health, the environment or natural resources or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.); the Hazardous Material Transportation Act, as amended (49 U.S.C. § 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. § 136 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. § 6901 et seq.); the Toxic Substance Control Act, as amended (15 U.S.C. § 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. § 7401 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. § 1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. § 651 et seq.); the Safe Drinking Water Act, as amended (42 U.S.C. § 300f et seq.); and each of their state and local counterparts or equivalents and any transfer of ownership notification or approval statute, including the Industrial Site Recovery Act (N.J. Stat. Ann. § 13:1K-6 et seq.).   “Environmental Liabilities and Costs” means, with respect to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages (but excluding any punitive, consequential or treble damages), costs and expenses (including all fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines and penalties, whether contingent or otherwise, arising under any Environmental Law, Permit, order or agreement with any Governmental Authority or other Person, in each case relating to any environmental, health or safety condition or to any Release or threatened Release   14 --------------------------------------------------------------------------------   and resulting from the past, present or future operations of, or ownership of property by, such Person or any of its Subsidiaries or exposure to any Contaminant.   “Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs.   “Equity Issuance” means the issue or sale of any Stock of Holdings, the Company or any Subsidiary of the Company by Holdings, the Company or any Subsidiary of the Company to any Person other than Holdings, the Company or any Subsidiary of the Company.   “ERISA” means the United States Employee Retirement Income Security Act of 1974.   “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control or treated as a single employer with the Company or any of its Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code.   “ERISA Event” means (a) a reportable event described in Section 4043(c)(1), (2), (3), (5), (6), (8) or (9) of ERISA with respect to a Title IV Plan, other than events for which the thirty (30) day notice period has been waived, (b) the withdrawal of the Company or any of its Subsidiaries or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA, (c) the complete or partial withdrawal of the Company or any of its Subsidiaries or any ERISA Affiliate from any Multiemployer Plan, (d) notice of reorganization or insolvency of a Multiemployer Plan, (e) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA, (f) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC, (g) the failure to make any required contribution to a Title IV Plan or Multiemployer Plan, (h) the imposition of a lien under Section 412 of the Code or Section 302 of ERISA on the Company or any of its Subsidiaries or any ERISA Affiliate or (i) any other event or condition that might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA.   “Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Federal Reserve Board.   “Eurodollar Base Rate” means, with respect to any Interest Period for any Eurodollar Rate Loan, the rate determined by the Administrative Agent to be the offered rate for deposits in Dollars for the applicable Interest Period appearing on the Dow Jones Markets Telerate Page 3750 as of 11:00 a.m., London time, on the second full Business Day next preceding the first day of each Interest Period.  In the event that such rate does not appear on the Dow Jones Markets Telerate Page 3750 (or otherwise on the Dow Jones Markets screen), the Eurodollar Base Rate for the purposes of this definition shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent, or, in the absence of such availability, the Eurodollar Base Rate shall be the rate of interest determined by the Administrative Agent to be the rate per annum at which deposits in Dollars are offered by the principal office of Citibank in London to major banks in the London interbank market at 11:00 a.m. (London time) two Business Days before the first day of   15 --------------------------------------------------------------------------------   such Interest Period in an amount substantially equal to the Eurodollar Rate Loan of Citibank for a period equal to such Interest Period.   “Eurodollar Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Eurodollar Lending Office” opposite its name on Schedule II (Applicable Lending Offices and Addresses for Notices) or on the Assignment and Acceptance by which it became a Lender (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify to the Company and the Administrative Agent.   “Eurodollar Rate” means, with respect to any Interest Period for any Eurodollar Rate Loan, an interest rate per annum equal to the rate per annum obtained by dividing (a) the Eurodollar Base Rate by (b)(i) a percentage equal to 100% minus (ii) the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the Eurodollar Rate is determined) having a term equal to such Interest Period.   “Eurodollar Rate Loan” means any Loan that, for an Interest Period, bears interest based on the Eurodollar Rate.   “Event of Default” has the meaning specified in Section 9.1 (Events of Default).   “Excess Cash Flow” means, with respect to the Company and its Subsidiaries on a Consolidated basis for any period, an amount equal to (a) Consolidated EBITDA plus (b) the excess, if any, of the Working Capital at the beginning of such period over the Working Capital at the end of such period minus (c) without duplication:   (i)            Capital Expenditures to the extent permitted by this Agreement and paid in cash;   (ii)           total Consolidated Interest Expense paid in cash;   (iii)          Consolidated Cash Taxes paid or that will be paid within six months after the end of such period (which payments would have been deducted in calculating Excess Cash Flow for such period had they been made during such period); provided, however, that with respect to Consolidated Cash Taxes that will be paid within six months after the end of such period, (w) the Company shall have established adequate reserves therefor on the books of the Company in conformity with GAAP, (x) the Company shall deliver a certificate to the Administrative Agent not later than 90 days after the end of such period, signed by a Responsible Officer of the Company, describing the nature and amount of such Consolidated Cash Taxes and certifying that such Consolidated Cash Taxes will be paid within six months after the end of such period, (y) if such payment is not made within six months after the end of such period, then the Company shall promptly make an optional prepayment of Term Loans in accordance with Section 2.8 (Optional Prepayments) in an amount, if positive, equal to (A) the amount that would have been paid pursuant to Section 2.9(b) (Mandatory Prepayments)   16 --------------------------------------------------------------------------------   with respect to such period but for this clause (iii) minus (B) the amount of the payment made pursuant to Section 2.9(b) (Mandatory Prepayments) with respect to such fiscal period and (z) any deduction from Excess Cash Flow made with respect to such Consolidated Cash Taxes pursuant to this clause (iii) in such period shall not be deducted in computing Excess Cash Flow for the period in which such Consolidated Cash Taxes are paid;   (iv)          the aggregate principal amount of Indebtedness repaid or prepaid, excluding (A) Indebtedness in respect of Revolving Loans, Letters of Credit and any other Indebtedness that consists of a revolving line of credit, except to the extent that the commitments under such line of credit are permanently reduced by the amount of such prepayment, (B) Term Loans prepaid pursuant to Sections 2.8 (Optional Prepayments) and 2.9 (Mandatory Prepayments) and (C) repayments or prepayments of Indebtedness that, in accordance with GAAP, constitutes (or when incurred constituted) a long-term liability and current maturities of such long-term liabilities financed by incurring other such long-term Indebtedness;   (v)           Restricted Payments made in cash to the extent permitted under Section 8.5(c), (d), (e), (g) or (h) (Restricted Payments);   (vi)          letter of credit and commitment or facility fees (including the Unused Commitment Fee and similar fees in respect of any other revolving or committed line of credit);   (vii)         proceeds received from insurance claims with respect to casualty events or business interruption which reimburse prior business expenses to the extent such expenses were added to Consolidated Net Income in determining Consolidated EBITDA;   (viii)        cash payments made in satisfaction of non-current liabilities (other than Indebtedness);   (ix)           cash expenses incurred in connection with the Transactions or, to the extent permitted hereunder, any Investment permitted under Section 8.3 (Investments), Equity Issuance or Debt Issuance (whether or not consummated), or early extinguishment of Indebtedness;   (x)            fees and expenses in connection with exchanges or refinancings permitted by Section 8.5(f) (Restricted Payments);   (xi)           cash indemnity payments received pursuant to indemnification provisions in any agreement in connection with any Permitted Acquisition or any other Investment permitted hereunder (or in any similar agreement related to any other acquisition consummated prior to the Closing Date);   (xii)          extraordinary and non-recurring cash charges to the extent included in determining Consolidated EBITDA;   (xiii)         cash expenses incurred in connection with deferred compensation arrangements in connection with the Transactions;   17 --------------------------------------------------------------------------------   (xiv)        management fees paid under Section 8.8(d) (Transactions with Affiliates);   (xv)         cash from operations used to consummate a Permitted Acquisition or an Investment permitted under Section 8.3(e), (i) or (k) (Investments);   (xvi)        to the extent added to Consolidated Net Income in determining Consolidated EBITDA, losses from discontinued operations;   (xvii)       cash expenditures made in respect of Hedging Contracts to the extent not reflected in the computation of Consolidated EBITDA or Consolidated Interest Expense;   (xviii)      cash compensation expenses related to any SARs linked to the performance of Grupo Cinemex and its Subsidiaries granted to or for management of the Company with direct oversight responsibility for the operations of or senior consultants to Grupo Cinemex or management of Grupo Cinemex and its subsidiaries, cash expenses resulting from purchase accounting to the extent such expenses represent sales bonuses to management, and cash expenses related to retention, signing or completion bonuses in connection with the Transactions, any Permitted Acquisition or any Disposition;   (xix)         to the extent not deducted in the computation of Net Cash Proceeds in respect of any asset disposition or condemnation giving rise thereto, the amount of any mandatory prepayment of Indebtedness (other than Indebtedness hereunder or under any other Loan Document), together with any interest, premium or penalties required to be paid (and actually paid) in connection therewith (in the case of the foregoing clauses (c)(i) through (xix), to the extent made, paid, incurred or for, as the case may be, during such period);   (xx)          payments with respect to contingent contractual obligations required to be paid in the six months after the end of such period (which payments would have been deducted in calculating Excess Cash Flow for such period had they been made during such period); provided, however, that (x) the Company shall deliver a certificate to the Administrative Agent not later than 90 days after the end of such period, signed by a Responsible Officer of the Company, describing the nature and amount of such contingent contractual obligation and certifying that such contingent contractual obligation will be paid within six months after the end of such period, (y) if such payment is not made within six months after the end of such period, then the Company shall promptly make an optional prepayment of Term Loans in accordance with Section 2.8 (Optional Prepayments) in an amount, if positive, equal to (A) the amount that would have been paid pursuant to Section 2.9(b) (Mandatory Prepayments) with respect to such period but for this clause (xx) minus (B) the amount of the payment made pursuant to Section 2.9(b) (Mandatory Prepayments) with respect to such fiscal period and (z) any deduction from Excess Cash Flow made with respect to contingent contractual obligations pursuant to this clause (xx) in such period shall not be deducted in computing Excess Cash Flow for the period in which such contingent obligations are paid; and   (xxi)         the excess, if any, of the Working Capital at the end of such period over the Working Capital at the beginning of such period.   18 --------------------------------------------------------------------------------   “Existing AMC Credit Agreement” means the Second Amended and Restated Credit Agreement, dated as of March 26, 2004 and as amended, supplemented or otherwise modified from time to time, among the Company, the institutions party thereto as lenders and issuing banks and The Bank of Nova Scotia, as administrative agent.   “Existing Credit Agreements” means the Existing AMC Credit Agreement and the Existing Loews Credit Agreement.   “Existing Loews Credit Agreement” means that certain Credit Agreement, dated as of July 30, 2004 and as amended, supplemented or otherwise modified from time to time, among the Loews Cineplex Entertainment Corporation, Grupo Cinemex and Cadena, LCE Holdco LLC, the institutions party thereto as lenders and issuing banks and Citicorp, as administrative agent.   “Facilities” means (a) the Term Loan Facility and (b) the Revolving Credit Facility.   “Facility Increase” means any Revolving Commitment Increase or Term Loan Increase.   “Facility Increase Date” has the meaning specified in Section 2.1(c)(i) (Facility Increases).   “Fair Market Value” means (a) with respect to any asset or group of assets (other than a marketable Security) at any date, the value of the consideration obtainable in a sale of such asset at such date assuming a sale by a willing seller to a willing purchaser dealing at arm’s length and arranged in an orderly manner over a reasonable period of time having regard to the nature and characteristics of such asset, as reasonably determined by a Responsible Officer of the Company or, if such asset shall have been the subject of a relatively contemporaneous appraisal by an independent third party appraiser, the basic assumptions underlying which have not materially changed since its date, the value set forth in such appraisal and (b) with respect to any marketable Security at any date, the closing sale price of such Security on the Business Day next preceding such date, as appearing in any published list of any national securities exchange or the NASDAQ Stock Market or, if there is no such closing sale price of such Security, the final price for the purchase of such Security at face value quoted on such Business Day by a financial institution of recognized standing regularly dealing in Securities of such type and selected by the Administrative Agent.   “Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.   “Federal Reserve Board” means the Board of Governors of the United States Federal Reserve System, or any successor thereto.   19 --------------------------------------------------------------------------------   “Fee Letter” means the Fee Letter, dated June 20, 2005, addressed to the Company from the Arrangers and Credit Suisse, Cayman Islands Branch, and accepted by the Company on June 20, 2005, with respect to certain fees to be paid from time to time to the Arrangers and Credit Suisse, Cayman Islands Branch.   “Financial Statements” means the financial statements of the Company and its Subsidiaries delivered in accordance with Section 4.4 (Financial Statements) and Section 6.1 (Financial Statements).   “Fiscal Quarter” means each of the three month periods ending on or around March 31, June 30, September 30 and December 31.   “Fiscal Year” means the twelve month period ending on or around March 31.   “Foreign Pledge Agreements” means, collectively, (i) the Pledge Agreement to be entered into between LCE Mexican Holdings, Inc. and the Administrative Agent with respect to the Stock of Symphony Subsisting Vehicle, S. de R.L. de C.V. and (ii) the Pledge Agreement to be entered into among LCE Acquisition Sub, Inc., the Administrative Agent and LCE Lux Holdco S.a r.l. with respect to the Stock of LCE Lux Holdco S.a r.l.   “Foreign Subsidiary” means any Subsidiary of the Company that is not a Domestic Subsidiary.   “Fund” means any Person (other than a natural Person) that is or will be engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course.   “GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States.   “Governmental Authority” means any nation, sovereign or government, any state or other political subdivision thereof and any entity or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any central bank or stock exchange.   “Grupo Cinemex” has the meaning specified in the preamble to this Agreement.   “Guarantor” means the Company and each Subsidiary of the Company party to, or that becomes party to, the Guaranty.   “Guaranty” means the guaranty, in substantially the form of Exhibit H (Form of Guaranty), executed by the Guarantors.   “Guaranty Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any Indebtedness of another Person, if the purpose or intent of such Person in incurring the Guaranty Obligation is to provide assurance to the obligee of such Indebtedness that such Indebtedness will be paid or discharged,   20 --------------------------------------------------------------------------------   that any agreement relating thereto will be complied with, or that any holder of such Indebtedness will be protected (in whole or in part) against loss in respect thereof, including (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of Indebtedness of another Person and (b) any liability of such Person for Indebtedness of another Person through any agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise acquire such Indebtedness or any security therefor or to provide funds for the payment or discharge of such Indebtedness (whether in the form of a loan, advance, stock purchase, capital contribution or otherwise), (ii) to maintain the solvency or any balance sheet item, level of income or financial condition of another Person, (iii) to make take-or-pay or similar payments, if required, regardless of non-performance by any other party or parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss or (v) to supply funds to, or in any other manner invest in, such other Person (including to pay for property or services irrespective of whether such property is received or such services are rendered), if in the case of any agreement described under clause (b)(i), (ii), (iii), (iv) or (v) above the primary purpose or intent thereof is to provide assurance that Indebtedness of another Person will be paid or discharged, that any agreement relating thereto will be complied with or that any holder of such Indebtedness will be protected (in whole or in part) against loss in respect thereof.  The amount of any Guaranty Obligation shall be equal to the amount of the Indebtedness so guaranteed or otherwise supported.  The term “Guarantee” used as a verb herein has a corresponding meaning.   “Hedging Contracts” means all Interest Rate Contracts, foreign exchange contracts, currency swap or option agreements, forward contracts, commodity swap, purchase or option agreements, other commodity price hedging arrangements and all other similar agreements or arrangements designed to alter the risks of any Person arising from fluctuations in interest rates, currency values or commodity prices.   “Holdings” means Marquee Holdings Inc., a Delaware corporation.   “Holdings Senior Note Indenture” means the Indenture, dated as of August 18, 2004, pursuant to which the Holdings Senior Notes were issued between Holdings and HSBC, as the initial trustee, as amended, supplemented or otherwise modified and in effect from time to time in accordance with Section 8.11 (Modification of Debt Agreements).   “Holdings Senior Notes” means Holdings’ 12% Senior Discount Notes due 2014 issued pursuant to the Holdings Senior Note Indenture in the original principal amount of $304,000,000 and any additional notes issued pursuant to the Holdings Senior Note Indenture which have terms (other than interest rate, issuance price, issuance date, series and title) which are the same as the Holdings Senior Note Indenture.   “HSBC” means HSBC Bank USA, National Association.   “Incur”, “Incurrence” or “Incurred” has the meaning specified in the Senior Notes.   “Indebtedness” means, with respect to any Person, without duplication, (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes or other similar instruments, (c) all Capital Lease Obligations, (d) all obligations issued or assumed   21 --------------------------------------------------------------------------------   as the deferred purchase price of property (other than current and non-current accrued expenses, deferred revenue, all employee retirement obligations, and trade debt incurred in the ordinary course of business) which would appear as liabilities on a balance sheet of such Person, all conditional sale obligations (as determined under GAAP) and all obligations under any title retention agreement (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (e) all obligations for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transactions, (f) all obligations of the type referred to in clauses (a) through (e) above of other Persons for the payment of which such Person is directly or indirectly responsible or liable as obligor, guarantor or otherwise (limited to the stated or determinable amount of the related primary obligation, or portion thereof, or if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith), and (g) all obligations of the type referred to in clauses (a) through (f) above of other Persons which are secured by any lien on any property or asset of such Person, the amount of such obligation being deemed to be the lesser of the value of such property or asset or the amount of the obligation so secured; provided, however, that “Indebtedness” shall not include (i) any Non-Recourse Indebtedness, any obligations under any operating leases (as determined under GAAP as in effect on the Closing Date), trade accounts payable arising in the ordinary course of business and trade letters of credit issued in support of trade accounts payable arising in the ordinary course of business, (ii) regardless of any change in GAAP after the Closing Date, amounts owing in respect of preferred stock (other than Disqualified Stock issued after the Closing Date that would be treated as Indebtedness under GAAP as in effect at such time), (iii) any earn-out obligation or post closing payment adjustment until such obligation becomes certain of payment, (iv) any deferred compensation arrangements, (v) any non-compete or consulting obligations incurred in connection with the Transactions, any Permitted Acquisition or any similar transaction entered into prior to the Closing Date or (vi) items that would appear as a liability upon a balance sheet prepared in accordance with GAAP as a result of the application of EITF 97-10 “The Effects of Lessee Involvement in Asset Construction”; provided, further, that the amount of Indebtedness (x) for which recourse is limited either to a specified amount or to an identified asset of such Person shall be deemed to be equal to such specified amount or the fair market value of such identified asset, as the case may be, and (y) shall be determined by the principal amount thereof (or in the case of Indebtedness issued at a discount, the accreted amount) thereof.   “Indemnified Matter” has the meaning specified in Section 11.4 (Indemnities).   “Indemnitee” has the meaning specified in Section 11.4 (Indemnities).   “Indenture” means each of the Holdings Senior Note Indenture, the Senior Note Indentures, the Subordinated Note Indentures and other indentures, agreements or similar documents evidencing senior or subordinated notes or other debt securities of the Company or any of its Subsidiaries.   “Interest Period” means (a) in the case of any Eurodollar Rate Loan, (i) initially, the period commencing on the date such Eurodollar Rate Loan is made or on the date of conversion of a Base Rate Loan to such Eurodollar Rate Loan and ending one, two, three or six months thereafter (or if deposits of such duration are available to or agreed to by all applicable Lenders, ending nine or twelve months thereafter), as selected by the Company in its Notice of Borrowing or Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.2 (Borrowing Procedures) or Section 2.11 (Conversion/Continuation Option) and (ii) thereafter, if such Loan is continued, in whole or in part, as a Eurodollar Rate Loan pursuant to   22 --------------------------------------------------------------------------------   Section 2.11 (Conversion/Continuation Option), a period commencing on the last day of the immediately preceding Interest Period therefor and ending one, two, three or six months thereafter (or if deposits of such duration are available to or agreed to by all applicable Lenders, ending nine or twelve months thereafter), as selected by the Company in its Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.11 (Conversion/Continuation Option) and (b) in the case of any Peso TIIE Rate Loan, the period commencing on the date such Peso TIIE Rate Loan is made or on the date of conversion of a Peso Base Rate Loan to such Peso TIIE Rate Loan and ending on the 28th day thereafter; provided, however, that all of the foregoing provisions relating to Interest Periods are subject to the following:   (i)            if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless the result of such extension would be to extend such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day;   (ii)           any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month;   (iii)          the Borrowers may not select any Interest Period that ends after the date of a scheduled principal payment on the Loans as set forth in Article II (The Facilities) unless, after giving effect to such selection, the aggregate unpaid principal amount of the Loans for which Interest Periods end after such scheduled principal payment shall be equal to or less than the principal amount to which the Loans are required to be reduced after such scheduled principal payment is made;   (iv)          the Borrowers may not select any Interest Period in respect of (A) Eurodollar Rate Loans having an aggregate principal amount of less than $1,000,000 and (B) Peso TIIE Rate Loans having an aggregate principal amount of less than P5,000,000; and   (v)           there shall be outstanding at any one time no more than 20 Interest Periods in the aggregate for all Loans.   “Interest Rate Contracts” means all interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and interest rate insurance.   “International Assets” means (a) theatres located outside the United States and Canada, including the Mexican Assets and (b) Stock of Persons (other than AMC Entertainment International, Inc., a Delaware corporation) which own or operate theatres located outside the United States and Canada, including the Mexican Assets, in each case, together with all property and assets which are a part of or related to such theatres, including but not limited to cash, accounts receivable, real estate, leases, tenant improvements, furniture, fixtures and equipment, net of any accounts payable, accrued expenses and other current and long-term liabilities related to such theatres.   23 --------------------------------------------------------------------------------   “Investment” means, with respect to any Person, (a) any purchase or other acquisition by such Person of (i) any Security issued by, (ii) a beneficial interest in any Security issued by, or (iii) any other equity ownership interest in, any other Person, (b) any purchase by such Person of all or a significant part of the assets of a business conducted by any other Person, or all or substantially all of the assets constituting the business of a division, branch or other unit operation of any other Person, (c) any loan, advance (other than deposits with financial institutions available for withdrawal on demand, prepaid expenses, accounts receivable and similar items made or incurred in the ordinary course of business as presently conducted) or capital contribution by such Person to any other Person, including all Indebtedness of any other Person to such Person arising from a sale of property by such Person other than in the ordinary course of its business, and (d) any Guaranty Obligation incurred by such Person in respect of Indebtedness of any other Person.   “IRS” means the Internal Revenue Service of the United States or any successor thereto.   “Issue” means, with respect to any Letter of Credit, to issue (including any deemed issuance pursuant to Section 2.4(k) (Letters of Credit)), extend the expiry of, renew or increase the maximum face amount (including by deleting or reducing any scheduled decrease in such maximum face amount) of, such Letter of Credit.  The terms “Issued” and “Issuance” shall have a corresponding meaning.   “Issuer” means each Lender or Affiliate of a Lender that (a) is listed on the signature pages hereof as an “Issuer” or (b) hereafter becomes an Issuer with the approval of the Administrative Agent and the Company by agreeing pursuant to an agreement with and in form and substance satisfactory to the Administrative Agent and the Company to be bound by the terms hereof applicable to Issuers.   “Joint Venture” means (a) any Person which would constitute an “equity method investee” of the Company or any of its Subsidiaries, (b) any other Person designated by the Company in writing to the Administrative Agent as a “Joint Venture” for purposes of this Agreement and at least 50% but less than 100% of whose equity interests are directly owned by the Company or any of its Subsidiaries, and (c) any Person in whom the Company or any of its Subsidiaries beneficially owns any Stock that is not a Subsidiary.   “J.P. Morgan Partners Group” means (i) J.P. Morgan Partners, LLC and (ii) any Affiliates of J.P. Morgan Partners, LLC.   “Land” of any Person means all of those plots, pieces or parcels of land now owned, leased or hereafter acquired or leased or purported to be owned, leased or hereafter acquired or leased (including, in respect of the Loan Parties, as reflected in the most recent Financial Statements) by such Person.   “Leases” means, with respect to any Person, all of those leasehold estates in Real Property of such Person, as lessee, as such may be amended, supplemented or otherwise modified from time to time.   “Lender” means the Swing Lender and each other financial institution or other entity that (a) is listed on the signature pages hereof as a “Lender” or (b) from time to time becomes a party hereto by execution of an Assignment and Acceptance.   24 --------------------------------------------------------------------------------   “Letter of Credit” means any letter of credit Issued pursuant to Section 2.4 (Letters of Credit).   “Letter of Credit Obligations” means, at any time, the Dollar Equivalent of the aggregate of all liabilities at such time of the Company to all Issuers with respect to Letters of Credit, whether or not any such liability is contingent, including, without duplication, the sum of (a) the Reimbursement Obligations at such time and (b) the Letter of Credit Undrawn Amounts at such time.   “Letter of Credit Reimbursement Agreement” has the meaning specified in Section 2.4(a) (Letters of Credit).   “Letter of Credit Request” has the meaning specified in Section 2.4(c) (Letters of Credit).   “Letter of Credit Sublimit” means $50,000,000.   “Letter of Credit Undrawn Amounts” means, at any time, the aggregate undrawn face amount of all Letters of Credit outstanding at such time.   “Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, lien (statutory or other), security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever intended to assure payment of any Indebtedness or the performance of any other obligation, including any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease and any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction naming the owner of the asset to which such Lien relates as debtor.   “Loan” means any loan made by any Lender pursuant to this Agreement.   “Loan Documents” means, collectively, this Agreement, the Notes (if any), the Guaranty, the Fee Letter, each Letter of Credit Reimbursement Agreement, each Hedging Contract between any Loan Party and any Person that was a Lender or an Affiliate of a Lender at the time it entered into such Hedging Contract, each Cash Management Document, the Collateral Documents and each certificate, agreement or document executed by a Loan Party and delivered to the Administrative Agent or any Lender in connection with or pursuant to any of the foregoing.   “Loan Party” means each Borrower, each Guarantor and each other Subsidiary of the Company that executes and delivers a Loan Document.   “Local GAAP” means, with respect to any Foreign Subsidiary, generally accepted accounting principals in the jurisdictions in which such Person is organized and its principal business operations are conducted, consistently applied.   “Local Time” means, with respect to (a) any Loan denominated in Dollars, New York time and (b) any Loan denominated in Pesos, Mexico City time.   “Loews” means Loews Cineplex Entertainment Corporation, a Delaware corporation.   25 --------------------------------------------------------------------------------   “Loews Holdings” means LCE Holdings Inc., a Delaware corporation.   “Material Adverse Change” means a material adverse change in any of (a) the condition (financial or otherwise), business, operations or properties of the Company and its Subsidiaries, taken as a whole, (b) the legality, validity or enforceability of any Loan Document, (c) the perfection or priority of the Liens granted pursuant to the Collateral Documents, (d) the ability of the Borrowers to repay the Obligations or of the other Loan Parties to perform their respective obligations under the Loan Documents or (e) the rights and remedies of the Agents, the Lenders or the Issuers under the Loan Documents.   “Material Adverse Effect” means an effect that results in or causes, or could reasonably be expected to result in or cause, a Material Adverse Change.   “Merger” means, collectively, the merger of Loews with and into the Company and the merger of Loews Holdings with and into Holdings pursuant to the Merger Agreement.   “Merger Agreement” means the Agreement and Plan of Merger, dated as of June 20, 2005, between Holdings and Loews Holdings.   “Mexican Assets” means (a) the property and assets of Grupo Cinemex and Yelmo Cineplex and (b) the Stock of Grupo Cinemex and Yelmo Cineplex, in each case, together with all property and assets which are a part of or related to such entities, including but not limited to cash, accounts receivable, real estate, leases, tenant improvements, furniture, fixtures and equipment, net of any accounts payable, accrued expenses and other current and long-term liabilities related to such entities.   “Mexican Borrowers” has the meaning specified in the preamble to this Agreement.   “Mexican Facility” means the Peso Commitments and the provisions herein related to the Peso Loans.   “Mexican Facility Agent” has the meaning specified in the preamble to this Agreement.   “Mexican Lender” means each Revolving Credit Lender (or Affiliate thereof) that has a Peso Commitment or holds a Peso Loan and, at the time such Lender becomes a Mexican Lender, whether directly or through an Affiliate thereof, may make Peso Loans to the Mexican Borrowers, the interest payments with respect to which can be made free of withholding taxes.   “Mexican Lending Office” means, with respect to any Mexican Lender, the office of such Lender specified as its “Mexican Lending Office” opposite its name on Schedule II (Applicable Lending Offices and Addresses for Notices) or on the Assignment and Acceptance by which it became a Mexican Lender or such other office of such Lender as such Lender may from time to time specify to the Company and the Administrative Agent.   “Mexico” means the United Mexican States.   “Moody’s” means Moody’s Investors Service, Inc.   26 --------------------------------------------------------------------------------   “Mortgage Supporting Documents” means, with respect to a Mortgage for a parcel of Real Property, each the following:   (a)           (i) evidence in form and substance reasonably satisfactory to the Administrative Agent that the recording of counterparts of such Mortgage in the recording offices specified in such Mortgage will create a valid and enforceable first priority lien on property described therein in favor of the Administrative Agent for the benefit of the Secured Parties (or in favor of such other trustee as may be required or desired under local law) subject only to (A) Liens permitted under Section 8.2 (Liens, Etc.) and (B) such other Liens as the Administrative Agent may reasonably approve and (ii) an opinion of counsel in each state in which any such Mortgage is to be recorded in form and substance and from counsel reasonably satisfactory to the Administrative Agent;   (b)           (i) a Mortgagee’s Title Insurance Policy dated a date reasonably satisfactory to the Administrative Agent, which shall (A) be in an amount not less than the appraised value (determined by reference to an appraisal) of such parcel of Real Property in form and substance satisfactory to the Administrative Agent, (B) be issued at ordinary rates, (C) insure that the Lien granted pursuant to the Mortgage insured thereby creates a valid first Lien on such parcel of Real Property free and clear of all defects and encumbrances, except for Liens permitted under Section 8.2 (Liens, Etc.) and for such defects and encumbrances as may be approved by the Administrative Agent, (D) name the Administrative Agent for the benefit of the Secured Parties as the insured thereunder, (E) be in the form of ALTA Loan Policy - 1992 (or such local equivalent thereof as is reasonably satisfactory to the Administrative Agent), (F) contain a comprehensive lender’s endorsement (including, but not limited to, a revolving credit endorsement and a floating rate endorsement), (G) be issued by Chicago Title Insurance Company, First American Title Insurance Company, Lawyers Title Insurance Corporation or any other title company reasonably satisfactory to the Administrative Agent (including any such title companies acting as co-insurers or reinsurers) and (H) be otherwise in form and substance reasonably satisfactory to the Administrative Agent and (ii) a copy of all documents referred to, or listed as exceptions to title, in such title policy (or policies) in each case in form and substance reasonably satisfactory to the Administrative Agent;   (c)           copies of the most recent survey (if any) of such parcel of Real Property in the possession of the applicable Loan Party;   (d)           evidence in form and substance reasonably satisfactory to the Administrative Agent that all premiums in respect of each Mortgagee’s Title Insurance Policy, all recording fees and stamp, documentary, intangible or mortgage taxes, if any, in connection with the Mortgage have been paid;   (e)           if such parcel of Real Property is not used as a theatre for viewing movies, a Phase I environmental report with respect to such parcel of Real Property, dated a date not more than two years prior to the Closing Date, in form and substance reasonably satisfactory to the Administrative Agent; and   (f)            such other agreements, documents and instruments in form and substance reasonably satisfactory to the Administrative Agent as the Administrative Agent deems necessary or appropriate to create, register or otherwise perfect, maintain, evidence the   27 --------------------------------------------------------------------------------   existence, substance, form or validity of, or enforce a valid and enforceable first priority lien on such parcel of Real Property in favor of the Administrative Agent for the benefit of the Secured Parties (or in favor of such other trustee as may be required or desired under local law) subject only to (A) Liens permitted under Section 8.2 (Liens, Etc.) and (B) such other Liens as the Administrative Agent may reasonably approve.   “Mortgaged Real Property” means the Real Properties listed on Schedule 1.1 (Mortgaged Real Property) and any other Real Property of any Loan Party that becomes subject to a Mortgage.   “Mortgagee’s Title Insurance Policy” means a mortgagee’s title policy (or policies) or marked-up unconditional binder (or binders) for such insurance (or other evidence reasonably acceptable to the Administrative Agent proving ownership thereof).   “Mortgages” means the mortgages, deeds of trust or other real estate security documents made or required herein to be made by the Company or any other Loan Party, each in form and substance reasonably satisfactory to the Administrative Agent.   “Multiemployer Plan” means a multiemployer plan, as defined in Section 400l(a)(3) of ERISA, to which the Company or any of its Subsidiaries or any ERISA Affiliate has, or within the five (5) plan years preceding the date of this Agreement has had, any obligation to contribute.   “Multiplex” means any theatre owned by the Company or its Subsidiary which has ten or less screens for viewing movies.   “Net Cash Proceeds” means proceeds received by the Company or any of its Subsidiaries after the Closing Date in cash or Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, and casualty insurance settlements and condemnation awards, but in each case only as and when received) from any (a) Asset Sale (other than an Asset Sale permitted under Section 8.4(a), (c), (d), (e), (f) or (j) (Sale of Assets)) or Property Loss Event, net of (i) the costs, fees and expenses actually incurred in connection therewith (including, without limitation, attorneys’ fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses and brokerage, consultant and other customary fees), (ii) taxes paid or reasonably estimated to be payable as a result thereof, (iii) any amount required to be paid or prepaid on Indebtedness (other than the Obligations) secured by the assets subject to such Asset Sale or Property Loss Event (including any associated premium or penalty), and (iv) any reserve for adjustment in respect of (x) the sale price of such asset or assets established in accordance with GAAP and (y) any liabilities associated with such asset or assets and retained by the Company or any of its Subsidiaries after such sale or other disposition thereof, including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction, with it being understood that “Net Cash Proceeds” shall include, without limitation, any cash or Cash Equivalents (1) received upon the Disposition of any non-cash consideration received by the Company or any of its Subsidiaries in any such Disposition and (2) upon the reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount) of any reserve described in subclause (iv) above or, if such liabilities have not been satisfied in cash and such reserve not reversed within 365 days after such Asset Sale or Property Loss Event, the   28 --------------------------------------------------------------------------------   amount of such reserve; provided, however, that evidence of each of clauses (i), (ii), (iii)  and (iv) above is provided to the Administrative Agent, or (b) any Debt Issuance, net of underwriting discounts, brokers’ and advisors’ fees and other costs and expenses incurred in connection with such transaction; provided, however, that evidence of such costs is provided to the Administrative Agent.   “Net Indebtedness” means, with respect to any Person at any time, (i) the outstanding principal amount (or in the case of Indebtedness issued at discount, the accreted amount) of Indebtedness of such Person (determined on a Consolidated basis) as of such time minus (ii) cash and Cash Equivalents of such Person (determined on a Consolidated basis) at such time; provided, however, that, in determining the amount of Net Indebtedness of such Person for purposes of this definition, the amount of Indebtedness of such Person consisting of Revolving Loans and any other Indebtedness that consists of a revolving line of credit as of any date shall be deemed to be the aggregate outstanding principal amount thereof on the last day of each fiscal quarter ending during the four Fiscal Quarters most recently ended on or prior to such date, divided by four (4) (with the amount of Indebtedness under any revolving line of credit as of the end of any Fiscal Quarter prior to the Closing Date deemed to be $0 for purposes of such calculation).   “Net Senior Secured Indebtedness” means, with respect to any Person, without duplication, all Net Indebtedness of such Person and its Subsidiaries, excluding any subordinated Indebtedness and other unsecured Indebtedness and any Capital Lease Obligation.   “Net Senior Secured Leverage Ratio” means, with respect to any Person, as of any date of determination, on a Pro Forma Basis, the ratio of (i) Net Senior Secured Indebtedness of such Person and its Subsidiaries as of such date to (ii) Annualized EBITDA for such Person and its Subsidiaries for the four most recent Fiscal Quarters ended on such date for which financial statements are available.   “New Subordinated Note Indenture” means the Indenture, dated as of January 26, 2006, pursuant to which the New Subordinated Notes were issued between the Company and HSBC, as the initial trustee, as amended, supplemented or otherwise modified and in effect from time to time in accordance with Section 8.11 (Modification of Debt Agreements).   “New Subordinated Notes” means the Company’s 11% Senior Subordinated Notes due 2016 issued pursuant to the New Subordinated Note Indenture in the original principal amount of $325,000,000 and any additional notes issued pursuant to the New Subordinated Note Indenture which have terms (other than interest rate, issuance price, issuance date, series and title) which are the same as the New Subordinated Note Indenture.    “Non-Consenting Lender” has the meaning specified in Section 11.1(c) (Amendments, Waivers, Etc.).   “Non-Funding Lender” has the meaning specified in Section 2.2 (Borrowing Procedures).   “Non-Recourse Indebtedness” means Indebtedness as to which (i) neither the Company nor any of its Subsidiaries (a) provides credit support (including any undertaking, agreement or instrument which would constitute Indebtedness), (b) is directly or indirectly liable or (c) constitutes the lender (in each case, other than pursuant to and in compliance with   29 --------------------------------------------------------------------------------   Section 8.3 (Investments)) and (ii) no default with respect to such Indebtedness (including any rights which the holders thereof may have to take enforcement action against the relevant Unrestricted Subsidiary or its assets) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or its Subsidiaries (other than Non-Recourse Indebtedness) to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; provided, however, that notwithstanding the foregoing, guaranties of Capitalized Lease Obligations of any Unrestricted Subsidiary relating to leased property in service outside the United States shall not cause such Capitalized Lease Obligations to not be Non-Recourse Indebtedness.   “Non-U.S. Lender” means each Lender or Issuer (or the Administrative Agent) that is a Non-U.S. Person.   “Non-U.S. Person” means any Person that is not a Domestic Person.   “Note” means any Revolving Dollar Note, Peso Loan Note or Term Loan Note.   “Notice of Borrowing” has the meaning specified in Section 2.2 (Borrowing Procedures).   “Notice of Conversion or Continuation” has the meaning specified in Section 2.11 (Conversion/Continuation Option).   “Obligations” means the Loans, the Letter of Credit Obligations and all other amounts, obligations, covenants and duties owing by the Borrowers to any Agent, any Lender, any Issuer, any Affiliate of any of them or any Indemnitee, of every type and description (whether by reason of an extension of credit, opening or amendment of a letter of credit or payment of any draft drawn or other payment thereunder, loan, guaranty, indemnification, foreign exchange or currency swap transaction, interest rate hedging transaction or otherwise), present or future, arising under this Agreement, any other Loan Document (including Cash Management Documents and Hedging Contracts that are Loan Documents), whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired and whether or not evidenced by any note, guaranty or other instrument or for the payment of money, including all letter of credit, cash management and other fees, interest, charges, expenses, attorneys’ fees and disbursements, Cash Management Obligations and other sums chargeable to the Borrowers under this Agreement, any other Loan Document (including Cash Management Documents and Hedging Contracts that are Loan Documents) and all obligations of the Company under any Loan Document to provide cash collateral for any Letter of Credit Obligation.   “Patriot Act” means the USA Patriot Act of 2001 (31 U.S.C. 5318 et seq.).   “PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.   “Perfection Certificate” means a perfection certificate in form and substance satisfactory to the Administrative Agent.   “Permit” means any permit, approval, authorization, license, variance or permission required from a Governmental Authority under an applicable Requirement of Law.   30 --------------------------------------------------------------------------------   “Permitted Acquisition” means any Proposed Acquisition subject to the satisfaction of each of the following conditions:   (a)           each applicable Loan Party and any such newly created or acquired Subsidiary shall, or will within the times specified therein, have complied with the requirements of Section 7.11 (Additional Collateral and Guaranties);   (b)           (i) immediately before and immediately after giving Pro Forma Effect to any such purchase or other acquisition, no Default or Event of Default shall have occurred and be continuing and (ii) immediately after giving effect to such Proposed Acquisition, Holdings, the Company and its Subsidiaries shall be in Pro Forma Compliance with the covenants set forth in Article V (Financial Covenant), such compliance to be determined on the basis of the financial information most recently delivered to the Administrative Agent and the Lenders pursuant to Section 6.1 (Financial Statements) as though such purchase or other acquisition had been consummated as of the first day of the fiscal period covered thereby and evidenced by a certificate from the Chief Financial Officer of the Company demonstrating such compliance calculation in reasonable detail; and   (c)           the Company shall have delivered to the Administrative Agent, on behalf of the Lenders, no later than five (5) Business Days after the date on which any such Proposed Acquisition is consummated, a certificate of a Responsible Officer, in form and substance reasonably satisfactory to the Administrative Agent, certifying that all of the requirements set forth in this definition have been satisfied or will be satisfied on or prior to the consummation of such Proposed Acquisition.   “Permitted Holder” means:   (a)           any member of the Apollo Group;   (b)           any member of the J.P. Morgan Partners Group;   (c)           any member of the Bain Capital Group;   (d)           any member of the Carlyle Group;   (e)           any member of the Spectrum Group;   (f)            any Co-Investor; provided, however, that to the extent any Co-Investor acquires securities of Holdings in excess of the amount of such securities held by such Co-Investor on the Closing Date, such excess securities shall not be deemed to be held by a Permitted Holder; and   (g)           any Subsidiary, any employee stock purchase plan, stock option plan or other stock incentive plan or program, retirement plan or automatic reinvestment plan or any substantially similar plan of the Company or any Subsidiary or any Person holding securities of Holdings for or pursuant to the terms of any such employee benefit plan; provided, that if any lender or other Person shall foreclose on or otherwise realize upon or exercise any remedy with respect to any security interest in or Lien on any securities of Holdings held by any Person listed   31 --------------------------------------------------------------------------------   in this clause (g), then such securities shall no longer be deemed to be held by a Permitted Holder.   “Permitted Joint Venture” means any Joint Venture entered into by the Company or any of its Subsidiaries with one or more third parties (i) to which the Company or its Subsidiaries shall have contributed certain International Assets or the assets used in the business of National Cinema Network, Inc., and (ii) of which the Company shall own at least 33% (but not more than 50%) of the outstanding Stock.   “Permitted Refinancing” means, with respect to any Person, any modification, refinancing, refunding, renewal or extension of any Indebtedness of such Person; provided, however, that (a) the principal amount (or accreted value, if applicable) thereof does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed or extended, except by an amount equal to unpaid accrued interest and premium thereon plus other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such modification, refinancing, refunding, renewal or extension and by an amount equal to any existing commitments unutilized thereunder or as otherwise permitted pursuant to Section 8.1 (Indebtedness), (b) such modification, refinancing, refunding, renewal or extension has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being modified, refinanced, refunded, renewed or extended, (c) if the Indebtedness being modified, refinanced, refunded, renewed or extended is subordinated in right of payment to the Obligations, such modification, refinancing, refunding, renewal or extension is subordinated in right of payment to the Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being modified, refinanced, refunded, renewed or extended, (d) the terms and conditions (including, if applicable, as to collateral) of any such modified, refinanced, refunded, renewed or extended Indebtedness are not materially less favorable to the Loan Parties, the Lenders or the Secured Parties than the terms and conditions of the Indebtedness being modified, refinanced, refunded, renewed or extended, (e) such modification, refinancing, refunding, renewal or extension is incurred by the Person who is the obligor on the Indebtedness being modified, refinanced, refunded, renewed or extended, and (f) at the time thereof, no Event of Default shall have occurred and be continuing.   “Permitted Subordinated Indebtedness” means any unsecured Indebtedness of the Company that (a) is expressly subordinated to the prior payment in full in cash of the Obligations on terms and conditions no less favorable to the Lenders than the terms and conditions set forth in the New Subordinated Note Indenture, (b) will not mature prior to the date that is ninety-one (91) days after the Term Loan Maturity Date, (c) has no scheduled amortization or payments of principal prior to the Term Loan Maturity Date and (d) has covenant, default and remedy provisions no more restrictive, or mandatory prepayment, repurchase or redemption provisions no more onerous or expansive in scope, taken as a whole, than those set forth in the New Subordinated Note Indenture.   “Person” means an individual, partnership, corporation (including a business trust), joint stock company, estate, trust, limited liability company, unincorporated association, joint venture or other entity or a Governmental Authority.   “Peso” or the sign “P” each means the lawful money of Mexico.   32 --------------------------------------------------------------------------------   “Peso Available Credit” means, at any time, (a) the lesser of (i) the then effective Revolving Credit Commitments and (ii) $25,000,000 minus (b) the aggregate Peso Outstandings at such time.   “Peso Base Rate” means a rate of interest per annum equal to (a) in the case of any Peso Swing Loan, the Peso Swing Lender’s internal funding costs for funding such Peso Swing Loan as determined by the Peso Swing Lender and (ii) in the case of any Peso TIIE Rate Loan converted into a Peso Base Rate Loan, the Mexican Facility Agent’s internal funding costs for funding such Peso Base Rate Loan as determined by the Mexican Facility Agent, in each case, as notified to the applicable Borrower.  The determination by the Peso Swing Lender or the Mexican Facility Agent, as the case may be, of the Peso Base Rate shall be conclusive absent manifest error.   “Peso Base Rate Loan” means a Loan that bears interest based on the Peso Base Rate.   “Peso Borrowing” means Peso Loans made on the same day by the Mexican Lenders ratably according to their respective Peso Commitments.   “Peso Commitment” means, with respect to each Mexican Lender, the commitment of such Lender to (i) make Peso Loans to the Mexican Borrowers pursuant to Section 2.1(a) hereof and acquire interests in other Peso Outstandings in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule I (Commitments) under the caption “Peso Commitment,” as amended to reflect each Assignment and Acceptance executed by such Lender and as such amount may be reduced pursuant to this Agreement.   “Peso Loan” has the meaning specified in Section 2.1(a) (The Commitments).   “Peso Loan Note” means a promissory note of the applicable Mexican Borrower payable to the order of any Mexican Lender in a principal amount equal to the amount of such Lender’s Peso Commitment or evidencing the aggregate Indebtedness of such Mexican Borrower to such Lender resulting from the Peso Loans owing to such Lender.    “Peso Outstandings” means, at any particular time, the sum of the Dollar Equivalent of (a) the principal amount of the Peso Loans outstanding at such time and (b) the principal amount of the Peso Swing Loans outstanding at such time.   “Peso Spot Rate” means, on any day, the rate at which Pesos may be exchanged into Dollars, at (a) the spot (same day) rate announced by the Mexican Facility Agent and (i) quoted at 12:15 p.m. (Mexico City time) on Reuters Monitor Screen (Page MEX01 or any successor page for quoting such rate) on such day (or, if such day is not a Business Day, on the immediately preceding Business Day) or (ii) if such rate is not so quoted on Reuters Monitor Screen for the relevant date of determination, then the rate as published by Banco de Mexico in the Diario Oficial de la Federacion to be in effect on such day (or, if such day is not a Business Day, on the immediately preceding Business Day) or (b) if such rate is not so published or quoted as described in clause (a) for the relevant date of determination, the “Peso Spot Rate” shall be the rate of exchange at which in accordance with normal banking procedures the Mexican Facility Agent could purchase Dollars for Pesos on a customary basis in the Mexican Facility Agent’s Mexico City office at 11:00 a.m. (Mexico City time) on the date of such determination (or, if such   33 --------------------------------------------------------------------------------   day is not a Business Day, on the immediately preceding Business Day), and such determination shall be conclusive absent manifest error.   “Peso Swing Lender” means Banamex or any other Mexican Lender that becomes the Mexican Facility Agent or agrees, with the approval of the Administrative Agent, the Mexican Facility Agent and the Borrowers, to act as the Peso Swing Lender hereunder, in each case, in its capacity as the Peso Swing Lender hereunder.   “Peso Swing Loan” has the meaning specified in Section 2.3 (Swing Loans).   “Peso Swing Loan Sublimit” means $5,000,000.   “Peso TIIE Rate” means, for each Interest Period with respect to Peso Loans, the Tasa de Interés Interbancaria de Equilibrio (the Interbank Equilibrium Interest Rate) for Pesos for a period of twenty-eight (28) days published in the “Diario Oficial de la Federación” (Official Gazette of the Federation) and as replicated as set forth under the heading “TIIE” or its equivalent as published by Banco de México on its internet website page, http://www.banxico.org.mx/, or on the Reuters Screen MEX06 Page across from the caption “TIIE”, in either case, as of 1:00 p.m., Mexico City time, on the day that is one Business Day prior to the commencement of the relevant Interest Period; provided, however, in the event of any discrepancy between the rate published in the Diario Oficial de la Federación and the rate published by the Banco de México on its internet website page or the Reuters Screen MEX06 Page on the day that is one Business Day prior to the commencement of the relevant Interest Period, the rate published in the Diario Oficial de la Federación will govern; provided, further, that, if the rate is not published in the Diario Oficial de la Federación, rates replicated by the Banco de México on its internet website page or on the Reuters Screen MEX06 Page shall not be used.  If, for any Interest Period, the TIIE is not published in the Diario Oficial de la Federación by 1:00 p.m., Mexico City time, on the day that is one Business Day prior to the commencement of the relevant Interest Period, the Mexican Facility Agent shall notify the relevant Mexican Borrower and shall instead determine TIIE on the second Business Day prior to the commencement of the relevant Interest Period by calculating the arithmetic mean (rounded upward to the nearest five decimal places) of the quotations advised to Mexican Facility Agent at approximately 11:00 a.m. of the mid-market cost of funds for Pesos for a period of twenty-eight (28) days by the Mexico City offices of five major banks in the Mexican interbank market selected by the Mexican Facility Agent; provided, however, that if fewer than two quotations are provided, the rate for that interest determination date will be determined by the Mexican Facility Agent using a representative rate and the Mexican Facility Agent shall advise the relevant Mexican Borrower in advance of its final determination.   “Peso TIIE Rate Loan” means a Loan that bears interest based on the Peso TIIE Rate.   “Pledge and Security Agreement” means an agreement, in substantially the form of Exhibit I (Form of Pledge and Security Agreement), executed by each Loan Party (other than the Mexican Borrowers).   “Pledged Debt Instruments” has the meaning specified in the Pledge and Security Agreement.   “Pledged Stock” has the meaning specified in the Pledge and Security Agreement.   34 --------------------------------------------------------------------------------   “Prior Transactions” means, collectively, (i) the acquisition of the Company by Holdings, a company formed by the J.P. Morgan Partners Group, the Apollo Group and certain other co-investors, in December 2004 and (ii) the acquisition of Loews by Loews Holdings, a company formed by the Bain Capital Group, the Carlyle Group and the Spectrum Group, in July 2004.   “Process Agent” has the meaning specified in Section 11.12(b) (Submission to Jurisdiction; Service of Process).   “Pro Forma Basis,” “Pro Forma Compliance” or “Pro Forma Effect” means, for purposes of calculating compliance with any test under this Agreement in respect of any of the transactions referred to in clauses (a) through (d) of the definition of “Annualized EBITDA” or the incurrence or retirement of Indebtedness, such transaction, incurrence or retirement shall be treated as if such transaction, incurrence or retirement had occurred on the first day of the applicable period of measurement in such test or covenant; provided, however, that pro forma effect shall only be given to operating expense reductions or similar anticipated benefits from any transaction to the extent (a)(i) directly attributable to such transaction, (ii) expected to have a continuing impact on the Company and its Subsidiaries and (iii) factually supportable and (b) that such adjustments and the bases therefor are set forth in reasonable detail in a certificate of the Chief Financial Officer of the Company delivered to the Administrative Agent and dated the relevant date of determination and which certifies that the Company reasonably anticipates that such expense reductions or other benefits will be realized, or all necessary steps for the realization thereof taken, within twelve months following such date; provided, further, that any determination of Annualized EBITDA of an Annualized Theatre shall be as determined in good faith by the Company, the calculation of which shall be set forth in reasonable detail in a certificate of the Chief Financial Officer delivered to the Administrative Agent and dated the date of relevant determination; provided, further, that if any such Indebtedness being incurred or retired has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination.   “Projections” means those financial projections dated January 2006 covering the fiscal years ending in 2006 through 2010 inclusive, to be delivered to the Lenders by the Company.   “Property Loss Event” means (a) any loss of or damage to property of the Company or any of its Subsidiaries that results in the receipt by such Person of proceeds of insurance whose Dollar Equivalent exceeds (i) $10,000,000 for a single transaction or series of transactions or (ii) $20,000,000 in the aggregate in any Fiscal Year or (b) any taking of property of the Company or any of its Subsidiaries that results in the receipt by such Person of a compensation payment in respect thereof whose Dollar Equivalent exceeds (i) $10,000,000 for a single transaction or series of transactions or (ii) $20,000,000 in the aggregate in any Fiscal Year.   “Proposed Acquisition” means the proposed acquisition by the Company or any of its Subsidiaries of all or substantially all of the assets or Stock of any Proposed Acquisition Target, or the merger of any Proposed Acquisition Target with or into the Company or any Subsidiary of the Company (and, in the case of a merger with the Company, with the Company being the surviving corporation).   35 --------------------------------------------------------------------------------   “Proposed Acquisition Target” means any Person or any operating division, branch, business unit or line of business of such Person subject to a Proposed Acquisition.   “Purchasing Lender” has the meaning specified in Section 11.7 (Sharing of Payments, Etc.).   “Qualifying IPO” means the issuance by Holdings or the Company of its common Stock in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act of 1933 (whether alone or in connection with a secondary public offering).   “Ratable Portion” or (other than in the expression “equally and ratably”) “ratably” means, with respect to any Lender, (a) with respect to the Revolving Credit Facility, the percentage obtained by dividing (i) the Revolving Credit Commitment of such Lender by (ii) the aggregate Revolving Credit Commitments of all Lenders (or, at any time after the Revolving Credit Termination Date, the percentage obtained by dividing the aggregate outstanding principal balance of the Revolving Credit Outstandings owing to such Lender by the aggregate outstanding principal balance of the Revolving Credit Outstandings owing to all Lenders), (b) with respect to the Mexican Facility, the percentage obtained by dividing (i) the Peso Commitment of such Lender by (ii) the aggregate Peso Commitments of all Lenders (or, at any time after the Revolving Credit Termination Date, the percentage obtained by dividing the aggregate outstanding principal balance of the Peso Outstandings owing to such Lender by the aggregate outstanding principal balance of the Peso Outstandings owing to all Lenders) and (c) with respect to the Term Loan Facility, the percentage obtained by dividing (i) the Term Loan Commitment of such Lender by (ii) the aggregate Term Loan Commitments of all Lenders (or, at any time after the Closing Date, the percentage obtained by dividing the principal amount of such Lender’s Term Loans by the aggregate Term Loans of all Lenders).   “Real Property” of any Person means the Land of such Person, together with the right, title and interest of such Person, if any, in and to the streets, the Land lying in the bed of any streets, roads or avenues, opened or proposed, in front of, the air space and development rights pertaining to the Land and the right to use such air space and development rights, all rights of way, privileges, liberties, tenements, hereditaments and appurtenances belonging or in any way appertaining thereto, all fixtures, all easements now or hereafter benefiting the Land and all royalties and rights appertaining to the use and enjoyment of the Land, including all alley, vault, drainage, mineral, water, oil and gas rights, together with all of the buildings and other improvements now or hereafter erected on the Land and any fixtures appurtenant thereto.   “Register” has the meaning specified in Section 2.7(b) (Evidence of Debt).   “Reimbursement Date” has the meaning specified in Section 2.4(h) (Letters of Credit).   “Reimbursement Obligations” means, as and when matured, the obligation of the Company to pay, on the date payment is made or scheduled to be made to the beneficiary under each such Letter of Credit (or at such other date as may be specified in the applicable Letter of Credit Reimbursement Agreement) and in the currency drawn (or in such other currency as may be specified in the applicable Letter of Credit Reimbursement Agreement), all amounts of each draft and other requests for payments drawn under Letters of Credit, and all other matured   36 --------------------------------------------------------------------------------   reimbursement or repayment obligations of the Company to any Issuer with respect to amounts drawn under Letters of Credit.   “Related Documents” means the Merger Agreement and each other document and instrument executed with respect thereof.   “Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration, in each case, of any Contaminant into the indoor or outdoor environment or into or out of any property, including the movement of Contaminants through or in the air, soil, surface water, ground water or property.   “Remedial Action” means all actions required pursuant to Environmental Law to (a) clean up, remove, treat or in any other way remediate any Contaminant in the indoor or outdoor environment, (b) reasonably prevent the Release or reasonably minimize the further Release so that a Contaminant does not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment or (c) perform pre-remedial studies and investigations and post-remedial monitoring and care.   “Requirement of Law” means, with respect to any Person, the common law and all federal, state, local and foreign laws, treaties, rules and regulations, orders, judgments, decrees and other determinations of, concessions, grants, franchises, licenses and other Contractual Obligations with, any Governmental Authority or arbitrator, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.   “Requisite Lenders” means, collectively, (a) on and prior to the Closing Date, Lenders having more than fifty percent (50%) of the aggregate outstanding amount of the Commitments, (b) after the Closing Date and on and prior to the Revolving Credit Termination Date, Lenders having more than fifty percent (50%) of the sum of the aggregate outstanding amount of the Revolving Credit Commitments and the principal amount of all Term Loans then outstanding and (c) after the Revolving Credit Termination Date, Lenders having more than fifty percent (50%) of the sum of the aggregate Revolving Credit Outstandings and the principal amount of all Term Loans then outstanding.  A Non-Funding Lender shall not be included in the calculation of “Requisite Lenders.”   “Requisite Mexican Lenders” means, collectively, Mexican Lenders having more than fifty percent (50%) of the aggregate outstanding amount of the Peso Commitments or, after the Revolving Credit Termination Date, more than fifty percent (50%) of the aggregate Peso Outstandings.  A Non-Funding Lender shall not be included in the calculation of “Requisite Mexican Lenders.”   “Requisite Revolving Credit Lenders” means, collectively, Revolving Credit Lenders having more than fifty percent (50%) of the aggregate outstanding amount of the Revolving Credit Commitments or, after the Revolving Credit Termination Date, more than fifty percent (50%) of the aggregate Revolving Credit Outstandings.  A Non-Funding Lender shall not be included in the calculation of “Requisite Revolving Credit Lenders.”   “Requisite Term Lenders” means, collectively, Term Lenders having more than 50% of the aggregate outstanding amount of the Term Loan Commitments or, after the Closing Date, more than fifty percent (50%) of the principal amount of all Term Loans then outstanding.   37 --------------------------------------------------------------------------------   “Responsible Officer” means, with respect to any Person, any of the principal executive officers, managing members or general partners of such Person but, in any event, with respect to financial matters, the chief financial officer, treasurer or controller of such Person.   “Restricted Payment” means (a) any dividend, distribution or any other payment whether direct or indirect, on account of any Stock or Stock Equivalent of the Company or any of its Subsidiaries now or hereafter outstanding, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Stock or Stock Equivalent of the Company or any of its Subsidiaries now or hereafter outstanding and (c) any redemption, prepayment, defeasement, repurchase or other satisfaction prior to the scheduled maturity of any Subordinated Debt, any other subordinated Indebtedness of the Company or any of its Subsidiaries or any Disqualified Stock, or the setting aside of any funds for any of the foregoing.   “Revolving Commitment Increase” has the meaning specified in Section 2.1(c)(i) (Facility Increases).   “Revolving Credit Borrowing” means any Revolving Dollar Borrowing or any Peso Borrowing.   “Revolving Credit Commitment” means, with respect to each Revolving Credit Lender, the commitment of such Revolving Credit Lender to make Revolving Dollar Loans to the Company pursuant to Section 2.1(a) hereof and acquire interests in other Revolving Credit Outstandings in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Revolving Credit Lender’s name on Schedule I (Commitments) under the caption “Revolving Credit Commitment,” as amended to reflect each Assignment and Acceptance executed by such Revolving Credit Lender and as such amount may be reduced pursuant to this Agreement.   “Revolving Credit Facility” means the Revolving Credit Commitments and the provisions herein related to the Revolving Loans, Swing Loans, Letters of Credit and the Mexican Facility.   “Revolving Credit Lender” means each Lender that (a) has a Revolving Credit Commitment, (b) holds a Revolving Dollar Loan or (c) participates in any Letter of Credit, Peso Loans or Swing Loans.   “Revolving Credit Outstandings” means, at any particular time, the sum of the Dollar Equivalent of (a) the principal amount of the Revolving Loans outstanding at such time and (b) the Letter of Credit Obligations outstanding at such time.   “Revolving Credit Termination Date” shall mean the earliest of (a) the Scheduled Termination Date, (b) the date of termination of all of the Revolving Credit Commitments pursuant to Section 2.5 (Reduction and Termination of the Commitments) and (c) the date on which the Obligations become due and payable pursuant to Section 9.2 (Remedies).   “Revolving Dollar Borrowing” means Revolving Dollar Loans made on the same day by the Revolving Credit Lenders ratably according to their respective Revolving Credit Commitments.   38 --------------------------------------------------------------------------------   “Revolving Dollar Loan” has the meaning specified in Section 2.1(a) (The Commitments).   “Revolving Dollar Note” means a promissory note of the Company payable to the order of any Revolving Credit Lender in a principal amount equal to the amount of such Lender’s Revolving Credit Commitment or evidencing the aggregate Indebtedness of the Company to such Lender resulting from the Revolving Dollar Loans owing to such Revolving Credit Lender.    “Revolving Loan” means each of the Revolving Dollar Loans, the Peso Loans and the Swing Loans.   “S&P” means Standard & Poor’s Rating Services.   “SAR” means any stock appreciation rights or similar phantom stock rights.   “Sarbanes-Oxley Act” means the United States Sarbanes-Oxley Act of 2002.   “Scheduled Termination Date” means the sixth anniversary of the Closing Date.   “Secured Obligations” means, in the case of any Borrower, the Obligations of such Borrower, and, in the case of any other Loan Party, the obligations of such Loan Party under the Guaranty and the other Loan Documents to which it is a party.   “Secured Parties” means the Lenders, the Issuers, the Agents and any other holder of any Secured Obligation.   “Securities Account” has the meaning given to such term in the UCC.   “Security” means any Stock, Stock Equivalent, voting trust certificate, bond, debenture, note or other evidence of Indebtedness, whether secured, unsecured, convertible or subordinated, or any certificate of interest, share or participation in, any temporary or interim certificate for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing, but shall not include any evidence of the Obligations.   “Selling Lender” has the meaning specified in Section 11.7 (Sharing of Payments, Etc.).   “Senior Indebtedness” means with respect to any Person, without duplication, all Indebtedness of such Person and its Subsidiaries; provided, however, that Senior Indebtedness will not include: (a) any obligation of the Company to any Subsidiary or any obligation of a Subsidiary to the Company or another Subsidiary, (b) any liability for Federal, state, foreign, local or other taxes owed or owing by the Company or any of its Subsidiaries, (c) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (d) any Indebtedness, guarantee or obligation of the Company or any of its Subsidiaries that is expressly subordinate or junior in right of payment to any other Indebtedness, guarantee or obligation of the Company or any of its Subsidiaries, as the case may be, or (e) any capital stock.   “Senior Leverage Ratio” means, as of any date of determination, on a Pro Forma Basis, the ratio of (i) Senior Indebtedness of the Company and its Subsidiaries as of such date to   39 --------------------------------------------------------------------------------   (ii) Annualized EBITDA for the Company and its Subsidiaries for the four most recent Fiscal Quarters ended immediately preceding the date of such determination for which financial statements are available.   “Senior Note Indentures” means the 2010 Senior Note Indenture, the 2012 Senior Note Indenture and the Holdings Senior Note Indenture.   “Senior Notes” means the 2010 Senior Notes, the 2012 Senior Notes and the Holdings Senior Notes.   “Significant Subsidiary” means any Subsidiary that would be a “Significant Subsidiary” of the Company within the meaning of Rule 1-02 under Regulation S-X under the Securities Act of 1933.   “Solvent” means, with respect to any Person as of any date of determination, that, as of such date, (a) the value of the assets of such Person (both at fair value and present fair saleable value) is greater than the total amount of liabilities (including contingent and unliquidated liabilities) of such Person, (b) such Person is able to pay all liabilities of such Person as such liabilities mature and (c) such Person does not have unreasonably small capital.  In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.   “Special Purpose Vehicle” means any special purpose funding vehicle identified as such in writing by any Lender to the Administrative Agent.   “Spectrum Group” means (i) Spectrum Equity Investors IV, L.P., (ii) Spectrum Equity Investors Parallel IV, L.P., (iii) Spectrum IV Investment Managers’ Fund, L.P. and (iv) any Affiliates of Spectrum Equity Investors IV, L.P., Spectrum Equity Investors Parallel IV, L.P. and Spectrum IV Investment Managers’ Fund, L.P.   “Sponsor Management Agreement” means the Amended and Restated Fee Agreement, dated as of January 26, 2006, by and among Holdings, the Company, J.P. Morgan Partners (BHCA), L.P., Apollo Management V, L.P. and certain of its affiliates, Bain Capital Partners, LLC, TC Group, L.L.C. and Applegate and Collatos, Inc.   “Standby Letter of Credit” means any Letter of Credit that is not a Documentary Letter of Credit.   “Stock” means shares of capital stock (whether denominated as common stock or preferred stock), beneficial, partnership or membership interests, participations or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity, whether voting or non-voting.   “Stock Equivalents” means all securities convertible into or exchangeable for Stock and all warrants, options or other rights to purchase or subscribe for any Stock, whether or not presently convertible, exchangeable or exercisable.   “Subordinated Debt” means the Subordinated Notes and any Permitted Subordinated Indebtedness.   40 --------------------------------------------------------------------------------   “Subordinated Note Indentures” means the 2011 Subordinated Note Indenture, the 2012 Subordinated Note Indenture, the 2014 Subordinated Note Indenture and the New Subordinated Note Indenture.   “Subordinated Notes” means the 2011 Subordinated Notes, the 2012 Subordinated Notes, the 2014 Subordinated Notes and the New Subordinated Notes.   “Subsidiary” of any Person means (i) any corporation which more than 50% of the outstanding shares of Capital Stock of which having ordinary voting power for the election of directors is owned directly or indirectly by such Person, and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person, directly or indirectly, has more than a 50% equity interest, and, except as otherwise indicated herein, references to Subsidiaries shall refer to Subsidiaries of the Company.  Notwithstanding the foregoing, for purposes of this Agreement, an Unrestricted Subsidiary shall not be deemed a Subsidiary of the Company, other than for purposes of the definition of “Unrestricted Subsidiary” and Sections 4.3(a) (Subsidiaries; Borrower Information), 4.17 (Environmental Matters), 6.9 (Environmental Matters) and 7.10 (Environmental), unless the Company shall have designated in writing to the Administrative Agent an Unrestricted Subsidiary as a Subsidiary.   “Substitute Institution” has the meaning specified in Section 2.17 (Substitution of Lenders).   “Substitution Notice” has the meaning specified in Section 2.17 (Substitution of Lenders).   “Swing Lender” means each of the Dollar Swing Lender and the Peso Swing Lender.   “Swing Loan” means each of the Dollar Swing Loans and the Peso Swing Loans.   “Swing Loan Request” has the meaning specified in Section 2.3(c) (Swing Loans).   “Syndication Agent” means J.P. Morgan Securities Inc.   “Tax Affiliate” means, with respect to any Person, (a) any Subsidiary of such Person and (b) any Affiliate of such Person with which such Person files or is required to file consolidated, combined or unitary tax returns.   “Tax Return” has the meaning specified in Section 4.8(a) (Taxes).   “Taxes” has the meaning specified in Section 2.16(a) (Taxes).   “Term Lender” means each Lender that has a Term Loan Commitment or that holds a Term Loan.   “Term Loan” has the meaning specified in Section 2.1(b) (The Commitments).   41 --------------------------------------------------------------------------------   “Term Loan Borrowing” means a borrowing consisting of Term Loans made on the same day by the Term Lenders ratably according to their respective Term Loan Commitments.   “Term Loan Commitment” means, with respect to each Term Lender, the commitment of such Lender to make Term Loans to the Company in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule I (Commitments) under the caption “Term Loan Commitment” as amended to reflect each Assignment and Acceptance executed by such Lender and as such amount may be reduced pursuant to this Agreement.   “Term Loan Facility” means the Term Loan Commitments and the provisions herein related to the Term Loans.   “Term Loan Increase” has the meaning specified in Section 2.1(c)(i) (Facility Increases).   “Term Loan Maturity Date” means the seventh anniversary of the Closing Date.   “Term Loan Note” means a promissory note of the Company payable to the order of any Term Lender in a principal amount equal to the amount of the Term Loan owing to such Lender.   “Title IV Plan” means a pension plan, other than a Multiemployer Plan, subject to Title IV of ERISA and that is sponsored or maintained by the Company or any of its Subsidiaries or any ERISA Affiliate or to which the Company or any of its Subsidiaries or any ERISA Affiliate has, or within the five (5) plan years preceding the date of this Agreement has had, any obligation to contribute.   “Transactions” shall mean, collectively, the Merger, the issuance of the New Subordinated Notes and all other transactions consummated under the Loan Documents, the Related Documents and the New Subordinated Note Indenture.   “UCC” has the meaning specified in the Pledge and Security Agreement.   “Unrestricted Subsidiary” means a Subsidiary of the Company designated in writing to the Administrative Agent (i) whose properties and assets, to the extent they secure any Indebtedness at any time, secure only Non-Recourse Indebtedness and (ii) that has no (nor will have any) Indebtedness other than Non-Recourse Indebtedness.  Notwithstanding the foregoing, no Subsidiary may be designated an Unrestricted Subsidiary by the Company if at the time of such designation it is a Significant Subsidiary.   “Unused Commitment Fee” has the meaning specified in Section 2.12(a) (Fees).   “U.S. Lender” means each Lender or Issuer (or the Administrative Agent) that is a Domestic Person.   “Voting Stock” means Stock of any Person having ordinary power to vote in the election of members of the board of directors, managers, trustees or other controlling Persons, of   42 --------------------------------------------------------------------------------   such Person (irrespective of whether, at the time, Stock of any other class or classes of such entity shall have or might have voting power by reason of the happening of any contingency).   “Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (b) the then outstanding principal amount of such Indebtedness.   “Wholly-Owned Subsidiary” of any Person means any Subsidiary of such Person, all of the Stock of which (other than director’s qualifying shares or as may be required by law) is owned by such Person, either directly or indirectly through one or more Wholly-Owned Subsidiaries of such Person.   “Withdrawal Liability” means, with respect to the Company or any of its Subsidiaries at any time, the aggregate liability incurred (whether or not assessed) with respect to all Multiemployer Plans pursuant to Section 4201 of ERISA or for increases in contributions required to be made pursuant to Section 4243 of ERISA.   “Working Capital” means, for any Person at any date, the amount, if any, by which the Consolidated Current Assets of such Person at such date exceeds the Consolidated Current Liabilities of such Person at such date.   “2010 Senior Note Indenture” means the Indenture, dated as of August 18, 2004, pursuant to which the 2010 Senior Notes were issued between the Company (as successor to Marquee Inc.) and HSBC, as the initial trustee.   “2010 Senior Notes” means the Company’s Floating Rate Notes due 2010 issued pursuant to the 2010 Senior Note Indenture in the original principal amount of $250,000,000 and any additional notes issued pursuant to the 2010 Senior Note Indenture which have terms (other than interest rate, issuance price, issuance date, series and title) which are the same as the 2010 Senior Note Indenture.   “2012 Senior Note Indenture” means the Indenture, dated as of August 18, 2004, pursuant to which the 2012 Senior Notes were issued between the Company (as successor to Marquee Inc.) and HSBC, as the initial trustee.   “2012 Senior Notes” means the Company’s 85/8% Notes due 2012 issued pursuant to the 2012 Senior Note Indenture in the original principal amount of $250,000,000 and any additional notes issued pursuant to the 2012 Senior Note Indenture which have terms (other than interest rate, issuance price, issuance date, series and title) which are the same as the 2012 Senior Note Indenture.   “2011 Subordinated Note Indenture” means the Indenture, dated as of January 27, 1999, pursuant to which the 2011 Subordinated Notes were issued between the Company and The Bank of New York, as the initial trustee, as amended, supplemented or otherwise modified and in effect from time to time in accordance with Section 8.11 (Modification of Debt Agreements).   43 --------------------------------------------------------------------------------   “2011 Subordinated Notes” means the Company’s 9½% Senior Subordinated Notes due 2011 issued pursuant to the 2011 Subordinated Note Indenture in the original principal amount of $298,880,000 and any additional notes issued pursuant to the 2011 Subordinated Note Indenture which have terms (other than interest rate, issuance price, issuance date, series and title) which are the same as the 2011 Subordinated Note Indenture.   “2012 Subordinated Note Indenture” means the Indenture dated as of January 16, 2002 pursuant to which the 2012 Subordinated Notes were issued between the Company and HSBC, as the initial trustee, as amended, supplemented or otherwise modified and in effect from time to time in accordance with Section 8.11 (Modification of Debt Agreements).   “2012 Subordinated Notes” means the Company’s 97/8% Senior Subordinated Notes due 2012 issued pursuant to the 2012 Subordinated Note Indenture in the original principal amount of $175,000,000 and any additional notes issued pursuant to the 2012 Subordinated Note Indenture which have terms (other than interest rate, issuance price, issuance date, series and title) which are the same as the 2012 Subordinated Note Indenture.   “2014 Subordinated Note Indenture” means the Indenture dated as of February 24, 2004 pursuant to which the 2014 Subordinated Notes were issued between the Company and HSBC, as the initial trustee, as amended, supplemented or otherwise modified and in effect from time to time in accordance with Section 8.11 (Modification of Debt Agreements).   “2014 Subordinated Notes” means the Company’s 8% Senior Subordinated Notes due 2014 issued pursuant to the 2014 Subordinated Note Indenture in the original principal amount of $300,000,000 and any additional notes issued pursuant to the 2014 Subordinated Note Indenture which have terms (other than interest rate, issuance price, issuance date, series and title) which are the same as the 2014 Subordinated Note Indenture.   Section 1.2            Computation of Time Periods   In this Agreement, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding” and the word “through” means “to and including.”   Section 1.3            Accounting Terms and Principles   (a)           Except as set forth below, all accounting terms not specifically defined herein shall be construed in conformity with GAAP and all accounting determinations required to be made pursuant hereto (including for purpose of measuring compliance with Article V (Financial Covenant)) shall, unless expressly otherwise provided herein, be made in conformity with GAAP.   (b)           If at any time any change in GAAP would affect the computation of any financial ratio or requirement, and either the Company or the Administrative Agent shall so request, the Administrative Agent and the Company shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Requisite Lenders); provided, however, that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP, as applicable, prior to such change therein and (ii) the Company shall provide to the Administrative Agent and the Lenders a written reconciliation, in form and substance reasonably satisfactory to the   44 --------------------------------------------------------------------------------   Administrative Agent, between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.   (c)           For purposes of this Agreement, all references to Holdings or the Company shall give effect to the Merger.   (d)           For purposes of making all financial calculations to determine compliance with Article V (Financial Covenant) and any other financial ratio hereunder, all components of such calculations shall be adjusted to include or exclude, as the case may be, without duplication, such components of such calculations attributable to any business or assets that have been acquired by the Company or any of its Subsidiaries (including through Permitted Acquisitions) after the first day of the applicable period of determination and prior to the end of such period, as determined in good faith by the Company on a Pro Forma Basis.   Section 1.4            Conversion of Foreign Currencies   (a)           Indebtedness.  Indebtedness denominated in any currency other than Dollars shall be calculated using the Dollar Equivalent thereof as of the date of the Financial Statements on which such Indebtedness is reflected.   (b)           Dollar Equivalents.  The Administrative Agent shall determine the Dollar Equivalent of any amount as required hereby, and a determination thereof by the Administrative Agent shall be conclusive absent manifest error.  The Administrative Agent may, but shall not be obligated to, rely on any determination of the Dollar Equivalent of any amount made by any Loan Party in any document delivered to the Administrative Agent.  The Administrative Agent may determine or redetermine the Dollar Equivalent of any amount on any date either in its own discretion or upon the request of any Lender or Issuer.   (c)           Rounding-Off.  The Administrative Agent may set up appropriate rounding off mechanisms or otherwise round-off amounts hereunder to the nearest higher or lower amount in whole Dollar or cent to ensure amounts owing by any party hereunder or that otherwise need to be calculated or converted hereunder are expressed in whole Dollars or in whole cents, as may be necessary or appropriate.   Section 1.5            Certain Terms   (a)           The terms “herein,” “hereof,” “hereto” and “hereunder” and similar terms refer to this Agreement as a whole and not to any particular Article, Section, subsection or clause in, this Agreement.   (b)           Unless otherwise expressly indicated herein, (i) references in this Agreement to an Exhibit, Schedule, Article, Section, clause or sub-clause refer to the appropriate Exhibit or Schedule to, or Article, Section, clause or sub-clause in this Agreement and (ii) the words “above” and “below”, when following a reference to a clause or a sub-clause of any Loan Document, refer to a clause or sub-clause within, respectively, the same Section or clause.   (c)           Each agreement defined in this Article I shall include all appendices, exhibits and schedules thereto.  Unless the prior written consent of the Requisite Lenders is required hereunder for an amendment, restatement, supplement or other modification to any such   45 --------------------------------------------------------------------------------   agreement and such consent is not obtained, references in this Agreement to such agreement shall be to such agreement as so amended, restated, supplemented or modified.   (d)           References in this Agreement to any statute shall be to such statute as amended or modified from time to time and to any successor legislation thereto, in each case as in effect at the time any such reference is operative.   (e)           The term “including” when used in any Loan Document means “including without limitation” except when used in the computation of time periods.   (f)            The terms “Lender,” “Issuer,” “Administrative Agent” and “Mexican Facility Agent” include, without limitation, their respective successors.   (g)           Upon the appointment of any successor Administrative Agent pursuant to Section 10.7 (Successor Agent), references to Citicorp in Section 10.4 (The Agents Individually) and to Citibank in the definitions of Base Rate, Dollar Equivalent and Eurodollar Base Rate shall be deemed to refer to the financial institution then acting as the Administrative Agent or one of its Affiliates if it so designates.   ARTICLE II THE FACILITIES   Section 2.1            The Commitments   (a)           Revolving Credit Commitments.  On the terms and subject to the conditions contained in this Agreement, (i) each Revolving Credit Lender severally agrees to make loans in Dollars (each a “Revolving Dollar Loan”) to the Company from time to time on any Business Day during the period from the Closing Date until the Revolving Credit Termination Date in an aggregate principal amount at any time outstanding for all such loans by such Revolving Credit Lender not to exceed such Revolving Credit Lender’s Revolving Credit Commitment and (ii) each Mexican Lender severally agrees to make loans in Pesos (each a “Peso Loan”) to either of the Mexican Borrowers from time to time on any Business Day during the period from the date hereof until the Revolving Credit Termination Date in an aggregate principal amount at any time outstanding for all such loans by such Mexican Lender not to exceed such Mexican Lender’s Peso Commitment; provided, however, that at no time shall any Revolving Credit Lender be obligated to make a Revolving Loan in excess of such Revolving Credit Lender’s Ratable Portion of the Available Credit; provided, further, that at no time shall any Mexican Lender be obligated to make a Peso Loan in excess of such Mexican Lender’s Ratable Portion of the Peso Available Credit.  Within the limits of the Revolving Credit Commitment of each Revolving Credit Lender, the Available Credit and the Peso Available Credit, amounts of Revolving Loans repaid may be reborrowed by the Borrowers under this Section 2.1.   (b)           Term Loan Commitments.  On the terms and subject to the conditions contained in this Agreement, each Term Lender severally agrees to make a loan in Dollars (each a “Term Loan”) to the Company on the Closing Date in an aggregate principal amount not to exceed such Lender’s Term Loan Commitment.  Amounts of Term Loans repaid or prepaid may not be reborrowed.   46 --------------------------------------------------------------------------------   (c)           Facility Increases.    (i)            The Company may from time to time after the Closing Date, with the consent of the Administrative Agent, request (i) one or more increases in the Revolving Credit Commitments (each a “Revolving Commitment Increase”) or (ii) one or more increases in the Term Loan Commitments or additional tranches of term loans (each a “Term Loan Increase”); provided, however, that (A) the aggregate principal amount of all Facility Increases shall not exceed $300,000,000 and (B) each Facility Increase shall be in an amount not less than $25,000,000 (or, in the case of additional term loans on terms different from the existing Term Loans, $50,000,000).  Nothing in this Agreement shall be construed to obligate the Administrative Agent, the Mexican Facility Agent, any Arranger or any Lender to negotiate, solicit, provide or commit to any Facility Increase.  The Administrative Agent shall promptly notify each Lender of each proposed Facility Increase and of the proposed terms and conditions therefor agreed between the Company and the Administrative Agent.  Each such Lender (and each of their Affiliates and Approved Funds) may, in its sole discretion, commit to participate in such Facility Increase by forwarding its commitment therefor to the Administrative Agent.  The Administrative Agent, upon receipt of written commitments from Eligible Assignees in form and substance satisfactory to the Administrative Agent, shall allocate, in its sole discretion, to each such Eligible Assignee commitments with respect to such Facility Increase not to exceed the amount of written commitments received from such Eligible Assignee.  Each Facility Increase shall become effective on a date agreed by the Company and the Administrative Agent (each a “Facility Increase Date”); provided, however, that the conditions precedent set forth in Section 3.4 (Conditions Precedent to Each Facility Increase) shall have been satisfied on or prior to each such Facility Increase Date.  The Administrative Agent shall notify the Lenders and the Company, on or before 1:00 p.m., New York City time, on the first Business Day following a Facility Increase Date of the effectiveness of a Facility Increase and shall record in the Register all applicable additional information in respect of such Facility Increase.   (ii)           (A) The loans and commitments extended pursuant to any Facility Increase shall rank pari passu in right of payment with all other Loans and Commitments, (B) the Weighted Average Life to Maturity of the additional Term Loans under any Term Loan Increase shall not be shorter than the remaining average life to maturity of the Term Loan Facility prior to giving effect to such Term Loan Increase and (C) the final maturity date of the additional Term Loans shall not be earlier than the Term Loan Maturity Date.   (iii)          From and after the Facility Increase Date for any Revolving Commitment Increase, (A) the commitments under such Revolving Commitment Increase shall be deemed for all purposes part of the Revolving Credit Commitments, (B) each Eligible Assignee participating in such Revolving Commitment Increase shall become a Revolving Credit Lender and (C) the commitments under each Revolving Credit Commitment Increase shall have the same terms and conditions as the Revolving Credit Commitments.  On the Facility Increase Date for any Revolving Credit Commitment Increase, each Lender or Eligible Assignee participating in such Revolving Credit Commitment Increase shall purchase and assume from each existing Revolving Credit Lender having Revolving Loans and participations in Letters of Credit, Peso Loans and Swing Loans outstanding on such Facility Increase Date, without recourse or warranty, an undivided interest and participation, to the extent of such Lender’s Ratable Portion of the new Revolving Credit Commitments (after giving effect to such Revolving   47 --------------------------------------------------------------------------------   Credit Commitment Increase), in the aggregate outstanding Revolving Loans and participations in Letters of Credit, Peso Loans and Swing Loans, so as to ensure that, on the Facility Increase Date after giving effect to such Revolving Credit Commitment Increase, each Revolving Credit Lender is owed only its Ratable Portion of the Revolving Loans and participations in Letters of Credit, Peso Loans and Swing Loans outstanding on such Facility Increase Date.    Section 2.2            Borrowing Procedures   (a)           Borrowings in Dollars.    (i)            Each Revolving Dollar Borrowing or Term Loan Borrowing shall be made on notice given by the Company to the Administrative Agent not later than 1:00 p.m. (New York time) (i) one Business Day, in the case of a Borrowing of Base Rate Loans and (ii) three Business Days, in the case of a Borrowing of Eurodollar Rate Loans, prior to the date of the proposed Borrowing.  Each such notice shall be in substantially the form of Exhibit C (Form of Notice of Borrowing) (a “Notice of Borrowing”), specifying (A) the date of such proposed Borrowing, (B) the aggregate amount of such proposed Borrowing, (C) whether any portion of the proposed Borrowing will be of Base Rate Loans or Eurodollar Rate Loans and (D) for each Eurodollar Rate Loan, the initial Interest Period or Periods thereof.  Loans shall be made as Base Rate Loans unless, subject to Section 2.14 (Special Provisions Governing Eurodollar Rate Loans), the Notice of Borrowing specifies that all or a portion thereof shall be Eurodollar Rate Loans.  Notwithstanding anything to the contrary contained in Section 2.3(a) (Swing Loans), if any Notice of Borrowing requests a Borrowing of Base Rate Loans, the Administrative Agent may make a Dollar Swing Loan available to the Company in an aggregate amount not to exceed such proposed Borrowing, and the aggregate amount of the corresponding proposed Borrowing shall be reduced accordingly by the principal amount of such Swing Loan.  Each Borrowing shall be in an aggregate amount of not less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof.   (ii)           The Administrative Agent shall give to each Lender prompt notice of the Administrative Agent’s receipt of a Notice of Borrowing with respect to Borrowings denominated in Dollars and, if Eurodollar Rate Loans are properly requested in such Notice of Borrowing, the applicable interest rate determined pursuant to Section 2.14(a) (Determination of Interest Rate).  Each Lender shall, before 11:00 am. (New York time) on the date of the proposed Borrowing, make available to the Administrative Agent at its address referred to in Section 11.8 (Notices, Etc.), in immediately available funds, such Lender’s Ratable Portion of such proposed Borrowing.  Upon fulfillment (or due waiver in accordance with Section 11.1 (Amendments, Waivers, Etc.)) (i) on the Closing Date, of the applicable conditions set forth Section 3.1 (Conditions Precedent to Initial Loans and Letters of Credit) and (ii) at any time (including the Closing Date), of the applicable conditions set forth in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit), and after the Administrative Agent’s receipt of such funds, the Administrative Agent shall make such funds available to the Company.   48 --------------------------------------------------------------------------------   (b)           Peso Borrowings.    (i)            Each Peso Borrowing shall be made pursuant to a Notice of Borrowing given by any Mexican Borrower and the Company to the Mexican Facility Agent (with a copy to the Administrative Agent) not later than 1:00 p.m. (Mexico City time) three Business Days prior to the date of the proposed Borrowing.  Each Notice of Borrowing shall (A) specify the date of such proposed Borrowing, (B) specify the aggregate amount of such proposed Borrowing, (C) specify the account to which such funds are to be disbursed and (D) be in writing and be executed by the applicable Mexican Borrower and the Company.  Peso Loans shall be made as Peso TIIE Rate Loans.  Notwithstanding anything to the contrary contained in Section 2.3(a) (Swing Loans), the Mexican Facility Agent may make a Peso Swing Loan available to such Mexican Borrower in an aggregate amount not to exceed such proposed Borrowing, and the aggregate amount of the corresponding proposed Borrowing shall be reduced accordingly by the principal amount of such Swing Loan.  Each Borrowing shall be in an aggregate amount of not less than P5,000,000 or an integral multiple of P1,000,000 in excess thereof.   (ii)           The Mexican Facility Agent shall give to each Mexican Lender prompt notice of the Mexican Facility Agent’s receipt of a Notice of Borrowing with respect to Peso Borrowings and the applicable interest rate determined pursuant to Section 2.14(a) (Determination of Interest Rate).  Each Lender shall, before 11:00 am. (Mexico City time) on the date of the proposed Borrowing, make available to the Mexican Facility Agent at its address referred to in Section 11.8 (Notices, Etc.), in immediately available funds, such Lender’s Ratable Portion of such proposed Borrowing.  Upon fulfillment (or due waiver in accordance with Section 11.1 (Amendments, Waivers, Etc.)) (i) on the Closing Date, of the applicable conditions set forth Section 3.1 (Conditions Precedent to Initial Loans and Letters of Credit) and (ii) at any time (including the Closing Date), of the applicable conditions set forth in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit), and after the Mexican Facility Agent’s receipt of such funds, the Mexican Facility Agent shall make such funds available to the applicable Mexican Borrower.   (c)           Unless the Administrative Agent or the Mexican Facility Agent, as the case may be, shall have received notice from a Lender prior to the date of any proposed Borrowing that such Lender will not make available to the applicable Agent such Lender’s Ratable Portion of such Borrowing (or any portion thereof), such Agent, as the case may be, may assume that such Lender has made such Ratable Portion available to such Agent on the date of such Borrowing in accordance with this Section 2.2 and such Agent may, in reliance upon such assumption, make available to the relevant Borrower on such date a corresponding amount.  If and to the extent that such Lender shall not have so made such Ratable Portion available to the applicable Agent, such Lender and the relevant Borrower severally agree to repay to such Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to such Agent, at (i) in the case of such Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate (or, in the case of any Mexican Lender, the Peso Base Rate) for the first Business Day and thereafter at the interest rate applicable at the time to the Loans comprising such Borrowing.  If such Lender shall repay to such Agent such corresponding amount, such corresponding amount so repaid shall constitute such Lender’s Loan as part of such Borrowing for purposes of this Agreement.  If the relevant Borrower shall repay to the applicable Agent such corresponding   49 --------------------------------------------------------------------------------   amount, such payment shall not relieve such Lender of any obligation it may have hereunder to such Borrower.   (d)           The failure of any Lender to make on the date specified any Loan or any payment required by it (such Lender being a “Non-Funding Lender”), including any payment in respect of its participation in the Peso Loans, Swing Loans and Letter of Credit Obligations, shall not relieve any other Lender of its obligations to make such Loan or payment on such date but no such other Lender shall be responsible for the failure of any Non-Funding Lender to make a Loan or payment required under this Agreement.   Section 2.3            Swing Loans   (a)           Dollar Swing Loans.  On the terms and subject to the conditions contained in this Agreement, the Dollar Swing Lender shall make loans in Dollars (each a “Dollar Swing Loan”) otherwise available to the Company under the Revolving Credit Facility from time to time on any Business Day during the period from the date hereof until the Revolving Credit Termination Date in an aggregate principal amount at any time outstanding (together with the aggregate outstanding principal amount of any other Loan made by the Dollar Swing Lender hereunder in its capacity as a Lender or the Dollar Swing Lender) not to exceed the Dollar Swing Loan Sublimit; provided, however, that at no time shall the Dollar Swing Lender make any Dollar Swing Loan to the extent that, after giving effect to such Dollar Swing Loan, the aggregate Revolving Credit Outstandings would exceed the Revolving Credit Commitments in effect at such time.  Each Dollar Swing Loan shall be a Base Rate Loan and must be repaid in full within seven days after its making or, if sooner, upon any Revolving Dollar Borrowing hereunder and shall in any event mature no later than the Revolving Credit Termination Date.  Within the limits set forth in the first sentence of this clause (a), amounts of Dollar Swing Loans repaid may be reborrowed under this clause (a).   (b)           Peso Swing Loans.  On the terms and subject to the conditions contained in this Agreement, the Peso Swing Lender shall make loans in Pesos (each a “Peso Swing Loan”) otherwise available to the Mexican Borrowers under the Mexican Facility from time to time on any Business Day during the period from the date hereof until the Revolving Credit Termination Date in an aggregate principal amount at any time outstanding (together with the aggregate outstanding principal amount of any other Loan made by the Peso Swing Lender hereunder in its capacity as a Lender or the Peso Swing Lender) not to exceed the Peso Swing Loan Sublimit; provided, however, that at no time shall the Peso Swing Lender make any Peso Swing Loan to the extent that, after giving effect to such Swing Loan, (i) the aggregate Peso Outstandings would exceed the Peso Commitments in effect at such time or (ii) the aggregate Revolving Credit Outstandings would exceed the Revolving Credit Commitments in effect at such time.  Each Peso Swing Loan shall be a Peso Base Rate Loan and must be repaid in full within seven days after its making or, if sooner, upon any Peso Borrowing hereunder and shall in any event mature no later than the Revolving Credit Termination Date.  Within the limits set forth in the first sentence of this clause (b), amounts of Peso Swing Loans repaid may be reborrowed under this clause (b).   (c)           In order to request a Swing Loan, the applicable Borrower shall telecopy (or forward by electronic mail or similar means) to the applicable Agent (and, in the case of a Peso Swing Loan, with a copy to the Administrative Agent) a duly completed request in substantially the form of Exhibit D (Form of Swing Loan Request) (a “Swing Loan Request”), setting forth the requested amount and date of such Swing Loan and, with respect to Peso Swing   50 --------------------------------------------------------------------------------   Loans, specifying the account to which such funds are to be disbursed, to be received by such Agent not later than 1:00 p.m. (Local Time) on the day of the proposed borrowing; provided, however, that all Swing Loan Requests for Peso Swing Loans shall be in writing and be executed by the applicable Mexican Borrower and the Company.  The applicable Agent shall promptly notify the applicable Swing Lender of the details of the requested Swing Loan.  Subject to the terms of this Agreement, each Swing Lender may make a Swing Loan available to the applicable Agent and, in turn, such Agent shall make such amounts available to the applicable Borrower on the date of the relevant Swing Loan Request.  No Swing Lender shall make any Swing Loan in the period commencing on the first Business Day after it receives written notice from any Agent or any Revolving Credit Lender that one or more of the conditions precedent contained in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) shall not on such date be satisfied, and ending when such conditions are satisfied.  No Swing Lender shall otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) have been satisfied in connection with the making of any Swing Loan.   (d)           Each Swing Lender shall notify the applicable Agent in writing (which writing may be a telecopy or electronic mail) weekly, by no later than 10:00 a.m. (Local Time) on the first Business Day of each week, of the aggregate principal amount of its Swing Loans then outstanding.   (e)           (i)            With respect to the Dollar Swing Loans, (A) the Dollar Swing Lender may demand at any time that each Revolving Credit Lender pay to the Administrative Agent, for the account of such Swing Lender, in the manner provided in clause (f) below, such Revolving Credit Lender’s Ratable Portion of all or a portion of the applicable Dollar Swing Loans then outstanding, which demand shall be made through the Administrative Agent, shall be in writing and shall specify the outstanding principal amount of such Swing Loans demanded to be paid and (B) upon the occurrence of a Default or an Event of Default under Section 9.1(f) (Events of Default), each Revolving Credit Lender shall immediately acquire, without recourse or warranty, an undivided participation in each Dollar Swing Loan, by payment to the Administrative Agent, in immediately available funds, an amount equal to such Revolving Credit Lender’s Ratable Portion of such Swing Loan pursuant to clause (f) below.    (ii)           With respect to the Peso Swing Loans, (A) the Peso Swing Lender may demand at any time that each Mexican Lender pay to the Mexican Facility Agent, for the account of such Swing Lender, in the manner provided in clause (f) below, such Mexican Lender’s Ratable Portion of all or a portion of the applicable Peso Swing Loans then outstanding, which demand shall be made through the Mexican Facility Agent, shall be in writing and shall specify the outstanding principal amount of such Swing Loans demanded to be paid and (B) upon the occurrence of a Default or an Event of Default under Section 9.1(f) (Events of Default), each Mexican Lender shall immediately acquire, without recourse or warranty, an undivided participation in each Peso Swing Loan, by payment to the Mexican Facility Agent, in immediately available funds, an amount equal to such Mexican Lender’s Ratable Portion of such Swing Loan pursuant to clause (f) below.    (f)            Each Agent shall forward each notice referred to in clause (d) above and each demand referred to in clause (e) above to each applicable Lender on the day such notice or such demand is received by such Agent (except that any such notice or demand received by such Agent after 1:00 p.m. (Local Time) on any Business Day or any such demand received on a day   51 --------------------------------------------------------------------------------   that is not a Business Day shall not be required to be forwarded to the applicable Lenders by such Agent until the next succeeding Business Day), together with a statement prepared by such Agent specifying the amount of each applicable Lender’s Ratable Portion of the aggregate principal amount of the Swing Loans stated to be outstanding in such notice or demanded to be paid pursuant to such demand, and, notwithstanding whether or not the conditions precedent set forth in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) and 2.1(a) (Revolving Credit Commitments) shall have been satisfied (which conditions precedent the Revolving Credit Lenders hereby irrevocably waive), each applicable Lender shall, before 11:00 a.m. (Local Time) on the Business Day next succeeding the date of such Lender’s receipt of such notice or demand, make available to such Agent, in immediately available funds, for the account of the applicable Swing Lender, the amount specified in such statement.  Upon such payment by a Lender, such Lender shall, except as provided in clause (g) below, be deemed to have made a Revolving Loan to the applicable Borrower.  Each Agent shall use such funds to repay the applicable Swing Loans to the applicable Swing Lender.  To the extent that any Lender fails to make such payment available to such Agent for the account of any Swing Lender, the Borrowers shall repay such Swing Loan on demand.   (g)           Upon the occurrence of a Default or an Event of Default under Section 9.1(f) (Events of Default), each Revolving Credit Lender shall acquire, without recourse or warranty, an undivided participation in each Dollar Swing Loan otherwise required to be repaid by such Revolving Credit Lender pursuant to clause (f) above and each Mexican Lender shall acquire, without recourse or warranty, an undivided participation in each Peso Swing Loan otherwise required to be repaid by such Revolving Credit Lender pursuant to clause (f) above, in each case, which participation shall be in a principal amount equal to such Lender’s Ratable Portion of such Swing Loan, by paying to the applicable Swing Lender on the date on which such Lender would otherwise have been required to make a payment in respect of such Swing Loan pursuant to clause (f) above, in immediately available funds, an amount equal to such Lender’s Ratable Portion of such Swing Loan.  If all or part of such amount is not in fact made available by any applicable Lender to any Swing Lender on such date, such Swing Loan Lender shall be entitled to recover any such unpaid amount on demand from such Lender together with interest accrued from such date (i) in the case of any Revolving Credit Lender, at the Federal Funds Rate and (ii) in the case of any Mexican Lender, at the Peso Base Rate, for the first Business Day after such payment was due and thereafter at the rate of interest then applicable to Base Rate Loans.   (h)           From and after the date on which any Lender (i) is deemed to have made a Revolving Loan pursuant to clause (f) above with respect to any Swing Loan or (ii) purchases an undivided participation interest in a Swing Loan pursuant to clause (g) above, the applicable Swing Lender shall promptly distribute to such Lender such Lender’s Ratable Portion of all payments of principal of and interest received by such Swing Lender on account of such Swing Loan other than those received from a Lender pursuant to clause (f) or (g) above.   Section 2.4            Letters of Credit   (a)           On the terms and subject to the conditions contained in this Agreement, each Issuer agrees to Issue at the request of the Company and for the account of the Company (or for the joint and several account of the Company and a Subsidiary of the Company) one or more Letters of Credit from time to time on any Business Day during the period commencing on the Closing Date and ending on the earlier of the Revolving Credit Termination Date and (x) 30 days prior to the Scheduled Termination Date, in the case of a Documentary Letter of Credit and (y) 5 days prior to the Scheduled Termination Date, in the case of a Standby Letter of Credit; provided,   52 --------------------------------------------------------------------------------   however, that no Issuer shall be under any obligation to Issue (and, upon the occurrence of any of the events described in clauses (ii), (iii), (iv), (v), and (vi)(A) below, shall not Issue) any Letter of Credit upon the occurrence of any of the following:   (i)            any order, judgment or decree of any Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain such Issuer from Issuing such Letter of Credit or any Requirement of Law applicable to such Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuer shall prohibit, or request that such Issuer refrain from, the Issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuer with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Issuer is not otherwise compensated) not in effect on the date of this Agreement or result in any unreimbursed loss, cost or expense that was not applicable, in effect or known to such Issuer as of the date of this Agreement and that such Issuer in good faith deems material to such Issuer;   (ii)           such Issuer shall have received any written notice of the type described in clause (d) below;   (iii)          after giving effect to the Issuance of such Letter of Credit, the aggregate Revolving Credit Outstandings would exceed the aggregate Revolving Credit Commitments in effect at such time;   (iv)          after giving effect to the Issuance of such Letter of Credit, the sum of (i) the Dollar Equivalents of the Letter of Credit Undrawn Amounts at such time and (ii) the Dollar Equivalents of the Reimbursement Obligations at such time exceeds the Letter of Credit Sublimit;   (v)           (A)          such Letter of Credit is requested to be denominated in any Alternative Currency and the Issuer receives written notice from the Administrative Agent at or before 11:00 a.m. (New York time) on the date of the proposed Issuance of such Letter of Credit that, immediately after giving effect to the Issuance of such Letter of Credit, all Letter of Credit Obligations at such time in respect of each Letter of Credit denominated in currencies other than Dollars would exceed $5,000,000 or (B) such Letter of Credit is requested to be denominated in any currency other than Dollars or an Alternative Currency; or   (vi)          (A)          any fees due in connection with a requested Issuance have not been paid, (B) such Letter of Credit is requested to be Issued in a form that is not acceptable to such Issuer or (C) the Issuer for such Letter of Credit shall not have received, in form and substance reasonably acceptable to it and, if applicable, duly executed by the Company, applications, agreements and other documentation (collectively, a “Letter of Credit Reimbursement Agreement”) such Issuer generally employs in the ordinary course of its business for the Issuance of letters of credit of the type of such Letter of Credit.   None of the Revolving Credit Lenders (other than the Issuers in their capacity as such) shall have any obligation to Issue any Letter of Credit.   53 --------------------------------------------------------------------------------   (b)           In no event shall the expiration date of any Letter of Credit (i) be more than one year after the date of issuance thereof or (ii) be less than five days prior to the Scheduled Termination Date; provided, however, that any Letter of Credit with a term less than or equal to one year may provide for the renewal thereof for additional periods less than or equal to one year, as long as, (x) on or before the expiration of each such term and each such period, the Company and the Issuer of such Letter of Credit shall have the option to prevent such renewal and (y) neither the Issuer nor the Company shall permit any such renewal to extend the expiration date of any Letter of Credit beyond the date set forth in clause (ii) above.   (c)           In connection with the Issuance of each Letter of Credit, the Company shall give the relevant Issuer and the Administrative Agent at least two Business Days’ prior written notice, in substantially the form of Exhibit E (Form of Letter of Credit Request) (or in such other written or electronic form as is acceptable to the Issuer), of the requested Issuance of such Letter of Credit (a “Letter of Credit Request”).  Such notice shall be irrevocable and shall specify the Issuer of such Letter of Credit, the currency of issuance and face amount of the Letter of Credit requested (whose Dollar Equivalent shall not be less than $500,000 (or such lesser amount as mutually agreed between the Company and the relevant Issuer)), the date of Issuance of such requested Letter of Credit, the date on which such Letter of Credit is to expire (which date shall be a Business Day) and, in the case of an issuance, the Person for whose benefit the requested Letter of Credit is to be issued.  Such notice, to be effective, must be received by the relevant Issuer and the Administrative Agent not later than 1:00 p.m. (New York time) on the second Business Day prior to the requested Issuance of such Letter of Credit.   (d)           Subject to the satisfaction of the conditions set forth in this Section 2.4, the relevant Issuer shall, on the requested date, Issue a Letter of Credit on behalf of the Company in accordance with such Issuer’s usual and customary business practices.  No Issuer shall Issue any Letter of Credit in the period commencing on the first Business Day after it receives written notice from any Revolving Credit Lender that one or more of the conditions precedent contained in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) or clause (a) above (other than those conditions set forth in clauses (a)(i), (a)(vi)(B) and (C) above and, to the extent such clause relates to fees owing to the Issuer of such Letter of Credit and its Affiliates, clause (a)(vi)(A) above) are not on such date satisfied or duly waived and ending when such conditions are satisfied or duly waived.  No Issuer shall otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) have been satisfied in connection with the Issuance of any Letter of Credit.   (e)           The Company agrees that, if requested by the Issuer of any Letter of Credit, it shall execute a Letter of Credit Reimbursement Agreement in respect to any Letter of Credit Issued hereunder.  In the event of any conflict between the terms of any Letter of Credit Reimbursement Agreement and this Agreement, the terms of this Agreement shall govern.   (f)            Each Issuer shall comply with the following:   (i)            give the Administrative Agent written notice (or telephonic notice confirmed promptly thereafter in writing), which writing may be a telecopy or electronic mail, of the Issuance of any Letter of Credit Issued by it, of all drawings under any Letter of Credit Issued by it and of the payment (or the failure to pay when due) by the Company of any Reimbursement Obligation when due (which notice the   54 --------------------------------------------------------------------------------   Administrative Agent shall promptly transmit by telecopy, electronic mail or similar transmission to each Revolving Credit Lender);   (ii)           upon the request of any Revolving Credit Lender, furnish to such Revolving Credit Lender copies of any Letter of Credit Reimbursement Agreement to which such Issuer is a party and such other documentation as may reasonably be requested by such Revolving Credit Lender; and   (iii)          no later than 10 Business Days following the last day of each calendar month, provide to the Administrative Agent (and the Administrative Agent shall provide a copy to each Revolving Credit Lender requesting the same) and the Company separate schedules for Documentary Letters of Credit and Standby Letters of Credit issued by it, in form and substance reasonably satisfactory to the Administrative Agent, setting forth the aggregate Letter of Credit Obligations, in each case outstanding at the end of each month and any information requested by the Company or the Administrative Agent relating thereto.   (g)           Immediately upon the issuance by an Issuer of a Letter of Credit in accordance with the terms and conditions of this Agreement, such Issuer shall be deemed to have sold and transferred to each Revolving Credit Lender, and each Revolving Credit Lender shall be deemed irrevocably and unconditionally to have purchased and received from such Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Revolving Credit Lender’s Ratable Portion of the Revolving Credit Commitments, in such Letter of Credit and the obligations of the Company with respect thereto (including all Letter of Credit Obligations with respect thereto) and any security therefor and guaranty pertaining thereto.   (h)           The Company agrees to pay to the Issuer of any Letter of Credit the amount of all Reimbursement Obligations owing to such Issuer under any Letter of Credit issued for its account no later than the date that is the next succeeding Business Day after the Company receives written notice from such Issuer that payment has been made under such Letter of Credit (the “Reimbursement Date”), irrespective of any claim, set-off, defense or other right that the Company may have at any time against such Issuer or any other Person.  In the event that any Issuer makes any payment under any Letter of Credit and the Company shall not have repaid such amount to such Issuer pursuant to this clause (h) or any such payment by the Company is rescinded or set aside for any reason, such Reimbursement Obligation shall be payable on demand with interest thereon computed (i) from the date on which such Reimbursement Obligation arose to the Reimbursement Date, at the rate of interest applicable during such period to Revolving Loans that are Base Rate Loans and (ii) from the Reimbursement Date until the date of repayment in full, at the rate of interest applicable during such period to past due Revolving Loans that are Base Rate Loans, and such Issuer shall promptly notify the Administrative Agent, which shall promptly notify each Revolving Credit Lender of such failure, and each Revolving Credit Lender shall promptly and unconditionally pay to the Administrative Agent for the account of such Issuer the amount of such Revolving Credit Lender’s Ratable Portion of such payment (or the Dollar Equivalent thereof if such payment was made in any currency other than Dollars) in immediately available Dollars.  If the Administrative Agent so notifies such Revolving Credit Lender prior to 11:00 a.m. (New York time) on any Business Day, such Revolving Credit Lender shall make available to the Administrative Agent for the account of such Issuer its Ratable Portion of the amount of such payment on such Business Day in immediately available funds.  Upon such payment by a Revolving Credit Lender, such Revolving Credit Lender shall, except during the continuance of a Default or Event of Default under Section 9.1(f) (Events of Default)   55 --------------------------------------------------------------------------------   and notwithstanding whether or not the conditions precedent set forth in Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) shall have been satisfied (which conditions precedent the Revolving Credit Lenders hereby irrevocably waive), be deemed to have made a Revolving Loan to the Company in the principal amount of such payment.  Whenever any Issuer receives from the Company a payment of a Reimbursement Obligation as to which the Administrative Agent has received for the account of such Issuer any payment from a Revolving Credit Lender pursuant to this clause (h), such Issuer shall pay over to the Administrative Agent any amount received in excess of such Reimbursement Obligation and, upon receipt of such amount, the Administrative Agent shall promptly pay over to each Revolving Credit Lender, in immediately available funds, an amount equal to such Revolving Credit Lender’s Ratable Portion of the amount of such payment adjusted, if necessary, to reflect the respective amounts the Revolving Credit Lenders have paid in respect of such Reimbursement Obligation.   (i)            If and to the extent such Revolving Credit Lender shall not have so made its Ratable Portion of the amount of the payment required by clause (h) above available to the Administrative Agent for the account of such Issuer, such Revolving Credit Lender agrees to pay to the Administrative Agent for the account of such Issuer forthwith on demand any such unpaid amount together with interest thereon, for the first Business Day after payment was first due at the Federal Funds Rate and, thereafter, until such amount is repaid to the Administrative Agent for the account of such Issuer, at a rate per annum equal to the rate applicable to Base Rate Loans under the Facility.   (j)            The Company’s obligation to pay each Reimbursement Obligation and the obligations of the Revolving Credit Lenders to make payments to the Administrative Agent for the account of the Issuers with respect to Letters of Credit shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, including the occurrence of any Default or Event of Default, and irrespective of any of the following:   (i)            any lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein;   (ii)           any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document;   (iii)          the existence of any claim, set-off, defense or other right that the Borrowers, any other party guaranteeing, or otherwise obligated with, the Borrowers, any Subsidiary or other Affiliate thereof or any other Person may at any time have against the beneficiary under any Letter of Credit, any Issuer, the Administrative Agent or any Lender or any other Person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction;   (iv)          any draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;   (v)           payment by the Issuer under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and   56 --------------------------------------------------------------------------------   (vi)          any other act or omission to act or delay of any kind of the Issuer, the Lenders, the Administrative Agent or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.4, constitute a legal or equitable discharge of the Company’s obligations hereunder.   Any action taken or omitted to be taken by the relevant Issuer under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not result in any liability of such Issuer to the Company or any Lender.  In determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof, the Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary and, in making any payment under any Letter of Credit, the Issuer may rely exclusively on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever, and any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute willful misconduct or gross negligence of the Issuer.   (k)           Schedule 2.4 (Existing Letters of Credit) contains a schedule of certain letters of credit issued prior to the Closing Date for the account of the Company.  On the Closing Date (i) such letters of credit, to the extent outstanding, shall be automatically and without further action by the parties thereto converted to Letters of Credit issued pursuant to this Section 2.4 for the account of the Company and subject to the provisions hereof, and for this purpose the fees specified in Section 2.12(b) (Fees) shall be payable (in substitution for any fees set forth in the applicable letter of credit reimbursement agreements or applications relating to such letters of credit) as if such letters of credit had been issued on the Closing Date, (ii) the issuers of such Letters of Credit shall be deemed to be “Issuers” hereunder solely for the purpose of maintaining such letters of credit, for purposes of Section 2.16(f) relating to the obligation to provide the appropriate forms, certificates and statements to the Company and the Administrative Agent and any updates required by Section 2.16(f) and for purposes of Section 2.7 relating to the entries to be made in the Register, (iii) the Dollar Equivalent of the face amount of such letters of credit shall be included in the calculation of Letter of Credit Obligations and (iv) all liabilities of the Company with respect to such letters of credit shall constitute Obligations.  No letter of credit converted in accordance with this clause (k) shall be amended, extended or renewed without the prior written consent of the Administrative Agent.   Section 2.5            Reduction and Termination of the Commitments   Upon at least three Business Days’ prior notice to (i) the Administrative Agent, the Company may terminate in whole or reduce in part ratably the unused portions of the respective Revolving Credit Commitments of the Revolving Credit Lenders or, prior to the Closing Date, the unused portions the Term Loan Commitments of the Term Loan Lenders and (ii) the Mexican Facility Agent (with a copy to the Administrative Agent), the Mexican Borrowers may terminate in whole or reduce in part ratably the unused portions of the respective   57 --------------------------------------------------------------------------------   Peso Commitments of the Mexican Lenders; provided, however, that each partial reduction shall be in an aggregate amount of not less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof.  Any unused Term Loan Commitment shall terminate on the Closing Date.  In addition, all outstanding Revolving Credit Commitments shall terminate on the Revolving Credit Termination Date.   Section 2.6            Repayment of Loans   (a)           Each Borrower promises to repay the entire unpaid principal amount of the Revolving Loans and the Swing Loans owing by it on the Scheduled Termination Date or earlier, if otherwise required by the terms hereof.   (b)           The Company promises to repay the Term Loans at the dates and in the amounts set forth below:   DATE   AMOUNT   March 31, 2006   $ 1,625,000   June 30, 2006   $ 1,625,000   September 30, 2006   $ 1,625,000   December 31, 2006   $ 1,625,000   March 31, 2007   $ 1,625,000   June 30, 2007   $ 1,625,000   September 30, 2007   $ 1,625,000   December 31, 2007   $ 1,625,000   March 31, 2008   $ 1,625,000   June 30, 2008   $ 1,625,000   September 30, 2008   $ 1,625,000   December 31, 2008   $ 1,625,000   March 31, 2009   $ 1,625,000   June 30, 2009   $ 1,625,000   September 30, 2009   $ 1,625,000   December 31, 2009   $ 1,625,000   March 31, 2010   $ 1,625,000   June 30, 2010   $ 1,625,000   September 30, 2010   $ 1,625,000   December 31, 2010   $ 1,625,000   March 31, 2011   $ 1,625,000   June 30, 2011   $ 1,625,000   September 30, 2011   $ 1,625,000   December 31, 2011   $ 1,625,000   March 31, 2012   $ 1,625,000     58 --------------------------------------------------------------------------------   DATE     AMOUNT   June 30, 2012   $ 1,625,000   September 30, 2012   $ 1,625,000   Term Loan Maturity Date   $ 606,125,000     provided, however, that the Company shall repay the entire unpaid principal amount of the Term Loans on the Term Loan Maturity Date.   Section 2.7            Evidence of Debt   (a)           Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing Indebtedness of the Borrowers to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.   (b)           (i)            The Administrative Agent, acting as agent of the Borrowers solely for this purpose and for tax purposes, shall establish and maintain at its address referred to in Section 11.8 (Notices, Etc.) a record of ownership (the “Register”) in which the Administrative Agent agrees to register by book entry the Administrative Agent’s, each Lender’s and each Issuer’s interest in each Loan, each Letter of Credit and each Reimbursement Obligation, and in the right to receive any payments hereunder and any assignment of any such interest or rights.  In addition, the Administrative Agent, acting as agent of the Borrowers solely for this purpose and for tax purposes, shall establish and maintain accounts in the Register in accordance with its usual practice in which it shall record (i) the names and addresses of the Lenders and the Issuers, (ii) the Commitments of each Lender from time to time, (iii) the amount of each Loan made and, if a Eurodollar Rate Loan, the Interest Period applicable thereto, (iv) the amount of any principal or interest due and payable, and paid, by the Borrowers to, or for the account of, each Lender hereunder, (v) the amount that is due and payable, and paid, by the Company to, or for the account of, each Issuer, including the amount of Letter Credit Obligations (specifying the amount of any Reimbursement Obligations) due and payable to an Issuer, and (vi) the amount of any sum received by the Administrative Agent hereunder from the Borrowers, whether such sum constitutes principal or interest (and the type of Loan to which it applies), fees, expenses or other amounts due under the Loan Documents and each Lender’s and Issuer’s, as the case may be, share thereof, if applicable.   (ii)           Notwithstanding anything to the contrary contained in this Agreement, the Loans (including the Notes evidencing such Loans) and the Reimbursement Obligations are registered obligations and the right, title, and interest of the Lenders and the Issuers and their assignees in and to such Loans or Reimbursement Obligations, as the case may be, shall be transferable only upon notation of such transfer in the Register.  A Note shall only evidence the Lender’s or a registered assignee’s right, title and interest in and to the related Loan, and in no event is any such Note to be considered a bearer instrument or obligation.  This Section 2.7(b) and Section 11.2 shall be construed so that the Loans and Reimbursement Obligations are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related regulations (or any successor provisions of the Code or such regulations).   59 --------------------------------------------------------------------------------   (c)           The entries made in the Register and in the accounts therein maintained pursuant to clauses (a) and (b) above shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations recorded therein; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of each Borrower to repay the Loans owing by it in accordance with their terms.  In addition, the Loan Parties, the Administrative Agent, the Lenders and the Issuers shall treat each Person whose name is recorded in the Register as a Lender or as an Issuer, as applicable, for all purposes of this Agreement.  Information contained in the Register with respect to any Lender or Issuer shall be available for inspection by the Borrowers, the Administrative Agent, such Lender or such Issuer at any reasonable time and from time to time upon reasonable prior notice.   (d)           Notwithstanding any other provision of the Agreement, in the event that any Lender requests that a Borrower execute and deliver a promissory note or notes payable to such Lender in order to evidence the Indebtedness owing to such Lender by such Borrower hereunder, such Borrower shall promptly execute and deliver a Note or Notes to such Lender evidencing any Term Loans and Revolving Loans, as the case may be, of such Lender, substantially in the forms of Exhibit B-1 (Form of Revolving Dollar Note), Exhibit B-2 (Form of Peso Loan Note) or Exhibit B-3 (Form of Term Loan Note), respectively.   Section 2.8            Optional Prepayments   (a)           Revolving Loans.  Each Borrower may, upon (i) one Business Day’s prior notice in the case of Base Rate Loans and (ii) at least three Business Days’ prior notice in the case of Eurodollar Rate Loans or Peso TIIE Rate Loans to the applicable Agent (and in the case of any prepayment of Peso Loans, with a copy to the Administrative Agent) stating the proposed date and aggregate principal amount of the prepayment, prepay the outstanding principal amount of the Revolving Loans and Swing Loans owing by it in whole or in part at any time in the applicable currencies; provided, however, that, if any prepayment of any Eurodollar Rate Loan or Peso TIIE Rate Loan is made by a Borrower other than on the last day of an Interest Period for such Loan, such Borrower shall also pay any amount owing pursuant to Section 2.14(e) (Breakage Costs).  Each partial prepayment of (i) Base Rate Loans shall be in an aggregate amount not less than $500,000 or integral multiples of $100,000 in excess thereof, (b) Eurodollar Rate Loans shall be in an aggregate amount not less than $1,000,000 or integral multiples of $500,000 in excess thereof and (c) Peso TIIE Rate Loans shall be in an aggregate amount not less than P5,000,000 or integral multiples of P1,000,000 in excess thereof.   (b)           Term Loans.  The Company may, upon (i) at least one Business Day’s prior notice in the case of Base Rate Loans and (ii) at least three Business Days’ prior notice in the case of Eurodollar Rate Loans to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, prepay the outstanding principal amount of the Term Loans, in whole or in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that if any prepayment of any Eurodollar Rate Loan is made by the Company other than on the last day of an Interest Period for such Loan, the Company shall also pay any amounts owing pursuant to Section 2.14(e) (Breakage Costs).  Each partial prepayment of (i) Base Rate Loans shall be in an aggregate amount not less than $500,000 or integral multiples of $100,000 in excess thereof and (ii) Eurodollar Rate Loans shall be in an aggregate amount not less than $1,000,000 or integral multiples of $500,000 in excess thereof, and any such partial prepayment shall be applied to the remaining installments of the Term Loans as directed by the Company.  Upon the giving of such notice of prepayment, the principal   60 --------------------------------------------------------------------------------   amount of the Term Loans specified to be prepaid shall become due and payable on the date specified for such prepayment.   (c)           Notwithstanding anything to the contrary contained in this Agreement, the relevant Borrower may rescind any notice of prepayment under Section 2.8(a) or (b) if such prepayment would have resulted from a refinancing of all of the Facilities, which refinancing shall not be consummated or shall otherwise be delayed.   (d)           No Borrower shall have the right to prepay the principal amount of any Revolving Loan or any Term Loan other than as provided in this Section 2.8.    Section 2.9            Mandatory Prepayments   (a)           The Company shall prepay the Term Loans in accordance with clause (c) below:   (i)            within ten Business Days of receipt by the Company or any of its Subsidiaries of Net Cash Proceeds arising from (A) any Asset Sale permitted under Section 8.4(g) (Sale of Assets) in excess of $250,000,000, in an amount equal to 100% of such Net Cash Proceeds in excess of $250,000,000 and (B) any other Asset Sale or any Property Loss Event, in an amount equal to 100% of such Net Cash Proceeds; and   (ii)           within ten Business Days of receipt by the Company or any of its Subsidiaries of Net Cash Proceeds arising from any Debt Issuance (other than any Debt Issuance permitted by this Agreement (other than pursuant to Section 8.1(g)), in an amount equal to 100% of such Net Cash Proceeds.    (b)           If the Net Senior Secured Leverage Ratio as of the last day of any Fiscal Year (commencing with the fiscal year ended on or around March 31, 2007) is greater than 2.5 to 1.0, the Company shall prepay the Term Loans in accordance with clause (c) below, within ten Business Days after the delivery of Financial Statements pursuant to Section 6.1(b) (Financial Statements) for such Fiscal Year, in an amount equal to (i) 50% of Excess Cash Flow of the Company and its Subsidiaries for such Fiscal Year minus (ii) any optional prepayment of Term Loans made pursuant to Section 2.8(b) (Optional Prepayments) in such Fiscal Year.   (c)           Subject to the provisions of Section 2.13(g) (Payments and Computations), any prepayments made by the Company required to be applied in accordance with this clause (c), except in connection with a Deferred Prepayment Event, shall be applied to repay the outstanding principal balance of the Term Loans, until such Term Loans shall have been prepaid in full.  All repayments of the Term Loans made pursuant to this clause (c) shall be applied to reduce the remaining installments of such outstanding principal amounts of the Term Loans (i) in the stated order of their maturities for eight quarterly installments and then (ii) to reduce the remaining installments on a pro rata basis; provided, however, that (A) upon a Deferred Prepayment Event, the prepayments required above shall be reduced by the Deferred Prepayment Amount in respect of such Deferred Prepayment Event and (B) on the earlier of (1) the occurrence of an Event of Default and (2) the Deferred Prepayment Date, the remaining balance of such Deferred Prepayment Amount shall be applied as set forth above.   (d)           If at any time, the aggregate principal amount of (i) the Revolving Credit Outstandings exceed the aggregate Revolving Credit Commitments at such time, the Company   61 --------------------------------------------------------------------------------   shall forthwith prepay the Swing Loans first and then the other Revolving Loans then outstanding in an amount equal to such excess or (ii) the Peso Outstandings exceed the aggregate Peso Commitments at such time, the Mexican Borrowers shall forthwith prepay the Peso Swing Loans first and then the Peso Loans then outstanding in an amount equal to such excess; provided, however, that, to the extent such excess results solely by reason of a change in exchange rates, the Borrowers shall not be required to make such prepayment unless the amount of such excess causes the Revolving Credit Outstandings or the Peso Outstandings to exceed the Revolving Credit Commitments or Peso Commitments, as applicable, by more than 105%.  If any such excess remains after repayment in full of the aggregate outstanding Swing Loans and Revolving Loans, the Company shall provide cash collateral for the Letter of Credit Obligations in the manner set forth in Section 9.3 (Actions in Respect of Letters of Credit) in an amount equal to 105% of such excess.   Section 2.10         Interest   (a)           Rate of Interest.    (i)            Subject to the terms and conditions set forth in this Agreement, at the option of the Company, all Revolving Dollar Loans and Term Loans shall be made as Base Rate Loans or Eurodollar Rate Loans; provided, however, that all such Loans shall be made as Base Rate Loans unless, subject to Section 2.14 (Special Provisions Governing Eurodollar Rate Loans), the Notice of Borrowing specifies that all or a portion thereof shall be Eurodollar Rate Loans, as the case may be.  All Dollar Swing Loans shall be made as Base Rate Loans, all Peso Swing Loans shall be made as Peso Base Rate Loans and all Peso Loans shall be made as Peso TIIE Rate Loans, subject to conversion pursuant to Section 2.3 (Swing Loans) or Section 2.18 (Special Provisions Governing Peso Loans).   (ii)           All Loans and the outstanding amount of all other Obligations (other than pursuant to Hedging Contracts that are Loan Documents, to the extent such Hedging Contracts provide for the accrual of interest on unpaid obligations) shall bear interest, in the case of Loans, on the unpaid principal amount thereof from the date such Loans are made and, in the case of such other Obligations, from the date such other Obligations are due and payable until, in all cases, paid in full, except as otherwise provided in clause (c) below, as follows:   (A)          if a Base Rate Loan or such other Obligation, at a rate per annum equal to the sum of (A) the Base Rate as in effect from time to time and (B) the Applicable Margin;   (B)           if a Eurodollar Rate Loan, at a rate per annum equal to the sum of (A) the Eurodollar Rate determined for the applicable Interest Period and (B) the Applicable Margin in effect from time to time during such Interest Period;   (C)           if a Peso Base Rate Loan, at a rate per annum equal to the sum of (A) the Peso Base Rate as in effect from time to time and (B) the Applicable Margin; and   62 --------------------------------------------------------------------------------   (D)          if a Peso TIIE Rate Loan, at a rate per annum equal to the sum of (A) the Peso TIIE Rate determined for the applicable Interest Period and (B) the Applicable Margin in effect from time to time during such Interest Period.   (b)           Interest Payments.  (i) Interest accrued on each Base Rate Loan (other than Swing Loans) shall be payable in arrears (A) on the first Business Day of each calendar quarter, commencing on the first such day following the making of such Base Rate Loan, (B) in the case of Base Rate Loans that are Term Loans, upon the payment or prepayment thereof in full or in part on the principal amount paid or prepaid and (C) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Loan, (ii) interest accrued on Dollar Swing Loans shall be payable in arrears on the first Business Day of the immediately succeeding calendar quarter, (iii) Interest accrued on each Peso Base Rate Loan and each Peso Swing Loan shall be payable in arrears (A) on the first Business Day of each calendar quarter, commencing on the first such day following the making of such Peso Base Rate Loan or Peso Swing Loan, (B) upon the payment or prepayment thereof in full or in part on the principal amount paid or prepaid and (C) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Loan, (iv) interest accrued on each Eurodollar Rate Loan and each Peso TIIE Rate Loan shall be payable in arrears (A) on the last day of each Interest Period applicable to such Loan and, if such Interest Period has a duration of more than three months, on each date during such Interest Period occurring every three months from the first day of such Interest Period, (B) upon the payment or prepayment thereof in full or in part on the principal amount paid or prepaid and (C) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Loan and (v) interest accrued on the amount of all other Obligations shall be payable on demand from and after the time such Obligation becomes due and payable (whether by acceleration or otherwise).   (c)           Default Interest.  Notwithstanding the rates of interest specified in clause (a) above or elsewhere herein, effective immediately upon the occurrence of an Event of Default under Section 9.1(a) or (b) (Events of Default) and for as long thereafter as such Event of Default shall be continuing, the principal balance of all Loans and the amount of all other Obligations then due and payable shall bear interest at a rate that is two percent per annum in excess of the rate of interest applicable to such Loans or other Obligations from time to time.  Such interest shall be payable on the date that would otherwise be applicable to such interest pursuant to clause (b) above or otherwise on demand.   Section 2.11         Conversion/Continuation Option   (a)           Each applicable Borrower may elect (i) at any time on any Business Day to convert Base Rate Loans (other than Swing Loans) or any portion thereof to Eurodollar Rate Loans and (ii) at the end of any applicable Interest Period, (A) to convert Eurodollar Rate Loans or any portion thereof into Base Rate Loans or (B) to continue Eurodollar Rate Loans or Peso TIIE Rate Loans, or any portion thereof, for an additional Interest Period; provided, however, that (i) the aggregate amount of the Base Rate Loans for each Interest Period must be in the amount of at least $500,000 or an integral multiple of $100,000 in excess thereof, (ii) the aggregate amount of the Eurodollar Rate Loans for each Interest Period must be in the amount of at least $1,000,000 or an integral multiple of $500,000 in excess thereof and (iii) the aggregate amount of the Peso TIIE Rate Loans for each Interest Period must be in the amount of at least P5,000,000 or an integral multiple of P1,000,000 in excess thereof.  Each conversion or continuation shall be allocated among the Loans of each Lender in accordance with such Lender’s Ratable Portion.  Each such election shall be in substantially the form of Exhibit F (Form of Notice of Conversion   63 --------------------------------------------------------------------------------   or Continuation) (a “Notice of Conversion or Continuation”) and shall be made by giving the applicable Agent at least three Business Days’ prior written notice specifying (A) the amount and type of Loan being converted or continued, (B) in the case of a conversion to or a continuation of Eurodollar Rate Loans, the applicable Interest Period and (C) in the case of a conversion, the date of such conversion.   (b)           Each Agent shall promptly notify each applicable Lender of its receipt of a Notice of Conversion or Continuation and of the options selected therein.  Notwithstanding the foregoing, no conversion in whole or in part of Base Rate Loans to Eurodollar Rate Loans and no continuation in whole or in part of Eurodollar Rate Loans upon the expiration of any applicable Interest Period shall be permitted at any time at which (i) a Default or an Event of Default shall have occurred and be continuing or (ii) the continuation of, or conversion into, a Eurodollar Rate Loan would violate any provision of Section 2.14 (Special Provisions Governing Eurodollar Rate Loans).  If, within the time period required under the terms of this Section 2.11, the  Administrative Agent does not receive a Notice of Conversion or Continuation from the Company containing a permitted election to continue any Eurodollar Rate Loans for an additional Interest Period or to convert any such Loans, then, upon the expiration of the applicable Interest Period, such Loans shall be automatically converted to Base Rate Loans.  If, within the time period required under the terms of this Section 2.11, the  Mexican Facility Agent does not receive a Notice of Conversion or Continuation from the applicable Mexican Borrower containing a permitted election to continue any Peso TIIE Rate Loan for an additional Interest Period, then, upon the expiration of the applicable Interest Period, such Loans shall automatically be continued for an additional Interest Period.  Each Notice of Conversion or Continuation shall be irrevocable.   Section 2.12         Fees   (a)           Unused Commitment Fee.  The Company agrees to pay in immediately available Dollars to each Revolving Credit Lender a commitment fee on the actual daily amount by which the Revolving Credit Commitment of such Revolving Credit Lender exceeds such Lender’s Ratable Portion of the sum of (i) the aggregate outstanding principal amount of Revolving Dollar Loans and (ii) the outstanding amount of the aggregate Letter of Credit Obligations (the “Unused Commitment Fee”) from the date hereof through the Revolving Credit Termination Date at the Applicable Unused Commitment Fee Rate, payable in arrears (x) on the first Business Day of each calendar quarter, commencing on the first such Business Day following the Closing Date and (y) on the Revolving Credit Termination Date.   (b)           Letter of Credit Fees.  The Company agrees to pay the following amounts with respect to Letters of Credit issued by any Issuer:   (i)            to the Administrative Agent for the account of each Issuer of a Letter of Credit, with respect to each Letter of Credit issued by such Issuer, an issuance fee equal to 0.25% per annum of the Dollar Equivalent of the maximum undrawn face amount of such Letter of Credit, payable in arrears (A) on the first Business Day of each calendar quarter, commencing on the first such Business Day following the issuance of such Letter of Credit and (B) on the Revolving Credit Termination Date;   (ii)           to the Administrative Agent for the ratable benefit of the Revolving Credit Lenders, with respect to each Letter of Credit, a fee accruing in Dollars at a rate per annum equal to (A) the Applicable Margin for Revolving Loans that are   64 --------------------------------------------------------------------------------   Eurodollar Rate Loans minus (B) 0.25% on the Dollar Equivalent of the maximum undrawn face amount of such Letter of Credit, payable in arrears (1) on the first Business Day of each calendar quarter, commencing on the first such Business Day following the issuance of such Letter of Credit and (2) on the Revolving Credit Termination Date; provided, however, that during the continuance of an Event of Default under Section 9.1(a) or (b) (Events of Default), such fee shall be increased by two percent per annum (instead of, and not in addition to, any increase pursuant to Section 2.10(c) (Interest)) and shall be payable on demand; and   (iii)          to the Issuer of any Letter of Credit, with respect to the issuance, amendment or transfer of each Letter of Credit and each drawing made thereunder, customary documentary and processing charges in accordance with such Issuer’s standard schedule for such charges in effect at the time of issuance, amendment, transfer or drawing, as the case may be.   (c)           Additional Fees.  The Company has agreed to pay to the Administrative Agent and the Arrangers additional fees, the amount and dates of payment of which are embodied in the Fee Letter.   Section 2.13         Payments and Computations   (a)           The Borrowers shall make each payment hereunder (including fees and expenses) not later than 2:00 p.m. (Local Time) on the day when due, in the currency specified herein (or, if no such currency is specified, in Dollars) to the applicable Agent at its address referred to in Section 11.8 (Notices, Etc.) in immediately available funds without set-off or counterclaim.  Each Agent shall promptly thereafter cause to be distributed immediately available funds relating to the payment of principal, interest or fees to the applicable Lenders, in accordance with the application of payments set forth in clause (f) or (g) below, as applicable, for the account of their respective Applicable Lending Offices; provided, however, that amounts payable pursuant to Section 2.15 (Capital Adequacy), Section 2.16 (Taxes) or Section 2.14(c) or (d) (Special Provisions Governing Eurodollar Rate Loans) shall be paid only to the affected Lender or Lenders and amounts payable with respect to Swing Loans shall be paid only to the applicable Swing Lender.  Payments received by any Agent after 2:00 p.m. (Local Time) shall be deemed to be received on the next Business Day.   (b)           All computations of interest and of fees shall be made by the applicable Agent on the basis of a year of 360 days (or 365/366 days in the case of Obligations bearing interest at the Base Rate and the Unused Commitment Fee), in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest and fees are payable.  Each determination by such Agent of a rate of interest hereunder shall be conclusive and binding for all purposes, absent manifest error.   (c)           Each payment by the Borrowers of any Loan, Reimbursement Obligation (including interest or fees in respect thereof) and each reimbursement of various costs, expenses or other Obligation shall be made in the currency in which such Loan was made, such Letter of Credit issued or such cost, expense or other Obligation was incurred; provided, however, that (i) the Letter of Credit Reimbursement Agreement for a Letter of Credit may specify another currency for the Reimbursement Obligation in respect of such Letter of Credit and (ii) other than for payments in respect of a Loan or Reimbursement Obligation, Loan Documents duly executed   65 --------------------------------------------------------------------------------   by the Administrative Agent or any Hedging Contract may specify other currencies of payment for Obligations created by or directly related to such Loan Document or Hedging Contract.   (d)           Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of any Eurodollar Rate Loan or Peso TIIE Rate Loan to be made in the next calendar month, such payment shall be made on the immediately preceding Business Day.  All repayments of any Loans denominated in Dollars shall be applied to repay such Loans outstanding as Base Rate Loans or Eurodollar Rate Loans as notified by the Company to the Administrative Agent in writing (which writing may be by telecopy or electronic mail) not later than 1:00 p.m. (New York time) one Business Day prior to the scheduled date of such payment, with those Eurodollar Rate Loans having earlier expiring Eurodollar Interest Periods being repaid prior to those having later expiring Eurodollar Interest Periods; provided, however, that if the Company fails to so notify the Administrative Agent, such payment shall be applied first, to repay such Loans outstanding as Base Rate Loans and then, to repay such Loans outstanding as Eurodollar Rate Loans.  All repayments of any Loans denominated in Pesos shall be applied to repay such Loans outstanding as Peso Base Rate Loans or Peso TIIE Rate Loans as notified by the applicable Mexican Borrower to the Mexican Facility Agent in writing (which writing may be by telecopy or electronic mail) not later than 1:00 p.m. (Mexico City time) one Business Day prior to the scheduled date of such payment; provided, however, that if such Mexican Borrower fails to so notify the Mexican Facility Agent, such payment shall be applied first, to repay such Loans outstanding as Peso Base Rate Loans and then, to repay such Loans outstanding as Peso TIIE Rate Loans.    (e)           Unless any Agent shall have received notice from the applicable Borrower to the Lenders prior to the date on which any payment is due hereunder that such Borrower will not make such payment in full, such Agent may assume that such Borrower has made such payment in full to such Agent on such date and such Agent may, in reliance upon such assumption, cause to be distributed to each applicable Lender on such due date an amount equal to the amount then due such Lender.  If and to the extent that such Borrower shall not have made such payment in full to such Agent, each applicable Lender shall repay to such Agent forthwith on demand such amount distributed to such Lender together with interest thereon (in the case of the Administrative Agent, at the Federal Funds Rate for the first Business Day and thereafter, at the rate applicable to Base Rate Loans and, in the case of the Mexican Facility Agent, at the Peso Base Rate) for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to such Agent.   (f)            Except for payments and other amounts received by any Agent and applied in accordance with the provisions of clause (g) below (or required to be applied in accordance with Section 2.9(c) (Mandatory Prepayments)), all payments and any other amounts received by each Agent from or for the benefit of the Borrowers shall be applied as follows: first, to pay principal of, and interest on, any portion of the Loans such Agent may have advanced pursuant to the express provisions of this Agreement on behalf of any Lender, for which such Agent has not then been reimbursed by such Lender or the Borrowers, second, to pay all other Obligations then due and payable and third, as the Company so designates.  Payments in respect of Swing Loans received by any Agent shall be distributed to the applicable Swing Lender; payments in respect of Revolving Loans received by any Agent shall be distributed to each   66 --------------------------------------------------------------------------------   Revolving Credit Lender in accordance with such Lender’s Ratable Portion of the Revolving Credit Commitments; payments in respect of the Term Loans received by any Agent shall be distributed to each Term Lender in accordance with such Lender’s Ratable Portion of the Term Loans; and all payments of fees and all other payments in respect of any other Obligation shall be allocated among such of the Lenders and Issuers as are entitled thereto and, for such payments allocated to the Lenders, in proportion to their respective Ratable Portions.   (g)           The Borrowers hereby irrevocably waive the right to direct the application of any and all payments in respect of the Obligations and any proceeds of Collateral after the occurrence and during the continuance of an Event of Default and agrees that, notwithstanding the provisions of Section 2.9(c) (Mandatory Prepayments) and clause (f) above, each Agent may, and, upon either (A) the written direction of the Requisite Lenders or (B) the acceleration of the Obligations pursuant to Section 9.2 (Remedies) shall, apply all payments in respect of any Obligations and all funds on deposit in any Cash Collateral Account and all other proceeds of Collateral in the following order:   (i)            first, to pay Secured Obligations in respect of any expense reimbursements or indemnities then due to any Agent;   (ii)           second, to pay Secured Obligations in respect of any expense reimbursements or indemnities and Cash Management Obligations then due to the Lenders and the Issuers;   (iii)          third, to pay Secured Obligations in respect of any fees then due to any Agent, the Lenders and the Issuers;   (iv)          fourth, to pay interest then due and payable in respect of the Loans and Reimbursement Obligations;   (v)           fifth, to pay or prepay principal amounts on the Loans and Reimbursement Obligations, to provide cash collateral for outstanding Letter of Credit Undrawn Amounts in the manner described in Section 9.3 (Actions in Respect of Letters of Credit) and to pay Cash Management Obligations and amounts owing with respect to Hedging Contracts, ratably to the aggregate principal amount of such Loans, Reimbursement Obligations and Letter of Credit Undrawn Amounts, Cash Management Obligations and Obligations owing with respect to Hedging Contracts; and   (vi)          sixth, to the ratable payment of all other Secured Obligations;   provided, however, that if sufficient funds are not available to fund all payments to be made in respect of any Secured Obligation described in any of clauses Error! Reference source not found., (i), (ii), (iii), (iv) and (v) above, the available funds being applied with respect to any such Secured Obligation (unless otherwise specified in such clause) shall be allocated to the payment of such Secured Obligation ratably, based on the proportion of each Agent’s, Lender’s or Issuer’s interest in the aggregate outstanding Secured Obligations described in such clauses; provided, further, that payments that would otherwise be allocated to the Revolving Credit Lenders shall be allocated first to pay interest on and principal of any portion of the Revolving Loans that any Agent may have advanced on behalf of any Lender for which such Agent has not then been reimbursed by such Lender or the Borrowers, second to repay Swing Loans until such Loans are repaid in full and then to repay the Revolving Loans.  The order of priority set forth in clauses   67 --------------------------------------------------------------------------------   Error! Reference source not found., (i), (ii), (iii), (iv) and (v) above may at any time and from time to time be changed by the agreement of the Requisite Lenders without necessity of notice to or consent of or approval by the Borrowers, any Secured Party that is not a Lender or Issuer or by any other Person that is not a Lender or Issuer.  The order of priority set forth in clauses Error! Reference source not found., (i) and (ii) above may be changed only with the prior written consent of the Agents in addition to that of the Requisite Lenders.   Section 2.14         Special Provisions Governing Eurodollar Rate Loans and Peso TIIE Rate Loans   (a)           Determination of Interest Rate   The Eurodollar Rate for each Interest Period for Eurodollar Rate Loans shall be determined by the Administrative Agent pursuant to the procedures set forth in the definition of “Eurodollar Rate.”  The Peso TIIE Rate for each Interest Period for Peso Loans shall be determined by the Mexican Facility Agent pursuant to the procedures set forth in the definition of “Peso TIIE Rate.”  The Administrative Agent’s or the Mexican Facility Agent’s determination, as the case may be, shall be presumed to be correct absent manifest error and shall be binding on the Borrowers.   (b)           Interest Rate Unascertainable, Inadequate or Unfair   (i)            In the event that (A) the Administrative Agent determines that adequate and fair means do not exist for ascertaining the applicable interest rates by reference to which the Eurodollar Rate then being determined is to be fixed or (B) the Requisite Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period will not adequately reflect the cost to the Lenders of making or maintaining such Loans in the applicable currency for such Interest Period, the Administrative Agent shall forthwith so notify the Company and the Lenders, whereupon each Eurodollar Rate Loan shall automatically, on the last day of the current Interest Period for such Loan, convert into a Base Rate Loan and the obligations of the Lenders to make Eurodollar Rate Loans or to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended until the Administrative Agent shall notify the Company that the Requisite Lenders have determined that the circumstances causing such suspension no longer exist.   (ii)           In the event that (A) the Mexican Facility Agent determines that adequate and fair means do not exist for ascertaining the applicable interest rates by reference to which the Peso TIIE Rate then being determined is to be fixed or (B) the Requisite Mexican Lenders notify the Mexican Facility Agent that the Peso TIIE Rate for any Interest Period will not adequately reflect the cost to the Lenders of making or maintaining such Loans in the applicable currency for such Interest Period, the Mexican Facility Agent shall forthwith so notify the Borrowers and the Lenders, whereupon each Peso TIIE Rate Loan shall automatically, on the last day of the current Interest Period for such Loan, convert into a Peso Base Rate Loan and the obligations of the Lenders to make Peso TIIE Rate Loans shall be suspended until the Mexican Facility Agent shall notify the Borrowers that the Requisite Mexican Lenders have determined that the circumstances causing such suspension no longer exist.   68 --------------------------------------------------------------------------------   (c)           Increased Costs   If at any time any Lender determines that the introduction of, or any change in or in the interpretation of, any law, treaty or governmental rule, regulation or order (other than any change by way of imposition or increase of reserve requirements included in determining the Eurodollar Rate) or the compliance by such Lender with any guideline, request or directive from any central bank or other Governmental Authority (whether or not having the force of law), shall have the effect of increasing the cost to such Lender (except with respect to Taxes, which shall be governed by Section 2.16) of agreeing to make or making, funding or maintaining any Eurodollar Rate Loans or Peso TIIE Rate Loans, then the Borrowers shall from time to time, upon demand by such Lender (with a copy of such demand to the applicable Agent), pay to the applicable Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost.  A certificate as to the amount of such increased cost, submitted to the Borrowers and the applicable Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error.   (d)           Illegality   Notwithstanding any other provision of this Agreement, if any Lender determines that the introduction of, or any change in or in the interpretation of, any law, treaty or governmental rule, regulation or order after the date of this Agreement shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender or its applicable Lending Office to make Eurodollar Rate Loans or Peso TIIE Rate Loans or to continue to fund or maintain Eurodollar Rate Loans or Peso TIIE Rate Loans, then, on notice thereof and demand therefor by such Lender to the Borrowers through the applicable Agent, (i) the obligation of such Lender to make or to continue Eurodollar Rate Loans or Peso TIIE Rate Loans and to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended, and each such Lender shall make a Base Rate Loan as part of any requested Borrowing of Eurodollar Rate Loans or a Peso Base Rate Loan as part of any requested Borrowing of Peso TIIE Rate Loans and (ii) if the affected Eurodollar Rate Loans or Peso TIIE Rate Loans are then outstanding, the applicable Borrower shall immediately convert each such Loan into a Base Rate Loan or Peso Base Rate Loan, as applicable.  If, at any time after a Lender gives notice under this clause (d), such Lender determines that it may lawfully make Eurodollar Rate Loans or Peso TIIE Rate Loans, such Lender shall promptly give notice of that determination to the Borrowers and the applicable Agent, and the applicable Agent shall promptly transmit the notice to each other Lender.  Each Borrower’s right to request, and such Lender’s obligation, if any, to make Eurodollar Rate Loans or Peso TIIE Rate Loans, as applicable, shall thereupon be restored.   (e)           Breakage Costs   In addition to all amounts required to be paid by the Borrowers pursuant to Section 2.10 (Interest), the applicable Borrower shall compensate each Lender, upon written request, for all losses, expenses and liabilities (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain such Lender’s Eurodollar Rate Loans or Peso TIIE Rate Loans to such Borrower but excluding any loss of the Applicable Margin on the relevant Loans) that such Lender may sustain (i) if for any reason (other than solely by reason of such Lender being a Non-Funding Lender) a proposed Borrowing, conversion into or continuation of Eurodollar Rate Loans or Peso TIIE Rate Loans does not occur on a date specified therefor in a Notice of Borrowing or a Notice of Conversion or Continuation given by a Borrower or in a telephonic request by it for borrowing or   69 --------------------------------------------------------------------------------   conversion or continuation or a successive Interest Period does not commence after notice therefor is given pursuant to Section 2.11 (Conversion/Continuation Option), (ii) if for any reason any Eurodollar Rate Loan or Peso TIIE Rate Loan is prepaid (including mandatorily pursuant to Section 2.9 (Mandatory Prepayments)) on a date that is not the last day of the applicable Interest Period, (iii) as a consequence of a required conversion of a Eurodollar Rate Loan to a Base Rate Loan or Peso TIIE Rate Loan to a Peso Base Rate Loan as a result of any of the events indicated in clause (d) above or (iv) as a consequence of any failure by any Borrower to repay Eurodollar Rate Loans or Peso TIIE Rate Loans when required by the terms hereof.  The Lender making demand for such compensation shall deliver to applicable Borrower concurrently with such demand a written statement as to such losses, expenses and liabilities, and this statement shall be conclusive and binding for all purposes as to the amount of compensation due to such Lender, absent manifest error.   Section 2.15         Capital Adequacy   If at any time any Lender determines that (a) the adoption of, or any change in or in the interpretation of, any law, treaty or governmental rule, regulation or order after the date of this Agreement regarding capital adequacy, (b) compliance with any such law, treaty, rule, regulation or order or (c) compliance with any guideline or request or directive from any central bank or other Governmental Authority (whether or not having the force of law) shall have the effect of reducing the rate of return on such Lender’s (or any corporation controlling such Lender’s) capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change, compliance or interpretation, then, upon demand from time to time by such Lender (with a copy of such demand to the applicable Agent), the Borrowers shall pay to the applicable Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender for such reduction.  A certificate as to such amounts submitted to the Borrowers and the applicable Agent by such Lender shall be conclusive and binding for all purposes absent manifest error.   Section 2.16         Taxes   (a)           Except as otherwise provided in this Section 2.16, any and all payments by any Loan Party under each Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding (i) in the case of each Lender, each Issuer and each Agent (A) taxes measured by its net income, branch profits and franchise taxes imposed on it, and similar taxes imposed by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender, such Issuer or such Agent (as the case may be) is organized, (B) any U.S. or Mexican withholding taxes payable with respect to payments under the Loan Documents under laws (including any statute, treaty or regulation) in effect at the time a Lender becomes a party hereto or designates a new Applicable Lending Office, but not excluding any U.S. withholding taxes payable to the extent such Lender or its assignor (if any) was entitled, at the time of assignment or designation of a new Applicable Lending Office, to receive additional amounts from the Loan Parties with respect to such withholding tax pursuant to this Section 2.16 and (C) any withholding taxes attributable to a Lender’s failure to comply with Section 2.16(f), and (ii) in the case of each Lender or each Issuer, except to the extent arising solely as a result of entering into this Agreement, taxes measured by its net income, branch profits and franchise taxes imposed on it as a result of a present or former connection between such Lender or such Issuer (as the case may be) and the jurisdiction of the Governmental Authority   70 --------------------------------------------------------------------------------   imposing such tax or any taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”).  If any Taxes shall be required by law to be deducted from or in respect of any sum payable under any Loan Document to any Lender, any Issuer or any Agent (w) the sum payable shall be increased as may be necessary so that, after making all required deductions (including deductions applicable to additional sums payable under this Section 2.16), such Lender, such Issuer or such Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (x) the relevant Loan Party shall make such deductions, (y) the relevant Loan Party shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law and (z) the relevant Loan Party shall deliver to the applicable Agent evidence of such payment.   (b)           In addition, each Loan Party agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies of the United States or any political subdivision thereof or any applicable foreign jurisdiction, and all liabilities with respect thereto, in each case arising from any payment made under any Loan Document or from the execution, delivery or registration of, or otherwise with respect to, any Loan Document (collectively, “Other Taxes”).   (c)           Each Loan Party shall, jointly and severally, indemnify each Lender, each Issuer and each Agent for the full amount of Taxes and Other Taxes (including any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.16) paid by such Lender, such Issuer or such Agent (as the case may be) and any liability (including for penalties, interest and expenses) arising therefrom or with respect thereto.  This indemnification shall be made within 30 days from the date such Lender, such Issuer or such Agent (as the case may be) makes written demand therefor, which demand shall include reasonable supporting documentation of the imposition of such Taxes or Other Taxes.   (d)           Within 30 days after the date of any payment of Taxes or Other Taxes by any Loan Party, the Borrowers shall furnish to the Administrative Agent, at its address referred to in Section 11.8 (Notices, Etc.), the original or a certified copy of a receipt evidencing payment thereof.   (e)           Without prejudice to the survival of any other agreement of any Loan Party hereunder or under the Guaranty, the agreements and obligations of such Loan Party contained in this Section 2.16 shall survive the payment in full of the Obligations.   (f)            (i)            Each Non-U.S.  Lender that is entitled to an exemption from U.S. withholding tax, or that is subject to such tax at a reduced rate under an applicable tax treaty, shall (v) on or prior to the Closing Date in the case of each Non-U.S. lender that is a signatory hereto, (w) on or prior to the date of the Assignment and Acceptance pursuant to which such Non-U.S. Lender becomes a Lender, on or prior to the date a successor Issuer becomes an Issuer or the date a successor Administrative Agent becomes the Administrative Agent hereunder, (x) on or prior to the date on which any such form or certification expires or becomes obsolete, (y) after the occurrence of any event requiring a change in the most recent form or certification previously delivered by it to the Borrowers and the Administrative Agent, and (z) from time to time if requested by the Borrowers or the Administrative Agent, provide the Administrative Agent and the Borrowers with two completed originals of each of the following, as applicable:   71 --------------------------------------------------------------------------------   (A)          Form W-8ECI (claiming exemption from U.S. withholding tax because the income is effectively connected with a U.S. trade or business) or any successor form;   (B)           Form W-8BEN (claiming exemption from, or a reduction of, U.S.  withholding tax under an income tax treaty) or any successor form;   (C)           in the case of a Non-U.S. Lender claiming exemption under Sections 871(h) or 881(c) of the Code, a Form W-8BEN (claiming exemption from U.S. withholding tax under the portfolio interest exemption) or any successor form; or   (D)          any other applicable form, certificate or document prescribed by the IRS certifying as to such Non-U.S. Lender’s entitlement to such exemption from U.S. withholding tax or reduced rate with respect to all payments to be made to such Non-U.S. Lender under the Loan Documents.   (ii)           Each Lender entitled to complete exemption from Mexican withholding taxes shall provide, at any time reasonably requested by the Borrowers, the Administrative Agent or the Mexican Facility Agent, any applicable form, certificate or document certifying as to such Lender’s entitlement to complete exemption from Mexican withholding taxes with respect to all payments to be made to such Lender under the Loan Documents.   (iii)          Unless the Borrowers and the applicable Agent have received forms or other documents satisfactory to them indicating that payments under any Loan Document to or for a Lender are not subject to Mexican withholding tax, in the case of a Mexican Lender, or, in the case of all other Lenders, are not subject to U.S. withholding tax or are subject to U.S. withholding tax at a rate reduced by an applicable tax treaty, the Loan Parties and the applicable Agent shall withhold amounts required to be withheld by applicable Requirements of Law from such payments at the applicable statutory rate and pay over such amounts to the applicable taxing authority.  If the Borrowers and the Administrative Agent have received forms or other documents indicating that payments under any Loan Document to or for a Non-U.S. Lender are subject to U.S. withholding tax at a rate reduced by an applicable tax treaty, the Loan Parties and the Administrative Agent shall withhold amounts at such reduced rate and pay over such amounts to the applicable taxing authority.   (iv)          Each U.S. Lender shall (v) on or prior to the Closing Date in the case of each U.S. Lender that is a signatory hereto, (w) on or prior to the date of the Assignment and Acceptance pursuant to which such U.S. Lender becomes a Lender, on or prior to the date a successor Issuer becomes an Issuer or on or prior to the date a successor Administrative Agent becomes the Administrative Agent hereunder, (x) on or prior to the date on which any such form or certification expires or becomes obsolete, (y) after the occurrence of any event requiring a change in the most recent form or certification previously delivered by it to the Borrowers and the Administrative Agent, and (z) from time to time if requested by the Borrowers or the Administrative Agent, provide the Administrative Agent and the Borrowers with two completed originals of Form W-9 (certifying that such U.S. Lender is entitled to an exemption from U.S. backup   72 --------------------------------------------------------------------------------   withholding tax) or any successor form.  Solely for purposes of this Section 2.16(f), a U.S. Lender shall not include a Lender, an Issuer or an Administrative Agent that may be treated as an exempt recipient based on the indicators described in Treasury Regulation section 1.6049-4(c)(1)(ii).   (g)           Any Lender claiming any additional amounts payable pursuant to this Section 2.16 shall use its reasonable efforts (consistent with its internal policies and Requirements of Law) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that would be payable or may thereafter accrue and would not, in the sole determination of such Lender, be otherwise disadvantageous to such Lender.   (h)           Notwithstanding anything to the contrary contained herein, the Borrowers shall not be liable to any Mexican Lender with respect to any Taxes imposed or levied by the applicable taxing authorities of Mexico at a rate in excess of payments to banks established pursuant to the laws of Mexico and authorized to engage in the business of banking by the Mexican competent authorities.   Section 2.17         Substitution of Lenders   (a)           In the event that (i)(A) any Lender makes a claim under Section 2.14(c) (Increased Costs) or Section 2.15 (Capital Adequacy), (B) it becomes illegal for any Lender to continue to fund or make any Eurodollar Rate Loan and such Lender notifies the Borrowers pursuant to Section 2.14(d) (Illegality), (C) any Loan Party is required to make any payment pursuant to Section 2.16 (Taxes) that is attributable to a particular Lender or (D) any Lender becomes a Non-Funding Lender, (ii) in the case of clause (i)(A) above, as a consequence of increased costs in respect of which such claim is made, the effective rate of interest payable to such Lender under this Agreement with respect to its Loans materially exceeds the effective average annual rate of interest payable to the Requisite Lenders under this Agreement and (iii) in the case of clause (i)(A),(B) and (C) above, Lenders holding at least 75% of the Commitments are not subject to such increased costs or illegality, payment or proceedings (any such Lender, an “Affected Lender”), the Borrowers may substitute any Lender and, if reasonably acceptable to the Administrative Agent, any other Eligible Assignee (a “Substitute Institution”) for such Affected Lender hereunder, after delivery of a written notice (a “Substitution Notice”) by the Borrowers to the Administrative Agent and the Affected Lender within a reasonable time (in any case not to exceed 90 days) following the occurrence of any of the events described in clause (i) above that the Borrowers intends to make such substitution; provided, however, that, if more than one Lender claims increased costs, illegality or right to payment arising from the same act or condition and such claims are received by the Borrowers within 30 days of each other, then the Borrowers may substitute all, but not (except to the extent the Borrowers have already substituted one of such Affected Lenders before Borrowers’ receipt of the other Affected Lenders’ claim) less than all, Lenders making such claims.   (b)           If the Substitution Notice was properly issued under this Section 2.17, the Affected Lender shall sell, and the Substitute Institution shall purchase, all rights and claims of such Affected Lender under the Loan Documents and the Substitute Institution shall assume, and the Affected Lender shall be relieved of, the Affected Lender’s Revolving Credit Commitments and all other prior unperformed obligations of the Affected Lender under the Loan Documents (other than in respect of any damages (which pursuant to Section 11.5, do not include exemplary or punitive damages, to the extent permitted by applicable law) in respect of any such   73 --------------------------------------------------------------------------------   unperformed obligations).  Such purchase and sale (and the corresponding assignment of all rights and claims hereunder) shall be recorded in the Register maintained by the Administrative Agent and shall be effective on (and not earlier than) the later of (i) the receipt by the Affected Lender of its Ratable Portion of the Revolving Credit Outstandings, the Term Loans, together with any other Obligations owing to it, (ii) the receipt by the Administrative Agent of an agreement in form and substance satisfactory to it and the Borrowers whereby the Substitute Institution shall agree to be bound by the terms hereof and (iii) the payment in full to the Affected Lender in cash of all fees, unreimbursed costs and expenses and indemnities accrued and unpaid through such effective date.  Upon the effectiveness of such sale, purchase and assumption, the Substitute Institution shall become a “Lender” hereunder for all purposes of this Agreement having a Commitment in the amount of such Affected Lender’s Commitment assumed by it and such Commitment of the Affected Lender shall be terminated; provided, however, that all indemnities under the Loan Documents shall continue in favor of such Affected Lender.   (c)           Each Lender agrees that, if it becomes an Affected Lender and its rights and claims are assigned hereunder to a Substitute Institution pursuant to this Section 2.17, it shall execute and deliver to the Administrative Agent an Assignment and Acceptance to evidence such assignment, together with any Note (if such Loans are evidenced by a Note) evidencing the Loans subject to such Assignment and Acceptance; provided, however, that the failure of any Affected Lender to execute an Assignment and Acceptance shall not render such assignment invalid.   Section 2.18         Special Provisions Governing Peso Loans   (a)           At any time (i) after the occurrence and during the continuance of any Default or Event of Default, the Administrative Agent may (and, upon the request of any Mexican Lender, shall), or (ii) upon the replacement of any Peso Loan with a Revolving Dollar Loan pursuant to this Section 2.18, the Administrative Agent shall, demand that each Revolving Credit Lender pay in Dollars to the Administrative Agent, for the account of the Mexican Lenders, in the manner provided in clause (b) below, such Revolving Credit Lender’s Pro Rata Share of the Dollar Equivalent of the aggregate Peso Outstandings and related accrued but unpaid interest at such time, which demand shall be made through the Administrative Agent, shall be in writing and shall specify the outstanding principal amount and interest of the Peso Loans.   (b)           The Administrative Agent shall forward each demand referred to in clause (a) to each Revolving Credit Lender, on the day such demand is received by the Administrative Agent (except that any such demand received by the Administrative Agent after 1:00 p.m. (New York time) on any Business Day or any such demand that is received on a day that is not a Business Day shall not be required to be forwarded to the applicable Revolving Credit Lender by the Administrative Agent until the next succeeding Business Day), together with a statement prepared by the Administrative Agent specifying the amount of each applicable Revolving Credit Lender’s ratable portion of the aggregate Peso Outstandings and the Dollar Equivalent thereof demanded to be paid and, whether or not the conditions set forth in Section 2.1 (Revolving Credit Commitments) or 3.2 (Conditions Precedent to Each Loan and Letter of Credit) shall be satisfied (which conditions the Revolving Credit Lenders hereby irrevocably waive), each Revolving Credit Lender shall, before 11:00 a.m. (New York time) on the Business Day next succeeding the date of such Revolving Credit Lender’s receipt of such demand, make available to the Administrative Agent, in immediately available funds in Dollars for the account of each Mexican Lender, the amount specified in such Demand.  Upon such payment by a Revolving Credit Lender, such Revolving Credit Lender shall, except as provided in clause (c) below, be deemed to have made a Revolving Dollar Loan to the applicable Borrower in the   74 --------------------------------------------------------------------------------   principal amount of such payment and bearing interest at the Base Rate.  The Administrative Agent shall use such funds to repay the applicable Peso Loans to the applicable Mexican Lender.  To the extent that any Revolving Credit Lender fails to make such payment available to the Administrative Agent for the accounts of the Mexican Lenders, the applicable Borrower agrees to pay such Peso Loan on demand.  As of the date of any such demand, the Peso Loans (together with any interest then accrued thereon) shall, immediately and without further action, become due and payable and, to the extent not otherwise repaid pursuant to this clause (b), the applicable Borrower agrees, as a separate and independent obligation, to pay to the Mexican Facility Agent, for the account of any Mexican Lender entitled thereto, any amounts to which any Mexican Lender may be entitled pursuant to Section 11.4 (Indemnities) and which shall not otherwise have been repaid by the Revolving Credit Lenders pursuant to this Section 2.18.   (c)           Upon the occurrence of an Event of Default under Section 9.1(f), the Peso Loans shall automatically, immediately, and without notice of any kind, convert to Revolving Dollar Loans (based upon the Dollar Equivalent of the aggregate Peso Outstandings at the time of the occurrence of such Event of Default) bearing interest at the Base Rate, whereupon each Revolving Credit Lender shall acquire, without recourse or warranty, an undivided participation in each Peso Loan otherwise required to be repaid by such Revolving Credit Lender pursuant to clause (b) above, which participation shall be in a principal amount equal to such Revolving Credit Lender’s Ratable Portion by paying to the Administrative Agent for the benefit of the Mexican Lenders on the date on which such Revolving Credit Lender would otherwise have been required to make a payment in respect of such Peso Loan pursuant to clause (b) above, in immediately available funds in Dollars, an amount equal to such Revolving Credit Lender’s Ratable Portion thereof.  Subject to clause (e) below, if all or part of such amount is not in fact made available by such Revolving Credit Lender to the Administrative Agent on such date, the Mexican Lenders shall be entitled to recover any such unpaid amount on demand from such Revolving Credit Lender together with interest accrued from such date at the Base Rate.  As of the date of any such Event of Default under Section 9.1(f), all Peso Loans (together with any interest then accrued thereon) shall, immediately and without further action, become due and payable and, to the extent not otherwise repaid hereunder, the Company agrees, as a separate and independent obligation, to pay to the Administrative Agent, for the account of any Mexican Lender entitled thereto, any amounts to which any Mexican Lender may be entitled to pursuant to Section 11.4 (Indemnities) and which shall not otherwise have been repaid by the Revolving Credit Lenders pursuant to this Section 2.18.   (d)           From and after the date on which any Revolving Credit Lender (i) is deemed to have made a Revolving Dollar Loan pursuant to clause (b) above with respect to any Peso Loan or (ii) purchases an undivided participation interest in a Peso Loan pursuant to clause (c) above, the Mexican Facility Agent and the Mexican Lenders shall promptly distribute to such Revolving Credit Lender such Revolving Credit Lender’s Pro Rata Share of all payments of principal amount and interest received by the Mexican Facility Agent or the Mexican Lenders on account of such Peso Loan in excess of those amounts the Mexican Lender was entitled to receive pursuant to clause (b) or (c) above.   (e)           Notwithstanding the foregoing, a Revolving Credit Lender shall not have any obligation to acquire a participation in a Peso Loan pursuant to the foregoing paragraphs if a Default or Event of Default shall have occurred and be continuing at the time such Peso Loan was made and such Revolving Credit Lender shall have notified the Mexican Lenders in writing prior to the time such Peso Loan was made, that such Default or Event of Default has occurred and that   75 --------------------------------------------------------------------------------   such Revolving Credit Lender will not acquire participations in Peso Loans made while such Default or Event of Default is continuing.   ARTICLE III CONDITIONS TO LOANS AND LETTERS OF CREDIT   Section 3.1            Conditions Precedent to Initial Loans and Letters of Credit   The obligation of each Lender to make the Loans requested to be made by it on the Closing Date and the obligation of each Issuer to Issue Letters of Credit on the Closing Date is subject to the satisfaction or due waiver in accordance with Section 11.1 (Amendments, Waivers, Etc.) of each of the following conditions precedent:   (a)           Certain Documents.  The Administrative Agent shall have received on or prior to the Closing Date (and, to the extent any Borrowing of any Eurodollar Rate Loans or any Peso TIIE Rate Loans is requested to be made on the Closing Date, in respect of the Notice of Borrowing for such Loans, at least three Business Days prior to the Closing Date) each of the following (except as otherwise provided in Section 7.14 (Post-Closing Matters)), each dated the Closing Date unless otherwise indicated or agreed to by the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent and in sufficient copies for each Lender:   (i)            this Agreement, duly executed and delivered by the Borrowers and, for the account of each Lender requesting the same, a Note of each Borrower conforming to the requirements set forth herein;   (ii)           the Guaranty, duly executed and delivered by the Company and each other Guarantor;   (iii)          the Pledge and Security Agreement, duly executed and delivered by the Company and each other Guarantor, together with each of the following:   (A)          evidence (including a Perfection Certificate certified by a Responsible Officer of the Company) reasonably satisfactory to the Administrative Agent that, upon the filing and recording of instruments delivered at the Closing, the Administrative Agent (for the benefit of the Secured Parties) shall have a valid and perfected first priority security interest in the Collateral, including (x) such documents duly executed by each Loan Party (other than the Mexican Borrowers) as the Administrative Agent may reasonably request with respect to the perfection of its security interests in the Collateral (including financing statements under the UCC, patent, trademark and copyright security agreements suitable for filing with the Patent and Trademark Office or the Copyright Office, as the case may be, and other applicable documents under the laws of any jurisdiction with respect to the perfection of Liens created by the Pledge and Security Agreement) and (y) copies of UCC search reports as of a recent date listing all effective financing statements that name any Loan Party as debtor, together with copies of such financing statements, none of which shall cover the Collateral except for those that shall be terminated on the Closing Date or are otherwise permitted hereunder;   76 --------------------------------------------------------------------------------   (B)           all certificates, instruments and other documents representing all Pledged Stock being pledged pursuant to such Pledge and Security Agreement and stock powers for such certificates, instruments and other documents executed in blank; and   (C)           all instruments representing Pledged Debt Instruments being pledged pursuant to such Pledge and Security Agreement duly endorsed in favor of the Administrative Agent or in blank;   (iv)          the Foreign Pledge Agreements, duly executed and delivered by the Loan Parties party thereto, together with all certificates, instruments and other documents representing all Pledged Stock being pledged pursuant to such Foreign Pledge Agreements and stock powers for such certificates, instruments and other documents executed in blank;   (v)           Mortgages for all of the Mortgaged Real Property listed on Schedule 1.1, duly executed and delivered by the Loan Parties party thereto, together with all Mortgage Supporting Documents relating thereto;   (vi)          a favorable opinion of (A) Latham & Watkins LLP, counsel to the Loan Parties, in substantially the form of Exhibit G (Form of Opinion of counsel for the Loan Parties), and (B) counsel to the Loan Parties in each of the jurisdictions listed on Schedule 3.1(a) (Opinion Jurisdictions), in each case addressed to the Agents, the Lenders and the Issuers and addressing such other matters as any Lender through the Administrative Agent may reasonably request;   (vii)         a copy of each Related Document, the Sponsor Management Agreement and the New Subordinated Note Indenture, each certified as being true and correct by a Responsible Officer of the Company;   (viii)        a copy of the articles or certificate of incorporation (or equivalent Constituent Document) of each Loan Party, certified as of a recent date by the Secretary of State of the state of organization of such Loan Party, together with certificates of such official attesting to the good standing of each such Loan Party;   (ix)           a certificate of the Secretary or an Assistant Secretary of each Loan Party certifying (A) the names and true signatures of each officer of such Loan Party that has been authorized to execute and deliver any Loan Document or other document required hereunder to be executed and delivered by or on behalf of such Loan Party, (B) the by-laws (or equivalent Constituent Document) of such Loan Party as in effect on the date of such certification, (C) the resolutions of such Loan Party’s Board of Directors (or equivalent governing body) approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party and (D) that there have been no changes in the certificate of incorporation (or equivalent Constituent Document) of such Loan Party from the certificate of incorporation (or equivalent Constituent Document) delivered pursuant to clause (viii) above;   (x)            a certificate of the Chief Financial Officer of the Company, stating that the Company and its Subsidiaries are Solvent on a Consolidated basis, after   77 --------------------------------------------------------------------------------   giving effect to the initial Loans and Letters of Credit, the application of the proceeds thereof in accordance with Section 7.9 (Application of Proceeds), the consummation of the other Transactions and the payment of all estimated legal, accounting and other fees related hereto and thereto;   (xi)           a certificate of a Responsible Officer of the Company, in form and substance reasonably satisfactory to the Administrative Agent, to the effect that (A) the conditions set forth in Sections 3.1(e)(v), 3.1(e)(vi), 3.1(g), 3.1(h) and 3.2(b) have been satisfied and (B) no litigation not listed on Schedule 4.7 (Litigation) has been commenced against any Loan Party or any of its Subsidiaries that would have a Material Adverse Effect;   (xii)          evidence reasonably satisfactory to the Administrative Agent that the insurance policies required by Section 7.5 (Maintenance of Insurance) and any Collateral Document are in full force and effect, together with, unless otherwise agreed by the Administrative Agent, endorsements naming the Administrative Agent, on behalf of the Secured Parties, as an additional insured or loss payee, as applicable, under all insurance policies to be maintained with respect to the properties of the Company and each other Loan Party (other than the Mexican Borrowers); and   (xiii)         such other certificates, documents, agreements and information respecting any Loan Party as any Lender through the Administrative Agent may reasonably request.   (b)           Fees and Expenses Paid.  There shall have been paid to the Administrative Agent, for the account of the Administrative Agent, the Arrangers and the Lenders, as applicable, all fees and expenses (including reasonable fees and expenses of counsel) due and payable on or before the Closing Date (including all such fees described in the Fee Letter).   (c)           Refinancing of Existing Credit Agreements.  (i) All obligations under the Existing Credit Agreements shall have been repaid in full, (ii) each Existing Credit Agreement and all Loan Documents (as defined therein) shall have been terminated on terms reasonably satisfactory to the Administrative Agent and (iii) the Administrative Agent shall have received a payoff letter duly executed and delivered by the respective borrowers and agents thereunder or other evidence of such termination, in each case, in form and substance reasonably satisfactory to the Administrative Agent.   (d)           Debt Ratings.  The Facilities shall have been rated by S&P and Moody’s.   (e)           Merger.  The Administrative Agent shall be reasonably satisfied that (i) the terms and conditions of the Merger Agreement shall not have been amended, waived or modified without the approval of the Administrative Agent (other than any such waivers or amendments as are not, taken as a whole, materially adverse to the Administrative Agent and the Lenders), (ii) the Merger Agreement and the other Related Documents shall have been approved by all corporate action of Holdings, the Company and each of the other parties thereto, shall have been executed and delivered by each such party and shall be in full force and effect, (iii) all necessary consents and authorizations from, notices to and filings with any Governmental Authority and material third party consents in each case in connection with the Merger shall have   78 --------------------------------------------------------------------------------   been obtained and shall be in effect, except to the extent as would not have a Material Adverse Effect, (iv) subject only to the funding of the initial Loans hereunder, the Merger shall have been consummated in accordance with the Merger Agreement and all applicable Requirements of Law, (v) all representations and warranties contained in the Merger Agreement and the other Related Documents with respect to the consents and approvals needed to consummate the Merger shall be true and correct in all material respects on the Closing Date and (vi) no change shall have occurred since March 31, 2005 that, individually or in the aggregate, has had, or would reasonably be expected to have, a “Material Adverse Effect” (as defined in the Merger Agreement).   (f)            Consents, Etc.  Each of the Company and its Subsidiaries shall have received all consents and authorizations required pursuant to any material Contractual Obligation with any other Person and shall have obtained all Permits of, and effected all notices to and filings with, any Governmental Authority, in each case, as may be necessary to allow each of the Company and its Subsidiaries lawfully (i) to execute, deliver and perform, in all material respects, their respective obligations hereunder and under the Loan Documents to which each of them, respectively, is, or shall be, a party and each other agreement or instrument to be executed and delivered by each of them, respectively, pursuant thereto or in connection therewith and (ii) to create and perfect the Liens on the Collateral to be owned by each of them in the manner and for the purpose contemplated by the Loan Documents.   (g)           Existing Credit Agreements.  The representations and warranties set forth in (i) the Existing AMC Credit Agreement with respect to the historical business and operations of the Company and its Subsidiaries on or prior to the Closing Date and (ii) the Existing Loews Credit Agreement with respect to the historical business and operations of Loews and its Subsidiaries on or prior to the Closing Date shall be true and correct on and as of the Closing Date and shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date.   (h)           Indentures.  On a Pro Forma Basis, after giving effect to the Transactions, no Event of Default (as defined in the applicable Indenture) and no other event that, with the passing of time or the giving of notice or both, would become such Event of Default shall have occurred and be continuing under any of the Indentures.   (i)            Appointment of Process Agent.  The Administrative Agent shall have received evidence reasonably satisfactory to it that the Process Agent required by Section 11.12(b) shall have been duly appointed.   Section 3.2            Conditions Precedent to Each Loan and Letter of Credit   The obligation of each Lender on any date (including the Closing Date) to make any Loan and of each Issuer on any date (including the Closing Date) to Issue any Letter of Credit is subject to the satisfaction of each of the following conditions precedent:   (a)           Request for Borrowing or Issuance of Letter of Credit.  With respect to any Loan, the applicable Agent shall have received a duly executed Notice of Borrowing (or, in the case of Swing Loans, a duly executed Swing Loan Request), and, with respect to any Letter of   79 --------------------------------------------------------------------------------   Credit, the Administrative Agent and the Issuer shall have received a duly executed Letter of Credit Request.   (b)           Representations and Warranties; No Defaults.  The following statements shall be true on the date of such Loan or Issuance, both before and after giving effect thereto and, in the case of any Loan, to the application of the proceeds thereof:   (i)            in the case of Loans made or Letters of Credit Issued on the Closing Date, the representations and warranties set forth in Article IV (Representations and Warranties) (other than those set forth in Sections 4.4(a), 4.4(b), 4.5, 4.7, 4.8, 4.9, 4.11, 4.14, 4.15, 4.16, 4.17, 4.18 and 4.19) and in the other Loan Documents shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date;   (ii)           in the case of Loans made or Letters of Credit Issued on any date after the Closing Date, the representations and warranties set forth in Article IV (Representations and Warranties) and in the other Loan Documents shall be true and correct in all material respects on and as of such date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date; and   (iii)          no Default or Event of Default shall have occurred and be continuing; provided, however, that, in the case of Loans made or Letters of Credit Issued on the Closing Date, any Default or Event of Default arising from the breach of any representation or warranty set forth in the Loan Documents shall not constitute a failure of this condition unless it constitutes a failure of the condition set forth in Section 3.2(b)(i) above.   (c)           No Legal Impediments.  The making of the Loans or the Issuance of such Letter of Credit on such date does not violate any Requirement of Law on the date of or immediately following such Loan or Issuance of such Letter of Credit and is not enjoined, temporarily, preliminarily or permanently.   Each submission by any Borrower to any Agent of a Notice of Borrowing or a Swing Loan Request and the acceptance by such Borrower of the proceeds of each Loan requested therein, and each submission by the Company to an Issuer of a Letter of Credit Request, and the Issuance of each Letter of Credit requested therein, shall be deemed to constitute a representation and warranty by the Borrowers as to the matters specified in clause (b) above on the date of the making of such Loan or the Issuance of such Letter of Credit.   Section 3.3            Determinations of Initial Borrowing Conditions   For purposes of determining compliance with the conditions specified in Section 3.1 (Conditions Precedent to Initial Loans and Letters of Credit), each Lender shall be deemed to have consented to, approved, accepted or be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Administrative Agent responsible for the transactions   80 --------------------------------------------------------------------------------   contemplated by the Loan Documents shall have received notice from such Lender prior to the initial Borrowing, borrowing of Swing Loans or Issuance or deemed Issuance hereunder specifying its objection thereto and such Lender shall not have made available to the Administrative Agent such Lender’s Ratable Portion of such Borrowing or Swing Loans.   Section 3.4            Conditions Precedent to Each Facility Increase    The effectiveness of each Facility Increase shall be subject to the satisfaction of each of the following conditions precedent:   (a)           Certain Documents.  The Administrative Agent shall have received on or prior to the Facility Increase Date for such Facility Increase each of the following, each dated such Facility Increase Date unless otherwise indicated or agreed to by the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent:   (i)            written commitments duly executed by existing Lenders or Eligible Assignees in an aggregate amount equal to the amount of the proposed Facility Increase (as agreed between the Company and the Administrative Agent) and, in the case of each such Eligible Assignee, an assumption agreement in form and substance satisfactory to the Administrative Agent and duly executed by the Company, the Administrative Agent and such Eligible Assignee;   (ii)           an amendment to this Agreement, effective as of the Facility Increase Date and executed by the Company and the Administrative Agent, to the extent necessary to implement terms and conditions of the Facility Increase (including interest rates, fees and scheduled repayment dates and maturity), as agreed by the Company and the Administrative Agent, which, in any event, except for interest, fees, scheduled repayment dates and maturity, shall not be applied materially differently to the Facility Increase and the existing Facilities;   (iii)          for the account of each Lender or Eligible Assignee participating in such Facility Increase having requested the same by notice to the Administrative Agent and the Company received by each at least three Business Days prior to the Facility Increase Date (or such later date as may be agreed by the Company), Notes in each applicable Facility conforming to the requirements set forth in Section 2.7(d);   (iv)          for each Loan Party executing any Loan Document as part of such Facility Increase, a certificate of the secretary, assistant secretary or other officer of such Loan Party in charge of maintaining books and records of such Loan Party certifying as to the resolutions of such Loan Party’s board of directors or other appropriate governing body approving and authorizing the execution, delivery and performance of each document executed as part of such Facility Increase to which such Loan Party is a party;   (v)           duly executed favorable opinions of counsel to the Loan Parties in New York and such other local jurisdictions reasonably requested by the Administrative Agent, each addressed to the Agents, the Issuers and the Lenders and addressing such matters as the Administrative Agent may reasonably request; and   81 --------------------------------------------------------------------------------   (vi)          such other document as the Administrative Agent may reasonably request.   (b)           Fees and Expenses.  There shall have been paid to the Administrative Agent, for the account of the Administrative Agent, the Arrangers, any Lender (including any Person becoming a Lender as part of such Facility Increase on such Facility Increase Date) or any Issuer, as the case may be, all fees and expenses due and payable on or before the Facility Increase Date for such Facility Increase.   (c)           Conditions to Extensions of Credit.  As of the Facility Increase Date for such Facility Increase, (i) the conditions precedent set forth in Section 3.2 shall have been satisfied both before and after giving effect to such Facility Increase, (ii) such Facility Increase shall be made on the terms and conditions set forth in Section 2.1(c) and (iii) the Company and its Subsidiaries shall be in compliance with Article V as of the most recently ended Fiscal Quarter for which Financial Statements were delivered hereunder on a pro forma basis both before and after giving effect to such Facility Increase.   ARTICLE IV REPRESENTATIONS AND WARRANTIES   To induce the Lenders, the Issuers and the Agents to enter into this Agreement, the Company and, with respect to the Mexican Borrowers and their respective Subsidiaries only, the Mexican Borrowers represent and warrant each of the following to the Lenders, the Issuers and the Agents, on and as of the Closing Date and after giving effect to the Merger and the making of the Loans and the other financial accommodations on the Closing Date and on and as of each date as required by Section 3.2(b)(ii) (Conditions Precedent to Each Loan and Letter of Credit):   Section 4.1            Corporate Existence; Compliance with Law   Each of the Company and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) is duly qualified to do business as a foreign entity and in good standing under the laws of each jurisdiction where such qualification is necessary, except where the failure to be so qualified or in good standing would not, in the aggregate, have a Material Adverse Effect, (c) has all requisite power and authority and the legal right to own and operate its properties, to lease the property it operates under lease and to conduct its business as currently conducted, (d) is in compliance with its Constituent Documents except where the failure to be in compliance would not, in the aggregate, have a Material Adverse Effect, (e) is in compliance with all applicable Requirements of Law except where the failure to be in compliance would not, in the aggregate, have a Material Adverse Effect and (f) has all necessary Permits from or by, has made all necessary filings with, and has given all necessary notices to, each Governmental Authority having jurisdiction, to the extent required for such ownership, operation and conduct, except for Permits or filings or notices that can be obtained or made by the taking of ministerial action to secure the grant or transfer thereof or the failure to obtain or make would not, in the aggregate, have a Material Adverse Effect.   82 --------------------------------------------------------------------------------   Section 4.2            Corporate Power; Authorization; Enforceable Obligations   (a)           The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby:   (i)            are within such Loan Party’s corporate, limited liability company, partnership or other powers;   (ii)           have been or, at the time of delivery thereof pursuant to Article III (Conditions to Loans and Letters of Credit) will have been duly authorized by all necessary corporate or other organizational action, including the consent of shareholders, partners and members where required;   (iii)          do not and will not (A) contravene or violate such Loan Party’s respective Constituent Documents, (B) violate any other Requirement of Law applicable to such Loan Party (including Regulations T, U and X of the Federal Reserve Board), or any order or decree of any Governmental Authority or arbitrator applicable to such Loan Party, (C) conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any Indenture or any notes issued pursuant thereto, (D) conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any Related Document or any other material Contractual Obligation of such Loan Party or any of its Subsidiaries, except to the extent such conflict, breach, default, termination or acceleration would not have a Material Adverse Effect, or (E) result in the creation or imposition of any Lien upon any property of such Loan Party or any of its Subsidiaries, other than those in favor of the Secured Parties pursuant to the Collateral Documents or as permitted by Section 8.2 (Liens, Etc.); and   (iv)          do not require the consent of, authorization by, approval of, notice to, or filing or registration with, any Governmental Authority or any other Person, other than those listed on Schedule 4.2 (Consents) and that have been or will be, prior to the Closing Date, obtained or made, copies of which have been or will be delivered to the Administrative Agent pursuant to Section 3.1 (Conditions Precedent to Initial Loans and Letters of Credit), and each of which on the Closing Date will be in full force and effect and, with respect to the Collateral, filings required to perfect the Liens created by the Collateral Documents.   (b)           This Agreement has been, and each of the other Loan Documents will have been upon delivery thereof pursuant to the terms of this Agreement, duly executed and delivered by each Loan Party party thereto.  This Agreement is, and the other Loan Documents will be, when delivered hereunder, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other laws affecting creditors’ rights generally and by general principles of equity.   (c)           The Obligations constitute “Senior Indebtedness,” “Senior Secured Financing” or “Designated Senior Indebtedness” (or any comparable term) under and as defined in the Subordinated Note Indentures and any documentation with respect to any other subordinated Indebtedness of the Company and each of its Subsidiaries.  No other Indebtedness   83 --------------------------------------------------------------------------------   qualifies as “Senior Secured Financing” or “Designated Senior Indebtedness” (or any comparable term) under the Subordinated Note Indentures.   Section 4.3            Subsidiaries; Borrower Information   (a)           Set forth on Schedule 4.3(a) (Ownership of Subsidiaries) is a complete and accurate list showing, as of the Closing Date, all Subsidiaries of the Company and, as to each such Subsidiary, the jurisdiction of its organization, the number of shares of each class of Stock authorized (if applicable), the number outstanding on the Closing Date, the number and percentage of the outstanding shares of each such class owned (directly or indirectly) by the Company and whether it is a Subsidiary or an Unrestricted Subsidiary.  No Stock of any Subsidiary of the Company that is a Loan Party is subject to any outstanding option, warrant, right of conversion or purchase of any similar right.  All of the outstanding Stock of each Subsidiary of the Company owned (directly or indirectly) by the Company has been validly issued, is fully paid and non-assessable (to the extent applicable) and is owned by the Company or a Subsidiary of the Company, free and clear of all Liens (other than the Lien in favor of the Secured Parties created pursuant to the Collateral Documents and nonconsensual Liens permitted by Section 8.2 (Liens, Etc.)), options, warrants, rights of conversion or purchase or any similar rights.  Neither the Company nor any other Loan Party is a party to, or has knowledge of, any agreement restricting the transfer or hypothecation of any Stock of any such Subsidiary, other than the Loan Documents and the Indentures.   (b)           Schedule 4.3(b) (Borrower Information) sets forth as of the Closing Date the name, address of principal place of business and tax identification number of each Borrower.   Section 4.4            Financial Statements   (a)           The Consolidated balance sheet of the Company and its Subsidiaries as at March 31, 2005, and the related Consolidated statements of income, retained earnings and cash flows of the Company and its Subsidiaries for the fiscal year then ended, certified by PriceWaterhouseCoopers LLP, and the Consolidated balance sheet of the Company and its Subsidiaries as at September 29, 2005, and the related Consolidated statements of income, retained earnings and cash flows of the Company and its Subsidiaries for the twenty-six weeks then ended, copies of which have been furnished to each Lender, fairly present, subject, in the case of said balance sheet as at September 29, 2005, and said statements of income, retained earnings and cash flows for the twenty-six weeks then ended, to the absence of footnote disclosure and normal year-end audit adjustments, the Consolidated financial condition of the Company and its Subsidiaries as at such dates and the Consolidated results of the operations of the Company and its Subsidiaries for the period ended on such dates, all in conformity with GAAP.   (b)           Neither the Company nor any of the Company’s Subsidiaries has any material obligation, contingent liability or liability for taxes, long-term leases or unusual forward or long-term commitment that is not reflected in the Financial Statements referred to in clause (a) above or in the notes thereto and not otherwise permitted by this Agreement.   (c)           The Projections reflect projections for the five year period beginning with the fiscal year ending in 2006, on a year by year basis.  The Projections are based upon estimates and assumptions stated therein, all of which the Company believed to be reasonable and fair in light of conditions and facts known to the Company at the time of delivery of the   84 --------------------------------------------------------------------------------   Projections and, as of such time, reflect the Company’s good faith and reasonable estimates of the future financial performance of the Company and its Subsidiaries and of the other information projected therein for the periods set forth therein (it being understood that actual results may vary materially from the Projections).   (d)           The unaudited Consolidated balance sheet of the Company and its Subsidiaries, a copy of which has been furnished to the Administrative Agent, has been prepared as of September 29, 2005, reflects as of such date, on a Pro Forma Basis, the Consolidated financial condition of the Company and its Subsidiaries, and the assumptions expressed therein, were reasonable based on the information available to the Company at the time so furnished.   Section 4.5            Material Adverse Change   Since March 31, 2005, there has been no Material Adverse Change and there have been no events or developments that, in the aggregate, have had a Material Adverse Effect.   Section 4.6            Solvency   Both before and after giving effect to (a) the Loans and Letter of Credit Obligations to be made or extended on the Closing Date or such other date as Loans and Letter of Credit Obligations requested hereunder are made or extended, (b) the disbursement of the proceeds of such Loans pursuant to the instructions of the Borrowers, (c) the Merger and the consummation of the other Transactions and (d) the payment and accrual of all transaction costs in connection with the foregoing, the Company and its Subsidiaries, on a Consolidated basis, are Solvent.   Section 4.7            Litigation   Except as set forth on Schedule 4.7 (Litigation), there are no pending (or, to the knowledge of the Company, threatened) actions, investigations or proceedings affecting the Company or any of its Subsidiaries before any court, Governmental Authority or arbitrator other than those that, in the aggregate, would not have a Material Adverse Effect.  The performance of any action by any Loan Party required or contemplated by any Loan Document is not restrained or enjoined (either temporarily, preliminarily or permanently).   Section 4.8            Taxes   (a)           All federal, state, local and foreign income and franchise and other material tax returns, reports and statements (collectively, the “Tax Returns”) required to be filed by the Company or any of its Tax Affiliates have been filed with the appropriate Governmental Authorities in all jurisdictions in which such Tax Returns are required to be filed, all such Tax Returns are true and correct in all material respects, and all taxes, charges and other impositions reflected therein or otherwise due and payable have been paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for non-payment thereof except where contested in good faith and by appropriate proceedings if adequate reserves therefor have been established on the books of the Company or such Tax Affiliate in conformity with GAAP or where the failure to pay such taxes would not have a Material Adverse Effect.  Except as would not have a Material Adverse Effect, no Tax Return is under audit or examination by any Governmental Authority and no notice of such an audit or examination or any assertion of any claim for Taxes has been given or made by any Governmental Authority.  Proper and accurate   85 --------------------------------------------------------------------------------   amounts have been withheld by the Company and each of its Tax Affiliates from their respective employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable Requirements of Law and such withholdings have been timely paid to the respective Governmental Authorities, except where the failure to pay such withholdings would not have a Material Adverse Effect.   (b)           None of the Company or any of its Tax Affiliates has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for the filing of any federal, state, local or foreign income or franchise or other material Tax Return or the assessment or collection of any material charges.   Section 4.9            Full Disclosure   The written information prepared or furnished by or on behalf of the Company in connection with this Agreement or the consummation of the transactions contemplated hereunder, taken as a whole, including the information contained in the Disclosure Documents and the Related Documents, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein or herein not misleading.    Section 4.10         Margin Regulations   None of the Borrowers is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Federal Reserve Board), and no proceeds of any Loan will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock in contravention of Regulation T, U or X of the Federal Reserve Board.   Section 4.11         No Burdensome Restrictions; No Defaults   (a)           None of the Company or any of its Subsidiaries (i) is a party to any Contractual Obligation the compliance with one or more of which would have, in the aggregate, a Material Adverse Effect or the performance of which by any thereof, either unconditionally or upon the happening of an event, would result in the creation of a Lien (other than a Lien permitted under Section 8.2 (Liens, Etc.)) on the assets of any thereof or (ii) is subject to one or more charter or corporate restrictions that would, in the aggregate, have a Material Adverse Effect.   (b)           None of the Company or any of its Subsidiaries is in default under or with respect to any Contractual Obligation owed by it and, to the knowledge of any Loan Party, no other party is in default under or with respect to any Contractual Obligation owed to any Loan Party or to any Subsidiary of any Loan Party, other than, in either case, those defaults that, in the aggregate, would not have a Material Adverse Effect.   (c)           No Default or Event of Default has occurred and is continuing.   (d)           To the knowledge of any Loan Party, there are no Requirements of Law applicable to any Loan Party or any Subsidiary of any Loan Party the compliance with which by such Loan Party or such Subsidiary, as the case may be, would, in the aggregate, have a Material Adverse Effect.   86 --------------------------------------------------------------------------------   Section 4.12         Investment Company Act   None of the Company or any of its Subsidiaries is an “investment company” as defined in, or is required to be registered as an “investment company” under, the Investment Company Act of 1940, as amended.   Section 4.13         Use of Proceeds   The proceeds of the Loans and the Letters of Credit are being used by the Borrowers (and, to the extent distributed to them by the Borrowers, each other Loan Party) solely (a) to refinance all Indebtedness and other obligations outstanding under the Existing Credit Agreements, (b) to pay costs, fees and expenses related to the Transactions, (c) for the payment of transaction costs, fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby and (d) for working capital and general corporate purposes.   Section 4.14         Insurance   Schedule 4.14 sets forth as of the Closing Date a summary of all insurance policies maintained by the Company and its Subsidiaries.  All material policies of insurance of any kind or nature of the Company or any of its Subsidiaries, including policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers’ compensation and employee health and welfare insurance, are in full force and effect and are of a nature and provide such coverage as the Company believes in its commercially reasonable judgment is sufficient and as is customarily carried by businesses of the size and character of such Person.    Section 4.15         Labor Matters   (a)           There are no strikes, work stoppages, slowdowns or lockouts pending or threatened against or involving the Company or any of its Subsidiaries, other than those that, in the aggregate, would not have a Material Adverse Effect.   (b)           There are no unfair labor practices, grievances, complaints or arbitrations pending, or, to any Loan Party’s knowledge, threatened, against or involving the Company or any of its Subsidiaries, nor are there any arbitrations or grievances threatened involving the Company or any of its Subsidiaries, other than those that, in the aggregate, would not have a Material Adverse Effect.   (c)           Except as set forth on Schedule 4.15 (Labor Matters), as of the Closing Date, there is no collective bargaining agreement covering any employee of the Company or its Subsidiaries.   (d)           Schedule 4.15 (Labor Matters) sets forth, as of the date hereof, all material consulting agreements, executive employment agreements, executive compensation plans, deferred compensation agreements, employee stock purchase and stock option plans and severance plans of the Company and any of its Subsidiaries.   87 --------------------------------------------------------------------------------   Section 4.16         ERISA   (a)           Schedule 4.16 (List of Plans) separately identifies as of the date hereof all Title IV Plans and all Multiemployer Plans.   (b)           Each employee benefit plan of the Company or any of the Company’s Subsidiaries intended to qualify under Section 401 of the Code does so qualify, and any trust created thereunder is exempt from tax under the provisions of Section 501 of the Code, except where such failures, in the aggregate, would not have a Material Adverse Effect.   (c)           Each Title IV Plan is in compliance in all material respects with applicable provisions of ERISA, the Code and other Requirements of Law except for noncompliance that, in the aggregate, would not have a Material Adverse Effect.   (d)           There has been no, nor is there reasonably expected to occur, any ERISA Event other than those that, in the aggregate, would not have a Material Adverse Effect.   (e)           Except to the extent set forth on Schedule 4.16 (List of Plans), none of the Company, any of the Company’s Subsidiaries or any ERISA Affiliate would have any Withdrawal Liability as a result of a complete withdrawal as of the date hereof from any Multiemployer Plan, other than those that, in the aggregate, would not have a Material Adverse Effect.   Section 4.17         Environmental Matters   (a)           The operations of the Company and each of its Subsidiaries are in compliance with all Environmental Laws, including obtaining and complying with all required environmental, health and safety Permits, other than non-compliances that, in the aggregate, would not have a Material Adverse Effect.   (b)           Except as disclosed on Schedule 4.17 (Environmental Matters), none of the Company or any of its Subsidiaries or any Real Property currently or, to the knowledge of any Loan Party, previously owned, operated or leased by or for the Company or any of its Subsidiaries is subject to any pending or, to the knowledge of any Loan Party, threatened, claim, order, agreement, notice of violation, notice of potential liability or is the subject of any pending or threatened proceeding or governmental investigation under or pursuant to Environmental Laws other than those that, in the aggregate, are not reasonably likely to have a Material Adverse Effect.   (c)           Except as disclosed on Schedule 4.17 (Environmental Matters), none of the Real Property owned or operated by the Company or any of its Subsidiaries is a treatment, storage or disposal facility requiring a Permit under the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the regulations thereunder or any state analog.   (d)           There are no facts, circumstances or conditions arising out of or relating to the operations or ownership of the Company or of Real Property owned, operated or leased by the Company or any of its Subsidiaries that are not specifically included in the financial information furnished to the Lenders which could reasonably be expected to result in the Company incurring Environmental Liabilities and Costs other than those that, in the aggregate, would not have a reasonable likelihood of having a Material Adverse Effect.   88 --------------------------------------------------------------------------------   (e)           As of the date hereof, no Environmental Lien has attached to any property of the Company or any of its Subsidiaries and, to the knowledge of any Loan Party, no Government Authority has undertaken any Remedial Action at any Real Property owned or leased by any Loan Party.   (f)            The Company and each of its Subsidiaries has made available to the Lenders copies of all material environmental, health or safety audits, studies, assessments, inspections, investigations or other environmental health and safety reports relating to the operations of the Company or any of its Subsidiaries or any Real Property of any of them that are in the possession, custody or control of the Company or any of its Subsidiaries which reveals known or potential material Environmental Liabilities and Costs.   Section 4.18         Intellectual Property   The Company and its Subsidiaries own or license or otherwise have the right to use all licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, copyright applications, Internet domain names, franchises, authorizations and other intellectual property rights (including all Intellectual Property as defined in the Pledge and Security Agreement) that are necessary for the operations of their respective businesses, without infringement upon or conflict with the rights of any other Person with respect thereto, including all trade names associated with any private label brands of the Company or any of its Subsidiaries, except to the extent the failure to own, license or otherwise have the right to use would not have a Material Adverse Effect.  To any Loan Party’s knowledge, no license, permit, patent, patent application, trademark, trademark application, service mark, trade name, copyright, copyright application, Internet domain name, franchise, authorization, other intellectual property right (including all “Intellectual Property” as defined in the Pledge and Security Agreement), slogan or other advertising device, product, process, method, substance, part or component, or other material now employed, or now contemplated to be employed, by the Company or any of its Subsidiaries infringes upon or conflicts with any rights owned by any other Person, except for such infringments and conflicts which would not have a Material Adverse Effect.  No claim or litigation regarding any of the foregoing is pending or, to the knowledge of any Loan Party, threatened which would have a Material Adverse Effect.   Section 4.19         Title; Real Property   (a)           Each of the Company and its Subsidiaries has good and marketable title to, or valid leasehold interests in, all Real Property and good title to all personal property, in each case that is purported to be owned or leased by it, including those reflected on the most recent Financial Statements delivered by the Company, and none of such properties and assets is subject to any Lien, except Liens permitted under Section 8.2 (Liens, Etc.).   (b)           Set forth on Schedule 4.19 (Real Property) is a complete and accurate list of all Real Property of each Loan Party and showing, as of the Closing Date, the current street address (including, where applicable, county, state and other relevant jurisdictions), record owner and, where applicable, lessee thereof.   (c)           No Loan Party owns or holds, or is obligated under or a party to, any lease, option, right of first refusal or other contractual right to purchase, acquire, sell, assign, dispose of or lease any Mortgaged Real Property of such Loan Party.   89 --------------------------------------------------------------------------------   (d)           No portion of any Real Property of any Loan Party or any of its Subsidiaries has suffered any material damage by fire or other casualty loss that has not heretofore been substantially repaired and restored to its original condition.  Except as disclosed to the Administrative Agent, no portion of any Real Property of any Loan Party or any of its Subsidiaries subject to a Mortgage in favor of the Administrative Agent is located in a special flood hazard area as designated by any federal Governmental Authority.   (e)           All Permits required to have been issued or appropriate to enable all Real Property of the Company or any of its Subsidiaries to be lawfully occupied and used for all of the purposes for which they are currently occupied and used have been lawfully issued and are in full force and effect, other than those that, in the aggregate, would not have a Material Adverse Effect.   (f)            None of the Company or any of its Subsidiaries has received any notice, or has any knowledge, of any pending, threatened or contemplated condemnation proceeding affecting any Real Property of the Company or any of its Subsidiaries or any part thereof, except those that, in the aggregate, would not have a Material Adverse Effect.   Section 4.20         Related Documents   (a)           The execution, delivery and performance by the Company or any of its Subsidiaries of the Related Documents to which it is a party and the consummation of the transactions contemplated thereby by such Person:   (i)            are within such Person’s respective corporate, limited liability company or partnership powers;   (ii)           at the Closing Date will have been duly authorized by all necessary corporate or other action, including the consent of stockholders where required;   (iii)          do not and will not (A) contravene or violate the Company’s or any of its Subsidiaries’ respective Constituent Documents, (B) violate any other Requirement of Law applicable to such Person, or any order or decree of any Governmental Authority or arbitrator, except for those that, in the aggregate, would not have a Material Adverse Effect, (C) conflict with or result in the breach of, constitute a default under, or result in or permit the termination or acceleration of, any Contractual Obligation of such Person, except for those that, in the aggregate, would not have a Material Adverse Effect or (D) result in the creation or imposition of any Lien upon any property of the Company or any of its Subsidiaries other than a Lien permitted under Section 8.2 (Liens, Etc.); and   (iv)          do not require the consent of, authorization by, approval of, notice to, or filing or registration with, any Governmental Authority or any other Person, other than those that (A) will have been obtained at the Closing Date, each of which will be in full force and effect on the Closing Date, none of which will on the Closing Date impose materially adverse conditions upon the exercise of control by the Company over any of its Subsidiaries and (B) in the aggregate, if not obtained, would not have a Material Adverse Effect.   90 --------------------------------------------------------------------------------   (b)           Each of the Related Documents has been or at the Closing Date will have been duly executed and delivered by the Company and each of its Subsidiaries party thereto and at the Closing Date will be the legal, valid and binding obligation of each such Person party thereto, enforceable against such Person in accordance with its terms.   Section 4.21         New Subordinated Notes   The proceeds of the New Subordinated Notes are being used by the Company solely in accordance with the Disclosure Documents.   ARTICLE V FINANCIAL COVENANT   As long as any Revolving Credit Commitment remains outstanding and unless the Requisite Revolving Credit Lenders otherwise consent in writing, commencing with the Fiscal Quarter ending on or around September 30, 2006, the Company and its Subsidiaries shall maintain on the last day of each Fiscal Quarter, a Net Senior Secured Leverage Ratio of not more than 3.25 to 1.0.   ARTICLE VI REPORTING COVENANTS   The Company agrees with the Lenders, the Issuers and the Agents to each of the following, as long as any Obligation (other than Cash Management Obligations, Obligations arising under Cash Management Documents and Hedging Contracts and contingent indemnification obligations as to which no claim is pending) or any Commitment remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing:   Section 6.1            Financial Statements   The Company shall furnish to the Administrative Agent (and the Administrative Agent will forward to or post on the Approved Electronic Platform for the Lenders) each of the following:   (a)           Quarterly Reports.  Within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, financial information regarding the Company and its Subsidiaries consisting of a Consolidated unaudited balance sheet as of the close of such quarter and the related statements of income and cash flow for such quarter and that portion of the Fiscal Year ending as of the close of such quarter, setting forth in comparative form the figures for the corresponding period in the prior year, in each case certified by a Responsible Officer of the Company as fairly presenting the Consolidated financial position of the Company and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in accordance with GAAP (subject to the absence of footnote disclosure and normal year-end audit adjustments).   (b)           Annual Reports.  Within 90 days after the end of each Fiscal Year, financial information regarding the Company and its Subsidiaries consisting of a Consolidated balance sheet of the Company and its Subsidiaries as of the end of such year and related   91 --------------------------------------------------------------------------------   statements of income and cash flows of the Company and its Subsidiaries for such Fiscal Year, all prepared in conformity with GAAP and certified, in the case of such Consolidated Financial Statements, without qualification as to the scope of the audit or as to the Company being a going concern by the Company’s Accountants, together with the report of such accounting firm stating that (i) such Financial Statements fairly present the Consolidated financial position of the Company and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except for changes with which the Company’s Accountants shall concur and that shall have been disclosed in the notes to the Financial Statements) and (ii) the examination by the Company’s Accountants in connection with such Consolidated Financial Statements has been made in accordance with generally accepted auditing standards.   (c)           Compliance Certificate.  Together with each delivery of any Financial Statement pursuant to clause (a) or (b) above, a certificate of a Responsible Officer of the Company in substantially the form of Exhibit J (Form of Compliance Certificate) (each, a “Compliance Certificate”) (i) showing in reasonable detail the calculations used in determining the Net Senior Secured Leverage Ratio (for purposes of determining the Applicable Margin and the Applicable Unused Commitment Fee Rate) and demonstrating compliance with the financial covenant contained in Article V (Financial Covenant) and (ii) stating that no Default or Event of Default has occurred and is continuing or, if a Default or an Event of Default has occurred and is continuing, stating the nature thereof and the action that the Company proposes to take with respect thereto.   (d)           Corporate Chart and Other Collateral Updates.  Together with each delivery of any Financial Statement pursuant to clause (b) above, (i) a certificate of a Responsible Officer of the Company certifying that the Corporate Chart attached thereto (or the last Corporate Chart delivered pursuant to this clause (d)) is true, correct, complete and current as of the date of such Financial Statement and (ii) a certificate of a Responsible Officer of the Company in form and substance reasonably satisfactory to the Administrative Agent that all certificates, statements, updates and other documents (including updated schedules) required to be delivered pursuant to the Collateral Documents by any Loan Party in the preceding Fiscal Year have been delivered thereunder (or such delivery requirement was otherwise duly waived or extended).   (e)           Business Plan.  Not later than 90 days after the end of each Fiscal Year, and containing substantially the types of financial information contained in the Projections, (i) the annual business plan of the Company and its Subsidiaries for the next succeeding Fiscal Year approved by the Board of Directors of the Company and (ii) forecasts prepared by management of the Company for each fiscal quarter in the next succeeding Fiscal Year, including, (x) a projected year-end Consolidated balance sheet and income statement and statement of cash flows and (y) a statement of all of the material assumptions on which such forecasts are based.   Section 6.2            Default Notices   (a)           As soon as practicable, and in any event within five Business Days after a Responsible Officer of any Loan Party has actual knowledge of the existence of any Default or Event of Default, the Company shall give the Administrative Agent notice specifying the nature of such Default or Event of Default, including the anticipated effect thereof, which notice, if given by telephone, shall be promptly confirmed in writing on the next Business Day (and the Administrative Agent will forward to or post on the Approved Electronic Platform for the Lenders any such written notice).   92 --------------------------------------------------------------------------------   (b)           As soon as practicable after a Responsible Officer of any Loan Party has actual knowledge of the existence of any event having had a Material Adverse Effect or having any reasonable likelihood of causing or resulting in a Material Adverse Change, the Company shall give the Administrative Agent notice specifying the nature of such event, including the anticipated effect thereof, which notice, if given by telephone, shall be promptly confirmed in writing on the next Business Day.   Section 6.3            Litigation   Promptly after the commencement thereof, the Company shall give the Administrative Agent written notice of the commencement of all actions, suits and proceedings before any domestic or foreign Governmental Authority or arbitrator affecting the Company or any of Subsidiary of the Company that (i) seeks injunctive or similar relief or (ii) in the reasonable judgment of the Company or such Subsidiary, expose the Company or such Subsidiary to liability in an amount aggregating $25,000,000 or more or that, if adversely determined, would have a Material Adverse Effect.   Section 6.4            SEC Filings; Press Releases   Promptly after the sending or filing thereof, the Company shall send the Administrative Agent notice (and, to the extent not publicly available on the Securities and Exchange Commission’s EDGAR database, copies) of (a) all reports and registration statements that the Company or any of its Subsidiaries files with the Securities and Exchange Commission or any national or foreign securities exchange or the National Association of Securities Dealers, Inc., and (b) all other statements concerning material changes or developments in the business of such Loan Party made available by any Loan Party to the public.   Section 6.5            Labor Relations   Promptly after becoming aware of the same, the Company shall give the Administrative Agent written notice of (a) any material labor dispute to which the Company or any of its Subsidiaries is or may become a party, including any strikes, lockouts or other disputes relating to any of such Person’s plants and other facilities, and (b) any Worker Adjustment and Retraining Notification Act or related liability incurred with respect to the closing of any plant or other facility of any such Person, in each case to the extent that such matter would reasonably be expected to have a Material Adverse Effect.   Section 6.6            Tax Returns   Upon the reasonable request of any Lender, through the Administrative Agent, the Company shall provide copies of all federal, state, local and foreign tax returns and reports filed by the Company or any Subsidiary of the Company in respect of taxes measured by income (excluding sales, use and like taxes).   Section 6.7            Insurance   As soon as is practicable and in any event within 90 days after the end of each Fiscal Year, the Company shall furnish the Administrative Agent with (a) a report in form and substance reasonably satisfactory to the Administrative Agent and the Lenders outlining all material insurance coverage maintained as of the date of such report by the Company or any   93 --------------------------------------------------------------------------------   Subsidiary of the Company and the duration of such coverage and (b) an insurance broker’s statement that all premiums then due and payable with respect to such coverage have been paid and confirming, with respect to any insurance maintained by the Company or any Loan Party, that the Administrative Agent has been named as loss payee or additional insured, as applicable.   Section 6.8            ERISA Matters   The Company shall furnish the Administrative Agent each of the following:   (a)           subject to paragraphs (b) and (c) below, promptly and in any event within 30 days after the Company or any Subsidiary of the Company or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, written notice describing such event, other than those that, in the aggregate, would not reasonably be likely to have a Material Adverse Effect;   (b)           promptly and in any event within 10 days after the Company or any Subsidiary of the Company or any ERISA Affiliate knows or has reason to know that a request for a minimum funding waiver under Section 412 of the Code has been filed with respect to any Title IV Plan or Multiemployer Plan, a written statement of a Responsible Officer of the Company describing such ERISA Event or waiver request and the action, if any, the Company, its Subsidiaries and ERISA Affiliates propose to take with respect thereto and a copy of any notice filed with the PBGC or the IRS pertaining thereto; and   (c)           simultaneously with the date that the Company or any Subsidiary of the Company or any ERISA Affiliate files a notice of intent to terminate any Title IV Plan, if such termination would require material additional contributions in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA, a copy of each notice.   Section 6.9            Environmental Matters   (a)           The Company shall provide the Administrative Agent promptly and in any event within 30 days after the Company or any Subsidiary of the Company learning of any of the following, written notice of each of the following:   (i)            that any Loan Party is, or is reasonably likely to be, liable to any Person as a result of a Release or threatened Release that would reasonably be expected to have a Material Adverse Effect.   (ii)           the receipt by any Loan Party of notification that any real or personal property of such Loan Party is or is reasonably likely to be subject to any Environmental Lien;   (iii)          the receipt by any Loan Party of any notice of violation of or potential liability under any Environmental Law, except for violations or liabilities the consequence of which, in the aggregate, would not be reasonably likely to have a Material Adverse Effect;   (iv)          the commencement of any judicial or administrative proceeding or investigation alleging a violation of or liability under any Environmental Law, that, in   94 --------------------------------------------------------------------------------   the aggregate, if adversely determined, would have a reasonable likelihood of having a Material Adverse Effect; and   (v)           any proposed action by any Loan Party or any of its Subsidiaries or any proposed change in Environmental Laws that, in the aggregate, have a reasonable likelihood of requiring the Loan Parties to make additional capital improvements to obtain compliance with Environmental Laws that, in the aggregate, would have a Material Adverse Effect.   (b)           The Company shall promptly and in any event within 30 days after receipt by the Company or any Subsidiary of the Company of a written request by any Lender through the Administrative Agent, a report providing an update of the status of any environmental, health or safety compliance, hazard or liability issue identified in any notice or report delivered by the Company pursuant to Section 6.9(a) of this Agreement.   Section 6.10         Other Information   The Company shall provide the Administrative Agent or any Lender with such other information respecting the business, properties, condition, financial or otherwise, or operations of the Company or any Subsidiary of the Company as the Administrative Agent or such Lender through the Administrative Agent may from time to time reasonably request.   ARTICLE VII AFFIRMATIVE COVENANTS   The Company and, with respect to the Mexican Borrowers and their respective Subsidiaries only, the Mexican Borrowers agree with the Lenders, the Issuers and the Agents to each of the following, as long as any Obligation (other than Cash Management Obligations, Obligations arising under Cash Management Documents and Hedging Contracts and contingent indemnification obligations as to which no claim is pending) or any Commitment remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing:   Section 7.1            Preservation of Corporate Existence, Etc.   The Company shall, and shall cause each Subsidiary of the Company to, preserve and maintain its legal existence, rights (charter and statutory) and franchises, except as permitted by Sections 8.4 (Sale of Assets) and 8.6 (Restriction on Fundamental Changes).   Section 7.2            Compliance with Laws, Etc.   The Company shall, and shall cause each Subsidiary of the Company to, comply with all applicable Requirements of Law, Contractual Obligations and Permits, except where the failure so to comply would not, in the aggregate, have a Material Adverse Effect.   Section 7.3            Conduct of Business   The Company shall, and shall cause each Subsidiary of the Company to, use its reasonable efforts to preserve its business and the goodwill and business of the customers, advertisers, suppliers and others having business relations with the Company or any of its   95 --------------------------------------------------------------------------------   Subsidiaries, except in each case where the failure to comply with the above would not, in the aggregate, have a Material Adverse Effect.   Section 7.4            Payment of Taxes, Etc.   The Company shall, and shall cause each Subsidiary of the Company to, pay and discharge before the same shall become delinquent, all material lawful governmental claims, taxes, assessments, charges and levies, except where contested in good faith, by proper proceedings and adequate reserves therefor have been established on the books of the Company or the appropriate Subsidiary in conformity with GAAP.   Section 7.5            Maintenance of Insurance   The Company shall (a) maintain for, itself, and the Company shall cause to be maintained for each Subsidiary of the Company, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same or similar general areas in which the Company or such Subsidiary operates and (b) cause all such insurance relating to any Loan Party to name the Administrative Agent on behalf of the Secured Parties as additional insured or loss payee, as appropriate.   Section 7.6            Access   The Company shall, and shall cause each Subsidiary of the Company to, from time to time permit any agents, representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants (subject to such independent public accountants’ customary procedures), all at the reasonable expense of the Company and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company; provided, however, that, excluding any such visits and inspections during the continuation of an Event of Default, only the Administrative Agent on behalf of the Lenders may exercise rights of the Administrative Agent and the Lenders under this Section 7.6 and the Administrative Agent shall not exercise such rights more often than two times during any calendar year absent the existence of an Event of Default and only one such time shall be at the Company’s expense; provided, further, that, during an Event of Default, the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Company at any time during normal business hours and upon reasonable advance notice.  The Administrative Agent and the Lenders shall give the Company the opportunity to participate in any discussions with the Company’s independent public accountants.   Section 7.7            Keeping of Books   The Company shall, and shall cause each Subsidiary of the Company to keep, proper books and records in conformity with GAAP or Local GAAP, as applicable.   96 --------------------------------------------------------------------------------   Section 7.8            Maintenance of Properties, Etc.   The Company shall, and shall cause each Subsidiary of the Company to, maintain and preserve (a) (i) in good working order and condition all of its properties necessary in the conduct of its business and (ii) all rights, permits, licenses, approvals and privileges (including all Permits) used or useful or necessary in the conduct of its business; provided, however, that the Company and its Subsidiaries may close or otherwise cease to operate theatres and remove fixtures and personalty therefrom upon the expiration or other termination of the applicable lease if the board of directors of the Company or such Subsidiary, as the case may be, determines in good faith that the maintenance and continued operation thereof is no longer desirable in the conduct of the business of the Company or such Subsidiary, as the case may be, and (b) all registered patents, trademarks, trade names, copyrights and service marks used or useful or necessary in their respective businesses, except where failure to so maintain and preserve the items set forth in clauses (a) and (b) above would not, in the aggregate, have a Material Adverse Effect.   Section 7.9            Application of Proceeds   The Company (and, to the extent distributed to them by the Company, each Loan Party) shall use the entire amount of the proceeds of the Loans as provided in Section 4.13 (Use of Proceeds).   Section 7.10         Environmental   The Company shall, and shall cause each Subsidiary of the Company to, comply with Environmental Laws and, without limiting the foregoing, the Company shall, at its sole cost and expense, upon receipt of any written notification or otherwise obtaining knowledge of any Release that has any reasonable likelihood of any of the Company or any Subsidiary of the Company incurring Environmental Liabilities and Costs, (a) conduct, or pay for consultants to conduct, reasonable tests or assessments of environmental conditions at such operations or properties, including the investigation and testing of subsurface conditions and (b) take such Remedial Action as required by Environmental Laws or as any Governmental Authority requires to address the Release and otherwise ensure compliance with Environmental Laws, in each case, except where the failure to conduct such tests or assessments, take such Remedial Action or otherwise ensure compliance would not, in the aggregate, have a Material Adverse Effect.   Section 7.11         Additional Collateral and Guaranties   (a)           Upon the formation or acquisition of any new direct or indirect Subsidiary by any Loan Party or the designation in accordance with Section 7.13 (Designation of Unrestricted Subsidiaries) of any existing direct or indirect Unrestricted Subsidiary as a Subsidiary or any Subsidiary guaranteeing any Indebtedness of any Domestic Loan Party, the Company shall, in each case, at the Company’s expense, within thirty (30) days after such formation, acquisition, designation or guarantee or such longer period as the Administrative Agent may agree in its reasonable discretion:   (i)            cause each such Subsidiary that is (x) a Wholly-Owned Subsidiary that is a Domestic Subsidiary, (y) a non-Wholly-Owned Subsidiary that is a Domestic Subsidiary that has guaranteed the Indebtedness of any Loan Party or (z) a Foreign Subsidiary that has guaranteed the Indebtedness of any Domestic Loan Party, to   97 --------------------------------------------------------------------------------   duly execute and deliver to the Administrative Agent a guaranty or guaranty supplement, in form and substance reasonably satisfactory to the Administrative Agent, guaranteeing the Obligations of each Borrower;   (ii)           cause each such Subsidiary that is required to become a Guarantor pursuant to this Section 7.11 to furnish to the Administrative Agent a description of the real properties owned and leased by such Subsidiary in detail reasonably satisfactory to the Administrative Agent;   (iii)          cause each such Subsidiary that is required to become a Guarantor pursuant to this Section 7.11, at the request of the Administrative Agent, to duly execute and deliver to the Administrative Agent Mortgages, Mortgage Supporting Documents, joinders, amendments and other Collateral Documents, as specified by and in form and substance reasonably satisfactory to the Administrative Agent (consistent with the Mortgages, Mortgage Supporting Documents and other Collateral Documents in effect on the Closing Date, if applicable), granting a Lien in substantially all of the personal property of such Subsidiary, all owned Real Property with a value in excess of $5,000,000 individually or $15,000,000 in the aggregate for all such Subsidiaries (provided, that, if a mortgage tax will be owed, the amount secured by the Mortgage shall be limited to the fair market value of the property at the time the Mortgage is entered into), in each case, securing the Secured Obligations of such Subsidiary under its Guaranty;   (iv)          (x) cause each such Subsidiary that is required to become a Guarantor pursuant to this Section 7.11 to deliver any and all certificates, instruments and other documents representing all Pledged Stock, Pledged Debt Instruments and all other Stock, Stock Equivalents and other debt Securities owned by such Subsidiary accompanied by undated Stock powers or other appropriate instruments of transfer executed or endorsed in blank and (y) cause each Loan Party that is a direct or indirect parent of such Subsidiary that is required to provide a guaranty pursuant to this Section 7.11 to deliver any and all certificates, instruments or other documents representing the outstanding Stock or Stock Equivalents of such Subsidiary held by such direct or indirect parent, accompanied by undated Stock powers or other appropriate instruments of transfer executed in blank and instruments evidencing the intercompany debt issued by such Subsidiary and held by such direct or indirect parent, endorsed in blank to the Administrative Agent;   (v)           take and cause such Subsidiary and each Loan Party that is a direct or indirect parent of such Subsidiary to take whatever action (including the recording of Mortgages, the filing of UCC financing statements, the giving of notices and the endorsement of notices on title documents and delivery of Pledged Stock and Pledged Debt Instruments) as may be necessary in the reasonable opinion of the Administrative Agent to vest in the Administrative Agent (or in any representative of the Administrative Agent designated by it) valid, perfected and enforceable first-priority Liens on the properties purported to be subject to the Mortgages and other Collateral Documents delivered pursuant to this Section 7.11, subject only to Liens permitted under Section 8.2 (Liens, Etc.), enforceable against all third parties in accordance with their terms; and   (vi)          deliver to the Administrative Agent a signed copy of an opinion, addressed to the Administrative Agent and the other Secured Parties, of counsel for the   98 --------------------------------------------------------------------------------   Loan Parties reasonably acceptable to the Administrative Agent as to such matters set forth in this Section 7.11 as the Administrative Agent may reasonably request.   (b)           For the avoidance of doubt, (i) no Foreign Subsidiary shall be obligated to guarantee the obligations of any Borrower (unless such Subsidiary is a guarantor of any Indebtedness of any Domestic Loan Party) and (ii) (A) no assets of any Foreign Subsidiary shall be required to be pledged to support obligations of any Borrower (unless such assets are pledged to support any Indebtedness of any Domestic Loan Party) and (B) no more than 65% of the voting stock (within the meaning of Section 956 of the Code and the Treasury Regulations thereunder) of any Foreign Subsidiary shall be required to be pledged by the Company or any of its Subsidiaries to support the obligations of any Borrower (unless such stock has been pledged to support any Indebtedness of any Domestic Loan Party).   (c)           Upon the acquisition of (x) any personal property by any Loan Party (other than property that would constitute Excluded Property (as defined in the Pledge and Security Agreement)) or (y) fee owned Real Property with a value in excess of $5,000,000 individually by any Loan Party or $15,000,000 in the aggregate for all Loan Parties (provided that, if a mortgage tax will be owed, the amount secured by the Lien referred to below shall be limited to the fair market value of the property at the time the applicable Mortgage is entered into), and such personal property and/or fee owned Real Property shall not already be subject to a valid, perfected and enforceable first-priority Lien in favor of the Administrative Agent for the benefit of the Secured Parties, subject only to Liens permitted under Section 8.2 (Liens, Etc.), the Company shall give notice thereof to the Administrative Agent within thirty (30) days after such acquisition and shall, if requested by the Administrative Agent or the Requisite Lenders, cause such assets to be subjected to a Lien securing the Secured Obligations and will take, or cause the relevant Loan Party to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect or record such Lien, including, without limitation, executing and delivering to the Administrative Agent Mortgages, Mortgage Supporting Documents, joinders, amendments and other Collateral Documents, as specified by and in form and substance reasonably satisfactory to the Administrative Agent (consistent with the Mortgages, Mortgage Supporting Documents and other Collateral Documents in effect on the Closing Date, if applicable).   (d)           Notwithstanding the foregoing, (x) the Administrative Agent shall not take a security interest in those assets as to which the Administrative Agent shall determine, in its reasonable discretion, that the cost of obtaining such Lien (including any mortgage, stamp, intangibles or other tax) are excessive in relation to the benefit to the Lenders of the security afforded thereby and (y) Liens required to be granted pursuant to this Section 7.11 shall be subject to exceptions and limitations consistent with those set forth in the Collateral Documents as in effect on the Closing Date (to the extent appropriate in the applicable jurisdiction).   Section 7.12         Cash Collateral Accounts   The Administrative Agent may establish one or more Cash Collateral Accounts with such depositaries and Securities Intermediaries as it in its sole discretion shall determine.  The Company agrees that each such Cash Collateral Account shall meet the requirements set forth in the definition of “Cash Collateral Account”.  Without limiting the foregoing, funds on deposit in any Cash Collateral Account may be invested (but the Administrative Agent shall be under no obligation to make any such investment) in Cash Equivalents at the direction of the Administrative Agent and, except during the continuance of an Event of Default, the   99 --------------------------------------------------------------------------------   Administrative Agent agrees with the Company to issue Entitlement Orders for such investments in Cash Equivalents as requested by the Company; provided, however, that the Administrative Agent shall not have any responsibility for, or bear any risk of loss of, any such investment or income thereon.  None of the Company, any of its Subsidiaries or any other Loan Party or Person claiming on behalf of or through the Company, any Subsidiary of the Company or any other Loan Party shall have any right to demand payment of any funds held in any Cash Collateral Account at any time prior to the termination of all outstanding Letters of Credit and the payment in full of all then outstanding and payable monetary Obligations.   Section 7.13         Designation of Unrestricted Subsidiaries   The board of directors of the Company may at any time designate any Subsidiary as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Subsidiary; provided, however, that (i) immediately before and after such designation, no Default shall have occurred and be continuing, (ii) immediately after giving effect to such designation, the Company and its Subsidiaries shall be in compliance, on a Pro Forma Basis, with the covenants set forth in Article V (Financial Covenant) (and, as a condition precedent to the effectiveness of any such designation, the Company shall deliver to the Administrative Agent a certificate setting forth in reasonable detail the calculations demonstrating such compliance), (iii) neither Mexican Borrower may be designated as an Unrestricted Subsidiary, (iv) no Subsidiary may be designated as an Unrestricted Subsidiary if it is a “Restricted Subsidiary” for the purpose of any Indenture and (v) no Unrestricted Subsidiary that is designated as a Subsidiary may be redesignated as an Unrestricted Subsidiary at any time prior to twelve (12) months after being so designated as a Subsidiary.  The designation of any Subsidiary as an Unrestricted Subsidiary shall constitute an Investment by the Company therein at the date of designation in an amount equal to the net book value of the Company’s Investment therein.  The designation of any Unrestricted Subsidiary as a Subsidiary shall constitute the incurrence at the time of designation of any Indebtedness or Liens of such Subsidiary existing at such time.   Section 7.14         Post-Closing Matters   The Company shall, and shall cause each of its Subsidiaries to, deliver each of the documents, instruments and agreements and take each of the actions set forth on Schedule 7.14 (Post-Closing Matters) within the time periods set forth on such Schedule.   ARTICLE VIII NEGATIVE COVENANTS   The Company and, with respect to the Mexican Borrowers and their respective Subsidiaries only, the Mexican Borrowers agree with the Lenders, the Issuers and the Agents to each of the following, as long as any Obligation (other than Cash Management Obligations, Obligations arising under Cash Management Documents and Hedging Contracts and contingent indemnification obligations as to which no claim is pending) or any Commitment remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing:   100 --------------------------------------------------------------------------------   Section 8.1            Indebtedness   The Company shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except the following Indebtedness:   (a)           the Secured Obligations (other than in respect of Hedging Contracts) and Guaranty Obligations in respect thereto;   (b)           (i) Indebtedness existing on the date of this Agreement and disclosed on Schedule 8.1 (Existing Indebtedness), (ii) Indebtedness under the New Subordinated Notes in an aggregate principal amount not to exceed $325,000,000 and (iii) any Permitted Refinancing thereof;   (c)           Permitted Subordinated Indebtedness; provided, however, that (i) both immediately prior to and after giving effect thereto, no Default or Event of Default shall exist or result therefrom and (ii) the Company and its Subsidiaries will be in Pro Forma Compliance with Article V (Financial Covenant) after giving effect to the incurrence or issuance of such Indebtedness;   (d)           Guaranty Obligations incurred by the Company or any of its Subsidiaries in respect of Indebtedness of the Company or any Subsidiary that is otherwise permitted by this Section 8.1 (other than clause (a) above); provided, however, that (i) none of the Company and its Subsidiaries shall be permitted to Guarantee any Indebtedness arising under any Indenture (or any Permitted Refinancing thereof) unless such Subsidiary shall have also Guaranteed the Obligations substantially on the terms set forth in the Guaranty and (ii) if the Indebtedness being Guaranteed is subordinated to the Obligations, then the Guaranty Obligations with respect to such Indebtedness shall be subordinated to the Guaranty Obligations with respect to the Obligations on terms at least as favorable to the Lenders as those contained in the subordination provisions of such Indebtedness;   (e)           Indebtedness of (i) any Domestic Loan Party owing to any other Domestic Loan Party, (ii) any Domestic Subsidiary that is not a Loan Party owing to (A) any other Domestic Subsidiary that is not a Loan Party or (B) the Company or a Loan Party in respect of an Investment permitted under Section 8.3(c) (Investments), (iii) any Domestic Loan Party owing to any Foreign Subsidiary, (iv) any Foreign Subsidiary owing to any other Foreign Subsidiary and (v) any Foreign Subsidiary or any Subsidiary that is not a Loan Party owing to any Domestic Loan Party in respect of an Investment permitted under Section 8.3(c) (Investments); provided, however, that all such Indebtedness of any Loan Party owing to any Subsidiary that is not a Loan Party (or to any Mexican Borrower) must be expressly subordinated to the Obligations;   (f)            (i) Capital Lease Obligations and purchase money Indebtedness (including Indebtedness in respect of mortgage, industrial revenue bond, industrial development bond and similar financings) to finance the purchase, repair or improvement of fixed or capital assets and incurred concurrently with or within 270 days of the purchase, repair or improvement of the property subject to the Liens permitted under Section 8.2(i) (Liens, Etc.) (including permitted sale-leaseback transactions) and (ii) any Permitted Refinancing thereof;   101 --------------------------------------------------------------------------------   (g)           (i) Indebtedness denominated in Pesos of Foreign Subsidiaries domiciled in Mexico, in an aggregate principal amount at any time outstanding for all such Indebtedness not to exceed $30,000,000, to the extent that the Net Cash Proceeds of any such Indebtedness are applied to prepay the Loans to the extent required pursuant to Section 2.9 (Mandatory Prepayments) and (ii) any Permitted Refinancing thereof;   (h)           Indebtedness in respect of Interest Rate Contracts and other Hedging Contracts permitted under Section 8.15 (No Speculative Transactions);   (i)            (i) Indebtedness of the Company and its Subsidiaries (A) assumed in connection with any Permitted Acquisition; provided, however, that such Indebtedness is not incurred in contemplation of such Permitted Acquisition or (B) owed to the seller of any property acquired in a Permitted Acquisition on an unsecured subordinated basis, which subordination shall be on terms reasonably satisfactory to the Administrative Agent, in each case, so long as (1) both immediately prior to and after giving effect thereto, no Default or Event of Default shall exist or result therefrom and (2) the Company and its Subsidiaries will be in Pro Forma Compliance with Article V (Financial Covenant) after giving effect to such Permitted Acquisition and the incurrence or issuance of such Indebtedness and (ii) any Permitted Refinancing thereof;   (j)            Indebtedness representing deferred compensation to employees of the Company and its Subsidiaries incurred in the ordinary course of business;   (k)           Indebtedness consisting of promissory notes issued by the Company or any of its Subsidiaries to current or former officers, directors, employees or consultants, their respective estates, spouses or former spouses to finance the purchase or redemption of Stock or Stock Equivalents of Holdings or the Company, or to finance a Restricted Payment with respect to SARs, in each case, to the extent permitted by Section 8.5 (Restricted Payments);   (l)            Indebtedness incurred by the Company or its Subsidiaries in a Permitted Acquisition or Asset Sale in respect of agreements providing for indemnification, the adjustment of the purchase price or similar adjustments;   (m)          Indebtedness consisting of obligations of the Company or its Subsidiaries under deferred employee compensation or other similar arrangements incurred by such Person in connection with the Transactions and Permitted Acquisitions;   (n)           Cash Management Obligations and other Indebtedness in respect of netting services, overdraft protections and similar arrangements, in each case, in connection with Deposit Accounts;   (o)           Indebtedness consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;   (p)           Indebtedness incurred by the Company or any of its Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers’ compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement or similar obligations regarding workers’ compensation claims; provided, however, that, upon the   102 --------------------------------------------------------------------------------   drawing of such letters of credit or the incurrence of such Indebtedness, such obligations shall be reimbursed within 30 days following such drawing or incurrence;   (q)           obligations in respect of performance and surety bonds and performance and completion guarantees provided by the Company or any of its Subsidiaries, or obligations in respect of letters of credit related thereto, in each case, in the ordinary course of business or consistent with past practice;   (r)            in the case of any Foreign Subsidiary, Indebtedness in an aggregate principal amount not to exceed $40,000,000 at any time outstanding (i) to the extent such Indebtedness is utilized within 90 days of the incurrence thereof to finance a Permitted Acquisition, and (ii) incurred in connection with any substantially contemporaneous Permitted Refinancing of such Indebtedness;   (s)           Indebtedness not otherwise permitted under this Section 8.1; provided, however, that, (i) both immediately prior to and after giving effect thereto, no Default or Event of Default shall exist or result therefrom, (ii) the Company and its Subsidiaries will be in Pro Forma Compliance with Article V (Financial Covenant) after giving effect to the incurrence or issuance of such Indebtedness and (iii) as of the date any such Indebtedness is Incurred, after giving Pro Forma Effect to such Indebtedness, (A) the Company’s Annualized EBITDA Ratio for the four full Fiscal Quarters immediately preceding such date shall be greater than or equal to 2.0 to 1.0 and (B) the Company’s Senior Leverage Ratio as of such date shall be less than or equal to 3.25 to 1.0; and   (t)            all premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (s) above.   Section 8.2            Liens, Etc.   The Company shall not, nor shall it permit any of its Subsidiaries to, create or suffer to exist, any Lien upon or with respect to any of their respective properties or assets, whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any right to receive income, except for the following:   (a)           Liens created pursuant to the Loan Documents;   (b)           Liens existing on the date of this Agreement and disclosed on Schedule 8.2 (Existing Liens) or, to the extent not listed in such schedule, where the property or assets subject to such Liens have a Fair Market Value that does not exceed $5,000,000 in the aggregate, and any modifications, replacements, renewals or extensions thereof; provided, however, that (i) the Lien does not extend to any additional property other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien or financed by Indebtedness permitted under Section 8.1 (Indebtedness) and (B) proceeds and products thereof and (ii) the renewal, extension or refinancing of the obligations secured by such Liens is permitted by Section 8.1 (Indebtedness);   (c)           Liens for taxes, assessments or governmental charges which are not overdue for a period of more than 30 days or which are being contested in good faith and by   103 --------------------------------------------------------------------------------   appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;   (d)           statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen, repairmen, construction contractors or other like Liens arising in the ordinary course of business which secure amounts not overdue for a period of more than thirty 30 days or if more than 30 days overdue, are unfiled and no other action has been taken to enforce such Lien or which are being contested in good faith and by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person;   (e)           (i) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation and (ii) pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Company or any of its Subsidiaries;   (f)            deposits to secure the performance of bids, trade contracts, governmental contracts and leases (other than Indebtedness for borrowed money), statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature (including those to secure health, safety and environmental obligations) incurred in the ordinary course of business;   (g)           easements, rights-of-way, restrictions, encroachments, protrusions and other similar encumbrances and title defects affecting real property which, in the aggregate, do not materially interfere with the ordinary conduct of the business of the applicable Person;   (h)           Liens securing judgments for the payment of money not constituting an Event of Default under Section 9.1(g) (Events of Default);   (i)            Liens securing Indebtedness permitted under Section 8.1(f) (Indebtedness); provided, however, that (i) such Liens attach concurrently with or within two hundred and seventy (270) days after the acquisition, repair, replacement, construction or improvement (as applicable) of the property subject to such Liens, (ii) such Liens do not at any time encumber any property except for accessions to such property other than the property financed by such Indebtedness and the proceeds and the products thereof and (iii) with respect to Capitalized Leases, such Liens do not at any time extend to or cover any assets (except for accessions to such assets) other than the assets subject to such Capitalized Leases; provided, further, that individual financings of equipment provided by one lender may be cross-collateralized to other financings of equipment provided by such lender;   (j)            leases, licenses, subleases or sublicenses granted to others in the ordinary course of business, which do not (i) interfere in any material respect with the business of the Company or any of its material Subsidiaries or (ii) secure any Indebtedness;   (k)           Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;   104 --------------------------------------------------------------------------------   (l)            Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other commodities brokerage accounts incurred in the ordinary course of business; and (iii) in favor of a banking institution arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;   (m)          Liens (i) on cash advances in favor of the seller of any property to be acquired in an Investment permitted pursuant to Sections 8.3(c) to be applied against the purchase price for such Investment, and (ii) consisting of an agreement to Dispose of any property in an Asset Sale permitted under Section 8.4 (Sale of Assets), in each case, solely to the extent such Investment or Disposition, as the case may be, would have been permitted on the date of the creation of such Lien;   (n)           Liens on property of any Foreign Subsidiary that does not constitute Collateral, which Liens secure Indebtedness of such Foreign Subsidiary permitted under Section 8.1 (Indebtedness);   (o)           Liens in favor of the Company or another Loan Party securing Indebtedness permitted under Section 8.1(e) (Indebtedness);   (p)           Liens existing on property at the time of its acquisition or existing on the property of any Person at the time such Person becomes a Subsidiary, in each case after the date hereof (other than Liens on the Equity Interests of any Person that becomes a Subsidiary); provided that (i) such Lien was not created in contemplation of such acquisition or such Person becoming a Subsidiary, (ii) such Lien does not extend to or cover any other assets or property (other than the proceeds or products thereof and other than after-acquired property subjected to a Lien securing Indebtedness and other obligations incurred prior to such time and which Indebtedness and other obligations are permitted hereunder that require, pursuant to their terms at such time, a pledge of after-acquired property, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition), and (iii) the Indebtedness secured thereby is permitted under Section 8.1(f), (i) or (m) (Indebtedness);   (q)           Liens arising from precautionary UCC financing statement filings regarding leases entered into by the Company or any of its Subsidiaries in the ordinary course of business;   (r)            Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Company or any of its Subsidiaries in the ordinary course of business permitted by this Agreement;   (s)           Liens deemed to exist in connection with Investments in repurchase agreements under Section 8.3 (Investments);   (t)            Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;   105 --------------------------------------------------------------------------------   (u)           Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Company or any Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Company and its Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers or the Company or any Subsidiary in the ordinary course of business;   (v)           Liens solely on any cash earnest money deposits made by the Company or any of its Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;   (w)          Permitted Exceptions (as defined in the Mortgages);   (x)            other Liens securing Indebtedness at any time outstanding in an aggregate principal amount not to exceed $25,000,000;   (y)           in the case of leased Real Property, (i) liens on the fee interest in the land held by the landlord under the applicable lease, (ii) rights of the landlord under the applicable lease, (iii) all superior, underlying and ground leases and all renewals, amendments, modifications, replacements, substitutions and extensions thereof; and   (z)            licenses, sublicenses or similar rights to use any patent, trademark, copyright or other intellectual property right granted to others by the Company or any of its Subsidiaries in the ordinary course of business, which do not interfere in any material respect with the business of the Company or such Subsidiary.   Section 8.3            Investments   The Company shall not, nor shall it permit any of its Subsidiaries to, make or maintain, directly or indirectly, any Investment, except for the following:   (a)           Investments existing on the date of this Agreement and disclosed on Schedule 8.3 (Existing Investments);   (b)           advances or extensions of credit on terms customary in the industry in the form of accounts or other receivables incurred or pre-paid film rentals, and loans and advances made in settlement of such accounts receivable, all in the ordinary course of business consistent with past practice;   (c)           Investments by (i) any Loan Party in any other Loan Party, (ii) any Subsidiary that is not a Loan Party in the Company or any other Subsidiary or (iii) any Loan Party in a Subsidiary that is not a Loan Party; provided, however, that the Dollar Equivalent of the aggregate outstanding amount of all Investments permitted pursuant to this clause (iii) shall not exceed $100,000,000 at any time;   (d)           any Investment in Cash Equivalents; provided, however, that, in the case of all of the foregoing obligations, they mature within 12 months of the date of purchase (unless required to mature earlier pursuant to the definition of “Cash Equivalents”);   106 --------------------------------------------------------------------------------   (e)           so long as no Default or Event of Default has occurred and is continuing or would result from such Investment, Investments by the Company or any Subsidiary of the Company in another Person, if (i) as a result of such Investment, (A) such other Person becomes a Loan Party or (B) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or another Loan Party and (ii) such other Person is engaged substantially only in the lines of business permitted under Section 8.8 (Change in Nature of Business);   (f)            loans or advances to employees of the Company or any Subsidiary in the ordinary course of business consistent with past practices, not to exceed $2,000,000 in aggregate amount at any time outstanding;   (g)           refundable construction advances made with respect to the construction of motion picture exhibition theatres in the ordinary course of business consistent with past practice;   (h)           so long as immediately before or after giving effect thereto, no Default or Event of Default shall have occurred and be continuing, Investments consisting of contributions of International Assets to Permitted Joint Ventures; provided, however, that the aggregate net book value of all International Assets contributed by the Company and its Subsidiaries to any Permitted Joint Venture shall not exceed $150,000,000 either individually or in the aggregate;   (i)            Investments by the Company or any Subsidiary in connection with a Permitted Acquisition;   (j)            Investments made using Stock of the Company; provided, however, that (i) immediately before and immediately after giving Pro Forma Effect to any such Investment, no Default or Event of Default shall have occurred and be continuing and (ii) immediately after giving effect to such Investment, the Company and its Subsidiaries shall be in Pro Forma Compliance with the covenant set forth in Article V (Financial Covenant), such compliance to be determined on the basis of the financial information most recently delivered to the Administrative Agent and the Lenders pursuant to Section 6.1 (Financial Statements) as though such Investment had been consummated as of the first day of the fiscal period covered thereby and evidenced by a certificate from the Chief Financial Officer of the Company demonstrating such compliance calculation in reasonable detail; and   (k)           Investments not otherwise permitted under this Section 8.3; provided, however, that the aggregate amount of all such Investments, together with the aggregate amount of all Restricted Payments made under Section 8.5(h) (Restricted Payments) shall not at any time exceed the sum of (x) $150,000,000 plus (y) the Available Amount plus (z) an amount equal to the lesser of the return of cash with respect to any such Investment and the initial amount of such Investment, in either case, less the cost of disposition of such Investment; provided, further, that in the event the Company or any of its Subsidiaries makes an Investment in any Person under this clause (k), and after the date of making such Investment, such Person becomes a Guarantor, such Investment will be reclassified as having been incurred under clause (c) of this Section and the amount invested in such Investment will become available for incurrence under this clause (k) at such time.   107 --------------------------------------------------------------------------------   Section 8.4            Sale of Assets   The Company shall not, nor shall it permit any of its Subsidiaries to, sell, convey, transfer, lease or otherwise dispose (“Dispose” or “Disposition”) of, any of their respective assets or any interest therein (including the sale or factoring at maturity or collection of any accounts) to any Person (including any Unrestricted Subsidiary), or permit or suffer any other Person to acquire any interest in any of their respective assets or issue or sell any shares of their Stock or any Stock Equivalents (any such disposition being an “Asset Sale”), except for the following:   (a)           any Asset Sale to any Loan Party;   (b)           sale or disposition of Stock or Stock Equivalents of any Unrestricted Subsidiary;   (c)           transfers of assets that constitute Investments in Unrestricted Subsidiaries permitted by Section 8.3(k) (Investments) hereof;   (d)           any Asset Sale where the Dollar Equivalent of the Fair Market Value of the assets subject to such Asset Sale is less than $5,000,000 individually or $35,000,000 in the aggregate;   (e)           (i)  Dispositions of inventory in the ordinary course of business and (ii) Dispositions of property or assets (other than operating theatres) that have become obsolete, damaged, worn or surplus in the ordinary course of business;   (f)            like kind exchanges of theatres for other theatres or property, in each case, for Fair Market Value;   (g)           as long as no Default or Event of Default is continuing or would result therefrom, any Asset Sale for not less than Fair Market Value of assets set forth on Schedule 8.4(g) (Asset Sales); provided, however, that an amount equal to all Net Cash Proceeds of such Asset Sale in excess of $250,000,000 are applied to the payment of the Obligations as set forth in, and to the extent required by, Section 2.9 (Mandatory Prepayments);   (h)           as long as no Default or Event of Default is continuing or would result therefrom, any sale or disposition of any Multiplex theatre for not less than Fair Market Value; provided, however, that an amount equal to all Net Cash Proceeds of such sale or disposition are applied to the payment of the Obligations as set forth in, and to the extent required by, Section 2.9 (Mandatory Prepayments);   (i)            as long as (i) no Default or Event of Default is continuing or would result therefrom and (ii) at least 75% of the aggregate consideration received by the Company or any Subsidiary from such Asset Sale is in cash or Cash Equivalents, any other Asset Sale for not less than Fair Market Value; provided, however, that (A) the Dollar Equivalent of the aggregate consideration received during any Fiscal Year for all such Asset Sales shall not exceed $90,000,000 and (B) an amount equal to all Net Cash Proceeds of such Asset Sale are applied to the payment of the Obligations as set forth in, and to the extent required by, Section 2.9 (Mandatory Prepayments);   108 --------------------------------------------------------------------------------   (j)            any non-exclusive license of patents, trademarks, copyrights or other intellectual property owned by the Company or any of its Subsidiaries, which license is granted in the ordinary course of business and which does not interfere in any material respect with the business of the Company or such Subsidiary; and   (k)           any Asset Sale if the assets Disposed of in such Asset Sale are contemporaneously leased back to the Company or the applicable Subsidiary on fair market terms (whether pursuant to an operating lease or a lease giving rise to a Capital Lease Obligation).   Section 8.5            Restricted Payments   The Company shall not, nor shall permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Payment, except for the following:   (a)           (i) Restricted Payments by any Subsidiary of the Company to any Loan Party and (ii) Restricted Payments by a non-Wholly-Owned Subsidiary of the Company to its shareholders generally so long as the Company or any Subsidiary which owns the equity interest or interests in the non-Wholly-Owned Subsidiary paying such dividends receives at least its proportionate share thereof (based on its relative holdings of equity interests in the non-Wholly-Owned Subsidiary paying such dividends and taking into account the relative preferences, if any, of the various classes of equity interests in such Subsidiary);   (b)           dividends and distributions declared and paid on the common Stock of the Company and payable only in common Stock of the Company;   (c)           cash dividends on the Stock of the Company to Holdings paid and declared in any Fiscal Year solely for the purpose of funding the following:   (i)            ordinary operating expenses of Holdings not in excess of $4,000,000 in the aggregate in any Fiscal Year;   (ii)           reasonable and customary indemnification claims made by directors or officers of Holdings attributable to the ownership or operations of the Company and its Subsidiaries;   (iii)          payments by Holdings in respect of foreign, federal, state or local taxes owing by Holdings in respect of the Company and its Subsidiaries, but not greater than the amount that would be payable by the Company and its Subsidiaries, on a consolidated, combined or unitary basis;   (iv)          the Restricted Payments permitted to be made by Holdings under clause (g) below;   (v)           fees and expenses (other than to Affiliates) related to any unsuccessful equity or debt offering permitted by this Agreement; and   (vi)          management fees permitted to be paid under Section 8.8(d) (Transactions with Affiliates);   109 --------------------------------------------------------------------------------   (d)           Restricted Payments by the Company to pay (or make Restricted Payments to allow the Holdings to pay) for the repurchase, retirement or other acquisition or retirement for value of common Stock of the Company or Holdings held by any future, present or former employee, director or consultant of the Company, Holdings or any of their Subsidiaries pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement, or may make Restricted Payments in respect of SARs; provided, however, that the aggregate amount of Restricted Payments made under this clause (d) does not exceed in any calendar year $10,000,000 (with unused amounts in any calendar year being permitted to be carried over to the two succeeding calendar years); provided, further, that such amount in any calendar year may be increased by an amount not to exceed (i) the Net Cash Proceeds from the sale of Stock (other than Disqualified Stock) to members of management, directors or consultants of Holdings or its Subsidiaries that occurs after the Closing Date plus (ii) the amount of any cash bonuses otherwise payable to members of management, directors or consultants of Holdings or any of its Subsidiaries in connection with the Transactions that are foregone in return for the receipt of Stock of the Company or Holdings pursuant to a deferred compensation plan plus (iii) the cash proceeds of key man life insurance policies received by Holdings, the Company or its Subsidiaries after the Closing Date (provided, that Holdings may elect to apply all or any portion of the aggregate increase contemplated by clauses (i), (ii) and (iii) above in any calendar year) less (iv) the amount of any Restricted Payments previously made pursuant to clauses (i), (ii) and (iii) above;   (e)           Restricted Payments of up to (i) in the event the Net Senior Secured Leverage Ratio is equal to or less than 1.5 to 1.0, but greater than 1.0 to 1.0, 25%, (ii) in the event the Net Senior Secured Leverage Ratio is equal to or less than 1.0 to 1.0, but greater than 0.75 to 1.0, 50% and (iii) in the event the Net Senior Secured Leverage Ratio is equal to or less than 0.75 to 1.0, 75% of the aggregate amount of Net Cash Proceeds received during the Fiscal Year immediately preceding such Restricted Payment, from all Asset Sales consummated during such Fiscal Year under Section 8.4(g) (Sale of Assets) to the extent such Net Cash Proceeds are not required to prepay the Loans under Section 2.9(a)(i)(A) (Mandatory Prepayments);   (f)            (i) the repurchase of Stock or Subordinated Debt, if such repurchase is completed through the issuance of Stock or new Permitted Subordinated Indebtedness, (ii) regularly scheduled or otherwise required repayments or redemptions of Subordinated Debt and (iii) renewals, extensions, refinancings and refundings of Subordinated Debt, as long as such renewal, extension, refinancing or refunding is permitted under Section 8.1 (Indebtedness);   (g)           the repurchase of company granted stock awards or options necessary to satisfy obligations attributable to tax withholding; and   (h)           Restricted Payments not otherwise permitted under this Section 8.5; provided, however, that the aggregate amount of all such Restricted Payments, together with the aggregate amount of all Investments made under Section 8.3(k), shall not exceed (i) $150,000,000 plus (ii) the Available Amount;   provided, however, that the Restricted Payments described in clauses (c) through (h) above shall not be permitted if either (A) an Event of Default or Default shall have occurred and be continuing at the date of declaration or payment thereof or would result therefrom or (B) such Restricted Payment is prohibited under the terms of any Indebtedness (other than the Obligations) of the Company or any of its Subsidiaries.   110 --------------------------------------------------------------------------------   Section 8.6            Restriction on Fundamental Changes   The Company shall not, nor shall permit any of its Subsidiaries to, (i) merge with any Person, (ii) consolidate with any Person or (iii) liquidate, wind up or dissolve itself, except that:   (a)           any Subsidiary may merge with (i) any Borrower (including a merger, the purpose of which is to reorganize such Borrower into a new jurisdiction); provided, however, that such Borrower shall be the continuing or surviving Person (and, in the case of any such transaction involving a Domestic Loan Party, the continuing or surviving Person shall be organized under the laws of any state of the United States of America or the District of Columbia) or (ii) any one or more other Subsidiaries; provided, however, that when any Subsidiary that is a Loan Party is merging with another Subsidiary, (A) a Loan Party shall be the continuing or surviving Person or (B) to the extent constituting an Investment, such Investment must be an Investment permitted under Section 8.3(c) (Investments) or Indebtedness permitted under Section 8.1(e) (Indebtedness);   (b)           (i) any Subsidiary that is not a Loan Party may merge or consolidate with or into any other Subsidiary that is not a Loan Party and (ii) any Subsidiary (other than a Borrower) may liquidate, wind up, dissolve or change its legal form if the Company determines in good faith that such action is in the best interests of the Company and if not materially disadvantageous to the Lenders;   (c)           so long as no Default or Event of Default exists or would result therefrom, any Subsidiary may merge with any other Person in order to effect an Investment permitted pursuant to Section 8.3 (Investments); provided, however, that (i) the continuing or surviving Person shall be a Subsidiary, which together with each of its Subsidiaries, shall have complied with the requirements of Section 7.11 (Additional Collateral and Guaranties) and (ii) to the extent constituting an Investment, such Investment must be a permitted Investment in accordance with Section 8.3 (Investments);   (d)           the Company and its Subsidiaries may consummate the Merger; and   (e)           so long as no Default or Event of Default exists or would result therefrom, a merger, dissolution, liquidation or consolidation, the purpose of which is to effect an Asset Sale permitted pursuant to Section 8.4 (Sale of Assets), may be effected.   Section 8.7            Change in Nature of Business   The Company shall not, nor shall it permit any of its Subsidiaries to, make any material change in the nature or conduct of its business as carried on at the date hereof, whether in connection with a Permitted Acquisition or otherwise.   Section 8.8            Transactions with Affiliates   The Company shall not, nor shall it permit any of its Subsidiaries to, enter into any transaction of any kind with any Affiliate of the Company, whether or not in the ordinary course of business, other than:   111 --------------------------------------------------------------------------------   (a)           transactions among (i) the Loan Parties or (ii) Grupo Cinemex and its Subsidiaries;   (b)           on fair and reasonable terms substantially as favorable to the Company or such Subsidiary as would be obtainable by the Company or such Subsidiary at the time in a comparable arm’s-length transaction with a Person other than an Affiliate;   (c)           the payment of fees and expenses in connection with the consummation of the Transactions;   (d)           so long as no Event of Default shall have occurred and be continuing under Section 9.1(f) hereof, any payments of management, consulting monitoring and advisory fees to the Permitted Holders (plus any unpaid management and monitoring fees within such amount accrued in any prior year) and related indemnities and reasonable out-of-pocket expenses attributable to the ownership or operations of the Company and its Subsidiaries, and in each case pursuant to the Sponsor Management Agreement as in effect on the Closing Date;   (e)           equity issuances, repurchases, retirement or other acquisition of Stock by the Company permitted under Section 8.5 (Restricted Payments) hereof;   (f)            loans and other transactions by the Company and its Subsidiaries to the extent permitted under this Article VIII (Negative Covenants);   (g)           employment and severance arrangements between Holdings, the Company and its Subsidiaries and their respective officers and employees in the ordinary course of business;   (h)           payments by Holdings, the Company and its Subsidiaries pursuant to the tax sharing agreements among Holdings, the Company and its Subsidiaries on customary terms to the extent attributable to the ownership or operation of the Company and its Subsidiaries;   (i)            the payment of customary fees and reasonable out-of-pocket cost to, and indemnities provided on behalf of, directors, officers, employees and consultants of Holdings, the Company and the Subsidiaries in the ordinary course of business to the extent attributable to the ownership or operation of the Company and its Subsidiaries, as determined in good faith by the board of directors of the Company or senior management thereof;   (j)            transactions pursuant to permitted agreements in existence on the Closing Date and set forth on Schedule 8.8 hereto or any amendment thereto to the extent such an amendment is not adverse to the Lenders in any material respect;   (k)           dividends, redemptions and repurchases permitted under Section 8.5  (Restricted Payments) hereof; and   (l)            payments by the Company and any Subsidiaries to the Permitted Holders made for any customary financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including in connection with acquisitions or divestitures, which payments are (i) pursuant to the Sponsor Management Agreement as in effect on the Closing Date and (ii) approved by the majority of the members of the board of directors or   112 --------------------------------------------------------------------------------   a majority of the disinterested members of the board of directors of the Company, in each case in good faith.   Section 8.9            Limitations on Restrictions on Subsidiary Distributions; No New Negative Pledge   The Company shall not, nor shall it permit any of its Subsidiaries to, (a) agree to enter into or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of such Subsidiary to pay dividends or make any other distribution or transfer of funds or assets or make loans or advances to or other Investments in, or pay any Indebtedness owed to, the Company or any Subsidiary of the Company or (b) enter into or suffer to exist or become effective any agreement prohibiting or limiting the ability of the Company or any Subsidiary of the Company to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, to secure the Obligations, including any agreement requiring any other Indebtedness or Contractual Obligation to be equally and ratably secured with the Obligations; provided, however, that the foregoing shall not apply to Contractual Obligations which (i) (A) exist on the date hereof and (to the extent not otherwise permitted by this Section 8.9) are listed on Schedule 8.9 and (B) to the extent Contractual Obligations permitted by clause (A) are set forth in an agreement evidencing Indebtedness, are set forth in any agreement evidencing any permitted renewal, extension or refinancing of such Indebtedness so long as such renewal, extension or refinancing does not expand the scope of such Contractual Obligation, (ii) are binding on a Subsidiary at the time such Subsidiary first becomes a Subsidiary of the Company, so long as such Contractual Obligations were not entered into in contemplation of such Person becoming a Subsidiary of the Company, (iii) represent Indebtedness of a Subsidiary of the Company which is not a Loan Party which is permitted by Section 8.1 (Indebtedness), (iv) arise in connection with any Asset Sale permitted by Section 8.4 (Sale of Assets), (v) are customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under Section 8.3 (Investments) and applicable solely to such joint venture entered into in the ordinary course of business, (vi) are negative pledges and restrictions on Liens in favor of any holder of Indebtedness permitted under Section 8.1 (Indebtedness), but solely to the extent any negative pledge relates to the property financed by or the subject of such Indebtedness (and excluding in any event any Indebtedness arising under any Indenture or Subordinated Debt), (vii) are customary restrictions on leases, subleases, licenses or asset sale agreements otherwise permitted hereby so long as such restrictions may relate to the assets subject thereto, (viii) comprise restrictions imposed by any agreement relating to secured Indebtedness permitted pursuant to Section 8.1(f) (Indebtedness) to the extent that such restrictions apply only to the property or assets securing such Indebtedness, (ix) are customary provisions restricting subletting or assignment of any lease governing a leasehold interest, (x) are customary provisions restricting assignment of any agreement entered into in the ordinary course of business and (xi) are restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business.   Section 8.10         Modification of Related Documents   The Company shall not, nor shall it permit any of its Subsidiaries to alter, rescind, terminate, amend, supplement, waive or otherwise modify any provision of any Related Document, except for modifications that are not materially adverse to the interests of the Secured Parties under the Loan Documents or in the Collateral.   113 --------------------------------------------------------------------------------   Section 8.11         Modification of Debt Agreements   The Company shall not, nor shall it permit any of its Subsidiaries to, change or amend the terms of any of the Subordinated Note Indentures, or any other subordinated notes or other subordinated debt securities (or any indenture or agreement or other material document entered into in connection therewith) if the effect of such amendment is to (a) increase the interest rate on such Indebtedness, (b) change the dates upon which payments of principal or interest are due on such Indebtedness other than to extend such dates, (c) change any default or event of default other than to delete or make less restrictive any default provision therein, or add any covenant with respect to such Indebtedness, (d) change the subordination provisions of such Indebtedness, (e) change the redemption or prepayment provisions of such Indebtedness other than to extend the dates therefor or to reduce the premiums payable in connection therewith or (f) change or amend any other term in a manner materially adverse to the interests of the Secured Parties under the Loan Documents or in the Collateral.   Section 8.12         Modification of Constituent Documents   The Company shall not, nor permit any of its Subsidiaries to, change its capital structure (including in the terms of its outstanding Stock) or otherwise amend its Constituent Documents in a manner materially adverse to the Secured Parties.   Section 8.13         Accounting Changes; Fiscal Year   The Company shall not, and shall not permit any Subsidiary of the Company to, change its (a) accounting treatment and reporting practices or tax reporting treatment, except as required by GAAP or any Requirement of Law and disclosed to the Lenders and the Administrative Agent or (b) Fiscal Year.   Section 8.14         Margin Regulations   The Company shall not, nor shall it permit any of its Subsidiaries to, use all or any portion of the proceeds of any credit extended hereunder to purchase or carry margin stock (within the meaning of Regulation U of the Federal Reserve Board) in contravention of Regulation U of the Federal Reserve Board.   Section 8.15         No Speculative Transactions   The Company shall not, nor shall it permit any of its Subsidiaries to, engage in any speculative transaction or in any transaction involving Hedging Contracts, except for the sole purpose of hedging in the ordinary course of business and consistent with industry practices.   Section 8.16         Designation of Senior Debt   The Company shall not, nor permit any of its Subsidiaries to, designate any Indebtedness, other than the Obligations and the Senior Notes, as “Senior Indebtedness,” “Senior Secured Financing” or “Designated Senior Indebtedness” (or any comparable term) under and as defined in the Subordinated Note Indentures and any documentation with respect to any other subordinated Indebtedness of the Company and each of its Subsidiaries.   114 --------------------------------------------------------------------------------   ARTICLE IX EVENTS OF DEFAULT   Section 9.1            Events of Default   Each of the following events shall be an “Event of Default”:   (a)           any Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation when the same becomes due and payable; or   (b)           any Borrower shall fail to pay any interest on any Loan, any fee under any of the Loan Documents or any other Obligation (other than one referred to in clause (a) above) and such non-payment continues for a period of five Business Days after the due date therefor; or   (c)           any representation or warranty made or deemed made by any Loan Party in any Loan Document or by any Loan Party (or any of its officers) in connection with any Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or   (d)           any Loan Party shall fail to perform or observe:   (i)            any term, covenant or agreement contained in Article V (Financial Covenant), as such Article may be waived, amended or otherwise modified from time to time by the Requisite Revolving Credit Lenders pursuant to Section 11.1 (Amendments, Waivers, Etc.);   (ii)           any term, covenant or agreement contained in Section 6.1 (Financial Statements), 6.2(a) (Default Notices), 7.1 (Preservation of Corporate Existence, Etc.) (solely with respect to the Loan Parties), 7.6 (Access), 7.9 (Application of Proceeds), or 7.11 (Additional Collateral and Guaranties) or Article VIII (Negative Covenants); or   (iii)          any other term, covenant or agreement contained in this Agreement or in any other Loan Document if such failure under this clause (iii) shall remain unremedied for 30 days after the date on which written notice thereof shall have been given to the Company by the Administrative Agent or any Lender; or   (e)           (i) the Company or any other Loan Party or any Significant Subsidiary of the Company (other than the Mexican Borrowers and their respective Subsidiaries if no Peso Outstandings or Peso Commitments remain outstanding and all outstanding Indebtedness of the Mexican Borrowers and their respective Subsidiaries is Non-Recourse Indebtedness) shall fail to make any payment on any Indebtedness of the Company or any such Subsidiary (other than the Obligations) or any Guaranty Obligation in respect of Indebtedness of any other Person, and, in each case, such failure relates to Indebtedness having a principal amount of $25,000,000 or more, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness or   115 --------------------------------------------------------------------------------   (iii) any such Indebtedness shall become or be declared to be due and payable, or be required to be prepaid or repurchased (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or   (f)            (i) the Company or any other Loan Party with assets greater than $1,000,000 or any Significant Subsidiary of the Company (other than the Mexican Borrowers and their respective Subsidiaries if no Peso Outstandings or Peso Commitments remain outstanding and all outstanding Indebtedness of the Mexican Borrowers and their respective Subsidiaries is Non-Recourse Indebtedness) shall generally not pay its debts as such debts become due, shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors, (ii) any proceeding shall be instituted by or against the Company or any other Loan Party with assets greater than $1,000,000 or any Significant Subsidiary of the Company (other than the Mexican Borrowers and their respective Subsidiaries if no Peso Outstandings or Peso Commitments remain outstanding and all outstanding Indebtedness of the Mexican Borrowers and their respective Subsidiaries is Non-Recourse Indebtedness) seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts, under any Requirement of Law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a custodian, receiver, trustee or other similar official for it or for any substantial part of its property; provided, however, that, in the case of any such proceedings instituted against the Company or any such Loan Party or any such Significant Subsidiary (but not instituted by the Company or such Loan Party or such Subsidiary) either such proceedings shall remain undismissed or unstayed for a period of 60 days or more or any action sought in such proceedings shall occur or (iii) the Company or any other Loan Party with assets greater than $1,000,000 or any Significant Subsidiary of the Company (other than the Mexican Borrowers and their respective Subsidiaries if no Peso Outstandings or Peso Commitments remain outstanding and all outstanding Indebtedness of the Mexican Borrowers and their respective Subsidiaries is Non-Recourse Indebtedness) shall take any corporate (or equivalent) action to authorize any action set forth in clauses (i) or (ii) above; or   (g)           one or more judgments or orders (or other similar process) involving, in the case of money judgments, an aggregate amount whose Dollar Equivalent exceeds $25,000,000, to the extent not covered by insurance, shall be rendered against the Company or any other Loan Party or any Significant Subsidiary of the Company (other than the Mexican Borrowers and their respective Subsidiaries if no Peso Outstandings or Peso Commitments remain outstanding and all outstanding Indebtedness of the Mexican Borrowers and their respective Subsidiaries is Non-Recourse Indebtedness) and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or   (h)           an ERISA Event shall occur and the Dollar Equivalent of the amount of all liabilities and deficiencies resulting therefrom, whether or not assessed, exceeds $25,000,000 in the aggregate; or   (i)            any material provision of any Loan Document after delivery thereof shall for any reason fail or cease to be valid and binding on, or enforceable against, any Loan Party party thereto, or any Loan Party shall state in writing that any provision of any Loan Document after delivery thereof is for any reason not valid and binding on, or enforceable against, any Loan Party party thereto; or   116 --------------------------------------------------------------------------------   (j)            any Collateral Document shall for any reason fail or cease to create a valid and enforceable Lien on any Collateral in excess of $5,000,000 in the aggregate purported to be covered thereby or, except as permitted by the Loan Documents, such Lien shall fail or cease to be a perfected and first priority Lien, or any Loan Party shall so state in writing; or   (k)           there shall occur any Change of Control; or   (l)            any of the Obligations shall cease to be “Senior Indebtedness,” “Senior Secured Financing” or “Designated Senior Indebtedness” (or any comparable term) under and as defined in the Subordinated Note Indentures and any documentation with respect to any other subordinated Indebtedness of the Company or any of its Subsidiaries.   Section 9.2            Remedies   During the continuance of any Event of Default, the Administrative Agent (a) may, and, at the request of the Requisite Lenders, shall, by notice to the Company declare that all or any portion of the Commitments be terminated, whereupon the obligation of each Lender to make any Loan and each Issuer to Issue any Letter of Credit shall immediately terminate and (b) may and, at the request of the Requisite Lenders, shall, by notice to the Company, declare the Loans, all interest thereon and all other amounts and Obligations payable under this Agreement to be forthwith due and payable, whereupon the Loans, all such interest and all such amounts and Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrowers; provided, however, that upon the occurrence of the Events of Default specified in Section 9.1(f) (Events of Default), (x) the Commitments of each Lender to make Loans and the commitments of each Lender and Issuer to Issue or participate in Letters of Credit shall each automatically be terminated and (y) the Loans, all such interest and all such amounts and Obligations shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrowers.  In addition to the remedies set forth above, the Administrative Agent may exercise any remedies provided for by the Collateral Documents in accordance with the terms thereof or any other remedies provided by applicable law.   Section 9.3            Actions in Respect of Letters of Credit   At any time (i) upon the Revolving Credit Termination Date, (ii) after the Revolving Credit Termination Date when the aggregate funds on deposit in Cash Collateral Accounts shall be less than 105% of the Letter of Credit Obligations and (iii) as may be required by Section 2.9(d) (Mandatory Prepayments), the Company shall pay to the Administrative Agent in immediately available funds at the Administrative Agent’s office referred to in Section 11.8 (Notices, Etc.), for deposit in a Cash Collateral Account, (x) in the case of clauses (i) and (ii) above, the amount required to that, after such payment, the aggregate funds on deposit in the Cash Collateral Accounts equals or exceeds 105% of the sum of all outstanding Letter of Credit Obligations and (y) in the case of clause (iii) above, the amount required by Section 2.9(d) (Mandatory Prepayments).  The Administrative Agent may, from time to time after funds are deposited in any Cash Collateral Account, apply funds then held in such Cash Collateral Account to the payment of any amounts, in accordance with Section 2.9(d) (Mandatory Prepayments) and Section 2.13(g) (Payments and Computations), as shall have become or shall become due and payable by the Company to the Issuers or Lenders in respect of the Letter of Credit Obligations.   117 --------------------------------------------------------------------------------   The Administrative Agent shall promptly give written notice of any such application; provided, however, that the failure to give such written notice shall not invalidate any such application.   Section 9.4                                   Rescission   If at any time after termination of the Commitments or acceleration of the maturity of the Loans, the Borrowers shall pay all arrears of interest and all payments on account of principal of the Loans and Reimbursement Obligations that shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified herein) and all Events of Default and Defaults (other than non-payment of principal of and accrued interest on the Loans due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 11.1 (Amendments, Waivers, Etc.), then upon the written consent of the Requisite Lenders and written notice to the Company, the termination of the Commitments or the acceleration and their consequences may be rescinded and annulled; provided, however, that such action shall not affect any subsequent Event of Default or Default or impair any right or remedy consequent thereon.  The provisions of the preceding sentence are intended merely to bind the Lenders and the Issuers to a decision that may be made at the election of the Requisite Lenders, and such provisions are not intended to benefit the Borrowers and do not give the Borrowers the right to require the Lenders to rescind or annul any acceleration hereunder, even if the conditions set forth herein are met.   ARTICLE X THE AGENTS   Section 10.1                            Authorization and Action   (a)                                  Each Lender and each Issuer hereby appoints Citicorp as the Administrative Agent, and Banamex as the Mexican Facility Agent, hereunder and each Lender and each Issuer authorizes each Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to such Agent under such agreements and to exercise such powers as are reasonably incidental thereto.  Without limiting the foregoing, each Lender and each Issuer hereby (i) authorizes each Agent to execute and deliver, and to perform its obligations under, each of the Loan Documents to which such Agent is a party, to exercise all rights, powers and remedies that such Agent may have under such Loan Documents and (ii) authorizes the Administrative Agent act as agent for the Lenders, Issuers and the other Secured Parties under the Collateral Documents.   (b)                                 As to any matters not expressly provided for by this Agreement and the other Loan Documents (including enforcement or collection), no Agent shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Requisite Lenders, and such instructions shall be binding upon all Lenders and each Issuer; provided, however, that no Agent shall be required to take any action that (i) such Agent in good faith believes exposes it to personal liability unless such Agent receives an indemnification satisfactory to it from the Lenders and the Issuers with respect to such action or (ii) is contrary to this Agreement or applicable law.  Each Agent agrees to give to each Lender and each Issuer, if applicable, prompt notice of each notice given to it by any Loan Party pursuant to the terms of this Agreement or the other Loan Documents.   118 --------------------------------------------------------------------------------   (c)                                  In performing its functions and duties hereunder and under the other Loan Documents, each Agent is acting solely on behalf of the Lenders and the Issuers except to the limited extent provided in Section 2.7(b), and its duties are entirely administrative in nature.  No Agent assumes and shall not be deemed to have assumed any obligation other than as expressly set forth herein and in the other Loan Documents or any other relationship as the agent, fiduciary or trustee of or for any Lender, Issuer or holder of any other Obligation.  Each Agent may perform any of its duties under any Loan Document by or through its agents or employees.   (d)                                 None of the Arrangers, the Syndication Agent and the Co-Documentation Agents shall have any obligations or duties whatsoever in such capacity under this Agreement or any other Loan Document and shall incur no liability hereunder or thereunder in such capacity.   Section 10.2                            Agent’s Reliance, Etc.   None of the Administrative Agent, the Mexican Facility Agent or any of their respective Affiliates, directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it, him, her or them under or in connection with this Agreement or the other Loan Documents, except for its, his, her or their own gross negligence or willful misconduct.  Without limiting the foregoing, any Agent (a) may treat the payee of any Note as its holder until such Note has been assigned in accordance with Section 11.2(e) (Assignments and Participations), (b) may rely on the Register to the extent set forth in Section 2.7 (Evidence of Debt), (c) may consult with legal counsel (including counsel to the Borrowers or any other Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, (d) makes no warranty or representation to any Lender or Issuer and shall not be responsible to any Lender or Issuer for any statements, warranties or representations made by or on behalf of the Company or any of its Subsidiaries in or in connection with this Agreement or any other Loan Document, (e) shall not have any duty to ascertain or to inquire either as to the performance or observance of any term, covenant or condition of this Agreement or any other Loan Document, as to the financial condition of any Loan Party or as to the existence or possible existence of any Default or Event of Default, (f) shall not be responsible to any Lender or Issuer for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created under or in connection with, this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or thereto and (g) shall incur no liability under or in respect of this Agreement or any other Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which writing may be a telecopy or electronic mail) or any telephone message believed by it to be genuine and signed or sent by the proper party or parties.   Section 10.3                            Posting of Approved Electronic Communications   (a)                                  Each of the Lenders, the Issuers and the Borrowers agree, and the Borrowers shall cause each Guarantor to agree, that any Agent may, but shall not be obligated to, make the Approved Electronic Communications available to the Lenders and Issuers by posting such Approved Electronic Communications on IntraLinks™ or a substantially similar electronic platform chosen by such Agent to be its electronic transmission system (the “Approved Electronic Platform”).   119 --------------------------------------------------------------------------------   (b)                                 Although the Approved Electronic Platform and its primary web portal are secured with generally-applicable security procedures and policies implemented or modified by each Agent from time to time (including, as of the Closing Date, a dual firewall and a User ID/Password Authorization System) and the Approved Electronic Platform is secured through a single-user-per-deal authorization method whereby each user may access the Approved Electronic Platform only on a deal-by-deal basis, each of the Lenders, the Issuers and the Borrowers acknowledges and agrees, and the Borrowers shall cause each Guarantor to acknowledge and agree, that the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution.  In consideration for the convenience and other benefits afforded by such distribution and for the other consideration provided hereunder, the receipt and sufficiency of which is hereby acknowledged, each of the Lenders, the Issuers and the Borrowers hereby approves, and the Borrowers shall cause each Guarantor to approve, distribution of the Approved Electronic Communications through the Approved Electronic Platform and understands and assumes, and the Borrowers shall cause each Guarantor to understand and assume, the risks of such distribution.   (c)                                  THE APPROVED ELECTRONIC PLATFORM AND THE APPROVED ELECTRONIC COMMUNICATIONS ARE PROVIDED “AS IS” AND “AS AVAILABLE”.  NONE OF THE AGENTS OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (THE “AGENT AFFILIATES”) WARRANT THE ACCURACY, ADEQUACY OR COMPLETENESS OF THE APPROVED ELECTRONIC COMMUNICATIONS OR THE APPROVED ELECTRONIC PLATFORM AND EACH EXPRESSLY DISCLAIMS LIABILITY FOR ERRORS OR OMISSIONS IN THE APPROVED ELECTRONIC PLATFORM AND THE APPROVED ELECTRONIC COMMUNICATIONS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT AFFILIATES IN CONNECTION WITH THE APPROVED ELECTRONIC PLATFORM OR THE APPROVED ELECTRONIC COMMUNICATIONS.   (d)                                 Each of the Lenders, the Issuers and the Borrowers agree, and the Borrowers shall cause each Guarantor to agree, that each Agent may, but (except as may be required by applicable law) shall not be obligated to, store the Approved Electronic Communications on the Approved Electronic Platform in accordance with such Agent’s generally-applicable document retention procedures and policies.   Section 10.4                            The Agents Individually   With respect to its Ratable Portion, Citicorp and Banamex shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender.  The terms “Lenders”, “Revolving Credit Lenders”, “Term Lenders”, “Requisite Lenders” and any similar terms shall, unless the context clearly otherwise indicates, include, without limitation, each Agent in its individual capacity as a Lender, a Revolving Credit Lender, Term Lender or as one of the Requisite Lenders.  Citicorp, Banamex and their respective Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with, any Loan Party as if Citicorp were not acting as the Administrative Agent and Banamex were not acting as the Mexican Facility Agent.   120 --------------------------------------------------------------------------------   Section 10.5                            Lender Credit Decision   Each Lender and each Issuer acknowledges that it shall, independently and without reliance upon any Agent or any other Lender, conduct its own independent investigation of the financial condition and affairs of the Borrowers and each other Loan Party in connection with the making and continuance of the Loans and with the issuance of the Letters of Credit.  Each Lender and each Issuer also acknowledges that it shall, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and other Loan Documents.  Except for the documents expressly required by any Loan Document to be transmitted by any Agent to the Lenders or the Issuers, no Agent shall have any duty or responsibility to provide any Lender or any Issuer with any credit or other information concerning the business, prospects, operations, property, financial or other condition or creditworthiness of any Loan Party or any Affiliate of any Loan Party that may come into the possession of such Agent or any Affiliate thereof or any employee or agent of any of the foregoing.   Section 10.6                            Indemnification   Each Lender agrees to indemnify each Agent and each of its Affiliates, and each of their respective directors, officers, employees, agents and advisors (to the extent not reimbursed by the Borrowers and without limiting their obligation to do so), from and against such Lender’s aggregate Ratable Portion of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements (including reasonable fees, expenses and disbursements of financial and legal advisors) of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against, such Agent or any of its Affiliates, directors, officers, employees, agents and advisors in any way relating to or arising out of this Agreement or the other Loan Documents or any action taken or omitted by such Agent under this Agreement or the other Loan Documents; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s or such Affiliate’s gross negligence or willful misconduct.  Without limiting the foregoing, each Lender agrees to reimburse each Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable fees, expenses and disbursements of financial and legal advisors) incurred by such Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of its rights or responsibilities under, this Agreement or the other Loan Documents, to the extent that such Agent is not reimbursed for such expenses by the Borrowers or another Loan Party.   Section 10.7                            Successor Agents   Any Agent may resign at any time by giving 30 days’ prior written notice thereof to the Lenders and the Borrowers.  Upon any such resignation, the Requisite Lenders shall have the right to appoint a successor Agent.  If no successor Agent shall have been so appointed by the Requisite Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent’s giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, selected from among the Lenders.  In either case, such appointment shall be subject to the prior written approval of the Company (which approval may not be unreasonably withheld and shall not be required upon the occurrence and during the continuance   121 --------------------------------------------------------------------------------   of an Event of Default).  Upon the acceptance of any appointment as Agent by a successor Agent, such successor Agent shall succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents.  Prior to any retiring Agent’s resignation hereunder as Agent, the retiring Agent shall take such action as may be reasonably necessary to assign to the successor Agent its rights as Agent under the Loan Documents.  After such resignation, the retiring Agent shall continue to have the benefit of this Article X as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents.   Section 10.8                            Concerning the Collateral and the Collateral Documents   (a)                                  Each Lender and each Issuer agrees that any action taken by any Agent or the Requisite Lenders (or, where required by the express terms of this Agreement, a greater proportion of the Lenders) in accordance with the provisions of this Agreement or of the other Loan Documents, and the exercise by such Agent or the Requisite Lenders (or, where so required, such greater proportion) of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders, Issuers and other Secured Parties.  Without limiting the generality of the foregoing, the Administrative Agent shall have the sole and exclusive right and authority to (i) act as the disbursing and collecting agent for the Lenders and the Issuers with respect to all payments and collections arising in connection herewith and with the Collateral Documents, (ii) execute and deliver each Collateral Document and accept delivery of each such agreement delivered by the Company or any of its Subsidiaries, (iii) act as collateral agent for the Lenders, the Issuers and the other Secured Parties for purposes of the perfection of all security interests and Liens created by such agreements and all other purposes stated therein, provided, however, that the Administrative Agent hereby appoints, authorizes and directs the Mexican Facility Agent and each Lender and Issuer to act as collateral sub-agent for the Administrative Agent, the Lenders and the Issuers for purposes of the perfection of all security interests and Liens with respect to the Collateral, including any Deposit Accounts maintained by a Loan Party with, and cash and Cash Equivalents held by, such Lender or such Issuer, (iv) manage, supervise and otherwise deal with the Collateral, (v) take such action as is necessary or desirable to maintain the perfection and priority of the security interests and Liens created or purported to be created by the Collateral Documents and (vi) except as may be otherwise specifically restricted by the terms hereof or of any other Loan Document, exercise all remedies given to the Agents, the Lenders, the Issuers and the other Secured Parties with respect to the Collateral under the Loan Documents relating thereto, applicable law or otherwise.   (b)                                 Each of the Lenders and the Issuers hereby consents to the release and hereby directs, in accordance with the terms hereof, the Administrative Agent to release (or, in the case of clause (ii) below, release or subordinate) any Lien held by the Administrative Agent for the benefit of the Lenders and the Issuers against any of the following:   (i)                                     all of the Collateral and all Loan Parties, upon termination of the Commitments and payment and satisfaction in full of all Loans, all Reimbursement Obligations and all other Obligations that the Administrative Agent has been notified in writing are then due and payable (and, in respect of contingent Letter of Credit Obligations, with respect to which cash collateral has been deposited or a back-up letter of credit has been issued, in either case in the appropriate currency and on terms satisfactory to the Administrative Agent and the applicable Issuers);   122 --------------------------------------------------------------------------------   (ii)                                  any assets that are subject to a Lien permitted by Section 8.2(i) (Liens, Etc.); and   (iii)                               any part of the Collateral sold or disposed of by a Loan Party if such sale or disposition is permitted by this Agreement (or permitted pursuant to a waiver of or consent to a transaction otherwise prohibited by this Agreement).   Each of the Lenders and the Issuers hereby directs the Administrative Agent to execute and deliver or file such termination and partial release statements and do such other things as are necessary to release Liens to be released pursuant to this Section 10.8 promptly upon the effectiveness of any such release.   Section 10.9                            Collateral Matters Relating to Related Obligations   The benefit of the Loan Documents and of the provisions of this Agreement relating to the Collateral shall extend to and be available in respect of any Secured Obligation arising under any Hedging Contract or Cash Management Obligation or that is otherwise owed to Persons other than the Administrative Agent, the Lenders and the Issuers (collectively, “Related Obligations”) solely on the condition and understanding, as among the Administrative Agent and all Secured Parties, that (a) the Related Obligations shall be entitled to the benefit of the Loan Documents and the Collateral to the extent expressly set forth in this Agreement and the other Loan Documents and to such extent the Administrative Agent shall hold, and have the right and power to act with respect to, the Guaranty and the Collateral on behalf of and as agent for the holders of the Related Obligations, but the Administrative Agent is otherwise acting solely as agent for the Lenders and the Issuers and shall have no fiduciary duty, duty of loyalty, duty of care, duty of disclosure or other obligation whatsoever to any holder of Related Obligations, (b) all matters, acts and omissions relating in any manner to the Guaranty, the Collateral, or the omission, creation, perfection, priority, abandonment or release of any Lien, shall be governed solely by the provisions of this Agreement and the other Loan Documents and no separate Lien, right, power or remedy shall arise or exist in favor of any Secured Party under any separate instrument or agreement or in respect of any Related Obligation, (c) each Secured Party shall be bound by all actions taken or omitted, in accordance with the provisions of this Agreement and the other Loan Documents, by the Administrative Agent and the Requisite Lenders, each of whom shall be entitled to act at its sole discretion and exclusively in its own interest given its own Commitments and its own interest in the Loans, Letter of Credit Obligations and other Obligations to it arising under this Agreement or the other Loan Documents, without any duty or liability to any other Secured Party or as to any Related Obligation and without regard to whether any Related Obligation remains outstanding or is deprived of the benefit of the Collateral or becomes unsecured or is otherwise affected or put in jeopardy thereby, (d) no holder of Related Obligations and no other Secured Party (except the Administrative Agent, the Lenders and the Issuers, to the extent set forth in this Agreement) shall have any right to be notified of, or to direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under this Agreement or the Loan Documents and (e) no holder of any Related Obligation shall exercise any right of setoff, banker’s lien or similar right except to the extent provided in Section 11.6 (Right of Set-off) and then only to the extent such right is exercised in compliance with Section 11.7 (Sharing of Payments, Etc.).   123 --------------------------------------------------------------------------------   ARTICLE XI MISCELLANEOUS   Section 11.1                            Amendments, Waivers, Etc.   (a)                                  No amendment or waiver of any provision of this Agreement or any other Loan Document (other than the Fee Letter) nor consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be in writing and (x) in the case of any such waiver or consent, signed by the Requisite Lenders (or by the Administrative Agent with the consent of the Requisite Lenders) and (y) in the case of any other amendment, by the Requisite Lenders (or by the Administrative Agent with the consent of the Requisite Lenders) and the Company or the applicable Loan Party, as the case may be, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by each Lender directly affected thereby, in addition to the Requisite Lenders (or the Administrative Agent with the consent thereof), do any of the following:   (i)                                     waive any condition specified in Section 3.1 (Conditions Precedent to Initial Loans and Letters of Credit) or 3.2(b) or (c) (Conditions Precedent to Each Loan and Letter of Credit), except with respect to a condition based upon another provision hereof, the waiver of which requires only the concurrence of the Requisite Lenders and, in the case of the conditions specified in Section 3.1 (Conditions Precedent to Initial Loans and Letters of Credit), subject to the provisions of Section 3.3 (Determinations of Initial Borrowing Conditions);   (ii)                                  increase the Commitment of such Lender or subject such Lender to any additional obligation;   (iii)                               extend the scheduled final maturity of any Loan owing to such Lender, or waive, reduce or postpone any scheduled date fixed for the payment or reduction of principal or interest of any such Loan or fees owing to such Lender (it being understood that Section 2.9 (Mandatory Prepayments) does not provide for scheduled dates fixed for payment) or for the reduction of such Lender’s Commitment;   (iv)                              forgive, reduce, or release any Borrower from its obligations to repay, the principal amount of any Loan or Reimbursement Obligation owing to such Lender (other than by the payment or prepayment thereof);   (v)                                 reduce the rate of interest on any Loan or Reimbursement Obligation outstanding and owing to such Lender or any fee payable hereunder to such Lender;   (vi)                              expressly subordinate any of the Secured Obligations or any Liens securing the Secured Obligations;   (vii)                           postpone any scheduled date fixed for payment of interest or fees owing to such Lender or waive any such payment;   124 --------------------------------------------------------------------------------   (viii)                        change the aggregate Ratable Portions of Lenders required for any or all Lenders to take any action hereunder;   (ix)                                (A)                              release all or substantially all of the Collateral except as provided in Section 10.8(b) (Concerning the Collateral and the Collateral Documents), (B) release any Borrower from its payment obligation to such Lender under this Agreement or the Notes owing to such Lender (if any), (C) release any material Guarantor or all or substantially all of the Guarantors from its or their obligations under the Guaranty except in connection with the sale or other disposition of a Guarantor (or all or substantially all of the assets thereof) permitted by this Agreement (or permitted pursuant to a waiver or consent of a transaction otherwise prohibited by this Agreement) or (D) amend, modify or waive the proviso in Section 11.10 (Binding Effect); or   (x)                                   amend Section 10.8(b) (Concerning the Collateral and the Collateral Documents), Section 11.7 (Sharing of Payments, Etc.), this Section 11.1 or any definition of the terms “Requisite Lenders,” “Requisite Revolving Credit Lenders,” “Requisite Term Lenders” or “Ratable Portion”;   and provided, further, that (A) any modification of the application of payments to the Term Loans pursuant to Section 2.9 (Mandatory Prepayments) shall require the consent of the Requisite Term Lenders, (B) no amendment, waiver or consent shall, unless in writing and signed by any Special Purpose Vehicle that has been granted an option pursuant to Section 11.2(e) (Assignments and Participations), affect the grant or nature of such option or the right or duties of such Special Purpose Vehicle hereunder, (C) no amendment, waiver or consent shall, unless in writing and signed by the applicable Agent in addition to the Lenders required above to take such action, affect the rights or duties of such Agent under this Agreement or the other Loan Documents, (D) no amendment, waiver or consent shall, unless in writing and signed by the applicable Swing Lender in addition to the Lenders required above to take such action, affect the rights or duties of such Swing Lender under this Agreement or the other Loan Documents and (E) the Requisite Mexican Lenders (or the Administrative Agent with the prior written consent thereof), on the one hand, and the Borrowers, on the other hand, may amend, supplement or otherwise modify or waive any of the terms and provisions (and related definitions) related solely to the borrowings (but not including any conditions to such borrowings) and payment procedures with respect to the Mexican Facility; provided, further, that (w) the Administrative Agent may, at the request of the Company and without the consent of any Lender, release Grupo Cinemex and Cadena as Borrowers hereunder if no Peso Outstandings or Peso Commitments remain outstanding, (x) the Administrative Agent may, with the consent of the Company, amend, modify or supplement this Agreement to cure any ambiguity, omission, defect or inconsistency, so long as such amendment, modification or supplement does not adversely affect the rights of any Lender or any Issuer, (y) the Administrative Agent and the Company may amend, modify or supplement this Agreement to the extent necessary to implement the terms of a Facility Increase in accordance with the terms hereof and (z) the Requisite Revolving Credit Lenders (or the Administrative Agent with the prior written consent thereof), on the one hand, and the Company, on the other hand, may amend, supplement or otherwise modify or waive any of the terms and provisions (and related definitions) of Article V (Financial Covenant).   (b)                                 The Administrative Agent may, but shall have no obligation to, with the written concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender.  Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.  No notice to or demand on any Borrower in any case shall entitle such Borrower to any   125 --------------------------------------------------------------------------------   other or further notice or demand in similar or other circumstances.   (c)                                  If, in connection with any proposed amendment, modification, waiver or termination requiring the consent of all Revolving Credit Lenders or Term Lenders, the consent of Requisite Lenders is obtained but the consent of any Revolving Credit Lender or Term Lender whose consent is required is not obtained (any such Lender whose consent is not obtained as described in this Section 11.1 being referred to as a “Non-Consenting Lender”), then, at the Company’s request, an Eligible Assignee reasonably acceptable to the Administrative Agent shall have the right to purchase from such Non-Consenting Lender, and such Non-Consenting Lender agrees that it shall, upon the Administrative Agent’s request, sell and assign to the Lender acting as the Administrative Agent or such Eligible Assignee, all of the Revolving Credit Commitments and Revolving Credit Outstandings of such Non-Consenting Lender if such Non-Consenting Lender is a Revolving Credit Lender and all of the Term Loans of such Non-Consenting Lender if such Non-Consenting Lender is a Term Lender, in each case, for an amount equal to the principal balance of all such Revolving Loans or Term Loans, as applicable, held by the Non-Consenting Lender and all accrued and unpaid interest and fees with respect thereto through the date of sale; provided, however, that such purchase and sale shall be recorded in the Register maintained by the Administrative Agent and not be effective until (x) the Administrative Agent shall have received from such Eligible Assignee an agreement in form and substance reasonably satisfactory to the Administrative Agent and the Company whereby such Eligible Assignee shall agree to be bound by the terms hereof and (y) such Non-Consenting Lender shall have received payments of all Revolving Loans or Term Loans, as applicable, held by it and all accrued and unpaid interest and fees with respect thereto through the date of the sale.  Each Lender agrees that, if it becomes a Non-Consenting Lender, it shall execute and deliver to the Administrative Agent an Assignment and Acceptance to evidence such sale and purchase and shall deliver to the Administrative Agent any Note (if the assigning Lender’s Loans are evidenced by Notes) subject to such Assignment and Acceptance; provided, however, that the failure of any Non-Consenting Lender to execute an Assignment and Acceptance shall not render such sale and purchase (and the corresponding assignment) invalid and such assignment shall be recorded in the Register.   Section 11.2                            Assignments and Participations   (a)                                  Each Lender may sell, transfer, negotiate or assign to one or more Eligible Assignees all or a portion of its rights and obligations hereunder (including all of its rights and obligations with respect to the Term Loans, the Revolving Loans, the Swing Loans and the Letters of Credit); provided, however, that (i)(A) if any such assignment shall be of the assigning Lender’s Revolving Credit Outstandings and Revolving Credit Commitments, such assignment shall cover the same percentage of such Lender’s Revolving Credit Outstandings and Revolving Credit Commitments, (B) if any such assignment shall be of the assigning Lender’s Peso Outstandings and Peso Commitments, such assignment shall cover the same percentage of such Lender’s Peso Outstandings and Peso Commitments and (C) if any such assignment shall be of the assigning Lender’s Term Loans and Term Loan Commitments, such assignment shall cover the same percentage of such Lender’s Term Loans and Term Loan Commitments, (ii) the aggregate amount being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event (if less than the Assignor’s entire interest) be less than (x) in the case of Revolving Credit Outstandings and Revolving Credit Commitments, $5,000,000 or an integral multiple of $1,000,000 in excess thereof, (y) in the case of Peso Outstandings and Peso Commitments, $1,000,000 or an integral   126 --------------------------------------------------------------------------------   multiple of $1,000,000 in excess thereof and (z) in the case of Term Loans and Term Loan Commitments, $1,000,000 or an integral multiple of $1,000,000 in excess thereof, except, in either case, (A) with the consent of the Company and the Administrative Agent or (B) if such assignment is being made to a Lender or an Affiliate or Approved Fund of a Lender, and (iii) if such Eligible Assignee is not, prior to the date of such assignment, a Lender or an Affiliate or Approved Fund of a Lender, such assignment shall be subject to the prior consent of the Administrative Agent, the Company and, with respect to assignments of Revolving Credit Outstandings and Revolving Credit Commitments, each Issuer (which consents shall not be unreasonably withheld or delayed); provided, further, that, notwithstanding any other provision of this Section 11.2, the consent of the Company shall not be required for any assignment occurring when any Event of Default under Section 9.1(a), (b) or (f) shall have occurred and be continuing.  Any such assignment need not be ratable as among the Term Loan Facility and the Revolving Credit Facility.   (b)                                 The parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note (if the assigning Lender’s Loans are evidenced by a Note) subject to such assignment.  Upon the execution, delivery, acceptance and recording in the Register of any Assignment and Acceptance and, other than in respect of assignments made pursuant to Section 2.17 (Substitution of Lenders) and Section 11.1(c) (Amendments, Waivers, Etc.), the receipt by the Administrative Agent from the assignee of an assignment fee in the amount of $3,500 from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall become a party hereto and, to the extent that rights and obligations under the Loan Documents have been assigned to such assignee pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender, and if such Lender were an Issuer, of such Issuer hereunder and thereunder, and (ii) the Notes (if any) corresponding to the Loans assigned thereby shall be transferred to such assignee by notation in the Register and (iii) the assignor thereunder shall, to the extent that rights and obligations under this Agreement have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except for those surviving the payment in full of the Obligations) and be released from its obligations under the Loan Documents, other than those relating to events or circumstances occurring prior to such assignment (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto).   (c)                                  The Administrative Agent shall maintain at its address referred to in Section 11.8 (Notices, Etc.) a copy of each Assignment and Acceptance delivered to and accepted by it and shall record in the Register the names and addresses of the Lenders and Issuers and the principal amount of the Loans and Reimbursement Obligations owing to each Lender from time to time and the Commitments of each Lender.  Any assignment pursuant to this Section 11.2 shall not be effective until such assignment is recorded in the Register.   (d)                                 Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, the Administrative Agent shall, if such Assignment and Acceptance has been completed, (i) accept such Assignment and Acceptance, (ii) record or cause to be recorded the information contained therein in the Register and (iii) give prompt notice thereof to the Company.  Within five Business Days after its receipt of such notice, each Borrower, at its own expense, shall, if requested by such assignee, execute and deliver to the Administrative Agent new Notes to the order of such assignee in an amount equal to the   127 --------------------------------------------------------------------------------   Commitments and Loans assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has surrendered any Note for exchange in connection with the assignment and has retained Commitments or Loans hereunder, new Notes to the order of the assigning Lender in an amount equal to the Commitments and Loans retained by it hereunder.  Such new Notes shall be dated the same date as the surrendered Notes and be in substantially the form of Exhibit B-1 (Form of Revolving Dollar Note), Exhibit B-2 (Form of Peso Loan Note) or Exhibit B-3 (Form of Term Loan Note), as applicable.   (e)                                  In addition to the other assignment rights provided in this Section 11.2, each Lender may do each of the following:   (i)                                     grant to a Special Purpose Vehicle the option to make all or any part of any Loan that such Lender would otherwise be required to make hereunder and the exercise of such option by any such Special Purpose Vehicle and the making of Loans pursuant thereto shall satisfy (once and to the extent that such Loans are made) the obligation of such Lender to make such Loans thereunder; provided, however, that (x) nothing herein shall constitute a commitment or an offer to commit by such a Special Purpose Vehicle to make Loans hereunder and no such Special Purpose Vehicle shall be liable for any indemnity or other Obligation (other than the making of Loans for which such Special Purpose Vehicle shall have exercised an option, and then only in accordance with the relevant option agreement) and (y) such Lender’s obligations under the Loan Documents shall remain unchanged, such Lender shall remain responsible to the other parties for the performance of its obligations under the terms of this Agreement and shall remain the holder of the Obligations for all purposes hereunder; and   (ii)                                  assign, as collateral or otherwise, any of its rights under this Agreement, whether now owned or hereafter acquired (including rights to payments of principal or interest on the Loans), to (A) without notice to or consent of the Administrative Agent or the Borrowers, any Federal Reserve Bank (pursuant to Regulation A of the Federal Reserve Board) and (B) without notice to or consent of the Administrative Agent or the Borrowers, (1) any holder of, or trustee or other representative for the benefit of, the holders of such Lender’s Securities and (2) any Special Purpose Vehicle to which such Lender has granted an option pursuant to clause (i) above;   provided, however, that no such assignment or grant shall release such Lender from any of its obligations hereunder except as expressly provided in clause (i) above and except, in the case of a subsequent foreclosure pursuant to an assignment as collateral, if such foreclosure is made in compliance with the other provisions of this Section 11.2 other than this clause (e) or clause (f) below.  Each party hereto acknowledges and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior debt of any such Special Purpose Vehicle, such party shall not institute against, or join any other Person in instituting against, any Special Purpose Vehicle that has been granted an option pursuant to this clause (e) any bankruptcy, reorganization, insolvency or liquidation proceeding (such agreement shall survive the payment in full of the Obligations).  The terms of the designation of, or assignment to, such Special Purpose Vehicle shall not restrict such Lender’s ability to, or grant such Special Purpose Vehicle the right to, consent to any amendment or waiver to this Agreement or any other Loan Document or to the departure by the Borrowers from any provision of this Agreement or any other Loan Document without the consent of such Special Purpose Vehicle except, as long as the Administrative Agent and the Lenders, Issuers and other Secured Parties   128 --------------------------------------------------------------------------------   shall continue to, and shall be entitled to continue to, deal solely and directly with such Lender in connection with such Lender’s obligations under this Agreement, to the extent any such consent would reduce the principal amount of, or the rate of interest on, any Obligations, amend this clause (e) or postpone any scheduled date of payment of such principal or interest.  Each Special Purpose Vehicle shall be entitled to the benefits of Sections 2.15 (Capital Adequacy) and 2.16 (Taxes) and of 2.14(d) (Illegality) as if it were such Lender; provided, however, that anything herein to the contrary notwithstanding, no Borrower shall, at any time, be obligated to make any payment under Section 2.15 (Capital Adequacy), 2.16 (Taxes) or 2.14(d) (Illegality) to any such Special Purpose Vehicle and any such Lender in excess of the amount the Borrowers would have been obligated to pay to such Lender in respect of such interest if such Special Purpose Vehicle had not been assigned the rights of such Lender hereunder; and provided, further, that such Special Purpose Vehicle shall have no direct right to enforce any of the terms of this Agreement against the Borrowers, the Administrative Agent or the other Lenders.   (f)                                    Each Lender may sell participations to one or more Persons (except to the Persons designated by the Company in writing to the Administrative Agent on or prior to the Closing Date) in or to all or a portion of its rights and obligations under the Loan Documents (including all its rights and obligations with respect to the Term Loans, Revolving Loans and Letters of Credit).  The terms of such participation shall not, in any event, require the participant’s consent to any amendments, waivers or other modifications of any provision of any Loan Documents, the consent to any departure by any Loan Party therefrom, or to the exercising or refraining from exercising any powers or rights such Lender may have under or in respect of the Loan Documents (including the right to enforce the obligations of the Loan Parties), except if any such amendment, waiver or other modification or consent would (i) reduce the amount, or postpone any date fixed for, any amount (whether of principal, interest or fees) payable to such participant under the Loan Documents, to which such participant would otherwise be entitled under such participation or (ii) result in the release of all or substantially all of the Collateral other than in accordance with Section 10.8(b) (Concerning the Collateral and the Collateral Documents).  In the event of the sale of any participation by any Lender, (w) such Lender’s obligations under the Loan Documents shall remain unchanged, (x) such Lender shall remain solely responsible to the other parties for the performance of such obligations, (y) such Lender shall remain the holder of such Obligations for all purposes of this Agreement and (z) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Each participant shall be entitled to the benefits of Sections 2.15 (Capital Adequacy) and 2.16 (Taxes) and of 2.14(d) (Illegality) as if it were a Lender; provided, however, that anything herein to the contrary notwithstanding, the Borrowers shall not, at any time, be obligated to make any payment under Section 2.15 (Capital Adequacy), 2.16 (Taxes) or 2.14(d) (Illegality) to the participants in the rights and obligations of any Lender (together with such Lender) in excess of the amount the Borrowers would have been obligated to pay to such Lender in respect of such interest had such participation not been sold; and provided, further, that such participant in the rights and obligations of such Lender shall have no direct right to enforce any of the terms of this Agreement against the Borrowers, the Administrative Agent or the other Lenders.   (g)                                 Any Issuer may at any time assign its rights and obligations hereunder to any other Lender by an instrument in form and substance satisfactory to the Company, the Administrative Agent, such Issuer and such Lender, subject to the provisions of Section 2.7(b) (Evidence of Debt) relating to notations of transfer in the Register.  If any Issuer ceases to be a   129 --------------------------------------------------------------------------------   Lender hereunder by virtue of any assignment made pursuant to this Section 11.2, then, as of the effective date of such cessation, such Issuer’s obligations to Issue Letters of Credit pursuant to Section 2.4 (Letters of Credit) shall terminate and such Issuer shall be an Issuer hereunder only with respect to outstanding Letters of Credit issued prior to such date.   Section 11.3                            Costs and Expenses   (a)                                  The Company agrees upon demand to pay, or reimburse each Agent for, all of such Agent’s reasonable out-of-pocket audit, legal, appraisal, valuation, filing, document duplication and reproduction and investigation expenses and for all other reasonable out-of-pocket costs and expenses of every type and nature (including the reasonable fees, expenses and disbursements of the Agents’ counsel, Weil, Gotshal & Manges LLP, local legal counsel, auditors, accountants, appraisers, printers, insurance and environmental advisors, and other consultants and agents) incurred by such Agent in connection with any of the following: (i) the Administrative Agent’s audit and investigation of the Company and its Subsidiaries in connection with the preparation, negotiation or execution of any Loan Document or the Administrative Agent’s periodic audits of the Company or any of its Subsidiaries, as the case may be, (ii) the preparation, negotiation, execution or interpretation of this Agreement (including, without limitation, the satisfaction or attempted satisfaction of any condition set forth in Article III (Conditions to Loans and Letters of Credit)), any Loan Document or any proposal letter or commitment letter issued in connection therewith, or the making of the Loans hereunder, (iii) the creation, perfection or protection of the Liens under any Loan Document (including any reasonable fees, disbursements and expenses for local counsel in various jurisdictions), (iv) the ongoing administration of this Agreement and the Loans, including consultation with attorneys in connection therewith and with respect to any Agent’s rights and responsibilities hereunder and under the other Loan Documents, (v) the protection, collection or enforcement of any Obligation or the enforcement of any Loan Document, (vi) the commencement, defense or intervention in any court proceeding relating in any way to the Obligations, any Loan Party, any of the Company’s Subsidiaries, the Merger, the Related Documents, this Agreement or any other Loan Document, (vii) the response to, and preparation for, any subpoena or request for document production with which any Agent is served or deposition or other proceeding in which such Agent is called to testify, in each case, relating in any way to the Obligations, any Loan Party, any of the Company’s Subsidiaries, the Merger, the Related Documents, this Agreement or any other Loan Document or (viii) any amendment, consent, waiver, assignment, restatement, or supplement to any Loan Document or the preparation, negotiation and execution of the same.   (b)                                 The Company further agrees to pay or reimburse each Agent and each of the Lenders and Issuers upon demand for all out-of-pocket costs and expenses, including reasonable attorneys’ fees (including allocated costs of internal counsel and costs of settlement), incurred by such Agent, such Lenders or such Issuers in connection with any of the following: (i) in enforcing any Loan Document or Obligation or any security therefor or exercising or enforcing any other right or remedy available by reason of an Event of Default, (ii) in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a “work-out” or in any insolvency or bankruptcy proceeding, (iii) in commencing, defending or intervening in any litigation or in filing a petition, complaint, answer, motion or other pleadings in any legal proceeding relating to the Obligations, any Loan Party, any of the Company’s Subsidiaries and related to or arising out of the transactions contemplated hereby or by any other Loan Document or Related Document or (iv) in taking any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) described in clause (i), (ii) or (iii) above; provided,   130 --------------------------------------------------------------------------------   however, that the Company’s obligations under this paragraph (b) to pay or reimburse the Agents, the Lenders and the Issuers for the expenses of counsel shall be limited to one outside counsel to the Administrative Agent, one outside counsel to the Mexican Facility Agent and one outside counsel to the Lenders and the Issuers and, in each case, any reasonably appropriate local counsel in each relevant jurisdiction, and if the interests of any Lender or group of Lenders (other than all of the Lenders) are distinctly or disproportionately affected, one additional outside counsel for such Lender or group of Lenders.   Section 11.4                            Indemnities   (a)                                  The Company agrees to indemnify and hold harmless each Agent, Arranger, Lender, Issuer (including each Person obligated on a Hedging Contract that is a Loan Document if such Person was a Lender or Issuer at the time of it entered into such Hedging Contract) and Co-Documentation Agent, the Syndication Agent and each of their respective Affiliates, and each of the directors, officers, employees, agents, trustees, representatives, attorneys, consultants and advisors of or to any of the foregoing (including those retained in connection with the satisfaction or attempted satisfaction of any condition set forth in Article III (Conditions to Loans and Letters of Credit) (each such Person being an “Indemnitee”) from and against any and all claims, damages, liabilities, obligations, losses, penalties, actions, judgments, suits, costs, disbursements and expenses, joint or several, of any kind or nature (including fees, disbursements and expenses of financial and legal advisors to any such Indemnitee) that may be imposed on, incurred by or asserted against any such Indemnitee in connection with or arising out of any investigation, litigation or proceeding, whether or not such investigation, litigation or proceeding is brought by any such indemnitee or any of its directors, security holders or creditors or any such Indemnitee, director, security holder or creditor is a party thereto, whether direct, indirect, or consequential and whether based on any federal, state or local law or other statutory regulation, securities or commercial law or regulation, or under common law or in equity, or on contract, tort or otherwise, in any manner relating to or arising out of this Agreement, any other Loan Document, any Obligation, any Letter of Credit, any Disclosure Document, any Related Document, or any act, event or transaction related or attendant to any thereof, or the use or intended use of the proceeds of the Loans or Letters of Credit or in connection with any investigation of any potential matter covered hereby (collectively, the “Indemnified Matters”); provided, however, that the Borrowers shall not have any liability under this Section 11.4 to an Indemnitee with respect to any Indemnified Matter that has resulted primarily from the gross negligence or willful misconduct of that Indemnitee, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.  Without limiting the foregoing, “Indemnified Matters” include (i) all Environmental Liabilities and Costs arising from or connected with the past, present or future operations of the Company or any of its Subsidiaries involving any property subject to a Collateral Document, or damage to real or personal property or natural resources or harm or injury alleged to have resulted from any Release of Contaminants on, upon or into such property or migrating from such property, (ii) any costs or liabilities incurred in connection with any Remedial Action concerning the Company or any of its Subsidiaries, (iii) any costs or liabilities incurred in connection with any Environmental Lien on Real Property or any asset owned or leased by the Company or any of its Subsidiaries and (iv) any costs or liabilities concerning the Company or any of its Subsidiaries, including their operations and owned or leased Real Property, incurred in connection with any other matter under any Environmental Law, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (49 U.S.C. § 9601 et seq.) and applicable state property transfer laws, whether, with respect to any such matter, such Indemnitee is a mortgagee pursuant to any   131 --------------------------------------------------------------------------------   leasehold mortgage, a mortgagee in possession, the successor in interest to the Company or any of its Subsidiaries, or the owner, lessee or operator of any property of the Company or any of its Subsidiaries by virtue of foreclosure, except, with respect to those matters referred to in clauses (i), (ii), (iii) and (iv) above, to the extent (x) incurred following foreclosure by the Administrative Agent, any Lender or any Issuer, or the Administrative Agent, any Lender or any Issuer having become the successor in interest to the Company or any of its Subsidiaries and (y) to the extent attributable solely to acts or omissions of the Administrative Agent, such Lender or such Issuer or any agent on behalf of the Administrative Agent, such Lender or such Issuer or any other Indemnitee.   (b)                                 The Company shall indemnify each Agent, Arranger, Lender, Issuer, Co-Documentation Agent and Syndication Agent for, and hold such Agent, Arranger, Lender, Issuer, Co-Documentation Agent and Syndication Agent harmless from and against, any and all claims for brokerage commissions, fees and other compensation made against the Agents, the Arrangers, the Lenders, the Issuers, the Co-Documentation Agents and the Syndication Agent for any broker, finder or consultant with respect to any agreement, arrangement or understanding made by or on behalf of any Loan Party or any of its Subsidiaries in connection with the transactions contemplated by this Agreement.   (c)                                  The Company, at the request of any Indemnitee, shall have the obligation to defend against any investigation, litigation or proceeding or requested Remedial Action, in each case contemplated in clause (a) above, and the Company, in any event, may participate in the defense thereof with legal counsel of the Company’s choice.  In the event that such Indemnitee requests the Company to defend against such investigation, litigation or proceeding or requested Remedial Action, the Company shall promptly do so and such Indemnitee shall have the right to have legal counsel of its choice participate in such defense.  No action taken by legal counsel chosen by such Indemnitee in defending against any such investigation, litigation or proceeding or requested Remedial Action, shall vitiate or in any way impair the Company’s obligation and duty hereunder to indemnify and hold harmless such Indemnitee.   (d)                                 The Borrowers agree that any indemnification or other protection provided to any Indemnitee pursuant to this Agreement (including pursuant to this Section 11.4) or any other Loan Document shall (i) survive payment in full of the Obligations and (ii) inure to the benefit of any Person that was at any time an Indemnitee under this Agreement or any other Loan Document.   Section 11.5                            Limitation of Liability   (a)                                  Each Borrower agrees that no Indemnitee shall have any liability (whether in contract, tort or otherwise) to any Loan Party or any of their respective Subsidiaries or any of their respective equity holders or creditors for or in connection with the transactions contemplated hereby and in the other Loan Documents and Related Documents, except to the extent such liability is determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted primarily from such Indemnitee’s gross negligence or willful misconduct.  In no event, however, shall any Indemnitee be liable on any theory of liability for any special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings).  Each Borrower hereby waives, releases and agrees (each for itself and on behalf of its Subsidiaries) not to sue upon any such claim for any special, indirect, consequential or punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor.   132 --------------------------------------------------------------------------------   (b)                                 IN NO EVENT SHALL ANY AGENT AFFILIATE HAVE ANY LIABILITY TO ANY LOAN PARTY, LENDER, ISSUER OR ANY OTHER PERSON FOR DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT OR CONTRACT OR OTHERWISE) ARISING OUT OF ANY LOAN PARTY OR ANY AGENT AFFILIATE’S TRANSMISSION OF APPROVED ELECTRONIC COMMUNICATIONS THROUGH THE INTERNET OR ANY USE OF THE APPROVED ELECTRONIC PLATFORM, EXCEPT TO THE EXTENT SUCH LIABILITY OF ANY AGENT AFFILIATE IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FORM SUCH AGENT AFFILIATE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.   Section 11.6                            Right of Set-off   Upon the occurrence and during the continuance of any Event of Default each Lender and each Affiliate of a Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lender or its Affiliates to or for the credit or the account of any Borrower against any and all of the Obligations now or hereafter existing whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and even though such Obligations may be unmatured.  Each Lender agrees promptly to notify such Borrower after any such set-off and application made by such Lender or its Affiliates; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application.  Each Lender agrees that it shall not, without the express consent of the Requisite Lenders (and that, it shall, to the extent lawfully entitled to do so, upon the request of the Requisite Lenders) exercise its set-off rights under this Section 11.6 against any deposit accounts of the Loan Parties and their Subsidiaries maintained with such Lender or any Affiliate thereof.  The rights of each Lender under this Section 11.6 are in addition to the other rights and remedies (including other rights of set-off) that such Lender may have.   Section 11.7                            Sharing of Payments, Etc.   (a)                                  If any Lender (directly or through an Affiliate thereof) obtains any payment (whether voluntary, involuntary, through the exercise of any right of set-off (including pursuant to Section 11.6 (Right of Set-off)) or otherwise) of the Loans owing to it, any interest thereon, fees in respect thereof or amounts due pursuant to Section 11.3 (Costs and Expenses) or 11.4 (Indemnities) (other than payments pursuant to Section 2.14 (Special Provisions Governing Eurodollar Rate Loans), 2.15 (Capital Adequacy) or 2.16 (Taxes) or otherwise receives any Collateral or any “Proceeds” (as defined in the Pledge and Security Agreement) of Collateral (other than payments pursuant to Section 2.14 (Special Provisions Governing Eurodollar Rate Loans), 2.15 (Capital Adequacy) or 2.16 (Taxes)) (in each case, whether voluntary, involuntary, through the exercise of any right of set-off  (including pursuant to Section 11.6 (Right of Set-off)) or otherwise) in excess of its Ratable Portion of all payments of such Obligations obtained by all the Lenders, such Lender (a “Purchasing Lender”) shall forthwith purchase from the other Lenders (each, a “Selling Lender”) such participations in their Loans or other Obligations as shall be necessary to cause such Purchasing Lender to share the excess payment ratably with each of them.   133 --------------------------------------------------------------------------------   (b)                                 If all or any portion of any payment received by a Purchasing Lender is thereafter recovered from such Purchasing Lender, such purchase from each Selling Lender shall be rescinded and such Selling Lender shall repay to the Purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Selling Lender’s ratable share (according to the proportion of (i) the amount of such Selling Lender’s required repayment in relation to (ii) the total amount so recovered from the Purchasing Lender) of any interest or other amount paid or payable by the Purchasing Lender in respect of the total amount so recovered.   (c)                                  The Borrowers agree that any Purchasing Lender so purchasing a participation from a Selling Lender pursuant to this Section 11.7 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrowers in the amount of such participation.   Section 11.8                            Notices, Etc.   (a)                                  Addresses for Notices.  All notices, demands, requests, consents and other communications provided for in this Agreement shall be given in writing, or by any telecommunication device capable of creating a written record (including electronic mail), and addressed to the party to be notified as follows:   (i)                                     if to the Company:   AMC ENTERTAINMENT INC. 920 Main Street Kansas City, MO 64105 Attention: General Counsel Telecopy no: (816) 480-4700 E-Mail Address: [email protected]   (ii)                                  if to any Mexican Borrower:   GRUPO CINEMEX, S.A. DE C.V. Blvd. Manuel Avila Camacho No. 40 Piso 16 Lomas de Chapultepec C.P. 11000, México, D.F. Attention:  Miguel Angel Dávila Guzmán Telecopy no:  52 (55) 52 01 58 89 E-mail Address:  [email protected]   with a copy to:   AMC ENTERTAINMENT INC. 920 Main Street Kansas City, MO 64105 Attention:  General Counsel Telecopy no:  (816) 480-4700 E-Mail Address: [email protected]   134 --------------------------------------------------------------------------------   (iii)                               if to any Lender, at its Applicable Lending Office specified opposite its name on Schedule II (Applicable Lending Offices and Addresses for Notices) or on the signature page of any applicable Assignment and Acceptance;   (iv)                              if to any Issuer, at the address set forth under its name on Schedule II (Applicable Lending Offices and Addresses for Notices); and   (v)                                 if to the Administrative Agent or the Dollar Swing Lender:   CITICORP NORTH AMERICA, INC. 390 Greenwich Street New York, New York 10013 Attention:  Rob Ziemer Telecopy no:  (646) 291-1655 E-Mail Address:  [email protected]   with a copy to:   CITICORP NORTH AMERICA, INC. Global Loans Support Services 2 Penns Way, Suite 110 New Castle, Delaware 19720 Attention:  Kwasi Bame Telecopy no:  (212) 994-0975 E-Mail Address:  [email protected]   and with a further copy to: WEIL, GOTSHAL & MANGES, LLP 767 Fifth Avenue New York, New York 10153-0119 Attention:  Daniel S. Dokos Telecopy no:  (212) 310-8007 E-Mail Address:  [email protected]   135 --------------------------------------------------------------------------------   (vi)                              if to the Mexican Facility Agent or the Peso Swing Lender:   BANCO NACIONAL DE MEXICO, S.A., INTEGRANTE   DEL GRUPO FINANCIERO BANAMEX Act. Roberto Medellín No. 800 4° Piso Sur. Col. Santa Fe. C.P. 01210 Mexico, D.F. Mexico Attention:    Antonio Munoz Gómez Mónica Flores Solano Francisco Medina Patino Telecopy no:  (52-55) 22-62-29-27 and (52-55) 22-62-29-12 E-Mail Address:     [email protected] [email protected] [email protected]   with a copy to: CITICORP NORTH AMERICA, INC. 390 Greenwich Street New York, New York 10013 Attention:  Rob Ziemer Telecopy no:  (646) 291-1655 E-Mail Address:  [email protected]   or at such other address as shall be notified in writing (x) in the case of any Borrower, each Agent and Swing Lender, to the other parties and (y) in the case of all other parties, to the Company and the Administrative Agent.   (b)                                 Effectiveness of Notices.  All notices, demands, requests, consents and other communications described in clause (a) above shall be effective (i) if delivered by hand, including any overnight courier service, upon personal delivery, (ii) if delivered by mail, when deposited in the mails, (iii) if delivered by posting to an Approved Electronic Platform (to the extent permitted by Section 10.3 to be delivered thereunder), an Internet website or a similar telecommunication device requiring a user prior access to such Approved Electronic Platform, website or other device (to the extent permitted by Section 10.3 to be delivered thereunder), when such notice, demand, request, consent and other communication shall have been made generally available on such Approved Electronic Platform, Internet website or similar device to the class of Person being notified (regardless of whether any such Person must accomplish, and whether or not any such Person shall have accomplished, any action prior to obtaining access to such items, including registration, disclosure of contact information, compliance with a standard user agreement or undertaking a duty of confidentiality) and such Person has been notified that such communication has been posted to the Approved Electronic Platform and (iv) if delivered by electronic mail or any other telecommunications device, when transmitted to an electronic mail address (or by another means of electronic delivery) as provided in clause (a) above; provided, however, that notices and communications to any Agent pursuant to Article II (The Facilities) or Article X (The Agents) shall not be effective until received by such Agent.   136 --------------------------------------------------------------------------------   (c)                                  Use of Electronic Platform.  Notwithstanding clause (a) and (b) above (unless the Administrative Agent requests that the provisions of clause (a) and (b) above be followed) and any other provision in this Agreement or any other Loan Document providing for the delivery of any Approved Electronic Communication by any other means the Loan Parties shall deliver all Approved Electronic Communications to the Administrative Agent by properly transmitting such Approved Electronic Communications in an electronic/soft medium in a format acceptable to the Administrative Agent to [email protected] or such other electronic mail address (or similar means of electronic delivery) as the Administrative Agent may notify the Borrowers.  Nothing in this clause (c) shall prejudice the right of any Agent or Lender or Issuer to deliver any Approved Electronic Communication to any Loan Party in any manner authorized in this Agreement or to request that the Borrowers effect delivery in such manner.   Section 11.9                            No Waiver; Remedies   No failure on the part of any Lender, Issuer or Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.   Section 11.10                     Binding Effect   This Agreement shall become effective when it shall have been executed by the Borrowers and the Agents and when the Administrative Agent shall have been notified by each Lender and Issuer that such Lender or Issuer has executed it and thereafter shall be binding upon and inure solely to the benefit of the Borrowers, the Agents and each Lender and Issuer and, in each case, their respective successors and assigns; provided, however, that the Borrowers shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders.   Section 11.11                     Governing Law   This Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.   Section 11.12                     Submission to Jurisdiction; Service of Process   (a)                                  Any legal action or proceeding with respect to this Agreement or any other Loan Document may be brought in the courts of the State of New York located in the City of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, each party hereto hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.  The parties hereto hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions.   (b)                                 The Company hereby irrevocably consents to the service of any and all legal process, summons, notices and documents in any suit, action or proceeding brought in the United States of America arising out of or in connection with this Agreement or any other Loan Document by the mailing (by registered or certified mail, postage prepaid) or delivering of a copy   137 --------------------------------------------------------------------------------   of such process to such Borrower at its address specified in Section 11.8 (Notices, Etc.).  Each Mexican Borrower hereby irrevocably designates, appoints and empowers Corporation Services Company (telephone no: (212) 299-5600) (telecopy no: (212) 299-5656) (the “Process Agent”), in the case of any suit, action or proceeding brought in the United States of America as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notices and documents that may be served in any action or proceeding arising out of or in connection with this Agreement or any Loan Document.  Such service may be made by mailing (by registered or certified mail, postage prepaid) or delivering a copy of such process to such Mexican Borrower in care of the Process Agent at the Process Agent’s above address, and each Mexican Borrower hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf.  As an alternative method of service, each Mexican Borrower irrevocably consents to the service of any and all process in any such action or proceeding by the mailing (by registered or certified mail, postage prepaid) of copies of such process to the Process Agent or such Mexican Borrower at its address specified in Section 11.8 (Notices, Etc.).  Each Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.   (c)                                  Nothing contained in this Section 11.12 shall affect the right of any Agent or any Lender to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against such Borrower or any other Loan Party in any other jurisdiction.   (d)                                 If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase Dollars with such other currency at the spot rate of exchange quoted by the Administrative Agent at 11:00 a.m. (New York time) on the Business Day preceding that on which final judgment is given, for the purchase of Dollars, for delivery two Business Days thereafter.   Section 11.13                     Waiver of Jury Trial   EACH OF THE AGENTS, THE LENDERS, THE ISSUERS AND THE BORROWERS IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.   Section 11.14                     Marshaling; Payments Set Aside   None of the Agents, Lenders or Issuers shall be under any obligation to marshal any assets in favor of any Borrower or any other party or against or in payment of any or all of the Obligations.  To the extent that any Borrower makes a payment or payments to the Agents, the Lenders or the Issuers or any such Person receives payment from the proceeds of the Collateral or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, right and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.   138 --------------------------------------------------------------------------------   Section 11.15                     Section Titles   The section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto, except when used to reference a section.  Any reference to the number of a clause, sub-clause or subsection hereof immediately followed by a reference in parenthesis to the title of the Section containing such clause, sub-clause or subsection is a reference to such clause, sub-clause or subsection and not to the entire Section; provided, however, that, in case of direct conflict between the reference to the title and the reference to the number of such Section, the reference to the title shall govern absent manifest error.  If any reference to the number of a Section (but not to any clause, sub-clause or subsection thereof) is followed immediately by a reference in parenthesis to the title of a Section, the title reference shall govern in case of direct conflict absent manifest error.   Section 11.16                     Execution in Counterparts   This Agreement may be executed in any number of counterparts and by different parties 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.  Signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are attached to the same document.  Delivery of an executed signature page of this Agreement by facsimile transmission, electronic mail or by posting on the Approved Electronic Platform shall be as effective as delivery of a manually executed counterpart hereof.  A set of the copies of this Agreement signed by all parties shall be lodged with the Company and the Administrative Agent.   Section 11.17                     Entire Agreement   This Agreement, together with all of the other Loan Documents and all certificates and documents delivered hereunder or thereunder, embodies the entire agreement of the parties and supersedes all prior agreements and understandings relating to the subject matter hereof.  In the event of any conflict between the terms of this Agreement and any other Loan Document, the terms of this Agreement shall govern.   Section 11.18                     Confidentiality   Each Lender and each Agent agree to keep information obtained by it pursuant hereto and the other Loan Documents confidential in accordance with such Lender’s or Agent’s, as the case may be, customary practices and agrees that it shall only use such information in connection with the transactions contemplated by this Agreement and not disclose any such information other than (a) to such Lender’s or Agent’s, as the case may be, employees, representatives and agents that are or are expected to be involved in the evaluation of such information in connection with the transactions contemplated by this Agreement and are advised of the confidential nature of such information, (b) to the extent such information presently is or hereafter becomes available to such Lender or Agent, as the case may be, on a non-confidential basis from a source other than any Borrower or any other Loan Party, (c) to the extent disclosure is required by law, regulation or judicial order or requested or required by bank regulators or auditors or (d) to current or prospective assignees, participants and Special Purpose Vehicle grantees of any option described in Section 11.2(f) (Assignments and Participations), contractual counterparties in any Hedging Contract permitted hereunder and to their respective legal or   139 --------------------------------------------------------------------------------   financial advisors, in each case and to the extent such assignees, participants, grantees or counterparties agree to be bound by, and to cause their advisors to comply with, the provisions of this Section 11.18.  Notwithstanding any other provision in this Agreement, the Agents hereby agree that the Borrowers (and each of their respective officers, directors, employees, accountants, attorneys and other advisors) may disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the Facility and the transactions contemplated hereby and all materials of any kind (including opinions and other tax analyses) that are provided to it relating to such U.S. tax treatment and U.S. tax structure.   Section 11.19                     Patriot Act Notice.   Each Lender subject to the Patriot Act hereby notifies the Borrowers that, pursuant to Section 326 of the Patriot Act, it is required to obtain, verify and record information that identifies the Borrowers, including the name and address of the Borrowers and other information that will allow such Lender to identify the Borrowers in accordance with the Patriot Act.   Section 11.20                     Designated Senior Debt   All Obligations shall be “Senior Indebtedness”, “Senior Secured Financing” and “Designated Senior Debt” (or any comparable term) for purposes of the Subordinated Note Indentures and any other subordinated Indebtedness of the Company and its Subsidiaries.   [SIGNATURE PAGES FOLLOW]   140 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.     AMC ENTERTAINMENT INC.,   as Borrower       By: /s/ Craig R. Ramsey     Name: Craig R. Ramsey   Title: Executive Vice President & Chief Financial Officer           GRUPO CINEMEX, S.A. DE C.V.,   as Borrower       By: /s/ Miguel Ángel Dávila Guzmán     Name: Miguel Ángel Dávila Guzmán   Title: President & Chief Executive Officer           CADENA MEXICANA DE EXHIBICIÓN, S.A. DE C.V.,   as Borrower       By: /s/ Miguel Ángel Dávila Guzmán     Name: Miguel Ángel Dávila Guzmán   Title: President & Chief Executive Officer     [SIGNATURE PAGE TO AMC ENTERTAINMENT INC. CREDIT AGREEMENT]   --------------------------------------------------------------------------------     CITICORP NORTH AMERICA, INC.,   as Administrative Agent, Dollar Swing Lender and Lender       By: /s/ Rob Ziemer     Name: Rob Ziemer   Title: Vice President   --------------------------------------------------------------------------------     BANCO NACIONAL DE MEXICO, S.A., INTEGRANTE DEL GRUPO FINANCIERO BANAMEX,   as Mexican Facility Agent, Peso Swing Lender and Mexican Lender       By: /s/ Roberto Luis Castillo     Name: Roberto Luis Castillo   Title: Director           By: /s/ Antonio Muñoz Gómez     Name: Ing. Antonio Muñoz Gómez   Title: Director   --------------------------------------------------------------------------------     J.P. MORGAN SECURITIES INC.,   as Syndication Agent       By: /s/ Robert Dorr     Name: Robert Dorr   Title: Vice President           CHASE LINCOLN FIRST COMMERCIAL CORPORATION,   as Lender       By: /s/ Marian N. Schulman     Name: Marian N. Schulman   Title: Vice President   --------------------------------------------------------------------------------     CREDIT SUISSE SECURITIES (USA) LLC,   as Co-Documentation Agent       By: /s/ Lauri Sivaflian     Name: Lauri Sivaflian   Title: Managing Director       By: /s/ Dana F. Klein     Name: Dana F. Klein   Title: Managing Director           CREDIT SUISSE, CAYMAN ISLANDS BRANCH,   as Lender       By: /s/ Paul L. Colón     Name: Paul L. Colón   Title: Director       By: /s/ Shaheen Malik     Name: Shaheen Malik   Title: Associate   --------------------------------------------------------------------------------     BANK OF AMERICA, N.A.,   as Co-Documentation Agent and Lender       By: /s/ David H. Strickert     Name: David H. Strickert   Title: Senior Vice President   --------------------------------------------------------------------------------     THE BANK OF NOVA SCOTIA,   as Lender and Issuer       By: /s/ Jose B. Carlos     Name: Jose B. Carlos   Title: Authorized Signatory   --------------------------------------------------------------------------------  

FORM OF KEY EXECUTIVE EMPLOYMENT PROTECTION AGREEMENT THIS AGREEMENT, dated as of      , 200_, by and between The Hartford Financial Services Group, Inc., a Delaware corporation (the “Company”), and      (“Executive”). W I T N E S S E T H : WHEREAS, the Company and/or one or more subsidiaries thereof (the “Subsidiaries”) have employed Executive in an officer position and has determined that Executive holds an important position with the Company; WHEREAS, the Company believes that, in the event it is confronted with a situation that could result in a change in ownership or control of the Company, continuity of management will be essential to its ability to evaluate and respond to such situation in the best interests of shareholders; WHEREAS, the Company understands that any such situation will present significant concerns for Executive with respect to Executive’s financial and job security; WHEREAS, the Company desires to assure itself of Executive’s services during the period in which it is confronting such a situation, and to provide Executive with certain financial assurances to enable Executive to perform the responsibilities of Executive’s position without undue distraction and to exercise judgment without bias due to Executive’s personal circumstances; and WHEREAS, to achieve these objectives, the Company and Executive desire to enter into an agreement providing the Company and Executive with certain rights and obligations upon the occurrence of a Change of Control (as defined in Section 2 hereof). NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is hereby agreed by and between the Company and Executive as follows: 1 1.   Effective Date of Agreement. The effective date of this Agreement (the “Effective Date”) shall be the date on which a Change of Control occurs; provided that if Executive is not actively employed by the Company on the Effective Date, this Agreement shall be void and without effect. 2. Certain Applicable Definitions.   (a)   Beneficial Owner. For purposes of this Agreement, “Beneficial Owner” means any Person who, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” (within the meaning of Rule 13d-3 under the Securities and Exchange Act of 1934, as amended (the “Act”)) of any securities of a company, including any such right pursuant to any agreement, arrangement or understanding (whether or not in writing), provided that: (i) a Person shall not be deemed the Beneficial Owner of any security as a result of an agreement, arrangement or understanding to vote such security (A) arising solely from a revocable proxy or consent given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the Act and the applicable rules and regulations thereunder, or (B) made in connection with, or to otherwise participate in, a proxy or consent solicitation made, or to be made, pursuant to, and in accordance with, the applicable provisions of the Act and the applicable rules and regulations thereunder, in either case described in clause (A) or (B) above, whether or not such agreement, arrangement or understanding is also then reportable by such Person on Schedule 13D under the Act (or any comparable or successor report); and (ii) a Person engaged in business as an underwriter of securities shall not be deemed to be the Beneficial Owner of any security acquired through such Person’s participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (b) Change of Control. For purposes of this Agreement, “Change of Control” means: (i) a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Act disclosing that any Person, other than the Company or a subsidiary of the Company or any employee benefit plan sponsored by the Company or a subsidiary of the Company is the Beneficial Owner of twenty percent or more of the outstanding stock of the Company entitled to vote in the election of directors of the Company; (ii) any Person, other than the Company or a subsidiary of the Company or any employee benefit plan sponsored by the Company or a subsidiary of the Company shall purchase shares pursuant to a tender offer or exchange offer to acquire any stock of the Company (or securities convertible into stock) for cash, securities or any other consideration, provided that after consummation of the offer, the Person in question is the Beneficial Owner of fifteen percent or more of the outstanding stock of the Company entitled to vote in the election of directors of the Company (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire stock); (iii) any merger, consolidation, recapitalization or reorganization of the Company approved by the stockholders of the Company shall be consummated, other than any such transaction immediately following which the persons who were the Beneficial Owners of the outstanding securities of the Company entitled to vote in the election of directors of the Company immediately prior to such transaction are the Beneficial Owners of at least 55% of the total voting power represented by the securities of the entity surviving such transaction entitled to vote in the election of directors of such entity (or the ultimate parent of such entity) in substantially the same relative proportions as their ownership of the securities of the Company entitled to vote in the election of directors of the Company immediately prior to such transaction; provided that, such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such threshold (or to preserve such relative voting power) is due solely to the acquisition of voting securities by an employee benefit plan of the Company, such surviving entity or any subsidiary of such surviving entity; (iv) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company approved by the stockholders of the Company shall be consummated; or (v) within any 24 month period, the persons who were directors of the Company immediately before the beginning of such period (the “Incumbent Directors”) shall cease (for any reason other than death) to constitute at least a majority of the board of directors of the Company (the “Board”) or the board of directors of any successor to the Company, provided that any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director (A) was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors 2 either actually or by prior operation of this clause (v), and (B) was not designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (iii) or clause (iv) of Section 2(b) of this Agreement. (c) Person. For purposes of this Agreement, “Person” has the meaning ascribed to such term in Section 3(a)(9) of the Act, as supplemented by Section 13(d)(3) of the Act; provided, however, that Person shall not include: (i) the Company, any subsidiary of the Company or any other Person controlled by the Company, (ii) any trustee or other fiduciary holding securities under any employee benefit plan of the Company or of any subsidiary of the Company, or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of securities of the Company. 3. Employment Period. Subject to Section 7 of this Agreement, the Company agrees to continue Executive in the employ of the Company and/or the Subsidiary, and Executive agrees to remain in the employ thereof, for the period commencing on the Effective Date and ending on the second anniversary of the date on which a Change of Control occurs (the “Employment Period”). Notwithstanding the foregoing, if, prior to the Effective Date, Executive is demoted to a position lower than the position held by Executive as of the date first above written, or is otherwise determined by the chairman of the Company (the “Chairman”) prior to the Effective Date to hold a position inappropriate for coverage under this Agreement, this Agreement shall be void and without effect, unless the Board, any appropriate committee thereof, or the Chairman declares that this Agreement shall continue in effect by written notice delivered to Executive within 60 days following such demotion or determination. 4. Position and Duties. (a) No Reduction in Position. During the Employment Period, Executive’s position (including titles and tier), authority and responsibilities shall be at least commensurate with those held, exercised and assigned immediately prior to the Effective Date. It is understood that, for purposes of this Agreement, such position, authority and responsibilities shall not be regarded as not commensurate merely by virtue of the fact that a successor shall have acquired all or substantially all of the business and/or assets of the Company as contemplated by Section 10(d) of this Agreement. (b) Business Time. On and after the Effective Date, Executive agrees to devote full attention during normal business hours to the business and affairs of the Company and to use best efforts to perform faithfully and efficiently the responsibilities assigned to Executive hereunder, to the extent necessary to discharge such responsibilities, except for: (i) time spent (A) serving on the board of directors of any business corporation with the consent of the Board, any appropriate committee of the Board, or the Chairman, (B) serving on the board of, or working for, any charitable or community organization (with the consent of the Board, any appropriate committee of the Board, or the Chairman if any such service or work is to be performed during normal business hours), or (C) pursuing Executive’s personal financial and legal affairs, so long as the foregoing activities, individually or collectively, do not substantially interfere with the performance of Executive’s responsibilities hereunder or violate any of the provisions of Section 9 hereof, and (ii) periods of vacation, sick leave or other leave to which Executive is entitled under the programs and policies of the Company that apply to similarly situated executives. It is expressly understood and agreed that Executive’s continuing to serve on any boards and committees on which Executive is serving or with which Executive is otherwise associated immediately preceding the Effective Date shall not be deemed to interfere substantially with the performance of Executive’s responsibilities hereunder. 5. Compensation. (a) Base Salary. During the Employment Period, the Company and/or the Subsidiaries shall pay Executive a base salary at an annual rate no less than the annual rate in effect immediately prior to the Effective Date. Such base salary shall be reviewed at least once during each calendar year of the Employment Period, and may be increased at any time and from time to time by action of the Board or any appropriate committee thereof or any individual having authority to take such action in accordance with the Company’s regular practices, but shall not be reduced below the annual rate in effect immediately prior to the Effective Date. Executive’s base salary, as it may be increased from time to time, shall be referred 3 to herein as “Base Salary.” Neither the Base Salary nor any increase in Base Salary after the Effective Date shall serve to limit or reduce any obligation of the Company hereunder. (b) Annual Bonus. For each calendar year ending during the Employment Period, Executive shall have the opportunity to earn and receive an annual bonus, based on the achievement of target levels of performance, equal to no less than the percentage of Executive’s Base Salary used to calculate such bonus immediately prior to the Effective Date. Executive’s annual bonus opportunity, as it may be increased from time to time during the Employment Period, shall be referred to herein as “Target Bonus.” The actual bonus, if any, payable for any calendar year during the Employment Period shall be determined in accordance with the terms of the Company’s Annual Executive Bonus Program or any successor annual incentive plan (the “Annual Plan”) based upon the performance of the Company and/or its applicable affiliates and/or Executive against target objectives established under such Annual Plan. Subject to Executive’s election to defer all or a portion of any annual bonus payable hereunder pursuant to the terms of any deferred compensation, deferred restricted stock or savings plan or other similar arrangement maintained or established by the Company or its affiliates and made available to Executive, any annual bonus payable under this Section 5(b) shall be paid to Executive in accordance with the terms of the Annual Plan. (c) Long-term Incentive Compensation. During the Employment Period, Executive shall participate in all of the Company’s existing and future long-term incentive compensation programs for key executives at a level commensurate with Executive’s participation in such programs immediately prior to the Effective Date, or, if more favorable to the Executive, at the level made available to Executive or other similarly situated executives at any time thereafter. 6. Benefits, Perquisites and Expenses. (a) Benefits. During the Employment Period, Executive (and, to the extent applicable, his or her dependents) shall be entitled to participate in or be covered under: (i) each welfare benefit plan maintained or as hereafter amended or established by the Company or its applicable affiliates, including, without limitation, each group life, hospitalization, medical, dental, health, accident or disability insurance or similar plan or program thereof, and (ii) each pension, retirement, savings, deferred compensation, deferred restricted stock, stock purchase or other similar plan or program maintained or as hereafter amended or established by the Company or its applicable affiliates, in each case at a level commensurate with the Executive’s participation in such plans or programs immediately prior to the Effective Date, or, if more favorable to the Executive, at the level made available to Executive or other similarly situated executives at any time thereafter. (b) Perquisites. For each calendar year during the Employment Period, Executive shall be entitled to no less than the number of paid vacation days per year that Executive was entitled to immediately prior to the Effective Date, and shall also be entitled to receive such other perquisites commensurate with those generally provided to Executive immediately prior to the Effective Date, or, if more favorable to the Executive, at the level made available from time to time to Executive or other similarly situated executives at any time thereafter. (c) Business Expenses. During the Employment Period, the Company shall pay or reimburse Executive for all reasonable business expenses incurred or paid by Executive in the performance of Executive’s duties, upon presentation of expense statements or vouchers and such other information as the Company may require and in accordance with the generally applicable policies and procedures of the Company as in effect immediately prior to the Effective Date, or, if more favorable to the Executive, in accordance with the policies and procedures in effect at any time thereafter. (d) Office and Support Staff. During the Employment Period, Executive shall be entitled to an office with furnishings and other material appointments, and to secretarial and other assistance, at a level commensurate with the foregoing provided immediately prior to the Effective Date, or, if more favorable to the Executive, in accordance with the policies and procedures in effect at any time thereafter. (e) Indemnification. The Company shall indemnify Executive and hold Executive harmless from and against any claim, loss or cause of action, regardless whether asserted during or after the Employment Period, arising from or out of Executive’s performance as an officer, director or employee of the Company or any of its affiliates or in any other capacity, including any fiduciary capacity, in which Executive serves at the request of the Company, to the maximum extent permitted by applicable law and under the Certificate of Incorporation and By-Laws of the Company, as may be amended from time to time (the “Governing Documents”), provided that in no event shall the protection afforded to Executive be less than that afforded under the Governing Documents as in effect immediately prior to the Effective Date. 7. Early Termination of the Employment Period. (a) Termination. Notwithstanding Section 3 hereof, the Employment Period shall end upon the earliest to occur of: (i) a Termination For Cause, (ii) a Termination Without Cause, (iii) a Termination For Good Reason, (iv) a Voluntary Termination, (v) a Termination Due to Retirement, (vi) a Termination Due to Disability, or (vii) a Termination Due to Death. (b) Notice of Termination. Communication of termination of the Employment Period shall be made to the other party by Notice of Termination (as defined in this Section 7) in the case of: (i) a Termination For Cause, (ii) a Termination Without Cause, (iii) a Termination For Good Reason, or (iv) a Voluntary Termination. (c) Benefits Payable Upon Termination; Rules for Determining Reason for Termination.   (i)   Benefits Payable Upon Termination. (A) Following the end of the Employment Period, Executive (or in the event of the Executive’s death, his or her surviving spouse, if any, or if none, his or her estate) shall be paid the type or types of compensation determined to be payable in accordance with the following table, such payment to be made in the form specified in such table and at the time established pursuant to Section 8 hereof. Capitalized terms used in such table shall have the meanings set forth in Section 7(d) hereof. (B) The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations under this Agreement shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment. (ii) Rules for Determining Reason for Termination. (A) No Termination Without Cause or Termination For Good Reason shall be treated as a Termination Due to Retirement or a Termination Due to Disability for purposes of any Pro Rata Target Bonus, Severance Payment, Equity Awards or Vested Benefits Enhancement, notwithstanding the fact that, either on, before or after the Date of Termination with respect thereto, (I) Executive was eligible for Retirement as defined in The Hartford Investment and Savings Plan, as may be amended from time to time, or any successor plan thereof (the “Savings Plan”), (II) Executive requested to be treated as a retiree for purposes of the Savings Plan or any other plan or program of the Company or its affiliates, or   (III)   Executive or the Company could have terminated Executive’s       employment in a Termination Due to Disability hereunder. (B) No Termination Due to Retirement shall be treated as a Voluntary Termination. (C) Notwithstanding any provision in this Agreement to the contrary, in the event of a Change of Control as described in Section 2(b)(iii) or Section 2(b)(iv) hereof, if the employment of Executive involuntarily terminates on or after the date of a shareholder approval described in either of such Sections but before the date of a consummation described in either of such Sections, the date of termination of Executive’s employment shall be deemed for purposes of this Agreement to be the day following the date of the applicable consummation. 4                               BENEFITS PAYABLE                               BENEFIT   Accrued Salary   Pro Rata Target Bonus   Severance Payment   Equity Awards   Vested Benefits   Vested Benefits Enhancement (only applicable in the event that Executive’s employment by the Company and/or the Subsidiaries terminates prior to July 1, 2009)   Welfare Benefits Continuation                                                             FORM OF PAYMENT   Lump Sum   Lump Sum   Lump Sum   Determined Under the Applicable Plan   Determined Under the Applicable Plan   Lump Sum   Determined Under the Applicable Plan                                                             Termination For Cause   Payable   Not Payable   Not Payable   Determined Under the Applicable Plan   Determined Under the Applicable Plan   Not Payable   Not Available                               Termination Without Cause   Payable   Payable   Payable   Determined Under the Applicable Plan   Determined Under the Applicable Plan   Payable   Available                               Termination For Good Reason   Payable   Payable   Payable   Determined Under the Applicable Plan   Determined Under the Applicable Plan   Payable   Available                                                             Voluntary Termination   Payable   Not Payable   Not Payable   Determined Under the Applicable Plan   Determined Under the Applicable Plan   Not Payable   Not Available                                                             Termination Due to Retirement   Payable   Determined Under the Applicable Plan   Not Payable   Determined Under the Applicable Plan   Determined Under the Applicable Plan   Not Payable   Available                                                             Termination Due to Disability   Payable   Payable   Not Payable   Determined Under the Applicable Plan   Determined Under the Applicable Plan   Not Payable   Available                                                             Termination Due to Death   Payable   Payable   Not Payable   Determined Under the Applicable Plan   Determined Under the Applicable Plan   Not Payable   Not Available                               5 (d) Definitions. For purposes of this Agreement, the following capitalized terms used herein shall have the following meanings: “Accrued Salary” means Base Salary earned, but unpaid, for services rendered to the Company and/or the Subsidiaries on or prior to the Date of Termination (other than Base Salary deferred pursuant to Executive’s election under the terms of any applicable Company plan or program), plus any vacation pay accrued by Executive as of such date. “Available” means that a particular benefit shall be made available to Executive to the extent specifically provided herein or required by applicable law. “Date of Termination” means: (i) in the case of a termination for which a Notice of Termination is required, the date of receipt of such Notice of Termination, or, if later, the date specified therein, as the case may be, or (ii) in all other cases, the actual date on which Executive’s employment terminates during the Employment Period. “Determined Under the Applicable Plan” means that the determination of whether a particular benefit shall or shall not be paid to Executive, and, where specifically provided by this Agreement, the timing or form of any benefit payment, shall be made solely by application of the terms of the plan or program providing such benefit, except to the extent that the terms of such plan or program are expressly superseded or modified by this Agreement. “Equity Awards” means the outstanding stock option, restricted stock, restricted stock unit, deferred restricted stock, performance share, performance unit, and other equity or long-term incentive compensation awards, if any, held by Executive as of the Date of Termination. “ERPs” means any excess retirement plans maintained or as hereafter amended or established by the Company or its applicable affiliates. “ESPs” means any excess investment and savings plans maintained or as hereafter amended or established by the Company or its applicable affiliates. “Lump Sum” means a single lump sum cash payment. “Not Available” means that the particular benefit shall not be made available to Executive, except to the extent required by applicable law. “Not Payable” means that the particular benefit shall not be paid or otherwise provided to Executive. “Notice of Termination” means: (i) in the case of a Termination For Cause, a written notice given by the Company to Executive, within 30 calendar days of the Company’s having actual knowledge of the events giving rise to such Termination For Cause, (ii) in the case of a Termination Without Cause, a written notice given by the Company to Executive at least 30 calendar days before the effective date of such Termination Without Cause, (iii) in the case of a Termination For Good Reason, a written notice given by Executive to the Company within 180 days of Executive’s having actual knowledge of the events giving rise to such Termination For Good Reason, and which (A) indicates the specific termination provision in this Agreement relied upon, (B) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (C) if the applicable Date of Termination is other than the date of receipt of such notice, specifies such Date of Termination (which date shall be not more than 15 days after the giving of such notice), provided that the failure by Executive to set forth in such Notice of Termination any fact or circumstance that contributes to a showing of Good Reason shall not waive any right of Executive hereunder or preclude Executive from asserting such fact or circumstance in enforcing his or her rights hereunder, or (iv) in the case of a Voluntary Termination, a written notice given by Executive to the Company at least 30 calendar days before the Date of Termination specified therein. “Payable” means that a particular benefit shall be paid to Executive in the amount, at the time, and in the form specified herein. “Pro-Rata Target Bonus” means an amount equal to the product of: (i) Executive’s Target Bonus under Section 5(b) for the calendar year in which the Date of Termination occurs, multiplied by (ii) a fraction (the “Service Fraction”), the numerator of which is equal to the number of rounded months (rounded to the nearest number of whole months) in such calendar year which have elapsed as of such Date of Termination, and the denominator of which is 12; provided that, if the Date of Termination occurs in the last quarter of any calendar year, Pro-Rata Target Bonus shall mean the amount determined under the foregoing formula or, if greater, the product of: (A) the bonus that would have been paid to Executive based on actual performance for such calendar year, multiplied by (B) the Service Fraction. “Severance Payment” means a cash amount equal to two times the sum of: (i) Executive’s Base Salary at the rate in effect as of the Date of Termination, plus (ii) Executive’s Target Bonus amount under Section 5(b) hereof for the calendar year in which the Date of Termination occurs. “Termination Due to Death” means a termination of Executive’s employment due to the death of Executive. “Termination Due to Disability” means: (i) a termination of Executive’s employment by the Company as a result of a determination by the Board, the appropriate committee thereof or the Chairman that Executive has been incapable of substantially fulfilling the positions, duties, responsibilities and obligations set forth in this Agreement on account of physical, mental or emotional incapacity resulting from injury, sickness or disease for a period of (A) at least four consecutive months, or (B) more than six months in any twelve month period, or (ii) Executive’s termination of employment on account of Disability as defined in the Savings Plan. “Termination Due to Retirement” means Executive’s termination of employment on account of Executive’s Retirement as defined in the Savings Plan. “Termination For Cause” means the Company’s termination of Executive’s employment due to: (i) Executive’s conviction of a felony, (ii) an act or acts of extreme dishonesty or gross misconduct on Executive’s part which result or are intended to result in material damage to the Company’s business or reputation, or (iii) repeated material violations by Executive of his or her obligations under Section 4 of this Agreement, which violations are demonstrably willful and deliberate on the Executive’s part and which result in material damage to the Company’s business or reputation. “Termination For Good Reason” means the occurrence of any of the following after the occurrence of a Change of Control: (i) (A) the assignment to Executive of any duties inconsistent in any material adverse respect with Executive’s position, including titles, duties, authority or responsibilities as contemplated by Section 4 of this Agreement, or (B) any other material adverse change in such position, including titles, duties, authority or responsibilities; (ii) any failure by the Company and/or the Subsidiaries to comply with any of the provisions of Sections 5 and 6 of this Agreement at a level of least equal to that in effect immediately preceding such Change of Control, other than an insubstantial or inadvertent failure remedied by the Company and/or the Subsidiaries promptly after receipt of notice thereof given by Executive; (iii) the Company’s requiring Executive to be based at any office or location more than 25 miles from the location at which Executive performed the services specified under Section 4 hereof immediately prior to such Change of Control, except for travel reasonably required in the performance of Executive’s responsibilities; (iv) any failure by the Company to obtain the assumption and agreement to perform this Agreement by a successor as contemplated by Section 10(d); or (v) any attempt by the Company and/or the Subsidiaries to terminate Executive’s employment in a Termination For Cause that is determined in a proceeding pursuant to Section 9 or Section 10 hereof not to constitute a Termination For Cause. Notwithstanding the foregoing, a termination of Executive’s employment shall not be treated as a Termination For Good Reason (I) if Executive shall have consented in writing to the occurrence of the event giving rise to the claim of Termination For Good Reason, or (II) if Executive shall have delivered a Notice of Termination to the Company, and the facts and circumstances specified therein as providing a basis for such Termination For Good Reason are cured by the Company within 10 days of its receipt of such Notice of Termination. “Termination Without Cause” means any involuntary termination of Executive’s employment by the Company and/or the Subsidiaries, other than a Termination For Cause, a Termination Due to Disability by the Company or a Termination Due to Death. “Vested Benefits” means amounts that are vested or that Executive is otherwise entitled to receive, without the performance by Executive of further services or the resolution of a contingency, under the terms of or in accordance with any investment and savings plan or retirement plan (including any plan providing retiree medical benefits) of the Company or its affiliates, and any ERPs or ESPs related thereto, and any deferred compensation or employee stock purchase plan or similar plan or program of the Company or its affiliates. “Vested Benefits Enhancement” means: (i) a cash amount equal to the present value, calculated using a discount rate equal to the then prevailing applicable Federal rate as determined under Section 1274(d) of the Internal Revenue Code of 1986, as amended (the “Code”), of the additional retirement benefits that would have been payable or available to Executive under any ERPs, based on (A) the age and service Executive would have attained or completed had Executive continued in the employ of the Company and/or the Subsidiaries until the second anniversary of the Date of Termination, and (B) where compensation is a relevant factor, Executive’s pensionable compensation as of such Date of Termination, such compensation to include, on the same terms as apply to other executives, any Severance Payment made to Executive, (ii) solely for purposes of vesting in any benefits under any ESPs, Executive shall be treated as having continued in the employ of the Company and/or the Subsidiaries until the second anniversary of such Date of Termination, and (iii) solely for purposes of determining eligibility for retiree medical benefits under any retirement plan or any retiree welfare benefit plan, policy or program of the Company or its affiliates, and any ERPs related thereto, Executive shall be treated as having continued in the employ of the Company and/or the Subsidiaries until the second anniversary of the occurrence of such Change of Control and to have retired on the last day of such period. A Vested Benefits Enhancement shall only be applicable in the event that Executive’s employment by the Company and/or the Subsidiaries terminates prior to July 1, 2009. “Voluntary Termination” means any voluntary termination of Executive’s employment by Executive, other than a Termination For Good Reason, a Termination Due to Retirement, or a Termination Due to Disability by Executive. “Welfare Benefits Continuation” means that until the second anniversary of the Date of Termination, Executive and, if applicable, his or her dependents, shall be entitled to continue participation in the life and health insurance benefit plans of the Company or its affiliates in which Executive and/or such dependents were participating as of the Date of Termination, and such other welfare benefit plans thereof in which the Company or its affiliates are required by law to permit the participation of Executive and/or such dependents, (collectively, the “Welfare Benefit Plans”). Such participation shall be on the same terms and conditions (including the requirement that Executive pay any premiums generally paid by an employee) as would apply if Executive were still in the employ of the Company and/or the Subsidiaries; provided that the continued participation of Executive and/or the dependents of Executive in such Welfare Benefit Plans shall cease on such earlier date as Executive may become eligible for comparable welfare benefits provided by a subsequent employer. To the extent that Welfare Benefits Continuation cannot be provided under the terms of the applicable plan, policy or program, the Company shall provide a comparable benefit under another plan or from the Company’s general assets. (e) Out-Placement Services. If the Employment Period terminates because of a Termination Without Cause or a Termination For Good Reason, Executive shall be entitled to out-placement services, provided by the Company or its designee at the Company’s expense, for 12 months following the Date of Termination, or such lesser period as Executive may require such services. (f) Certain Further Payments by Company. (i) Tax Reimbursement Payment. In the event that any amount or benefit paid or distributed to Executive pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Executive by the Company or any affiliate (collectively, the “Covered Payments”), are or become subject to the tax (the “Excise Tax”) imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any similar tax that may hereafter be imposed, the Company shall pay to Executive at the time specified in this Section an additional amount (the “Tax Reimbursement Payment”) such that the net amount retained by the Executive with respect to such Covered Payments, after deduction of any Excise Tax on the Covered Payments and any Federal, state and local income tax and other tax on the Tax Reimbursement Payment provided for by this Section, but before deduction for any Federal, state or local income or employment tax withholding on such Covered Payments, shall be equal to the amount of the Covered Payments. (ii) Applicable Rules. For purposes of determining whether any of the Covered Payments will be subject to the Excise Tax and the amount of such Excise Tax: (A) Such Covered Payments shall be treated as “parachute payments” within the meaning of Section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the good faith judgment of the Company’s independent certified public accountants appointed prior to the Effective Date or tax counsel selected by such accountants (the “Accountants”), the Company has a reasonable basis to conclude that such Covered Payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for personal services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Excise Tax; and (B) The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Section 280G of the Code. (iii) Additional Rules. For purposes of determining the amount of the Tax Reimbursement Payment, the Executive shall be deemed to pay (A) Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Tax Reimbursement Payment is to be made, and (B) any applicable state and local income and other taxes at the highest applicable marginal rate of taxation for the calendar year in which the Tax Reimbursement Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year. (iv) Repayment or Additional Payment in Certain Circumstances. (A) Repayment. In the event that the Excise Tax is subsequently determined by the Accountants or pursuant to any proceeding or negotiations with the Internal Revenue Service to be less than the amount taken into account hereunder in calculating the Tax Reimbursement Payment made, Executive shall repay to the Company, at the time that the amount of such reduction in the Excise Tax is finally determined, the portion of such prior Tax Reimbursement Payment that would not have been paid if such lesser Excise Tax had been applied in initially calculating such Tax Reimbursement Payment. Notwithstanding the foregoing, in the event any portion of the Tax Reimbursement Payment to be repaid to the Company has been paid to any Federal, state or local tax authority, repayment thereof shall not be required until actual refund or credit of such portion has been made to Executive by the applicable tax authority. Executive and the Company shall mutually agree upon the course of action to be pursued (and the method of allocating the expenses thereof) if Executive’s good faith claim for refund or credit is denied. 6 (B) Additional Tax Reimbursement Payment. In the event that the Excise Tax is later determined by the Accountants or pursuant to any proceeding or negotiations with the Internal Revenue Service to exceed the amount taken into account hereunder at the time the Tax Reimbursement Payment is made (including, but not limited to, by reason of any payment the existence or amount of which cannot be determined at the time of the Tax Reimbursement Payment), the Company shall make an additional Tax Reimbursement Payment in respect of such excess (plus any interest or penalty payable with respect to such excess) at the time that the amount of such excess is finally determined. (v) Timing for Tax Reimbursement Payment. The Tax Reimbursement Payment (or portion thereof) provided for in this Section 7 shall be paid to Executive not later than 10 business days following the payment of the Covered Payments; provided, however, that if the amount of such Tax Reimbursement Payment (or portion thereof) cannot be finally determined on or before the date on which payment is due, the Company shall pay to Executive by such date an amount estimated in good faith by the Accountants to be the minimum amount of such Tax Reimbursement Payment and shall pay the remainder of such Tax Reimbursement Payment (together with interest at 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 45 calendar days after payment of the related Covered Payment. To the extent that the amount of the estimated Tax Reimbursement Payment exceeds the amount subsequently determined to have been due, Executive shall pay such excess to the Company on the fifth business day after written demand by the Company for payment. 8. Timing of Payments. Accrued Salary shall be paid no later than 10 days following the Date of Termination. Severance Payments and Vested Benefits Enhancements, together with interest thereon based on prevailing short-term rates for the period between the date of payment and the Date of Termination, shall be paid during the 10 day period following the six month anniversary of the Date of Termination, unless earlier payment is permitted in accordance with guidance provided under Section 409A of the Code. Pro-Rata Target Bonus shall be paid as follows: (a) if the Date of Termination occurs in the first, second or third calendar quarter of any particular calendar year, then the Pro-Rata Target Bonus shall be paid no later than 10 days following the Date of Termination, or (b) if the Date of Termination occurs in the fourth calendar quarter of any particular calendar year, then the Pro-Rata Target Bonus shall be paid no later than the same time as similar awards are paid to other executives participating in the plans or programs under which the awards are paid, but in no event later than March 31 of the calendar year following the end of such fourth calendar quarter. Vested Benefits and Equity Awards shall be paid no later than the time for payment Determined Under the Applicable Plan except as otherwise expressly superseded or modified by this Agreement. Tax Reimbursement Payments shall be paid at the time specified in Section 7 hereof. 7 9. Confidentiality and Other Covenants. By and in consideration of the compensation and benefits to be provided by the Company hereunder, including the severance arrangements set forth herein, Executive agrees to the following: (a) Confidentiality. Without the prior written consent of the Company, except to the extent required by an order of a court having competent jurisdiction or under subpoena from an appropriate government agency, Executive shall not disclose to any third person, or permit the use of for the benefit of any person or any entity other than the Company or its affiliates, any trade secrets, customer lists, information regarding product development, marketing plans, sales plans, management organization information (including data and other information relating to members of the Board and management), operating policies or manuals, business plans, financial records, or other financial, organizational, commercial, business, sales, marketing, technical, product or employee information relating to the Company or its affiliates or information designated as confidential, proprietary, and/or a trade secret, or any other information relating to the Company or its affiliates that Executive knows from the circumstances, in good faith and good conscience, should be treated as confidential, or any information that the Company or its affiliates may receive belonging to customers, agents or others who do business with the Company or its affiliates, except to the extent that any such information previously has been disclosed to the public by the Company or is in the public domain (other than by reason of Executive’s violation of this Section 9(a)). (b) Company Property. Except as expressly provided herein, promptly following any termination of the Employment Period, Executive shall return to the Company all property of the Company, and all copies thereof in Executive’s possession or under his or her control. (c) Injunctive Relief and Other Remedies with Respect to Covenants. Executive acknowledges and agrees that the covenants and obligations of Executive with respect to confidentiality and Company property relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants and obligations will cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, Executive agrees that the Company shall be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) restraining Executive from committing any violation of the covenants and obligations contained in this Section 9. These remedies are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity. 8 Notwithstanding the foregoing, in no event shall an asserted violation of the provisions of this Section constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement following a Change of Control. 10. Miscellaneous. (a) Survival. All of the provisions of Sections 7 (relating to termination of the Employment Period following a Change of Control), 9 (relating to confidentiality and Company property), 10(b) (relating to arbitration), 10(c) (relating to legal fees and expenses) and 10(n) (relating to governing law) of this Agreement shall survive the termination of this Agreement. (b) Arbitration. Except as provided in Section 9, any dispute or controversy arising under or in connection with this Agreement (excluding employment related disputes that do not involve this Agreement) shall be resolved by binding arbitration. Such arbitration shall be held in the city of Hartford, Connecticut and except to the extent inconsistent with this Agreement, shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association in effect at the time of the arbitration, and otherwise in accordance with the principles that would be applied by a court of law or equity. The arbitrator shall be acceptable to both the Company and Executive. If the parties cannot agree on an acceptable arbitrator, the dispute or controversy shall be heard by a panel of three arbitrators; one appointed by each of the parties and the third appointed by the other two arbitrators. The Company and Executive further agree that they will abide by and perform any award or awards rendered by the arbitrators and that a judgment may be entered on any award or awards rendered by any state or federal court having jurisdiction over the Company or Executive or any of their respective property. (c) Legal Fees and Expenses. In any contest (whether initiated by Executive or by the Company) as to the validity, enforceability or interpretation of any provision of this Agreement, the Company shall pay Executive’s legal expenses (or cause such expenses to be paid) including, without limitation, Executive’s reasonable attorney’s fees, on a quarterly basis, upon presentation of proof of such expenses in a form acceptable to the Company, provided that Executive shall reimburse the Company for such amounts, plus simple interest thereon at the 90-day United States Treasury Bill rate as in effect from time to time, compounded annually, if Executive shall not prevail, in whole or in part, as to any material issue as to the validity, enforceability or interpretation of any provision of this Agreement. (d) Successors; Binding Effect. This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company shall require any successor to all or substantially all of the business and/or assets of the Company, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform the Agreement if no such succession had taken place. This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by Executive otherwise than by will or the law of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives. (e) Assignment. Except as provided in Section 10(d), neither this Agreement nor any of the rights or obligations hereunder shall be assigned or delegated by any party hereto without the prior written consent of the other party. (f) Entire Agreement. This Agreement together with the employment relationship between the parties constitutes the entire agreement between the parties hereto with respect to the matters referred to herein. In consideration of the mutual covenants herein contained and Executive’s continued participation in certain incentive compensation plans pursuant to which the level, if any, of participation is determined by the administrators of such plans, this Agreement supersedes and replaces any prior or subsequent severance plan or arrangement that otherwise would apply to Executive following a Change of Control, including any prior Key Executive Employment Protection Agreement. No other agreement relating to the terms of Executive’s employment by the Company, oral or otherwise, shall be binding between the parties unless it is in writing and signed by the party against whom enforcement is sought. There are no promises, representations, inducements or statements between the parties other than those that are expressly contained herein. Executive acknowledges that he or she is entering into this Agreement of his or her own free will and accord, and with no duress, and that he or she has read this Agreement and that he or she understands it and its legal consequences. (g) Severability; Reformation. In the event that one or more of the provisions of this Agreement shall become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. In the event of a determination that any of the provisions of Section 9(a) are not enforceable in accordance with their terms, Executive and the Company agree that such Section shall be reformed to make such Section enforceable in a manner that provides the Company the maximum rights permitted at law. (h) Waiver. Waiver by any party hereto of any breach or default by the other party of any of the terms of this Agreement shall not operate as a waiver of any other breach or default, whether similar to or different from the breach or default waived. No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or from any failure by either party hereto to assert its or his or her rights hereunder on any occasion or series of occasions. (i) Notices. Any notice required or desired to be delivered under this Agreement shall be in writing and shall be delivered personally, by courier service, by registered mail, return receipt requested, or by telecopy and shall be effective upon actual receipt by the party to which such notice shall be directed, and shall be addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):           If to the Company:   The Hartford Financial Services Group, Inc.     Executive Row, Home Office     Hartford Plaza     690 Asylum Avenue     Hartford, CT 06115 Attention: General Counsel       with a copy to:   Debevoise & Plimpton 875 Third Avenue New York, NY 10022 Attn: Lawrence K. Cagney, Esq. If to Executive: The home address of Executive shown on the records of the Company (j) Amendments. This Agreement may not be altered, modified or amended except by a written instrument signed by each of the parties hereto, provided however that the Company (i) may unilaterally amend this Agreement at any time as may be necessary, in its reasonable judgment, to comply with law or to avoid payments to Executive under the Agreement being subject to an additional tax under Section 409A of the Code, and (ii) may terminate this Agreement at any time prior to a Change of Control by written notice to Executive given at least six months prior to the date of termination of the Agreement, provided that a Change of Control is not threatened at the time the notice is given. For purposes of the preceding sentence, a Change of Control shall be deemed to be threatened for the period beginning on the date of any Potential Change of Control (as defined in The Hartford 2005 Incentive Stock Plan, as it may be amended from time to time) and ending upon the earlier of (i) the second anniversary of the date of such Potential Change of Control, (ii) the date a Change of Control occurs, or (iii) the date the Board determines in good faith that a Change of Control is no longer threatened. This Agreement is intended to comply with Section 409A of the Code, and no action taken by the Company shall be construed in a manner that would result in the imposition of an additional tax on Executive under Section 409A of the Code. (k) Headings. Except as expressly provided herein, headings to provisions of this Agreement are for the convenience of the parties only and are not intended to be part of or to affect the meaning or interpretation hereof. (l) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. (m) Withholding. Any payments provided for herein shall be reduced by any amounts required to be withheld by the Company from time to time under applicable Federal, State or local income or employment tax laws or similar statutes or other provisions of law then in effect. (n) Governing Law. This Agreement shall be governed by the laws of the State of Connecticut, without reference to principles of conflicts or choice of law under which the law of any other jurisdiction would apply. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and Executive has hereunto set his or her hand, as of the day and year first above written.       THE HARTFORD FINANCIAL       SERVICES GROUP, INC. WITNESSED:             By: Title:   Ann M. de Raismes Executive Vice President, Human Resources       EXECUTIVE WITNESSED:             9

EXHIBIT 10.3 XENONICS HOLDINGS, INC. WARRANT CERTIFICATE CLASS A WARRANTS THIS WARRANT CERTIFICATE (the “Warrant Certificate”) certifies that for value received, The Norman Patriot LLC (the “Holder”) is the owner of warrants (the "Warrants”), which entitle the Holder thereof to purchase at any time on or before the Expiration Date (as defined below) Two Hundred Fifty Thousand (250,000) shares (the “Warrant Shares”) of fully paid non-assessable shares of the common stock, par value $.001 per share, (the “Common Stock”), of XENONICS HOLDINGS, INC. a Nevada corporation (the "Company”), at a purchase price of Two Dollars and Twenty Cents ($2.20) per Warrant Share (the “Purchase Price”), in lawful money of the United States of America by bank or certified check, subject to adjustment as hereinafter provided. THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE WARRANTS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. 1. PURCHASE PRICE. The Warrants entitle the Holder to purchase the Warrant Shares at the Purchase Price. The Purchase Price and the number of Warrant Shares evidenced by this Warrant Certificate are subject to adjustment as provided in Article 7. 2. EXPIRATION DATE. (a) The Warrants are exercisable, at the option of the Holder, at any time after the date of issuance and on or before the Expiration Date (as defined below) by delivering to the Company written notice of exercise (the “Exercise Notice”), stating the number of Warrant Shares to be purchased thereby, accompanied by bank or certified check payable to the order of the Company for the Warrant Shares to be purchased. Within twenty business days of the Company’s receipt of the Exercise Notice accompanied by the consideration for the Warrant Shares being purchased, the Company shall issue and deliver to the Holder a certificate representing the Warrant Shares being purchased. In the case of exercise for less than all of the Warrant Shares represented by this Warrant Certificate, the Company shall cancel this Warrant Certificate upon the surrender thereof and shall execute and deliver a new Warrant Certificate for the balance of such Warrant Shares. (b) The term “Expiration Date” shall mean 5:00 p.m., California time, on April 13, 2011, or if such date shall in the State of California be a holiday or a day on which banks are authorized to close, then 5:00 p.m., California time, the next following day which in the State of California is not a holiday or a day on which banks are authorized to close. 3. RESTRICTIONS ON TRANSFER. (a) Restrictions. The Warrants and the Warrant Shares or any other security issuable upon exercise of the Warrants may not be assigned, transferred, sold, or otherwise deposed of unless (i) there is in effect a registration statement under the Securities Act of 1933, as amended (the “Act”), covering such sale, transfer, or other disposition or (ii) the Holder furnishes to the Company an opinion of counsel, reasonably acceptable to counsel for the Company, to the effect that the proposed sale, transfer, or other disposition may be effected without registration under the Act, as well as such other documentation incident to such sale, transfer, or other disposition as the Company’s counsel shall reasonably request. (b) Legend. Any Warrant Shares issued upon the exercise of the Warrants shall bear a legend to the following effect: “The shares evidenced by this certificate were issued upon exercise of Warrants and may not be sold, transferred, or otherwise disposed of in the absence of an effective registration under the Securities Act of 1933 (the “Act”) or an opinion of counsel, reasonably acceptable to counsel for the Company, to the effect that the proposed sale, transfer, or disposition may be effectuated without registration under the Act.” 4. RESERVATION OF SHARES. The Company covenants that it will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon exercise of the Warrants, such number of shares of Common Stock as shall then be issuable upon the exercise of the Warrants. The Company covenants that all shares of Common Stock which shall be issuable upon exercise of the Warrants shall be duly and validly issued and fully paid and non-assessable and free from all taxes, liens, and charges with respect to the issue thereof. Notwithstanding anything to the contrary in this Warrant Certificate, no Warrant Shares shall be issued pursuant to this Warrant Certificate unless and until the Company has received approval to issue such shares from the American Stock Exchange or from any other securities exchange or Nasdaq market on which shares of Common Stock may be traded as of the date of the Holder’s Warrant exercise. 5. LOSS OR MUTILATION. Upon receipt by the Company of reasonable evidence of the loss, theft, destruction, or mutilation of this Warrant Certificate and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to the Company, or in the case of mutilation, upon surrender and cancellation of the mutilated Warrant Certificate, the Company shall execute and deliver in lieu thereof, a new Warrant Certificate representing an equal number of Warrant Shares exercisable thereunder. 6. REDEMPTION RIGHT. Notwithstanding any provision in this Warrant Certificate to the contrary, the Company reserves the right to redeem the outstanding Warrants evidenced by this Warrant Certificate at any time prior to the full or partial exercise of such Warrants by giving the Holder at least thirty days’ prior written notice of such redemption if the closing price of the Common Stock has been at least $2.75 per share on each of twenty consecutive trading days, provided that the Company’s redemption notice must be delivered no later than the third business day after the end of any such twenty-day period. The redemption price of the Warrants shall be $0.001 per share. If this Warrant Certificate is either not exercised or tendered back to the Company by the end of the date specified in the redemption notice, this Warrant Certificate shall be canceled on the books of the Company and shall have no further value except for the $0.001 per share redemption price. 7 ANTI-DILUTION PROVISIONS. (a) The number of shares of Common Stock and the Purchase Price per Warrant Share pursuant to this Warrant Certificate shall be subject to adjustment from time to time as provided for in this Section 7(a). Notwithstanding any provision contained herein, the aggregate Purchase Price for the total number of Warrant Shares issuable pursuant to this Warrant Certificate shall remain unchanged. In case the Company shall at any time change as a whole, by subdivision or combination in any manner or by the making of a stock dividend, the number of outstanding shares of Common Stock into a different number of shares, (i) the number of shares which the Holder of this Warrant Certificate shall have been entitled to purchase pursuant to this Warrant Certificate shall be increased or decreased in direct proportion to such increase or decrease of shares, as the case may be, and (ii) the Purchase Price per Warrant Share (but not the aggregate Purchase Price) in effect immediately prior to such change shall be increased or decreased in inverse proportion to such increase or decrease of shares, as the case may be. (b) In case of any capital reorganization or any reclassification of the capital stock of the Company or in case of the consolidation or merger of the Company with another corporation (or in the case of any sale, transfer, or other disposition to another corporation of all or substantially all the property, assets, business, and goodwill of the Company), the Holder of this Warrant Certificate shall thereinafter be entitled to purchase the kind and amount of shares of capital stock which this Warrant Certificate entitled the Holder to purchase immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, transfer, or other disposition; and in any such case appropriate adjustments, shall be made in the application of the provisions of this Section 7 with respect to rights and interests thereafter of the Holder of this Warrant Certificate to the end that the provisions of this Section 7 shall thereafter be applicable, as nearly as reasonably possible, in relation to any shares or other property thereafter purchasable upon the exercise of this Warrant Certificate. (c) Fractional Shares. No certificate for fractional shares shall be issued upon the exercise of the Warrants, but in lieu thereof the Company shall purchase any such fractional shares calculated to the nearest cent. (d) Rights to the Holder. The Holder of this Warrant Certificate shall not be entitled to any rights of a shareholder of the Company in respect to any Warrant Shares purchasable upon the exercise hereof until such Warrant Shares have been paid for in full and issued to it. As soon as practicable after such exercise, the Company shall deliver a certificate or certificates for the number of full shares of Common Stock issuable upon such exercise, to the person or persons entitled to receive the same. 8. REPRESENTATIONS AND WARRANTIES. The Holder, by acceptance of this Warrant Certificate, represents and warrants to, and covenants and agrees with, the Company as follows: (a) This Warrant Certificate and the Warrants are being acquired for the Holder’s own account for investment and not with a view toward resale or distribution of any part thereof, and the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. (b) The Holder is aware that the Warrants are not registered under the Act or any state securities or blue sky laws and, as a result, substantial restrictions exist with respect to the transferability of the Warrants and the Warrant Shares to be acquired upon exercise of the Warrants. (c) The Holder is an accredited investor as defined in Rule 501(a) of Regulation D under the Act and is a sophisticated investor familiar with the type of risks inherent in the acquisition of securities such as the Warrants, and its financial position is such that it can afford to retain the Warrants and the Warrant Shares for an indefinite period of time without realizing any direct or indirect cash return on this investment. 9. MISCELLANEOUS. (a) Transfer Taxes: Expenses. The Holder shall pay any and all underwriters’ discounts, brokerage fees, and transfer taxes incident to the sale or exercise of the Warrants or the sale of the underlying shares issuable thereunder, and shall pay the fees and expenses of any special attorneys or accountants retained by it. (b) Notice. Any notice or other communication required or permitted to be given to the Company shall be in writing and shall be delivered by certified mail with return receipt or delivered in person against receipt, as follows: Xenonics Holdings, Inc. 2236 Rutherford Road, Suite 123 Carlsbad, CA 92008 (c) Governing Law. This Warrant Certificate shall be governed by, and construed in accordance with, the laws of the State of California, without reference to the conflicts of law principles of such state. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed as of the date set forth below. XENONICS HOLDINGS, INC, By /s/ Richard Naughton Its: Chief Executive Officer Date: April 13, 2006 1 XENONICS HOLDINGS, INC. WARRANT CERTIFICATE CLASS B WARRANTS THIS WARRANT CERTIFICATE (the “Warrant Certificate”) certifies that for value received, The Norman Patriot LLC (the “Holder”) is the owner of warrants (the "Warrants”), which entitle the Holder thereof to purchase on or before the Expiration Date (as defined below) Two Hundred Fifty Thousand (250,000) shares (the “Warrant Shares”) of fully paid non-assessable shares of the common stock, par value $.001 per share, (the “Common Stock”), of XENONICS HOLDINGS, INC., a Nevada corporation (the “Company”), at a purchase price of Three Dollars and Twenty Cents ($3.20) per Warrant Share (the “Purchase Price”), in lawful money of the United States of America by bank or certified check, subject to adjustment as hereinafter provided. THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE WARRANTS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. 1. PURCHASE PRICE. The Warrants entitle the Holder to purchase the Warrant Shares at the Purchase Price. The Purchase Price and the number of Warrant Shares evidenced by this Warrant Certificate are subject to adjustment as provided in Article 7. 2. VESTING AND EXPIRATION DATES. (a) The Warrants shall become vested and exercisable only if and when all of the Company’s Class A Warrants, as evidenced by the Warrant Certificate dated April 13, 2006 executed by the Company in favor of the Holder, have been fully exercised and all of the  shares of Common Stock underlying such Class A Warrants have been purchased and paid for by the Holder. (b) Upon becoming exercisable in accordance with the terms of Section 2(a), the Warrants are exercisable, at the option of the Holder, at any time thereafter and on or before the Expiration Date (as defined below) by delivering to the Company written notice of exercise (the “Exercise Notice”), stating the number of Warrant Shares to be purchased thereby, accompanied by bank or certified check payable to the order of the Company for the Warrant Shares to be purchased. Within twenty business days of the Company’s receipt of the Exercise Notice accompanied by the consideration for the Warrant Shares being purchased, the Company shall issue and deliver to the Holder a certificate representing the Warrant Shares being purchased. In the case of exercise for less than all of the Warrant Shares represented by this Warrant Certificate, the Company shall cancel this Warrant Certificate upon the surrender thereof and shall execute and deliver a new Warrant Certificate for the balance of such Warrant Shares. (c) The term “Expiration Date” shall mean 5:00 p.m., California time, on April 13, 2011, or if such date shall in the State of California be a holiday or a day on which banks are authorized to close, then 5:00 p.m., California time, the next following day which in the State of California is not a holiday or a day on which banks are authorized to close. 3. RESTRICTIONS ON TRANSFER. (a) Restrictions. The Warrants and the Warrant Shares or any other security issuable upon exercise of the Warrants may not be assigned, transferred, sold, or otherwise deposed of unless (i) there is in effect a registration statement under the Securities Act of 1933, as amended (the “Act”), covering such sale, transfer, or other disposition or (ii) the Holder furnishes to the Company an opinion of counsel, reasonably acceptable to counsel for the Company, to the effect that the proposed sale, transfer, or other disposition may be effected without registration under the Act, as well as such other documentation incident to such sale, transfer, or other disposition as the Company’s counsel shall reasonably request. (b) Legend. Any Warrant Shares issued upon the exercise of the Warrants shall bear a legend to the following effect: “The shares evidenced by this certificate were issued upon exercise of Warrants and may not be sold, transferred, or otherwise disposed of in the absence of an effective registration under the Securities Act of 1933 (the “Act”) or an opinion of counsel, reasonably acceptable to counsel for the Company, to the effect that the proposed sale, transfer, or disposition may be effectuated without registration under the Act.” 4. RESERVATION OF SHARES. The Company covenants that it will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon exercise of the Warrants, such number of shares of Common Stock as shall then be issuable upon the exercise of the Warrants. The Company covenants that all shares of Common Stock which shall be issuable upon exercise of the Warrants shall be duly and validly issued and fully paid and non-assessable and free from all taxes, liens, and charges with respect to the issue thereof. Notwithstanding anything to the contrary in this Warrant Certificate, no Warrant Shares shall be issued pursuant to this Warrant Certificate unless and until the Company has received approval to issue such shares from the American Stock Exchange or from any other securities exchange or Nasdaq market on which shares of Common Stock may be traded as of the date of the Holder’s Warrant exercise. 5. LOSS OR MUTILATION. Upon receipt by the Company of reasonable evidence of the loss, theft, destruction, or mutilation of this Warrant Certificate and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to the Company, or in the case of mutilation, upon surrender and cancellation of the mutilated Warrant Certificate, the Company shall execute and deliver in lieu thereof, a new Warrant Certificate representing an equal number of Warrant Shares exercisable thereunder. 6. REDEMPTION RIGHT. Notwithstanding any provision in this Warrant Certificate to the contrary, the Company reserves the right to redeem the outstanding Warrants evidenced by this Warrant Certificate at any time prior to the full or partial exercise of such Warrants by giving the Holder at least thirty days’ prior written notice of such redemption if the closing price of the Common Stock has been at least $4.00 per share on each of twenty consecutive trading days, provided that the Company’s redemption notice must be delivered no later than the third business day after the end of any such twenty-day period. The redemption price of the Warrants shall be $0.001 per share. If this Warrant Certificate is either not exercised or tendered back to the Company by the end of the date specified in the redemption notice, this Warrant Certificate shall be canceled on the books of the Company and shall have no further value except for the $0.001 per share redemption price. 7. ANTI-DILUTION PROVISIONS. (a) The number of shares of Common Stock and the Purchase Price per Warrant Share pursuant to this Warrant Certificate shall be subject to adjustment from time to time as provided for in this Section 7(a). Notwithstanding any provision contained herein, the aggregate Purchase Price for the total number of Warrant Shares issuable pursuant to this Warrant Certificate shall remain unchanged. In case the Company shall at any time change as a whole, by subdivision or combination in any manner or by the making of a stock dividend, the number of outstanding shares of Common Stock into a different number of shares, (i) the number of shares which the Holder of this Warrant Certificate shall have been entitled to purchase pursuant to this Warrant Certificate shall be increased or decreased in direct proportion to such increase or decrease of shares, as the case may be, and (ii) the Purchase Price per Warrant Share (but not the aggregate Purchase Price) in effect immediately prior to such change shall be increased or decreased in inverse proportion to such increase or decrease of shares, as the case may be. (b) In case of any capital reorganization or any reclassification of the capital stock of the Company or in case of the consolidation or merger of the Company with another corporation (or in the case of any sale, transfer, or other disposition to another corporation of all or substantially all the property, assets, business, and goodwill of the Company), the Holder of this Warrant Certificate shall thereinafter be entitled to purchase the kind and amount of shares of capital stock which this Warrant Certificate entitled the Holder to purchase immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, transfer, or other disposition; and in any such case appropriate adjustments, shall be made in the application of the provisions of this Section 7 with respect to rights and interests thereafter of the Holder of this Warrant Certificate to the end that the provisions of this Section 7 shall thereafter be applicable, as nearly as reasonably possible, in relation to any shares or other property thereafter purchasable upon the exercise of this Warrant Certificate. (c) Fractional Shares. No certificate for fractional shares shall be issued upon the exercise of the Warrants, but in lieu thereof the Company shall purchase any such fractional shares calculated to the nearest cent. (d) Rights to the Holder. The Holder of this Warrant Certificate shall not be entitled to any rights of a shareholder of the Company in respect to any Warrant Shares purchasable upon the exercise hereof until such Warrant Shares have been paid for in full and issued to it. As soon as practicable after such exercise, the Company shall deliver a certificate or certificates for the number of full shares of Common Stock issuable upon such exercise, to the person or persons entitled to receive the same. 8. REPRESENTATIONS AND WARRANTIES. The Holder, by acceptance of this Warrant Certificate, represents and warrants to, and covenants and agrees with, the Company as follows: (a) This Warrant Certificate and the Warrants are being acquired for the Holder’s own account for investment and not with a view toward resale or distribution of any part thereof, and the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. (b) The Holder is aware that the Warrants are not registered under the Act or any state securities or blue sky laws and, as a result, substantial restrictions exist with respect to the transferability of the Warrants and the Warrant Shares to be acquired upon exercise of the Warrants. (c) The Holder is an accredited investor as defined in Rule 501(a) of Regulation D under the Act and is a sophisticated investor familiar with the type of risks inherent in the acquisition of securities such as the Warrants, and its financial position is such that it can afford to retain the Warrants and the Warrant Shares for an indefinite period of time without realizing any direct or indirect cash return on this investment. 9. MISCELLANEOUS. (a) Transfer Taxes: Expenses. The Holder shall pay any and all underwriters’ discounts, brokerage fees, and transfer taxes incident to the sale or exercise of the Warrants or the sale of the underlying shares issuable thereunder, and shall pay the fees and expenses of any special attorneys or accountants retained by it. (b) Notice. Any notice or other communication required or permitted to be given to the Company shall be in writing and shall be delivered by certified mail with return receipt or delivered in person against receipt, as follows: Xenonics Holdings, Inc. 2236 Rutherford Road, Suite 123 Carlsbad, CA 92008 (c) Governing Law. This Warrant Certificate shall be governed by, and construed in accordance with, the laws of the State of California, without reference to the conflicts of law principles of such state. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed as of the date set forth below. XENONICS HOLDINGS, INC, By /s/ Richard Naughton Its: Chief Executive Officer Date: April 13, 2006 2

EXHIBIT 10.2 OFFER LETTER DATED SEPTEMBER 15, 1995 WITH STEVEN BALASIANO. -------------------------------------------------------------------------------- Exhibit 10.2 September 15, 1995 Mr. Steven Balasiano 915 Secaucus Road Secaucus, N.J.  07094 Dear Mr. Balasiano, We are pleased to offer you the position of Vice President — General Counsel of The Children’s Place Retail Stores, Inc. The terms of your appointment are as follows: 1)              Base salary will be $140,000 per annum with a review date of November 30 in each year. 2)              You will be entitled to participate in the Executive bonus plan. Your percentage of base salary will be 20% and the plan is based on the operating income of the company. The details of this plan I will explain to you before you join the company. 3)              You will receive a car allowance of a $8000 per annum payable monthly. 4)              You will be entitled to participate in the company Life insurance and Medical plan. A copy of the company’s plan is enclosed. 5)              You will also be entitled to participate in the company’s 401K plan. As mentioned to you this plan is currently being reviewed to incorporate a company matching. 6)              The company will be introducing an option or Phantom option plan for the executive structure and you will be entitled to participate when this is introduced. 7)              In the event that your employment is terminated without cause you would be entitled to 6 months severance. -------------------------------------------------------------------------------- Ezra and myself are truly looking forward to your joining the company and to you making a major contribution. You will be given every opportunity to expand your business experience and to fully comprehend the business of specialty retailing. As mentioned to you, your joining date would be around December 1, 1995 and we can discuss this nearer the date. Would you please sign a copy of this letter and return to me. Very best wishes, THE CHILDREN’S PLACE RETAIL STORES, INC.           /S/ STAN SILVER   Stan Silver   Executive Vice President & Chief Operating Officer               /S/ STEVEN BALASIANO   Steven Balasiano     --------------------------------------------------------------------------------

EXHIBIT 10.7 INDEMNITY AGREEMENT This INDEMNITY AGREEMENT (the “Agreement”) is dated as of                           , 2006 and is made by and between Ethanex Energy, Inc. a Nevada corporation (the “Company”), and                                , an officer or director of the Company (the “Indemnitee”). RECITALS A.    The Company is aware that competent and experienced persons are increasingly reluctant to serve as directors or officers of corporations unless they are protected by comprehensive liability insurance and/or indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors and officers; B.    Based on their experience as business managers, the Board of Directors of the Company (the “Board”) has concluded that, to retain and attract talented and experienced individuals to serve as officers and directors of the Company, and to encourage such individuals to take the business risks necessary for the success of the Company, it is necessary for the Company contractually to indemnify officers and directors and to assume for itself maximum liability for expenses and damages in connection with claims against such officers and directors in connection with their service to the Company; C.    The Nevada Revised Statutes under which the Company is organized (the “Law”), empowers the Company to indemnify by agreement its officers, directors, employees and agents, and persons who serve, at the request of the Company, as directors, officers, employees or agents of other corporations or enterprises, and expressly provides that the indemnification provided by the Law is not exclusive; and D.    The Company desires and has requested the Indemnitee to serve or continue to serve as a director or officer of the Company. As an inducement to serve and in consideration for such service, the Company has agreed to indemnify the Indemnitee for claims for damages arising out of or related to the performance of such services to the Company in accordance with the terms and conditions set forth in this Agreement. NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1.    Definitions. 1.1    Agent. For the purposes of this Agreement, “agent” of the Company means any person who is or at any time was a director or officer of the Company or a subsidiary of the Company; or is or at any time was serving at the request of, for the convenience of, or to represent the interest of the Company or a subsidiary of the Company as a director or officer of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise or an affiliate of the Company; or was a director or officer of another enterprise or affiliate of the Company at the request of, for the convenience of, or to represent the interests of such predecessor corporation. The term “enterprise” includes any employee benefit plan of the Company, its subsidiaries, affiliates and predecessor corporations. 1.2    Expenses. For purposes of this Agreement, “expenses” includes all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements and other out-of-pocket costs) actually and reasonably incurred by the Indemnitee in --------------------------------------------------------------------------------   connection with the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification or advancement of expenses under this Agreement, Section 145 of the Law or otherwise. 1.3    Proceeding. For the purposes of this Agreement, “proceeding” means any threatened, pending or completed action, suit, inquiry or other proceeding, whether civil, criminal, administrative, investigative or any other type whatsoever. 1.4    Subsidiary. For purposes of this Agreement, “subsidiary” means any corporation of which more than fifty percent (50%) of the outstanding voting securities is owned directly or indirectly by the Company, by the Company and one or more of its subsidiaries or by one or more of the Company’s subsidiaries. 2.    Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an agent of the Company, at the will of the Company (or under separate agreement, if such agreement exists), in the capacity the Indemnitee currently serves as an agent of the Company, faithfully and to the best of his ability, so long as he is duly appointed or elected and qualified in accordance with the applicable provisions of the charter documents of the Company or any subsidiary of the Company; provided, however, that the Indemnitee may at any time and for any reason resign from such position (subject to any contractual obligation that the Indemnitee may have assumed apart from this Agreement), and the Company or any subsidiary shall have no obligation under this Agreement to continue the Indemnitee in any such position. For the avoidance of doubt, the Company and Indemnitee each acknowledge and agree that the resignation or other termination of Indemnitee as an agent of the Company under this paragraph 2 shall not impair any right that Indemnitee may otherwise have to be indemnified under the terms of this Agreement. 3.    Directors’ and Officers’ Insurance. The Company shall, to the extent that the Board determines it to be economically reasonable, maintain a policy of directors’ and officers’ liability insurance (“D&O Insurance”), on such terms and conditions as may be approved by the Board. 4.    Mandatory Indemnification. Subject to Section 9 below, the Company shall indemnify and hold the Indemnitee harmless to the fullest extent permitted by the Law. Without limiting the generality of the foregoing, the Company shall indemnify and hold harmless the Indemnitee: 4.1    Third Party Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the Company) by reason of the fact that he is or at any time was an agent of the Company, or by reason of anything done or not done by him in any such capacity, against any and all expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) actually and reasonably incurred by him in connection with the investigation, defense, settlement or appeal of such proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; and 4.2    Derivative Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that he is or at any time was an agent of the Company, or by reason of anything done or not done by him in any such capacity, against any amounts paid in settlement of any such proceeding and all expenses actually and reasonably incurred by him in connection with the investigation, defense, settlement or appeal of such proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company; except that no indemnification under this -2- -------------------------------------------------------------------------------- subsection shall be made in respect of any claim, issue or matter as to which such person shall have been finally adjudged, in a judgment not subject to appeal, to be liable to the Company by a court of competent jurisdiction due to willful misconduct of a culpable nature in the performance of his duty to the Company, unless and only to the extent that 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, such person is fairly and reasonably entitled to indemnity for such amounts which the court shall deem proper; and 4.3    Exception for Amounts Covered by Insurance. Notwithstanding the foregoing, the Company shall not be obligated to indemnify the Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) to the extent such have been paid directly to the Indemnitee by D&O Insurance. 5.    Partial Indemnification and Contribution. 5.1    Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) incurred by him in the investigation, defense, settlement or appeal of a proceeding but is not entitled, however, to indemnification for all of the total amount thereof, then the Company shall nevertheless indemnify the Indemnitee for such total amount except as to the portion thereof to which the Indemnitee is not entitled to indemnification. 5.2    Contribution. If the Indemnitee is not entitled to the indemnification provided in Section 4 for any reason other than the statutory limitations set forth in the Law, then in respect of any threatened, pending or completed proceeding in which the Company is jointly liable with the Indemnitee (or would be if joined in such proceeding), the Company shall contribute to the amount of expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by the Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Company on the one hand and the Indemnitee on the other hand from the transaction from which such proceeding arose and (ii) the relative fault of the Company on the one hand and of the Indemnitee on the other hand in connection with the events which resulted in such expenses, judgments, fines or settlement amounts, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnitee on the other hand shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or any other method of allocation, which does not take account of the foregoing equitable considerations. 6.    Mandatory Advancement of Expenses. 6.1    Advancement. Subject to Section 9 below, the Company shall advance all expenses incurred by the Indemnitee in connection with the investigation, participation, defense, settlement or appeal of any proceeding to which the Indemnitee is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or at any time was an agent of the Company or by reason of anything done or not done by him in any such capacity. The Indemnitee hereby undertakes to promptly repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Certificate of Incorporation or Bylaws of the Company, the Law or otherwise. The advances to be made hereunder shall -3- --------------------------------------------------------------------------------   be paid by the Company to the Indemnitee within thirty (30) days following delivery of a written request therefor by the Indemnitee to the Company. 6.2    Exception. Notwithstanding the foregoing provisions of this Section 6, the Company shall not be obligated to advance any expenses to the Indemnitee arising from a lawsuit filed directly by the Company against the Indemnitee if an absolute majority of the members of the Board reasonably determines in good faith, within thirty (30) days of the Indemnitee’s request to be advanced expenses, that the facts known to them at the time such determination is made demonstrate clearly and convincingly that the Indemnitee acted in bad faith. If such a determination is made, the Indemnitee may have such decision reviewed by another forum, in the manner set forth in Sections 8.3, 8.4 and 8.5 hereof, with all references therein to “indemnification” being deemed to refer to “advancement of expenses,” and the burden of proof shall be on the Company to demonstrate clearly and convincingly that, based on the facts known at the time, the Indemnitee acted in bad faith. The Company may not avail itself of this Section 6.2 as to a given lawsuit if, at any time after the occurrence of the activities or omissions that are the primary focus of the lawsuit, the Company has undergone a change in control. For this purpose, a change in control shall mean a given person or group of affiliated persons or groups increasing their beneficial ownership interest in the Company by at least twenty (20) percentage points without advance Board approval. 7.    Notice and Other Indemnification Procedures. 7.1    Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of commencement of any proceeding, the Indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof. 7.2    If, at the time of the receipt of a notice of the commencement of a proceeding pursuant to Section 7.1 hereof, the Company has D&O 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 D&O Insurance policies. 7.3    In the event the Company shall be obligated to advance the expenses for any proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by the Indemnitee (which approval shall not be unreasonably withheld), upon the delivery to the Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to the same proceeding, provided that: (a) the Indemnitee shall have the right to employ his own counsel in any such proceeding at the Indemnitee’s expense; (b) the Indemnitee shall have the right to employ his own counsel in connection with any such proceeding, at the expense of the Company, if such counsel serves in a review, observer, advice and counseling capacity and does not otherwise materially control or participate in the defense of such proceeding; and (c) if (i) the employment of counsel by the Indemnitee has been previously authorized by the Company, (ii) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of any such defense or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of the Indemnitee’s counsel shall be at the expense of the Company. 8.    Determination of Right to Indemnification. -4- --------------------------------------------------------------------------------   8.1    To the extent the Indemnitee has been successful on the merits or otherwise in defense of any proceeding referred to in Section 4.1 or 4.2 of this Agreement or in the defense of any claim, issue or matter described therein, the Company shall indemnify the Indemnitee against expenses actually and reasonably incurred by him in connection with the investigation, defense or appeal of such proceeding, or such claim, issue or matter, as the case may be. 8.2    In the event that Section 8.1 is inapplicable, or does not apply to the entire proceeding, the Company shall nonetheless indemnify the Indemnitee unless the Company shall prove by clear and convincing evidence to a forum listed in Section 8.3 below that the Indemnitee has not met the applicable standard of conduct required to entitle the Indemnitee to such indemnification. 8.3    The Indemnitee shall be entitled to select the forum in which the validity of the Company’s claim under Section 8.2 hereof that the Indemnitee is not entitled to indemnification will be heard from among the following: (a)    a quorum of the Board consisting of directors who are not parties to the proceeding for which indemnification is being sought; (b)    the stockholders of the Company, provided however that the Indemnitee can select a forum consisting of the stockholders of the Company only with the approval of the Company; (c)    legal counsel mutually agreed upon by the Indemnitee and the Board, which counsel shall make such determination in a written opinion; (d)    a panel of three arbitrators, one of whom is selected by the Company, another of whom is selected by the Indemnitee and the last of whom is selected by the first two arbitrators so selected; or (e)    the courts of the State of Nevada or other court having jurisdiction of subject matter and the parties. 8.4    As soon as practicable, and in no event later than thirty (30) days after the forum has been selected pursuant to Section 8.3 above, the Company shall, at its own expense, submit to the selected forum its claim that the Indemnitee is not entitled to indemnification, and the Company shall act in the utmost good faith to assure the Indemnitee a complete opportunity to defend against such claim. 8.5    If the forum selected in accordance with Section 8.3 hereof is not a court, then after the final decision of such forum is rendered, the Company or the Indemnitee shall have the right to apply to the courts of the State of Nevada, the court in which the proceeding giving rise to the Indemnitee’s claim for indemnification is or was pending or any other court having jurisdiction of subject matter and the parties, for the purpose of appealing the decision of such forum, provided that such right is executed within sixty (60) days after the final decision of such forum is rendered. If the forum selected in accordance with Section 8.3 hereof is a court, then the rights of the Company or the Indemnitee to appeal any decision of such court shall be governed by the applicable laws and rules governing appeals of the decision of such court. 8.6    Notwithstanding any other provision in this Agreement to the contrary, the Company shall indemnify the Indemnitee against all expenses incurred by the Indemnitee in connection with any hearing or proceeding under this Section 8 involving the Indemnitee and against all expenses incurred by the Indemnitee in connection with any other proceeding between the Company and the Indemnitee -5- --------------------------------------------------------------------------------   involving the interpretation or enforcement of the rights of the Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims and/or defenses of the Indemnitee in any such proceeding was frivolous or not made in good faith. 9.    Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: 9.1    Claims Initiated by Indemnitee. To indemnify or advance expenses to the Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to proceedings specifically authorized by the Board or brought to establish or enforce a right to indemnification and/or advancement of expenses arising under this Agreement, the charter documents of the Company or any subsidiary or any statute or law or otherwise, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board finds it to be appropriate; or 9.2    Unauthorized Settlements. To indemnify the Indemnitee hereunder for any amounts paid in settlement of a proceeding unless the Company consents in advance in writing to such settlement, which consent shall not be unreasonably withheld; or 9.3    Securities Law Actions. To indemnify the Indemnitee on account of any suit in which judgment is rendered against the Indemnitee for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section l6(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law; or 9.4    Unlawful Indemnification. To indemnify the Indemnitee if a final decision by a court having jurisdiction in the matter, in a judgment not subject to appeal, shall determine that such indemnification is not lawful. In this respect, the Company and the Indemnitee have been advised that the Securities and Exchange Commission takes the position that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication. 10.    Non-Exclusivity. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements or otherwise, both as to action in the Indemnitee’s official capacity and to action in another capacity while occupying his position as an agent of the Company, and the Indemnitee’s rights hereunder shall continue after the Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors and administrators of the Indemnitee. 11.    General Provisions. 11.1    Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification and advancement of expenses to the Indemnitee to the fullest extent now or hereafter permitted by law, except as expressly limited herein. 11.2    Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, then: -6- -------------------------------------------------------------------------------- (a)    the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b)    to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 11.1 hereof. 11.3    Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. 11.4    Subrogation. In the event of full payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary or desirable to secure such rights and to enable the Company effectively to bring suit to enforce such rights. 11.5    Counterparts. This Agreement may be executed in one or more counterparts, which shall together constitute one agreement. 11.6    Successors and Assigns. The terms of this Agreement shall bind, and shall inure to the benefit of, the successors and assigns of the parties hereto. 11.7    Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given: (a) if delivered by hand and signed for by the party addressee; or (b) if mailed by certified or registered mail, with postage prepaid, on the third business day after the mailing date. Addresses for notices to either party are as shown on the signature page of this Agreement or as subsequently modified by written notice. 11.8    Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Nevada, without regard to any choice or conflict of laws principles, as applied to contracts between Nevada residents entered into and to be performed entirely within Nevada. 11.9    Consent to Jurisdiction. The Company and the Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of New York for all purposes in connection with any action or proceeding, which arises out of or relates to this Agreement. 11.10    Attorneys’ Fees. In the event Indemnitee is required to bring any action to enforce rights under this Agreement (including, without limitation, the payment or reimbursement of expenses of any proceeding described in Section 4), the Indemnitee shall be entitled to all reasonable fees and expenses in bringing and pursuing such action, unless a court of competent jurisdiction finds each of the material claims of the Indemnitee in any such action was frivolous and not made in good faith. [SIGNATURE PAGE FOLLOWS] -7- --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first written above.   ETHANEX ENERGY, INC.   INDEMNITEE                     By:     Title:             Address:                   -8- --------------------------------------------------------------------------------        

Exhibit 10.1 Agreement with Cambria Capital January 13, 2006 Mr. Ilan Kenig Unity Wireless Corporation 7438 Fraser Park Drive Suite 2300 Burnaby, British Columbia V5J 5B9 RE:  FINANCIAL ADVISORY / INVESTMENT BANKING AGREEMENT Dear Mr. Kenig: This letter confirms the terms upon which Unity Wireless Corporation together with all subsidiaries, affiliates, successors and other controlled units, either existing or formed subsequent to the execution of this engagement (the “Company”), engages Cambria Capital LLC (“Cambria ”), to act as the exclusive United States advisor for the Company in financial advisory, investment banking and related transactions.  This Agreement will be deemed to be effective as of the date set forth above. 1. Scope of Engagement. The Company hereby exclusively engages Cambria  (the “Engagement”) to identify on an exclusive “best efforts” basis funding sources and secure financing for the Company through a private placement of equity and/or debt in one or more transactions with one or more investors and/or lenders (the “Financing”). 2. Scope of Work. In connection with the Engagement: • Cambria  will familiarize itself to the extent it deems appropriate with the business, operations, financial condition and prospects of the Company; • Cambria  will identify and introduce potential sources of Financing for the Company; • Cambria  will assist the Company and its Board of Directors in evaluating Financing proposals; • Cambria  will assist the Company and its counsel in finalizing any Financing arranged by Cambria ; • Cambria  will render such other financial advisory and investment banking services as may, from time to time, be agreed upon by Cambria  and the Company; and • If requested, Cambria  will participate in meetings of the Board of Directors of the Company (either in person or by telephone, as appropriate). 3. Company Responsibilities, Representations and Warranties. In connection with the Engagement: • The Company agrees to cooperate with Cambria  and will furnish to Cambria  all information and data concerning the Company (the “Information”) which Cambria  reasonably deems appropriate for purposes of rendering its services hereunder, and will provide Cambria  access to its officers, directors, employees and advisors. • The Company represents and warrants to Cambria  that all Information included or incorporated by reference in any documents (including the Confidential Memorandum, if any) or otherwise made available to Cambria  by the Company to be communicated to possible investors, lenders and/or other third parties in connection with the Financing: (a) will be complete and correct and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (b) any projected financial information or other forward-looking information which the Company provides to Cambria  will be made by the Company in good faith, based on management’s best estimates at the time and based on facts and assumptions which the Company believed were reasonable at the time. • The Company agrees to promptly notify Cambria , in writing, if the Company believes that any Information that was previously provided to Cambria  has become materially misleading or inaccurate in any way. • The Company acknowledges and agrees that, in rendering its services hereunder, Cambria  will be using and relying on the Information (and information available from public sources and other sources deemed reliable by Cambria ) without independent investigation or verification thereof or independent appraisal or evaluation of the Company or its business or assets, or any other party to the Financing. Cambria  has no responsibility for the accuracy or completeness of any information, including the contents of a Confidential Memorandum, if any, regarding the Company. • The Company agrees it is solely responsible for the decision to accept a Financing and acknowledges that Cambria  is not responsible for the due diligence, legal, regulatory, compliance and success or failure of any Financing. • Any advice rendered by Cambria  during the Engagement or in meetings with the Company or its Board of Directors, as well as any written materials provided by Cambria , are intended solely for the benefit and confidential use of the Company and will not be reproduced, summarized, described or referred to or given to any other person for any purpose without Cambria ’s prior written consent. • The Company represents to Cambria  that the Company has not engaged in any public or private offering of securities or taken or failed to take any action that would cause any Financing not to qualify for an applicable exemption from registration under the Securities Act of 1933, as amended (the “Act”). Further the Company agrees not to solicit any offerees or take any action which might jeopardize the availability of exemption under the Act. 4. Fees. 4.1 Capital or Debt Financing.  As compensation for services rendered in connection with each Financing completed by the Company, Cambria  will be paid upon the closing for each such Financing a cash fee equal to 8% on any equity, subordinated debt or convertible debt raised (“Capital / Debt Fee”) not including exercise of Investor  warrants prior to any deductions or setoffs such as fees, deposits, reserves, expenses, or other amounts withheld or paid by the investor or lender, along with warrants described below.  Each transaction will be considered on its own and not integrated for purposes of this fee calculation.  To the extent that Cambria  has used any other agents or broker dealers, Cambria  will pay them directly or at Cambria ’s option, the Company will pay such third-party agents and reduce Cambria ’s Capital / Debt Fee by such amount and Cambria  will indemnify and hold harmless the Company from any claim made by any such agent or broker-dealer (used by Cambria ).  Any unpaid expenses approved by the Company in accordance with Section 5 below will be reimbursed to Cambria  as well at each closing of a capital or debt Financing. 4.2 Warrants.  Cambria  will receive warrants to purchase such number of shares of common stock equal to 10% of the aggregate number of fully-diluted and/or converted shares of common stock as are purchased by and/or issuable upon conversion securities issued in a Financing.  With respect to any debt financing, Cambria  will receive warrants to purchase such number of shares of common stock equal to 10% of the principal amount of debt (on as-if-converted basis).  In each case, the warrants shall be purchased for a nominal sum and shall be exercisable for five (5) years, non callable, with a strike price equal to the Exercise Price.  Unless otherwise agreed by the parties, “Exercise Price” shall mean the 120% of the Conversion Price of common stock underlying the Notes prior to the Closing Date. The terms of the warrants shall be set forth in one or more agreements in form and substance reasonably satisfactory to Cambria  and the Company.  The warrant agreements shall contain customary terms, including without limitation, provisions for stock splits, and customary demand and piggyback registration rights. 4.3 Follow-on Financing / Acquisition. For a period of twelve (12) months following the date of this Agreement and if a Financing or related transaction is completed with any party (i) which Cambria  has identified, (ii) in respect of which Cambria  has rendered advice, or (iii) with which Cambria  has directly or indirectly held discussions or furnished information regarding the Company, including investors in any original Financing or related transaction (each a “Cambria -Identified Party”)as set forth in Attachment A, Cambria  shall be entitled to receive fees as set forth in this Section 4 with respect to any such transaction.  If the Company enters into an acquisition or similar transaction within twelve (12) months of the termination of this Agreement with any Cambria -Identified Party, the Company and Cambria  shall negotiate compensation to be paid to Cambria  as is customary for a transaction of such type and size.  In the event that the Company consummates any transaction pursuant to this Section 4.3 (“Follow-on Transaction”), the Company hereby agrees to execute and deliver, prior to closing of such Follow-on Transaction, an irrevocable instruction letter to the party with whom such transaction is consummated (the “Third Party Funder”) referencing the fees due and owing to Cambria  and instructing the Third Party Funder to wire the fees directly to an account designated by Cambria .  The Company hereby acknowledges that Cambria  intends to, and shall be entitled to, send such Third Party Funder a letter (a) notifying them of the fee arrangements between the Company and Cambria , and (b) providing notice that any closing that does not include payment to Cambria  will constitute a breach by the Company under this Agreement. 5. Expenses. The Company will reimburse Cambria , for all legal fees and expenses (in an amount not to exceed to $10,000 with respect to a Financing) and other out-of-pocket expenses (including independent experts retained by Cambria ) reasonably incurred by it in connection with its representation and services hereunder solely for this transaction..  Cambria  shall submit an invoice to the Company for all such fees and expenses. Such fees and expenses shall be due and payable upon consummation of a Financing; provided however that in the even that no Financing shall take place (for any reason) the Company shall still be obligated to promptly pay to Cambria  all such fees and expenses referred to above upon submission by Cambria  of statements to the Company. Cambria  shall not incur any single expense (other than legal fees) in excess of $1,000 without prior written approval from the Company. 6. Scope of Responsibility. Neither Cambria  nor any of its affiliates (nor any of their respective control persons, directors, officers, employees or agents) shall be liable to the Company or to any other person claiming through the Company for any claim, loss, damage, liability, cost or expense suffered by the Company or any such person arising out of or related to Cambria ’s Engagement hereunder except for a claim, loss or expense that arises solely out of or is based solely upon any action or failure to act by Cambria , other than an action or failure to act undertaken at the request or with the consent of the Company, that is found in a final judicial determination to constitute bad faith, willful misconduct or gross negligence on the part of Cambria . 7. Indemnification. Since Cambria  will be acting on behalf of the Company in connection with its engagement, the Company agrees to indemnify Cambria  as set forth in Exhibit A to this Agreement.  Such indemnification agreement is an integral part of this Agreement and the terms thereof are incorporated by reference herein.  Such indemnification agreement shall survive any termination or completion of Cambria ’s engagement hereunder. 8. Termination. The term of this Agreement is six (6) months from the date hereof; provided, however, that Cambria ’s Engagement hereunder may be terminated, with or without cause, by either the Company or Cambria  upon thirty (30) days prior written notice to the other party; provided, further, that such termination will not affect Cambria ’s right to (a) expense reimbursement under Section 5, (b) receipt of payment of any fees or compensation pursuant to Section 4, (c) the indemnification contemplated by Section 7 above, and (d) any other compensation due under any other provision of this Agreement. 9. Right of First Refusal and Other Transactions If, in the six months following completion of the Financing, the Company elects to raise additional funds from a private placement of equity and/or debt to United States Investors, Cambria, with the exception of a United States Top Tier Investment Banks( in which case Cambria will receive participation rights) will have the first right of refusal to secure such funds.  In addition, if in the six months following the completion of the Financing, the Company seeks to engage in any mergers and/or acquisitions transactions in the United States, Cambria,  with the exception of a United States Top Tier Investment Banks or Mark Mueller,  will have the right of first refusal to advise the Company on any such transactions on mutually agreeable terms.     10. Governing Law; Jurisdiction; Waiver of Jury Trial. 10.1 This Agreement will be deemed made in New York and will be governed by the laws of the State of New York without regard to the conflict of law principles contained therein. The Company irrevocably submits to the jurisdiction of any court of the State of New York, for the purpose of any suit, action or other proceeding arising out of this Agreement, or any of the agreements or transactions contemplated hereby, which is brought by or against the Company. Each of the Company (and, to the extent permitted by law, on behalf of the Company’s equity holders and creditors) and Cambria  hereby knowingly, voluntarily and irrevocably waive any right it may have to a trial by jury in respect of any claim based upon, arising out of or in connection with this Agreement and the transactions contemplated hereby (including, without limitation, any Financing or Acquisition). 10.2 Any dispute arising hereunder, if not settled by mutual agreement, shall, at either party’s option, and, upon written notice by one party to the other, be settled by final and binding arbitration in New York, New York.  The arbitration shall be conducted in accordance with the Commercial Dispute Resolution Procedures and Rules of the American Arbitration Association (“AAA Rules”) by a single disinterested arbitrator appointed in accordance with such AAA Rules. 10.3 The arbitrator shall have authority to award relief under legal or equitable principles, including interim or preliminary relief, and to allocate responsibility for the costs of the arbitration and to award recovery of attorneys’ fees and expenses in such manner as is determined by the arbitrators. 10.4 Judgment upon the award rendered by the arbitrators may be entered in any court having personal and subject matter jurisdiction.  Each party hereby submits to the in personam and subject matter jurisdiction of the federal and state courts in the County of New York for the purpose of confirming any such award and entering judgment thereon. All proceedings under Sections 10.2 through 10.4 and all evidence given or discovered pursuant hereto, shall be maintained in confidence by both parties, except as required by law. 11. No Rights in Equityholders, Creditors. This Agreement does not create, and will not be construed as creating, rights enforceable by any person or entity not a party hereto, except those entitled thereto by virtue of Section 7 herein. The Company acknowledges and agrees that (a) Cambria  will act as an independent contractor and is being retained solely to assist the Company in its efforts to help with possible Financing(s), and that, Cambria  is not being retained to advise the Company on, or to express any opinion as to, the wisdom, desirability or prudence of consummating any Financing; and (b) Cambria  is not and will not be construed as a fiduciary of the Company or any affiliate thereof and will have no duties or liabilities to the equity holders or creditors of the Company, and affiliates of the Company or any other person by virtue of this Agreement and the retention of Cambria  hereunder, all of which duties and liabilities are hereby expressly waived. Neither equity holders nor creditors of the Company are intended beneficiaries hereunder. The Company confirms that it will rely on its own counsel, accountants and other similar expert advisors for legal (including compliance with state and federal securities laws), accounting, tax and other similar advice. 12. Cambria ; Other Activities. 12.1 It is understood and agreed that Cambria  and/or its affiliates may, from time to time, make a market in, have a long or short position, buy and sell or otherwise affect transactions for customer accounts and for their own respective accounts in the securities of, or perform investment banking or other services for, the Company and other entities which are or may be the subject of the Engagement contemplated by this Agreement. This is to confirm that possible investors identified or contacted by Cambria  could include entities in respect of which Cambria  may have rendered or may in the future render services. 12.2 The Company acknowledges that Cambria  and its affiliates are in the business of providing financial services and consulting advice to others.  Nothing herein contained shall be construed to limit or restrict Cambria  in conducting such business with respect to others, or in rendering such advice to others, except as such advice may relate to matters relating to the Company’s business and properties which information shall be confidential. 12.3 The Company shall not make or issue any public announcements or other communications regarding or relating to this Agreement without the prior approval of Cambria , except as required by law. 13. Miscellaneous. 13.1 This Agreement may not be modified or amended except in writing executed in counterparts, each of which will be deemed an original and all of which will constitute one and the same instrument. 13.2 This Agreement supersedes all prior agreements between the parties concerning the subject matter hereof. 13.3 Neither party may assign this Agreement without the prior written consent of the other party. 13.4 If any provision of this Agreement shall for any reason be held invalid or unenforceable by any court, governmental agency or arbitrator of competent jurisdiction, such invalidity or unenforceability shall not affect any other provision hereof, but this Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 13.5 The provisions contained in Sections 3, 4, 5, 7, 8, 9, 10, 11 and 13 shall survive expiration or termination of this Agreement. 13.6 All notices, requests, demands and other communications hereunder shall be given in writing and shall be (a) personally delivered; (b) sent by telecopier; (c) sent by an internationally-recognized overnight courier, or (d) sent to the parties at their respective addresses indicated herein by registered or certified mail, return receipt requested and postage prepaid.  The respective addresses to be used for all such notices, demands or requests are as follows: If to the Company, Unity Wireless Corporation 7438 Fraser Park Drive Suite 2300 Burnaby, British Columbia V5J 5B9 Telecopier:   Attention: Ilan Kenig Or to such other person or address as the Company shall designate in writing to the other party. If to Cambria , Cambria Capital LLC 830 Third Avenue, 14th Floor New York, New York  10022 Telecopier: (212) 581-7010 Attention: David Fuchs with a copy to: The same address listed above for Cambria , Attn: General Counsel. If personally delivered or delivered via internally-recognized overnight courier, such communication shall be deemed delivered upon actual receipt; if transmitted by telecopier pursuant to this Section 13, such communication shall be deemed delivered the next business day after transmission (and sender shall bear the burden of proof of delivery); and if sent by mail pursuant to this Section 13, such communication shall be deemed delivered as of the fifth (5th) business day following deposit of such communication in the mail.  Either party to this Agreement may change its address at any time by giving notice thereof in accordance with this Section 13. If the foregoing correctly sets forth our Agreement, please so indicate by signing below and returning an executed copy to Cambria Capital LLC. This Agreement may be executed by the exchange by facsimile/telecopy or e-mail/electronic signature between the Parties of signed counterparts of this Agreement. We look forward to working with you and the rest of the management team in a long-term relationship that assists the Company in achieving its business goals. Sincerely, ACCEPTED AND APPROVED: Cambria Capital LLC Unity Wireless Corporation _________________________ ________________________ David Fuchs Ilan Kenig President President, Director and CEO Exhibit 10.1 Agreement with Cambria Capital EXHIBIT A – INDEMNIFICATION PROVISIONS In connection with our engagement of Cambria  as our consultant and advisor, the Company hereby agrees to indemnify and hold Cambria  and its affiliates (which, purposes of this indemnity, shall include Cambria Capital Group LLC, a Delaware limited liability company) and the directors, officers, partners, shareholders, members, employees and agents of Cambria  and each other person, if any, controlling Cambria  or any of its affiliates (collectively the “Indemnified Persons”), harmless from and against any and all claims, actions, suits, proceedings (including those of shareholders), damages, liabilities and expenses incurred by any of them (including, but not limited to, fees and expenses of counsel) which are (A) related to or arise out of (i) any actions taken or omitted to be taken (including any untrue statements made or any statements omitted to be made) by the Company, or (ii) any actions taken or omitted to be taken by any Indemnified Person in connection with the Company’s engagement of Cambria  pursuant to this Agreement between the Cambria  and the Company, or (B) otherwise related to or arising out of Cambria ’s activities on our behalf pursuant to Cambria ’s engagement under this Agreement, and the Company shall reimburse any Indemnified Person for all expenses (including, but not limited to, fees and expenses of counsel) as incurred by such Indemnified Person in connection with investigating, preparing or defending any such claim, action, suit or proceeding (collectively a “Claim”), whether or not in connection with pending or threatened litigation in which any Indemnified Person is a party.  The Company will not, however, be responsible for any Claim which is finally judicially determined to have resulted exclusively from the gross negligence or willful misconduct of any person seeking indemnification hereunder.  The Company further agrees that no Indemnified Person shall have any liability to the Company for or in connection with Cambria ’s engagement under the Agreement except for any Claim incurred by the Company solely as a direct result of any Indemnified Person’s gross negligence or willful misconduct. The Company further agrees that it will not, without the prior written consent of Cambria  settle, compromise or consent to the entry of any judgment in any pending or threatened Claim in respect of which indemnification may be sought hereunder (whether or not any Indemnified Person is an actual or potential party to such Claim), unless such settlement, compromise or consent includes a legally binding, unconditional, and irrevocable release of each Indemnified Person hereunder from any and all liability arising out of such Claim. Promptly upon receipt by an Indemnified Person of notice of any complaint or the assertion or institution of any Claim with respect to which indemnification is being sought hereunder, such Indemnified Person shall notify the Company in writing of such complaint or of such assertion or institution, but failure to so notify the Company shall not relieve the Company from any obligation it may have hereunder, unless, and only to the extent that, such failure results in the forfeiture by it of substantial rights and defenses, and such failure to so notify the Company will not in any event relieve it from any other obligation or liability it may have to any Indemnified Person otherwise than under this Agreement.  If the Company so elects or is requested by such Indemnified Person, it will assume the defense of such Claim, including the employment of counsel reasonably satisfactory to such Indemnified Person and the payment of the fees and expenses of such counsel.  In the event, however, that such Indemnified Person reasonably determines in its sole judgment that having common counsel would present such counsel with a conflict of interest or such Indemnified Person concludes that there may be legal defenses available to it or other Indemnified Persons different from or in addition to those available to the Company, then such Indemnified Person may employ its own separate counsel to represent or defend it in any such Claim and the Company shall pay the reasonable fees and expenses of such counsel.  Notwithstanding anything herein to the contrary, if the Company fails timely or diligently to defend, contest, or otherwise protect against any Claim, the relevant Indemnified Party shall have the right, but not the obligation, to defend, contest, compromise, settle, assert crossclaims or counterclaims, or otherwise protect against the same, and shall be fully indemnified by the Company therefor, including, but not limited to, for the fees and expenses of its counsel and all amounts paid as a result of such Claim or the compromise or settlement thereof.  In any Claim in which the Company assumes the defense, the Indemnified Person shall have the right to participate in such defense and to retain its own counsel therefor at its own expense. The Company agrees that if any indemnity sought by an Indemnified Person hereunder is held by a court to be unavailable for any reason, then (whether or not Cambria  is the Indemnified Person) the Company and Cambria  shall contribute to the Claim for which such indemnity is held unavailable in such proportion as is appropriate to reflect the relative benefits to the Company, on the one hand, and Cambria , on the other, in connection with Cambria ’s engagement by the Company under the Agreement, subject to the limitation that in no event shall the amount of Cambria ’s contribution to such Claim exceed the amount of fees actually received by Cambria  from the Company pursuant to Cambria ’s engagement under the Agreement.  The Company hereby agrees that the relative benefits to it, on the one hand, and Cambria , on the other hand, with respect to Cambria ’s engagement under the Agreement shall be deemed to be in the same proportion as (a) the total value paid or proposed to be paid or received by the Company or its stockholders as the case may be, pursuant to the transaction (whether or not consummated) for which Cambria  is engaged to render services bears to (b) the fee paid or proposed to be paid to Cambria  in connection with such engagement. The Company’s indemnity, reimbursement and contribution obligations under this Agreement shall be in addition to, and shall in no way limit or otherwise adversely affect any rights that an Indemnified Party may have at law or at equity. Should Cambria , or any of its directors, officers, partners, shareholders, members, agents or employees, be required or be requested by the Company to provide documentary evidence or testimony in connection with any proceeding arising from or relating to Cambria ’s engagement under the Agreement, the Company agrees to pay all reasonable expenses (including, but not limited to, fees and expenses of counsel) in complying therewith and customary fees for sworn testimony or preparation thereof, payable in advance.

Exhibit 10.1   INTRADO INC.   NONQUALIFIED DEFERRED COMPENSATION PLAN     Amended and Restated Effective January 1, 2005   --------------------------------------------------------------------------------   TABLE OF CONTENTS     Page     ARTICLE 1 INTRODUCTION 1       1.1 Purpose of Plan 1 1.2 Status of Plan 1 1.3 Code Section 409A Transition Rules 1       ARTICLE 2 DEFINITIONS 2       2.1 Account 2 2.2 Administrator 2 2.3 Change in Control 2 2.4 Code 2 2.5 Committee 2 2.6 Compensation 2 2.7 Director 2 2.8 Disability 2 2.9 Discretionary Incentive Contribution 2 2.10 Effective Date 2 2.11 Election Form 3 2.12 Elective Deferral 3 2.13 Eligible Employee 3 2.14 Employer 3 2.15 ERISA 3 2.16 Key Employee 3 2.17 Normal Retirement Age 3 2.18 Participant 3 2.19 Plan 3 2.20 Plan Year 3 2.21 Separation from Service 3 2.22 Trust 3 2.23 Trustee 4 2.24 Unforeseeable Emergency 4       ARTICLE 3 PARTICIPATION 5       3.1 Commencement of Participation 5 3.2 Continued Participation 5       ARTICLE 4 ELECTIVE DEFERRALS AND DISCRETIONARY CONTRIBUTIONS 6       4.1 Elective Deferrals 6 4.3 Discretionary Incentive Contributions 6 4.4 Deferral Elections 7   i --------------------------------------------------------------------------------   ARTICLE 5 ACCOUNTS 9       5.1 Accounts 9 5.2 Status of Accounts 9 5.3 Deemed Investment of Amounts Deferred 9 5.4 Earnings and Losses 10 5.5 Vesting 10       ARTICLE 6 RABBI TRUST 11       6.1 Establishment of Rabbi Trust 11 6.2 Funding the Trust 11 6.3 Claims of Creditors 11       ARTICLE 7 DISTRIBUTIONS 12       7.1 Permissible Payments 12 7.2 Election as to Time and Form of Payment 12 7.3 Distributions to Key Employees 12 7.4 Default Elections 12 7.5 Beneficiary 13 7.6 Unforeseeable Emergency 13 7.7 Taxes 13 7.8 Failure of Qualification 13 7.9 Section 162(m) Deferrals 13       ARTICLE 8 PLAN ADMINISTRATOR 14       8.1 Plan Administration 14 8.2 Books and Records 14 8.3 Reliance on Tables, Etc. 14 8.4 Expenses 14 8.5 Appeals Committee 15 8.6 Indemnification 15       ARTICLE 9 CLAIM REVIEW PROCEDURES 16       9.1 Initial Claims 16 9.2 Claim Denials 16 9.3 Appeals 16 9.4 Determination of Time Periods 16 9.5 Voluntary Arbitration 17       ARTICLE 10 GENERAL PROVISIONS 18       10.1 Prohibition Against Funding 18 10.2 Limitation of Rights 18 10.3 Inalienability of Benefits 18   ii --------------------------------------------------------------------------------   10.4 Distributions Due Minor or Incompetent Persons 18 10.5 Headings 18 10.6 Governing Law 18       ARTICLE 11 AMENDMENT AND TERMINATION 19       11.1 Amendment of Plan 19 11.2 Termination of Plan 19   iii --------------------------------------------------------------------------------   ARTICLE 1 INTRODUCTION   1.1                                 PURPOSE OF PLAN.  INTRADO INC., A DELAWARE CORPORATION, HEREBY AMENDS, RESTATES IN ITS ENTIRETY, AND RE-NAMES THE INTRADO INC. NONQUALIFIED DEFERRED COMPENSATION PLAN (FORMERLY THE SCC COMMUNICATIONS CORP. DEFERRED COMPENSATION PLAN) (THE “PLAN”), EFFECTIVE AS OF JANUARY 1, 2005, UNLESS OTHERWISE PROVIDED HEREIN, TO PERMIT ELIGIBLE EMPLOYEES AND DIRECTORS TO DEFER RECEIPT OF CERTAIN COMPENSATION PURSUANT TO THE TERMS AND PROVISIONS SET FORTH BELOW.   1.2                                 STATUS OF PLAN.  THIS PLAN IS INTENDED TO BE AN UNFUNDED, NONQUALIFIED DEFERRED COMPENSATION ARRANGEMENT FOR THE PURPOSE OF PROVIDING DEFERRED COMPENSATION TO “A SELECT GROUP OF MANAGEMENT OR HIGHLY-COMPENSATED EMPLOYEES” WITHIN THE MEANING OF SECTIONS 201(2), 301(A)(3), AND 401(A)(1) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED. THIS RESTATEMENT IS INTENDED TO COMPLY WITH CODE SECTION 409A AND THE REGULATIONS AND GUIDANCE PROMULGATED THEREUNDER, AND IS NOT INTENDED TO CONSTITUTE A MATERIAL MODIFICATION TO THE SUBSTANTIVE TERMS OF THE PLAN AS IN EFFECT HERETOFORE. NOTWITHSTANDING ANY OTHER PROVISION HEREIN, THIS PLAN SHALL BE INTERPRETED, OPERATED AND ADMINISTERED IN A MANNER CONSISTENT WITH THESE INTENTIONS.   1.3                                 CODE SECTION 409A TRANSITION RULES.  THE COMMITTEE, IN ITS SOLE AND ABSOLUTE DISCRETION, MAY OFFER TO ANY PARTICIPANT THE OPTION TO (I) TERMINATE PARTICIPATION IN THE PLAN AND TO RECEIVE IN 2005 A COMPLETE PAYOUT OF HIS OR HER VESTED ACCOUNT, IF ANY, (II) PERMIT IN 2005 NEW ELECTIONS AS TO TIME AND FORM OF PAYMENT FOR DEFERRALS OF COMPENSATION THAT WOULD NOT OTHERWISE BE PAYABLE UNDER THE PLAN IN 2005, PROVIDED THE ELECTIONS ARE CONSISTENT WITH THE REQUIREMENTS OF CODE SECTION 409A, OR (III) PERMIT IN 2006 NEW ELECTIONS AS TO TIME AND FORM OF PAYMENT FOR DEFERRALS OF COMPENSATION THAT WOULD NOT OTHERWISE BE PAYABLE UNDER THE PLAN IN 2006, PROVIDED THE ELECTIONS ARE CONSISTENT WITH THE REQUIREMENTS OF CODE SECTION 409A.  ANY ELECTIONS MADE UNDER THIS SECTION SHALL BE ADMINISTERED BY THE COMMITTEE IN ACCORDANCE WITH INTERNAL REVENUE SERVICE NOTICE 2005-1, PROPOSED TREASURY REGULATIONS §1.409A-1 ET SEQ. AND ANY SUCCESSOR LEGISLATION OR GUIDANCE THAT AMENDS, SUPPLEMENTS OR REPLACES SUCH GUIDANCE.   *  *  *  *  END OF ARTICLE 1  *  *  *  *   1 --------------------------------------------------------------------------------   ARTICLE 2 DEFINITIONS   Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context:   2.1                                 ACCOUNT MEANS, FOR EACH PARTICIPANT, THE ACCOUNT ESTABLISHED FOR HIS OR HER BENEFIT UNDER SECTION 5.1.   2.2                                 ADMINISTRATOR MEANS THE EMPLOYER OR SUCH OTHER PERSON OR COMMITTEE AS MAY BE APPOINTED FROM TIME TO TIME BY THE EMPLOYER TO SUPERVISE THE ADMINISTRATION OF THE PLAN.   2.3                                 CHANGE IN CONTROL MEANS A CHANGE IN THE OWNERSHIP OR EFFECTIVE CONTROL OF THE EMPLOYER, OR IN THE OWNERSHIP OF A SUBSTANTIAL PORTION OF THE ASSETS OF THE EMPLOYER, AS DEFINED IN SECTION 409A OF THE CODE AND THE REGULATIONS THEREUNDER, AND ANY SUCCESSOR LEGISLATION OR GUIDANCE THAT AMENDS, SUPPLEMENTS, OR REPLACES SUCH SECTION OR SUBSECTION.   2.4                                 CODE MEANS THE INTERNAL REVENUE CODE OF 1986, AS AMENDED FROM TIME TO TIME.  REFERENCE TO ANY SECTION OR SUBSECTION OF THE CODE INCLUDES REFERENCE TO ANY COMPARABLE OR SUCCEEDING PROVISIONS OF ANY LEGISLATION THAT AMENDS, SUPPLEMENTS OR REPLACES SUCH SECTION OR SUBSECTION.   2.5                                 COMMITTEE MEANS THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF INTRADO, INC.   2.6                                 COMPENSATION MEANS THE PARTICIPANT’S WAGES, SALARIES, FEES FOR PROFESSIONAL SERVICES RENDERED AND OTHER AMOUNTS RECEIVED (WHETHER SUCH AMOUNTS ARE PAID IN CASH, EQUITY OR PROPERTY) FOR PERSONAL SERVICES ACTUALLY RENDERED IN THE COURSE OF EMPLOYMENT WITH THE EMPLOYER OR AFFILIATE TO THE EXTENT THAT THE AMOUNTS ARE INCLUDABLE IN GROSS INCOME, INCLUDING BUT NOT LIMITED TO COMMISSIONS PAID TO SALESPERSONS, COMPENSATION FOR SERVICES ON THE BASIS OF A PERCENTAGE OF PROFITS, COMMISSIONS ON INSURANCE PREMIUMS, TIPS, BONUSES, FRINGE BENEFITS, REIMBURSEMENTS, AND EXPENSE ALLOWANCES, BUT NOT INCLUDING THOSE ITEMS EXCLUDABLE FROM THE DEFINITION OF COMPENSATION UNDER TREASURY REGULATIONS SECTION 1.415-2(D)(3).   2.7                                 DIRECTOR MEANS AN INDIVIDUAL WHO SERVES AS A MEMBER OF THE BOARD OF DIRECTORS OF INTRADO, INC.   2.8                                 DISABILITY MEANS ANY MEDICALLY DETERMINABLE PHYSICAL OR MENTAL IMPAIRMENT THAT RENDERS A PARTICIPANT UNABLE TO ENGAGE IN ANY SUBSTANTIAL GAINFUL ACTIVITY AND WHICH CAN BE EXPECTED TO LAST FOR A CONTINUOUS PERIOD OF NOT LESS THAN 12 MONTHS AND/OR TO RESULT IN DEATH, AS DEFINED IN CODE SECTION 409A AND DETERMINED UNDER ANY LONG TERM DISABILITY PLAN SPONSORED BY THE EMPLOYER.   2.9                                 DISCRETIONARY INCENTIVE CONTRIBUTION MEANS A DISCRETIONARY ADDITIONAL CONTRIBUTION MADE BY THE EMPLOYER AS DESCRIBED IN SECTION 4.3.   2.10                           EFFECTIVE DATE MEANS JUNE 1, 2001, THE DATE ON WHICH THE PLAN FIRST BECAME EFFECTIVE.   2 --------------------------------------------------------------------------------   2.11                           ELECTION FORM MEANS THE PARTICIPATION ELECTION FORM AS APPROVED AND PRESCRIBED BY THE ADMINISTRATOR.   2.12                           ELECTIVE DEFERRAL MEANS THE PORTION OF COMPENSATION THAT IS DEFERRED BY A PARTICIPANT UNDER SECTION 4.1, IF ANY.   2.13                           ELIGIBLE EMPLOYEE MEANS, ON THE EFFECTIVE DATE OR ON ANY ENTRY DATE THEREAFTER, EACH EMPLOYEE SELECTED BY THE COMMITTEE TO PARTICIPATE IN THE PLAN.   2.14                           EMPLOYER MEANS INTRADO INC., ANY SUCCESSOR TO ALL OR A MAJOR PORTION OF THE EMPLOYER’S ASSETS OR BUSINESS THAT ASSUMES THE OBLIGATIONS OF THE EMPLOYER, AND ANY OTHER CORPORATION OR UNINCORPORATED TRADE OR BUSINESS THAT HAS ADOPTED THE PLAN WITH THE APPROVAL OF THE EMPLOYER, AND IS A MEMBER OF THE SAME CONTROLLED GROUP OF CORPORATIONS OR THE SAME GROUP OF TRADES OR BUSINESSES UNDER COMMON CONTROL (WITHIN THE MEANING OF CODE SECTIONS 414(B) AND 414(C)) AS THE EMPLOYER, OR AN AFFILIATED SERVICE GROUP (AS DEFINED IN CODE SECTION 414(M)) WHICH INCLUDES THE EMPLOYER, OR ANY OTHER ENTITY REQUIRED TO BE AGGREGATED WITH THE EMPLOYER PURSUANT TO REGULATIONS UNDER CODE SECTIONS 414(O) AND 409A OR ANY OTHER AFFILIATED ENTITY THAT IS DESIGNATED BY THE EMPLOYER AS ELIGIBLE TO ADOPT THE PLAN.   2.15                           ERISA MEANS THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED FROM TIME TO TIME.  REFERENCE TO ANY SECTION OR SUBSECTION OF ERISA INCLUDES REFERENCE TO ANY COMPARABLE OR SUCCEEDING PROVISIONS OF ANY LEGISLATION THAT AMENDS, SUPPLEMENTS OR REPLACES SUCH SECTION OR SUBSECTION.   2.16                           KEY EMPLOYEE MEANS AN EMPLOYEE OF THE EMPLOYER TREATED AS A “SPECIFIED EMPLOYEE” UNDER CODE SECTION 409A(A)(2)(B)(I), I.E., A KEY EMPLOYEE (AS DEFINED IN CODE SECTION 416(I) WITHOUT REGARD TO PARAGRAPH 5 THEREOF) OF A CORPORATION FOR SO LONG AS ANY OF ITS STOCK IS PUBLICLY TRADED ON AN ESTABLISHED SECURITIES MARKET OR OTHERWISE.   2.17                           NORMAL RETIREMENT AGE MEANS AGE 55.   2.18                           PARTICIPANT MEANS ANY INDIVIDUAL WHO PARTICIPATES IN THE PLAN IN ACCORDANCE WITH ARTICLE 3.   2.19                           PLAN MEANS THE INTRADO INC. NONQUALIFIED DEFERRED COMPENSATION PLAN AS SET FORTH HEREIN AND ITS PREDECESSOR PLAN KNOWN AS THE SCC COMMUNICATIONS CORPORATE DEFERRED COMPENSATION PLAN, TOGETHER WITH ANY AND ALL AMENDMENTS AND SUPPLEMENTS THERETO.   2.20                           PLAN YEAR MEANS THE PERIOD BEGINNING ON THE EFFECTIVE DATE AND ENDING ON DECEMBER 31, 2001, AND EACH CALENDAR YEAR THEREAFTER.   2.21                           SEPARATION FROM SERVICE MEANS A TERMINATION OF EMPLOYMENT FOR ANY REASON OTHER THAN MILITARY LEAVE, SICK LEAVE OR OTHER BONA FIDE LEAVE OF ABSENCE, AS PROVIDED IN CODE SECTION 409A AND THE REGULATIONS PROMULGATED THEREUNDER AND ANY LEGISLATION OR GUIDANCE THAT AMENDS, SUPPLEMENTS, OR REPLACES SUCH SECTION OR SUBSECTION.   2.22                           TRUST SHALL HAVE THE MEANING SET FORTH IN SECTION 6.1.   3 --------------------------------------------------------------------------------   2.23                           TRUSTEE SHALL HAVE THE MEANING SET FORTH IN SECTION 6.1.   2.24                           UNFORESEEABLE EMERGENCY MEANS A SEVERE FINANCIAL HARDSHIP TO THE PARTICIPANT RESULTING FROM AN ILLNESS OR ACCIDENT OF THE PARTICIPANT, THE PARTICIPANT’S SPOUSE OR DEPENDENT, LOSS OF THE PARTICIPANT’S PROPERTY DUE TO CASUALTY, OR OTHER SIMILAR EXTRAORDINARY AND UNFORESEEABLE CIRCUMSTANCES THAT IS CAUSED BY AN EVENT BEYOND THE CONTROL OF THE PARTICIPANT, AND THAT WOULD RESULT IN SEVERE FINANCIAL HARDSHIP TO THE PARTICIPANT IF EARLY DISTRIBUTION WERE NOT PERMITTED.   *  *  *  *  END OF ARTICLE 2  *  *  *  *   4 --------------------------------------------------------------------------------   ARTICLE 3 PARTICIPATION   3.1                                 COMMENCEMENT OF PARTICIPATION.  ANY ELIGIBLE EMPLOYEE AND DIRECTOR WHO ELECTS TO DEFER PART OF HIS OR HER COMPENSATION IN ACCORDANCE WITH SECTION 4.1 SHALL BECOME A PARTICIPANT IN THE PLAN AS OF THE DATE SUCH DEFERRALS COMMENCE.  ANY INDIVIDUAL WHO IS NOT ALREADY A PARTICIPANT AND WHOSE ACCOUNT IS CREDITED WITH A DISCRETIONARY INCENTIVE CONTRIBUTION SHALL BECOME A PARTICIPANT AS OF THE DATE SUCH AMOUNT IS CREDITED.   3.2                                 CONTINUED PARTICIPATION.  A PARTICIPANT IN THE PLAN SHALL CONTINUE TO BE A PARTICIPANT SO LONG AS ANY AMOUNT REMAINS CREDITED TO HIS OR HER ACCOUNT.   *  *  *  *  END OF ARTICLE 3  *  *  *  *   5 --------------------------------------------------------------------------------   ARTICLE 4 ELECTIVE DEFERRALS AND DISCRETIONARY CONTRIBUTIONS   4.1                                 ELECTIVE DEFERRALS.  AN INDIVIDUAL WHO WAS A PARTICIPANT ON OR BEFORE DECEMBER 31, 2004 MAY HAVE ELECTED, ON OR BEFORE MARCH 15, 2005, TO DEFER AN AMOUNT OF COMPENSATION HE OR SHE WOULD OTHERWISE BE ENTITLED TO RECEIVE FOR SERVICES PERFORMED ON OR BEFORE DECEMBER 31, 2005 UNDER THE RELEVANT PROVISIONS OF THE PLAN AS WERE THEN IN EFFECT.  ANY ELECTIONS MADE UNDER THIS SECTION 4.1 ARE IRREVOCABLE EXCEPT AS OTHERWISE PROVIDED UNDER SECTION 1.3.   Any individual who participates in the Plan on or after January 1, 2005 may elect to defer an amount of Compensation he or she would otherwise be entitled to receive for a Plan Year in accordance with the rules set forth in Section 4.4 below. Elections made under Section 4.4 may be changed at any time prior to the last permissible date for making such election, as permitted by Code section 409A and described in Section 4.4 below, at which time the election shall become irrevocable.  All deferral elections must be made in writing on a form prescribed by the Administrator and will be effective only when filed with the Administrator.   4.2                                 Deferral of Noncompete Payments.  If required by the terms of any noncompete agreement between the Company and an employee of the Company, any amounts due by the Company to employee under such agreement are required to be deferred under this Plan, then such employee shall be deemed an Eligible Employee, and amounts due to the employee under such noncompete agreement shall be credited to an Account established for the benefit of such employee (or to a separate sub-account of the employee’s Account if the employee is otherwise a Participant) as required under the noncompete agreement.  Distributions from such Account shall be made in accordance with such noncompete agreement, provided that, if the employee is a Key Employee, no portion of the Account shall be distributed to the employee prior to the first day of the seventh (7th) month following the employee’s Separation from Service or, if earlier, the first day consistent with the requirements of Code section 409A(a)(2)(B)(i).   4.3                                 DISCRETIONARY INCENTIVE CONTRIBUTIONS.  IN ADDITION TO OTHER CONTRIBUTIONS PROVIDED FOR UNDER THE PLAN, THE EMPLOYER MAY, IN ITS SOLE AND ABSOLUTE DISCRETION, ELECT TO MAKE A DISCRETIONARY INCENTIVE CONTRIBUTION TO THE ACCOUNT OF ANY, SOME OR ALL OF THE PARTICIPANTS.  NOTHING IN THIS PLAN, HOWEVER, SHALL OBLIGATE THE EMPLOYER TO MAKE DISCRETIONARY INCENTIVE CONTRIBUTIONS FOR THE BENEFIT OF PLAN PARTICIPANTS IN ANY PLAN YEAR.  THE EMPLOYER EXPRESSLY RETAINS THE RIGHT TO MAKE DISCRETIONARY INCENTIVE CONTRIBUTIONS TO SUCH PARTICIPANTS IN SUCH AMOUNTS OR SUCH PROPORTIONS AS IT DEEMS WARRANTED OR APPROPRIATE.  NOTHING IN THIS PLAN OR ANY OTHER AGREEMENT OR DOCUMENT SHALL REPRESENT OR BE CONSTRUED TO REPRESENT AN OBLIGATION OR PROMISE OF THE EMPLOYER TO MAKE DISCRETIONARY INCENTIVE CONTRIBUTIONS ON BEHALF OF A PARTICIPANT AT ANY TIME.  IN THE EVENT A DISCRETIONARY INCENTIVE CONTRIBUTION IS MADE ON BEHALF OF A PARTICIPANT, THE DISCRETIONARY INCENTIVE CONTRIBUTION SHALL BE DISTRIBUTED IN ACCORDANCE WITH THE PARTICIPANT’S DISTRIBUTION ELECTIONS IN EFFECT FOR ELECTIVE DEFERRALS OF COMPENSATION FOR SERVICES PERFORMED IN THE YEAR IN WHICH THE EMPLOYER MAKES THE DISCRETIONARY INCENTIVE CONTRIBUTION, OR, IF NO ELECTIVE DEFERRALS ARE IN EFFECT, UPON THE PARTICIPANT’S SEPARATION FROM SERVICE, SUBJECT TO SECTION 7.3 IF APPLICABLE, IN THE FORM OF A SINGLE LUMP SUM.   6 --------------------------------------------------------------------------------   4.4                                 DEFERRAL ELECTIONS.   (A)                                  INITIAL ELECTION:  EXCEPT PROVIDED IN PARAGRAPHS (B) AND (C) OF THIS SECTION 4.4, A PARTICIPANT MAY ELECT TO DEFER AN AMOUNT OF COMPENSATION FOR SERVICES PERFORMED DURING A PLAN YEAR NO LATER THAN THE LAST DAY OF THE PLAN YEAR PRECEDING THE PLAN YEAR IN WHICH THE AMOUNT BEING DEFERRED WOULD OTHERWISE BE MADE AVAILABLE TO THE PARTICIPANT.   (B)                                 INITIAL YEAR OF ELIGIBILITY:  NOTWITHSTANDING THE PROVISIONS OF SECTION 4.4(A), IN THE CASE OF A PARTICIPANT’S INITIAL YEAR OF ELIGIBILITY UNDER THIS PLAN, THE PARTICIPANT MAY MAKE A DEFERRAL ELECTION WITH RESPECT TO COMPENSATION FOR SERVICES TO BE PERFORMED SUBSEQUENT TO SUCH DEFERRAL ELECTION, PROVIDED SUCH ELECTION IS MADE NO LATER THAN 30 DAYS AFTER THE DATE THE PARTICIPANT FIRST BECOMES ELIGIBLE TO PARTICIPATE IN THIS PLAN.   (C)                                  PERFORMANCE-BASED COMPENSATION:  NOTWITHSTANDING THE PROVISIONS OF SECTION 4.4(A), IN THE CASE OF “PERFORMANCE-BASED COMPENSATION”, AS DEFINED UNDER CODE SECTION 409A AND DETERMINED BY THE ADMINISTRATOR, WHICH IS BASED ON SERVICES PERFORMED OVER A PERIOD OF AT LEAST 12 MONTHS, A PARTICIPANT MAY MAKE AN INITIAL ELECTION TO DEFER AN AMOUNT OF SUCH COMPENSATION NO LATER THAN 6 MONTHS BEFORE THE END OF THE PERIOD TO WHICH SUCH PERFORMANCE-BASED COMPENSATION APPLIES.  ANY REDEFERRAL OF SUCH AMOUNTS SHALL BE MADE AS PROVIDED IN SECTION 4.4(F).   (D)                                 TERM OF INITIAL ELECTION.  A DEFERRAL ELECTION SHALL BE EFFECTIVE FOR THE ENTIRE PLAN YEAR TO WHICH IT RELATES AND MAY NOT BE MODIFIED OR TERMINATED FOR THAT PLAN YEAR, EXCEPT THAT A PARTICIPANT MAY CANCEL, AND NOT POSTPONE OR OTHERWISE DELAY, HIS OR HER DEFERRAL ELECTION DURING A PLAN YEAR IN THE EVENT OF AN UNFORESEEABLE EMERGENCY.   (E)                                  SUBSEQUENT ELECTIONS. WITH RESPECT TO PLAN YEARS FOLLOWING A PARTICIPANT’S INITIAL YEAR OF PARTICIPATION IN THE PLAN, FAILURE TO COMPLETE A SUBSEQUENT ELECTION BY THE DEADLINE PROVIDED IN PARAGRAPHS (A) OR (C) OF THIS SECTION 4.4, AS APPLICABLE, SHALL CONSTITUTE A WAIVER OF THE PARTICIPANT’S RIGHT TO ELECT A DIFFERENT AMOUNT OF COMPENSATION TO BE DEFERRED FOR EACH SUCH PLAN YEAR AND SHALL BE CONSIDERED AN AFFIRMATION AND RATIFICATION TO CONTINUE THE PARTICIPANT’S EXISTING DEFERRAL ELECTION. HOWEVER, A PARTICIPANT MAY, PRIOR TO THE BEGINNING OF ANY PLAN YEAR, ELECT TO INCREASE OR DECREASE THE AMOUNT OF COMPENSATION TO BE DEFERRED FOR THE NEXT FOLLOWING PLAN YEAR BY FILING ANOTHER DEFERRAL ELECTION FORM WITH THE ADMINISTRATOR IN ACCORDANCE WITH PARAGRAPHS (A) OR (C) OF THIS SECTION 4.4, AS APPLICABLE.   (F)                                    REDEFERRAL ELECTIONS.  A PARTICIPANT MAY ELECT TO REDEFER A PREVIOUSLY DEFERRED AMOUNT AND POSTPONE DISTRIBUTION OF SUCH AMOUNT IF (I) THE REDEFERRAL ELECTION IS MADE NO LESS THAN 12 MONTHS BEFORE THE DISTRIBUTION IS SCHEDULED TO BE MADE; (II) THE REDEFERRAL ELECTION TAKES EFFECT NO EARLIER THAN 12 MONTHS AFTER THE DATE ON WHICH SUCH ELECTION IS MADE; AND (III) THE AMOUNT IS REDEFERRED FOR A PERIOD OF NO LESS THAN 5 ADDITIONAL YEARS FROM THE DATE THE AMOUNT WOULD BE MADE AVAILABLE TO   7 --------------------------------------------------------------------------------   THE PARTICIPANT IF NOT FOR THE SUBSEQUENT REDEFERRAL.  DURING THE REDEFERRAL PERIOD, REDEFERRED AMOUNTS MAY BE DISTRIBUTED ON ACCOUNT OF DEATH, DISABILITY OR UNFORESEEABLE EMERGENCY, BUT NOT ON ACCOUNT OF CHANGE IN CONTROL OR SEPARATION FROM SERVICE.   *  *  *  *  END OF ARTICLE 4  *  *  *  *   8 --------------------------------------------------------------------------------   ARTICLE 5 ACCOUNTS   5.1                                 ACCOUNTS.  THE ADMINISTRATOR SHALL ESTABLISH AN ACCOUNT AND SUB-ACCOUNTS FOR EACH PARTICIPANT AS ARE NECESSARY FOR THE PROPER ADMINISTRATION OF THE PLAN.  SUCH ACCOUNTS SHALL REFLECT ELECTIVE DEFERRALS AND DISCRETIONARY INCENTIVE CONTRIBUTIONS MADE FOR THE PARTICIPANT’S BENEFIT TOGETHER WITH ANY ADJUSTMENTS FOR INCOME, GAIN OR LOSS AND ANY PAYMENTS FROM THE ACCOUNT AS PROVIDED HEREIN.  AMOUNTS DEFERRED BY A PARTICIPANT UNDER ARTICLE 4 SHALL BE CREDITED TO THE PARTICIPANT’S ACCOUNT AS SOON AS ADMINISTRATIVELY PRACTICABLE AFTER THE AMOUNTS WOULD HAVE OTHERWISE BEEN PAID TO THE PARTICIPANT.  AS OF THE LAST BUSINESS DAY OF EACH CALENDAR QUARTER, THE ADMINISTRATOR SHALL PROVIDE THE PARTICIPANT WITH A STATEMENT OF HIS OR HER ACCOUNT REFLECTING THE INCOME, GAINS AND LOSSES (REALIZED AND UNREALIZED), AMOUNTS OF DEFERRALS, AND DISTRIBUTIONS FROM SUCH ACCOUNT SINCE THE PRIOR STATEMENT.   5.2                                 STATUS OF ACCOUNTS.  ACCOUNTS AND SUB-ACCOUNTS ESTABLISHED HEREUNDER SHALL BE RECORD-KEEPING DEVICES UTILIZED FOR THE SOLE PURPOSE OF DETERMINING BENEFITS PAYABLE UNDER THE PLAN, AND WILL NOT CONSTITUTE A SEPARATE FUND OF ASSETS BUT SHALL CONTINUE FOR ALL PURPOSES TO BE PART OF THE GENERAL, UNRESTRICTED ASSETS OF THE EMPLOYER, SUBJECT TO THE CLAIMS OF ITS GENERAL CREDITORS.   5.3                                 DEEMED INVESTMENT OF AMOUNTS DEFERRED.   (A)                                  FOR PURPOSES OF DETERMINING THE AMOUNTS TO BE CREDITED OR DEBITED TO A PARTICIPANT’S ACCOUNT, A PARTICIPANT MAY, AT THE TIME OF HIS OR HER DEFERRAL ELECTION, SELECT FROM AMONG THE INVESTMENT OPTIONS APPROVED BY THE EMPLOYER THOSE INVESTMENTS IN WHICH ALL OR PART OF HIS OR HER ACCOUNT (AND SUB-ACCOUNTS, IF ANY) SHALL BE DEEMED INVESTED.  SUCH INVESTMENT DESIGNATION SHALL BE MADE IN THE MANNER SPECIFIED BY THE ADMINISTRATOR.   (B)                                 THE PARTICIPANT’S INVESTMENT DESIGNATION SHALL REMAIN EFFECTIVE UNTIL HE OR SHE AMENDS SUCH INVESTMENT DESIGNATION AT SUCH TIMES (NOT LESS FREQUENTLY THAN MONTHLY) AND IN SUCH MANNER AS PRESCRIBED BY THE ADMINISTRATOR.  CHANGES TO A PARTICIPANT’S INVESTMENT DESIGNATION SHALL BECOME EFFECTIVE AS SOON AS ADMINISTRATIVELY PRACTICABLE.  IN NO EVENT SHALL ANY PARTICIPANT BE ENTITLED TO PROVIDE INVESTMENT DIRECTIONS FOR ANY INVESTMENTS OTHER THAN DEEMED INVESTMENTS.   (C)                                  A PARTICIPANT MAY DESIGNATE THAT ANY STOCK OF THE EMPLOYER CREDITED TO THE PARTICIPANT’S ACCOUNT BE TREATED AS SOLD AND THE PROCEEDS OF SUCH SALE DEEMED INVESTED IN ANY OTHER SPECIFIED DEEMED INVESTMENT OPTIONS THAT ARE AVAILABLE, IN WHICH EVENT THE ADMINISTRATOR SHALL COMPLY WITH SUCH REQUEST AS SOON AS ADMINISTRATIVELY PRACTICABLE.   (D)                                 A PARTICIPANT MAY APPOINT AN INVESTMENT ADVISOR TO ACT ON HIS OR HER BEHALF, OR REMOVE AN INVESTMENT ADVISOR, PROVIDED THE PARTICIPANT NOTIFIES THE EMPLOYER OF SUCH APPOINTMENT OR REMOVAL IN WRITING.   (E)                                  AS SOON AS ADMINISTRATIVELY PRACTICABLE AFTER THE ADOPTION OF THIS PLAN, AS AMENDED AND RESTATED HEREIN, DEEMED INVESTMENT OPTIONS SHALL BE AVAILABLE IN A   9 --------------------------------------------------------------------------------   REASONABLY WIDE RANGE OF MUTUAL FUNDS AND PUBLICLY TRADED STOCKS AND BONDS FOR THE PURPOSE OF CREDITING EARNINGS AND LOSSES UNDER SECTIONS 5.1, 5.3 AND 5.4.  IN NO EVENT SHALL ANY PORTION OF A PARTICIPANT’S ACCOUNT BE DEEMED TO BE INVESTED IN ANY STOCK OF THE EMPLOYER OR A SUCCESSOR COMPANY UNLESS SO ELECTED BY THE PARTICIPANT IN ACCORDANCE WITH THIS SECTION 5.3.  FOLLOWING A CHANGE IN CONTROL, NEITHER THE COMMITTEE NOR THE ADMINISTRATOR MAY ELIMINATE ONE OR MORE DEEMED INVESTMENT OPTIONS EXISTING IMMEDIATELY PRIOR TO SUCH CHANGE IN CONTROL WITHOUT SUBSTITUTING THEREFOR REASONABLY SIMILAR NEW DEEMED INVESTMENT OPTIONS.   5.4                                 EARNINGS AND LOSSES.  THE INVESTMENT DESIGNATION OF DEFERRED AMOUNTS UNDER SECTION 5.3 IS SOLELY FOR THE PURPOSE OF COMPUTING GAINS AND LOSSES PERTAINING TO COMPENSATION AMOUNTS DEFERRED HEREUNDER. EACH PARTICIPANT’S ACCOUNT SHALL BE PERIODICALLY ADJUSTED WITH GAINS AND LOSSES BASED ON THE RESULTS THAT WOULD HAVE BEEN ACHIEVED HAD DEFERRED AMOUNTS ACTUALLY BEEN INVESTED AS DIRECTED BY THE PARTICIPANT. NOTHING IN THIS SECTION OR OTHERWISE, HOWEVER, WILL REQUIRE THE EMPLOYER TO ACTUALLY MAINTAIN INVESTMENTS CORRESPONDING TO THE PARTICIPANTS’ INVESTMENT ELECTIONS.  IN THE EVENT THE EMPLOYER MAKES ACTUAL INVESTMENTS CORRESPONDING TO PARTICIPANTS’ ELECTIONS, NO PARTICIPANT OR BENEFICIARY WILL HAVE ANY RIGHTS OR BENEFICIAL INTEREST IN SUCH ACTUAL INVESTMENTS OTHER THAN THEIR RIGHTS AS UNSECURED CREDITORS OF THE EMPLOYER.   5.5                                 VESTING.  A PARTICIPANT SHALL AT ALL TIMES BE 100% VESTED IN ANY AMOUNTS CREDITED TO HIS OR HER ACCOUNT.   *  *  *  *  END OF ARTICLE 5  *  *  *  *   10 --------------------------------------------------------------------------------   ARTICLE 6 RABBI TRUST   6.1                                 ESTABLISHMENT OF RABBI TRUST.  THE COMPANY ESTABLISHED AN IRREVOCABLE RABBI TRUST FOR THE BENEFIT OF PARTICIPANTS AND THEIR BENEFICIARIES, AS APPROPRIATE (THE “TRUST).  THE TRUST IS GOVERNED BY A TRUST AGREEMENT AND HAS AN INDEPENDENT TRUSTEE (SUCH TRUSTEE HAS A FIDUCIARY DUTY TO CARRY OUT THE TERMS AND CONDITIONS OF THE RABBI TRUST) SELECTED BY THE EMPLOYER (THE “TRUSTEE”), AND HAS RESTRICTIONS AS TO THE EMPLOYER’S ABILITY TO AMEND THE TRUST OR TO CANCEL BENEFITS PROVIDED THEREUNDER.   6.2                                 FUNDING THE TRUST.  THE EMPLOYER SHALL PAY TO THE TRUST AMOUNTS DEFERRED UNDER ARTICLE 4 AS SOON AS ADMINISTRATIVELY PRACTICABLE AFTER THE AMOUNTS WOULD HAVE OTHERWISE BEEN PAID TO THE PARTICIPANT, LESS APPLICABLE TAXES REQUIRED TO BE WITHHELD, IF ANY.   6.3                                 CLAIMS OF CREDITORS.  THE ASSETS OF THE TRUST SHALL REMAIN SUBJECT TO THE CLAIMS OF THE GENERAL CREDITORS OF THE EMPLOYER IN THE EVENT OF AN INSOLVENCY OF THE EMPLOYER.   *  *  *  *  END OF ARTICLE 6*  *  *  *   11 --------------------------------------------------------------------------------   ARTICLE 7 DISTRIBUTIONS   7.1                                 PERMISSIBLE PAYMENTS.  PARTICIPANTS MAY ELECT TO RECEIVE AMOUNTS DEFERRED UNDER THIS PLAN UPON ANY OF THE FOLLOWING EVENTS, EACH A “DISTRIBUTION EVENT,” EXCEPT AS OTHERWISE PROVIDED IN SECTION 4.4(F).  ALL PAYMENTS SHALL BE MADE OR BEGIN TO BE MADE WITHIN 10 CALENDAR DAYS FOLLOWING THE OCCURRENCE OF THE APPLICABLE DISTRIBUTION EVENT, EXCEPT AS OTHERWISE PROVIDED IN SECTIONS 7.3 AND 7.8.   (1)                                  THE PARTICIPANT’S DISABILITY;   (2)                                  A TIME OR SCHEDULE SPECIFIED AT THE TIME EACH AMOUNT IS DEFERRED;   (3)                                  A CHANGE IN CONTROL;   (4)                                  THE PARTICIPANT’S SEPARATION FROM SERVICE;   (5)                                  THE PARTICIPANT’S UNFORESEEABLE EMERGENCY; OR   (6)                                  PARTICIPANT’S DEATH.   7.2                                 ELECTION AS TO TIME AND FORM OF PAYMENT.  AT THE TIME OF EACH DEFERRAL ELECTION, THE PARTICIPANT SHALL SPECIFY THE DATE OR DISTRIBUTION EVENT UPON WHICH PAYMENT OF THE DEFERRED AMOUNT (AND EARNINGS THEREON) IS TO COMMENCE, AND THE FORM OF PAYMENT OF THE DEFERRED AMOUNT (AND EARNINGS THEREON).  FOR EACH DEFERRED AMOUNT, A PARTICIPANT MAY ELECT TO RECEIVE PAYMENT IN THE FORM OF   (A)                                  A SINGLE LUMP-SUM DISTRIBUTION; OR   (B)                                 IN ANNUAL INSTALLMENTS OVER A PERIOD ELECTED BY THE PARTICIPANT NOT TO EXCEED 10 YEARS.  EACH INSTALLMENT PAYMENT SHALL EQUAL THE BALANCE OF THE PARTICIPANT’S ACCOUNT IMMEDIATELY PRIOR TO THE INSTALLMENT, DIVIDED BY THE NUMBER OF INSTALLMENTS REMAINING TO BE PAID; PROVIDED HOWEVER, THAT IF A PARTICIPANT DIES AFTER INSTALLMENT PAYMENTS COMMENCE BUT BEFORE ALL PAYMENT HAVE BEEN MADE, ALL REMAINING AMOUNTS WILL BE PAID TO HIS OR HER BENEFICIARY IN A SINGLE LUMP SUM NO LATER THAN 60 DAYS AFTER THE DEATH OF THE PARTICIPANT.  FOR PURPOSES OF A REDEFERRAL ELECTION MADE UNDER SECTION 4.4(F), AN ELECTION TO RECEIVE PAYMENT OF COMPENSATION IN ANNUAL INSTALLMENT PAYMENTS SHALL BE TREATED AS A SINGLE PAYMENT MADE ON THE FIRST OF SUCH INSTALLMENTS.   7.3                                 DISTRIBUTIONS TO KEY EMPLOYEES.  IN THE CASE OF A DISTRIBUTION TO A KEY EMPLOYEE ON ACCOUNT OF HIS OR HER SEPARATION FROM SERVICE, THE DISTRIBUTION MAY NOT COMMENCE BEFORE THE DATE THAT IS SIX (6) MONTHS AFTER THE DATE OF THE KEY EMPLOYEE’S SEPARATION FROM SERVICE.   7.4                                 DEFAULT ELECTIONS.  IF A PARTICIPANT FAILS TO SPECIFY THE DATE ON WHICH PAYMENT OF THE DEFERRED AMOUNT (AND EARNINGS THEREON) IS TO BEGIN, THE PARTICIPANT WILL BE DEEMED TO HAVE ELECTED DISTRIBUTION UPON SEPARATION FROM SERVICE, SUBJECT TO SECTION 7.3 IF APPLICABLE, IN THE FORM OF A SINGLE LUMP SUM.   12 --------------------------------------------------------------------------------   7.5                                 BENEFICIARY.  IF A PARTICIPANT DIES PRIOR TO THE COMPLETE DISTRIBUTION OF HIS OR HER ACCOUNT, THE BALANCE OF THE ACCOUNT SHALL BE PAID TO THE PARTICIPANT’S DESIGNATED BENEFICIARY IN A SINGLE LUMP-SUM PAYMENT WITHIN 60 DAYS OF THE PARTICIPANT’S DEATH.  EACH PARTICIPANT MAY FROM TIME TO TIME DESIGNATE ONE OR MORE PERSONS AS HIS OR HER BENEFICIARY, AND MAY CHANGE SUCH DESIGNATION FROM TIME TO TIME, WITHOUT THE CONSENT OF ANY PRIOR BENEFICIARY, BY WRITTEN NOTICE TO THE ADMINISTRATOR WHICH SHALL BE SIGNED AND DATED.  IN THE ABSENCE OF AN EFFECTIVE BENEFICIARY DESIGNATION AS TO PART OF ALL OF A PARTICIPANT’S INTEREST IN THE PLAN, DISTRIBUTION SHALL BE MADE TO THE PARTICIPANT’S SURVIVING SPOUSE, OR, IF NONE, TO HIS OR HER ISSUE PER STIRPES, IN A SINGLE PAYMENT.  IF NO SPOUSE OR ISSUE SURVIVES THE PARTICIPANT, PAYMENT SHALL BE MADE IN A SINGLE LUMP SUM TO THE PARTICIPANT’S ESTATE.   7.6                                 UNFORESEEABLE EMERGENCY.  IF A PARTICIPANT SUFFERS AN UNFORESEEABLE EMERGENCY, THE ADMINISTRATOR, IN ITS SOLE DISCRETION, MAY PAY TO THE PARTICIPANT ONLY THAT PORTION, IF ANY, OF HIS OR HER ACCOUNT THAT IS NECESSARY TO SATISFY THE EMERGENCY NEED AS DETERMINED BY THE ADMINISTRATOR, INCLUDING ANY AMOUNTS NECESSARY TO PAY ANY FEDERAL, STATE OR LOCAL INCOME TAXES REASONABLY ANTICIPATED TO RESULT FROM THE DISTRIBUTION.  A PARTICIPANT REQUESTING A DISTRIBUTION UNDER THIS SECTION 7.6 SHALL APPLY FOR THE PAYMENT IN A MANNER APPROVED BY THE ADMINISTRATOR AND SHALL PROVIDE SUCH ADDITIONAL INFORMATION AS THE ADMINISTRATOR MAY REQUIRE.   7.7                                 TAXES.  ALL PAYMENTS AND OTHER TAXABLE EVENTS SHALL BE SUBJECT TO APPLICABLE WITHHOLDING OF FEDERAL, STATE AND LOCAL INCOME, EMPLOYMENT AND OTHER TAXES AS DETERMINED BY THE ADMINISTRATOR.   7.8                                 FAILURE OF QUALIFICATION.  IF FOR ANY REASON THE PLAN FAILS TO MEET THE REQUIREMENTS OF CODE SECTION 409A AND THE REGULATIONS AND GUIDANCE PROMULGATED THEREUNDER, THE ADMINISTRATOR SHALL DISTRIBUTE TO THE PARTICIPANT THE PORTION OF THE PARTICIPANT’S ACCOUNT THAT IS REQUIRED TO BE INCLUDED IN INCOME AS A RESULT OF SUCH FAILURE.   7.9                                 SECTION 162(M) DEFERRALS.  TO THE EXTENT THE COMMITTEE ANTICIPATES THAT A PAYMENT (WHETHER IN CASH OR IN KIND) TO A PARTICIPANT’S DEFERRAL ACCOUNT DOES NOT QUALIFY AS PERFORMANCE-BASED COMPENSATION PURSUANT TO SECTION 162(M) OF THE CODE WITH RESPECT TO A PARTICIPANT WHO IS A “COVERED EMPLOYEE” FOR PURPOSES OF SUCH SECTION 162(M), THAT PORTION OF THE PAYMENT THAT WOULD OTHERWISE CAUSE THE PARTICIPANT’S COMPENSATION TO EXCEED THE LIMITATION ON THE AMOUNT OF COMPENSATION DEDUCTIBLE BY THE COMPANY IN ANY TAXABLE YEAR PURSUANT TO SUCH SECTION 162(M), SHALL BE DEFERRED.  ANY PAYMENT THAT IS DEFERRED PURSUANT TO THIS SECTION 7.9 SHALL BE PAID TO THE PARTICIPANT AT THE EARLIEST DATE AT WHICH THE COMMITTEE REASONABLY ANTICIPATES THAT THE DEDUCTION OF THE PAYMENT WILL NOT BE LIMITED OR ELIMINATED BY APPLICATION OF SECTION 162(M) OF THE CODE.   *  *  *  *  END OF ARTICLE 7  *  *  *  *   13 --------------------------------------------------------------------------------   ARTICLE 8 PLAN ADMINISTRATOR   8.1                                 PLAN ADMINISTRATION.  THE ADMINISTRATION OF THE PLAN SHALL BE UNDER THE SUPERVISION OF THE ADMINISTRATOR.  THE ADMINISTRATOR SHALL HAVE FULL POWER AND DISCRETION TO ADMINISTER THE PLAN IN ALL OF ITS DETAILS, SUBJECT TO THE REQUIREMENTS OF APPLICABLE LAW.  FOR THIS PURPOSE, THE ADMINISTRATOR’S DISCRETIONARY POWERS WILL INCLUDE, BUT WILL NOT BE LIMITED TO, THE FOLLOWING AUTHORITY, IN ADDITION TO ALL OTHER POWERS PROVIDED BY THIS PLAN:   (A)                                  TO MAKE AND ENFORCE SUCH RULES AS IT DEEMS NECESSARY OR PROPER FOR THE EFFICIENT ADMINISTRATION OF THE PLAN;   (B)                                 TO INTERPRET THE PLAN;   (C)                                  TO DECIDE ALL QUESTIONS CONCERNING THE PLAN;   (D)                                 TO COMPUTE THE AMOUNTS OF BENEFITS WHICH WILL BE PAYABLE TO ANY PARTICIPANT OR BENEFICIARY IN ACCORDANCE WITH THE PROVISIONS OF THE PLAN, AND TO DETERMINE THE PERSON OR PERSONS TO WHOM SUCH BENEFITS WILL BE PAID;   (E)                                  TO AUTHORIZE THE PAYMENT OF BENEFITS;   (F)                                    TO APPOINT SUCH AGENTS, COUNSEL, ACCOUNTANTS, CONSULTANTS AND OTHER PERSONS AS MAY BE REQUIRED TO ASSIST IN ADMINISTERING THE PLAN; AND   (G)                                 TO DELEGATE ITS RESPONSIBILITIES UNDER THE PLAN AND TO DESIGNATE OTHER PERSONS TO CARRY OUT ANY OF ITS RESPONSIBILITIES UNDER THE PLAN, ANY SUCH DELEGATIONS OR DESIGNATION TO BE BY WRITTEN INSTRUMENT AND IN ACCORDANCE WITH THE REQUIREMENTS OF APPLICABLE LAW.   Any determination by the Administrator, or its authorized delegate, shall be final and conclusive on all persons in the absence of clear and convincing evidence that the Administrator or delegate acted arbitrarily and capriciously.   8.2                                 BOOKS AND RECORDS.  THE ADMINISTRATOR SHALL MAINTAIN THE BOOKS AND RECORDS FOR THE PURPOSE OF THE PLAN AND SHALL MAKE AVAILABLE TO EACH PARTICIPANT SUCH OF ITS RECORDS AS PERTAIN TO THE PARTICIPANT FOR EXAMINATION DURING NORMAL BUSINESS HOURS.  THE ADMINISTRATOR SHALL HAVE NO OBLIGATION TO DISCLOSE ANY RECORDS OR INFORMATION WHICH THE ADMINISTRATOR, IN ITS SOLE DISCRETION, DETERMINES TO BE OF A PRIVILEGED OR CONFIDENTIAL NATURE.   8.3                                 RELIANCE ON TABLES, ETC.  IN ADMINISTERING THE PLAN, THE ADMINISTRATOR WILL BE ENTITLED TO RELY CONCLUSIVELY ON ALL TABLES, VALUATIONS, CERTIFICATES, OPINIONS AND REPORTS WHICH ARE FURNISHED BY ANY ACCOUNTANT, COUNSEL OR OTHER EXPERT WHO IS EMPLOYED OR ENGAGED BY THE ADMINISTRATOR.   8.4                                 EXPENSES.  ALL EXPENSES OF ADMINISTERING THE PLAN, WHETHER INCURRED BY THE EMPLOYER OF THE PLAN, SHALL BE PAID BY THE EMPLOYER.   14 --------------------------------------------------------------------------------   8.5                                 APPEALS COMMITTEE.  THE EMPLOYER SHALL APPOINT AN APPEALS COMMITTEE TO REVIEW ANY WRITTEN APPEAL OF A DENIAL OF A CLAIM FOR A BENEFIT UNDER THE PLAN AND TO PROVIDE A FINAL DETERMINATION WITH REGARD TO SUCH CLAIM.  ANY APPEALS COMMITTEE MEMBER APPOINTED BY THE EMPLOYER SHALL SERVE AT THE PLEASURE OF THE EMPLOYER, BUT MAY RESIGN BY WRITTEN NOTICE TO THE EMPLOYER AT ANY TIME.  MEMBERS OF THE APPEALS COMMITTEE SHALL SERVE WITHOUT COMPENSATION FROM THE PLAN FOR SUCH SERVICES.   8.6                                 INDEMNIFICATION.  THE EMPLOYER AGREES TO INDEMNIFY AND DEFEND TO THE FULLEST EXTENT PERMITTED BY LAW ANY EMPLOYEE OR OFFICER SERVING AS THE ADMINISTRATOR OR AS A MEMBER OF THE APPEALS COMMITTEE AGAINST ALL LIABILITIES, DAMAGES, COSTS AND EXPENSES (INCLUDING ATTORNEY’S FEES AND AMOUNTS PAID IN SETTLEMENT OF ANY CLAIMS APPROVED BY THE ADMINISTRATOR OR APPEALS COMMITTEE) OCCASIONED BY ANY ACTION TAKEN OR OMITTED IN CONNECTION WITH THE ADMINISTRATION OF THIS PLAN, IF SUCH ACT OR OMISSION IS IN GOOD FAITH.   *  *  *  END OF ARTICLE 8  *  *  *  *   15 --------------------------------------------------------------------------------   ARTICLE 9 CLAIM REVIEW PROCEDURES   9.1                                 INITIAL CLAIMS.  ALL CLAIMS AND INQUIRIES CONCERNING BENEFITS UNDER THE PLAN MUST BE SUBMITTED TO THE ADMINISTRATOR IN WRITING WITHIN ONE YEAR OF THE OCCURRENCE OF THE EVENT THAT GIVES RISE TO THE CLAIM.  ANY CLAIM FILED AFTER ONE YEAR OF SUCH EVENT SHALL BE BARRED.   9.2                                 CLAIM DENIALS.  IF ANY CLAIM FOR BENEFITS IS DENIED IN WHOLE OR IN PART, THE ADMINISTRATOR SHALL NOTIFY THE CLAIMANT IN WRITING WITHIN NINETY (90) DAYS OF RECEIPT OF THE CLAIM (45 DAYS FOR A DISABILITY CLAIM). IF SPECIAL CIRCUMSTANCES REQUIRE A LONGER PERIOD, THE ADMINISTRATOR SHALL NOTIFY THE CLAIMANT PRIOR TO THE EXPIRATION OF THE 90 DAY (OR 45 DAY) PERIOD OF THE REASONS FOR AN EXTENSION OF TIME. SUCH EXTENSION SHALL NOT EXCEED AN ADDITIONAL 90 DAYS (30 DAYS FOR A DISABILITY CLAIM).  A NOTICE OF DENIAL SHALL STATE IN A MANNER REASONABLY CALCULATED TO BE UNDERSTOOD BY THE CLAIMANT SPECIFIC REASONS FOR THE DENIAL, SPECIFIC REFERENCES TO THE PLAN PROVISIONS ON WHICH THE DENIAL IS BASED, A DESCRIPTION OF ANY ADDITIONAL INFORMATION OR MATERIAL NECESSARY FOR THE CLAIMANT TO PERFECT HIS OR HER CLAIM, AN EXPLANATION OF WHY SUCH INFORMATION OR MATERIAL IS NECESSARY, AND AN EXPLANATION OF THE PLAN’S REVIEW PROCEDURE, INCLUDING THE CLAIMANT’S RIGHT TO A REVIEW OF THE CLAIM DENIAL AND HIS OR HER RIGHT TO BRING A CIVIL ACTION UNDER ERISA SECTION 502(A) FOLLOWING AN ADVERSE DECISION ON APPEAL.   9.3                                 APPEALS.  A CLAIMANT OR HIS OR HER AUTHORIZED REPRESENTATIVE MAY APPEAL A CLAIM DENIAL WITHIN SIXTY (60) DAYS OF RECEIPT THEREOF (180 DAYS FOR A DISABILITY CLAIM) BY SUBMITTING TO THE APPEALS COMMITTEE A WRITTEN REQUEST FOR REVIEW.  THE REQUEST FOR REVIEW SHALL SET FORTH ALL OF THE GROUNDS UPON WHICH IT IS BASED, ALL FACTS IN SUPPORT THEREOF, AND ANY OTHER COMMENTS OR MATERIALS WHICH THE CLAIMANT DEEMS RELEVANT TO THE APPEAL. THE APPEALS COMMITTEE SHALL GIVE THE CLAIMANT AN OPPORTUNITY TO REVIEW PERTINENT DOCUMENTS IN PREPARING HIS OR HER REQUEST FOR REVIEW.   The Appeals Committee will review all comments, documents, records and other information submitted by the claimant related to the claim, without regard to whether such information was submitted or considered in the initial claim determination. The Appeals Committee may also request additional facts, documents or other materials as it deems necessary or appropriate in making its determination, and may hold a hearing of the parties involved.  The claimant shall be advised of the Appeals Committee decision within sixty (60) days (45 days for a Disability claim) after the appeal is received, except that if a hearing is held, the decision may be issued within one hundred twenty (120) days after the appeal is received (90 days for a Disability claim). The decision of the Appeals Committee shall be final and binding on all parties.  If the claim is denied on appeal, the decision shall clearly set forth specific reasons for the denial and specific references to the Plan provisions upon which the decision is based.  The claimant shall also be informed of his or her right to receive, upon request and free of charge, reasonable access to or copies of all documents, records and other information relevant to the claim, and of his or her right to bring a civil action under ERISA Section 502(a).   9.4                                 DETERMINATION OF TIME PERIODS.  IF THE DAY ON WHICH ANY OF THE FOREGOING TIME PERIODS IS TO END IS A SATURDAY, SUNDAY OR HOLIDAY RECOGNIZED BY THE EMPLOYER, THE PERIOD SHALL EXTEND UNTIL THE NEXT BUSINESS DAY.   16 --------------------------------------------------------------------------------   9.5                                 VOLUNTARY ARBITRATION.  A CLAIMANT WHOSE APPEAL HAS BEEN DENIED UNDER SECTION 9.3 SHALL HAVE THE RIGHT, BUT SHALL NOT BE REQUIRED, TO SUBMIT SAID BENEFIT DISPUTE TO BINDING ARBITRATION, CONDUCTED IN THE STATE OF COLORADO BEFORE A PANEL OF THREE (3) ARBITRATORS, TO BE SELECTED FROM THE AMERICAN ARBITRATION ASSOCIATION (“AAA”) ROSTER, IN ACCORDANCE WITH THE RULES OF THE AAA APPLICABLE TO COMMERCIAL ARBITRATIONS. A CLAIMANT’S VOLUNTARY PARTICIPATION IN THIS PROCESS SHALL HAVE NO EFFECT ON THE CLAIMANT’S RIGHTS TO ANY OTHER BENEFIT UNDER THE PLAN.  IN THE EVENT OF SUCH ARBITRATION, THE FOLLOWING PROVISIONS WILL APPLY, IN ACCORDANCE WITH 29 C.F.R. 2560.503-1(C):   (a)                                  The Plan shall not assert a failure to exhaust administrative remedies where a claimant elects to bring a civil action in court rather than through the voluntary arbitration process.   (b)                                 Any statute of limitations applicable to the claimant’s civil action will be tolled during the period of the voluntary arbitration.   (c)                                  All costs and expenses in connection with such arbitration, including the arbitrators’ fees, shall be borne by the Employer.   The arbitrators’ decision in any dispute shall be final and binding on all parties.   *  *  *  END OF ARTICLE 9*  *  *  *   17 --------------------------------------------------------------------------------   ARTICLE 10 GENERAL PROVISIONS   10.1                           PROHIBITION AGAINST FUNDING.  IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT THIS ARRANGEMENT BE AND REMAIN UNFUNDED FOR PURPOSES OF THE CODE AND ERISA.  NOTHING CONTAINED HEREIN SHALL BE DEEMED TO CREATE A TRUST OF ANY KIND OR CREATE ANY FIDUCIARY RELATIONSHIP.  FUNDS INVESTED HEREUNDER SHALL CONTINUE FOR ALL PURPOSES TO BE PART OF THE GENERAL, UNRESTRICTED ASSETS OF THE EMPLOYER, SUBJECT TO THE CLAIMS OF ITS GENERAL CREDITORS, AND NO PERSON SHALL, BY VIRTUE OF THE PROVISIONS OF THIS PLAN, HAVE ANY INTEREST IN SUCH FUNDS.  TO THE EXTENT ANY PERSON ACQUIRES A RIGHT TO RECEIVE PAYMENT UNDER THIS PLAN, SUCH RIGHT SHALL BE NO GREATER THAN THE RIGHT OF ANY UNSECURED GENERAL CREDITOR OF THE EMPLOYER.   10.2                           LIMITATION OF RIGHTS.  NEITHER THE ESTABLISHMENT OF THIS PLAN NOR PARTICIPATION THEREIN WILL BE CONSTRUED AS CONFERRING ON ANY PERSON ANY RIGHT TO CONTINUED EMPLOYMENT WITH OR SERVICE AS A DIRECTOR TO THE EMPLOYER, NOR ANY LEGAL OR EQUITABLE RIGHT AGAINST THE ADMINISTRATOR OR EMPLOYER EXCEPT AS EXPRESSLY PROVIDED HEREIN.  IN NO EVENT WILL THE TERMS OF EMPLOYMENT OR SERVICE OF ANY PARTICIPANT BE MODIFIED OR IN ANY WAY AFFECTED HEREBY.  THE EMPLOYER MAY TERMINATE THE EMPLOYMENT OF ANY PARTICIPANT AS FREELY AND WITH THE SAME EFFECT AS IF THE PLAN WERE NOT IN EXISTENCE.   10.3                           INALIENABILITY OF BENEFITS.  NO PARTICIPANT SHALL HAVE THE RIGHT TO ASSIGN, TRANSFER, HYPOTHECATE, ENCUMBER OR ANTICIPATE HIS OR HER INTEREST IN ANY BENEFITS UNDER THE PLAN, NOR SHALL THE BENEFITS UNDER THE PLAN BE SUBJECT TO BE TAKEN BY HIS OR HER CREDITORS BY ANY PROCESS WHATSOEVER, AND ANY ATTEMPT TO CAUSE SUCH RIGHT TO BE SO SUBJECTED WILL NOT BE RECOGNIZED, EXCEPT TO SUCH EXTENT AS MAY BE REQUIRED BY LAW.   10.4                           DISTRIBUTIONS DUE MINOR OR INCOMPETENT PERSONS.  IF ANY PARTICIPANT OR BENEFICIARY ENTITLED TO A DISTRIBUTION IS A MINOR, OR IS DETERMINED BY THE ADMINISTRATOR TO BE INCOMPETENT BY REASON OF PHYSICAL OR MENTAL DISABILITY (WHETHER OR NOT LEGALLY ADJUDICATED INCOMPETENT), THE ADMINISTRATOR SHALL HAVE THE POWER TO CAUSE THE DISTRIBUTIONS DUE TO SUCH PERSON TO BE MADE TO ANOTHER FOR THE BENEFIT OF THE PARTICIPANT OR BENEFICIARY.  DISTRIBUTIONS MADE PURSUANT TO SUCH POWER SHALL OPERATE AS A COMPLETE DISCHARGE OF THE EMPLOYER, THE ADMINISTRATOR, AND THEIR AUTHORIZED DELEGATES.   10.5                           HEADINGS.  HEADINGS OF ARTICLES AND SECTIONS ARE INSERTED SOLELY FOR CONVENIENCE AND REFERENCE AND CONSTITUTE NO PART OF THE PLAN.   10.6                           GOVERNING LAW.  TO THE EXTENT NOT PREEMPTED BY FEDERAL LAW, THIS PLAN SHALL BE GOVERNED BY, CONSTRUED AND ADMINISTERED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF COLORADO.   *  *  *  *  END OF ARTICLE 10  *  *  *  *   18 --------------------------------------------------------------------------------   ARTICLE 11 AMENDMENT AND TERMINATION   11.1                           AMENDMENT OF PLAN.  THE EMPLOYER RESERVES THE RIGHT TO AMEND THE PROVISIONS OF THIS PLAN AT ANY TIME OR TIMES, TO THE EXTENT THAT IT MAY DEEM ADVISABLE.  ANY AMENDMENT TO THE PLAN SHALL BE EFFECTED BY A WRITTEN INSTRUMENT SIGNED BY THE CEO OF THE EMPLOYER OR HIS OR HER AUTHORIZED DELEGATE. UNLESS OTHERWISE PROVIDED, ANY SUCH AMENDMENT WILL BE EFFECTIVE FOR ALL PARTICIPANTS AND THEIR BENEFICIARIES, WHETHER OR NOT EMPLOYED BY THE EMPLOYER.  NOTWITHSTANDING THE FOREGOING, FOLLOWING A CHANGE IN CONTROL, THE EMPLOYER SHALL NOT AMEND THE PLAN WITHOUT THE UNANIMOUS PRIOR WRITTEN CONSENT OF ALL PARTICIPANTS THAT WOULD BE ADVERSELY AFFECTED THEREBY, EXCEPT IN ORDER TO IMPLEMENT THE REQUIREMENTS OF A CHANGE IN LAW.   11.2                           TERMINATION OF PLAN.  THE EMPLOYER MAY DISCONTINUE OR TERMINATE THE PLAN UNDER ANY CIRCUMSTANCES PERMITTED BY CODE SECTION 409A, PROVIDED THAT THE TERMS OF THE PLAN SHALL REMAIN IN EFFECT FOR ACCOUNTS EXISTING ON THE DATE OF THE TERMINATION.   *  *  *  *  END OF ARTICLE 11  *  *  *  *   19 --------------------------------------------------------------------------------

Exhibit 10.28   NEW SKIES SATELLITES B.V.   Mr. Stephen J. Stott Chief Technical Officer New Skies Satellites B.V. Rooseveltplantsoen 4 2517 K R The Hague The Netherlands   December 14, 2005   Amendment to Employment Agreement   Dear Stephen:   As you know. SES Global S.A. (“SES”) has expressed interest in acquiring New Skies Satellites Holdings Ltd., the parent company of New Skies Satellites B.V. (the “Company’), through an amalgamation (the “Amalgamation”) and desires that senior management of the Company continue in employment following the closing of the Amalgamation. In order to facilitate the Amalgamation and for other good and valuable consideration the receipt of which is hereby acknowledged, the Company and you (the “Employee”) hereby agree, contingent on the Amalgamation occurring, to amend the Amended and Restated Employment Agreement, dated October 10, 2005, between the Company and Employee (the “Employment Agreement”), as follows (capitalized terms used but not defined herein shall have the meaning ascribed to them in the Employment Agreement):   1.     Section 3 of the Employment Agreement provides that Employee can terminate his employment for Good Reason and that upon such termination, Employee is entitled to termination payments under Section 5(a) of the Employment Agreement. Employee will have Good Reason to terminate his employment if, inter alia, there is “any material diminution of the level of responsibility or authority of the Employee, including the Employee’s reporting duties [or] any adverse change in Employee’s title or position.” Following the Amalgamation, the Company shall become a subsidiary of SES and shall no longer be a publicly traded company. Employee and the Company each recognize that there will be certain changes in Employee’s level of responsibility, authority, reporting duties and title that result from the Company ceasing to be a standalone public company and becoming a subsidiary of SES. At SES’s request Employee is willing to agree, as set forth below, to waive any rights he may have to terminate his employment for Good Reason arising solely as a result of changes in his level of responsibility, authority, reporting duties and title that result from the Company becoming a subsidiary of SES and being managed by SES consistently with the way SES currently manages its other subsidiaries, SES Americom and SES Astra, and both parties are willing to provide 60 days’ written notice to the other before any termination of employment, for arty reason (other than termination for Cause by the Company), shall be effective.   --------------------------------------------------------------------------------   Therefore, provided and for so long as the conditions below remain materially satisfied. Employee agrees to waive any rights he may have to claim that he has Good Reason to terminate his employment solely as a result of the changes to his level of responsibility, authority, reporting duties and title following the Amalgamation set forth below:   •      The Company shall become a separate subsidiary of SES. •      Employee shall report to the chief executive officer of the Company, who shall report directly to the board of directors of SES or the chief executive officer of SES, consistent with reporting lines of the chief executive officers of SES Americom and SES Astra. •      The size and scope of the Company’s operations (taking into account any assets, operations or employees transferred out of the Company, as well as any assets, operations or employees that are transferred into the Company) will not be materially diminished from their size and scope at the time of the Amalgamation. •      With respect to the operations of the Company, Employee shall have the same level of responsibility and authority that he currently has, subject to limitations on the responsibility and authority on the chief executive officer of the Company that are consistent with the limitations on the responsibility and authority that the chief executive officers of SES Americom and SES Astra are currently subject to. •      Employee shall retain his current title, subject to changes in the name of the Company to reflect its status as a subsidiary of SES.   Employee and the Company further agree that any termination of employment, for any reason (other than termination for Cause by the Company), shall be effective only upon 60 days’ prior written notice to the other party (for the avoidance of doubt, Employee shall be entitled to his salary, benefits and other rights (without any reduction) under this agreement until the effective date of the termination.   2.     Employee agrees that he intends to continue in his current employment for at least twelve months following the closing of the Amalgamation. If, during such twelve month period, Employee voluntarily terminates his employment without Good Reason (giving effect to Paragraph l above and subject to the conditions therein) or requests termination of his employment by a competent court (other than as a result of a breach by the Company or for Good Reason (after giving effect to Paragraph 1 above and subject to the conditions therein)), the parties determine it to be fair and reasonable that Employee will not be entitled to any severance or termination payments whatsoever pursuant to his Employment Agreement or pursuant to court order.   3.     The first sentence of Section 7(d) of the Employment Agreement shall be amended to read as follows: “Employee agrees not to engage in any aspect of the Satellite Business (as hereinafter defined) (i) during the Employment Period and (ii) in the event of the termination of the Employee’s employment during the Employment Period for any reason, until the later to expire of the period ending twelve months after the closing of the Amalgamation and, if applicable, the period ending twelve months after the termination of the Employee’s employment by the Company without Cause or by the Employee for Good Reason.”   2 --------------------------------------------------------------------------------   4.     Notwithstanding anything in Section 9 of the Employment Agreement to the contrary, there is no Gross-Up Payment to which Employee is entitled in connection with the Amalgamation.   5.     The first sentence of Section 5(a) of the Employment Agreement shall be revised to read as follows: “In the event of a termination of the Employee’s employment (l) by the Company without Urgent Cause or (2) by the Employee for Good Reason, the Company shall pay to (or in the case of business expenses pursuant to clause (i), reimburse) the Employee, or his estate in the event of his death, thirty (30) days following the Date of Termination ... [remainder of the sentence continues as currently written].   6.     Anything in this Amendment to the contrary, this Amendment shall take effect at the effective time of the Amalgamation, and if the Amalgamation does not occur, this Amendment will have no force or effect. Notwithstanding anything herein to the contrary, nothing herein shall be construed to prevent Employee from terminating his employment with the Company for Good Reason (giving effect to Paragraph l above and subject to the conditions therein) following the Amalgamation provided that any such termination for Good Reason shall be effective only upon 60 days’ prior written notice to the Company. Except as otherwise expressly provided herein, the terms of. the Employment Agreement shall remain in full force and effect.   Please indicate your agreement to the amendments set forth above in the space provided for your signature below.   Very truly yours,   New Skies Satellites B.V.   By: /s/ Daniel S. Goldberg       Agreed to this 14th day of December, 2005   /s/ Stephen J. Stott   Stephen J. Stott   3 --------------------------------------------------------------------------------

Exhibit 10.1 Execution Version STOCK PURCHASE AGREEMENT BY AND AMONG THE SHAREHOLDERS OF SCHAEFER MANUFACTURING, INC., WABTEC HOLDING CORPORATION and CCP LIMITED PARTNERSHIP, AS SELLERS’ AGENT AS OF OCTOBER 6, 2006 -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT is made as of October 6, 2006, by and among the shareholders of SCHAEFER MANUFACTURING, INC., a Wisconsin corporation (the “Company”) identified on Schedule A attached hereto (the “Sellers”), WABTEC HOLDING CORPORATION, a Delaware corporation (the “Purchaser”), and CCP LIMITED PARTNERSHIP, a Wisconsin limited partnership, in its capacity as Sellers’ Agent pursuant to the terms and conditions hereof (the “Sellers’ Agent”). RECITALS A. Sellers own as of Closing all of the issued and outstanding shares of capital stock of the Company and, in turn, the Company owns as of Closing all of the issued and shares of capital stock of Schaefer Equipment, Inc., an Ohio corporation (“Equipment Co.”). B. Sellers wish to sell the Shares to Purchaser, and Purchaser wishes to purchase the Shares from Sellers, on the terms and conditions set forth in this Agreement. AGREEMENTS In consideration of the recitals and of the mutual agreements, provisions and covenants set forth below, the Parties agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following definitions shall apply: “AAA” shall mean the American Arbitration Association. “Accounts Receivable” shall have the meaning specified in Section 3.24 of this Agreement. “Agreement” shall mean this Stock Purchase Agreement. “Ancillary Agreements” shall mean the agreements, documents and instruments related to this Agreement to which Purchaser, the Company or any Seller is a party. “Annual Financial Statements” shall mean the audited consolidated financial statements of the Company and its Subsidiaries for their 2004 and 2005 fiscal years, copies of which have been provided by Sellers to Purchaser. “Base Amount” shall have the meaning specified in Section 2.2 of this Agreement. “Basket Amount” shall have the meaning specified in Section 9.3(d)(i) of this Agreement. “Benefit Plans” shall mean any employee benefit plan as that term is defined in ERISA Sections 3(1), (2), (3), (37) and (40), and each pension plan, profit sharing plan, stock bonus plan, incentive compensation plan, incentive bonus plan, stock ownership plan, stock -------------------------------------------------------------------------------- purchase plan, stock option plan, stock appreciation plan, employee benefit plan, employee benefit policy, retirement plan, fringe benefit program, employee insurance plan, severance plan, disability plan, health care plan, sick leave plan, death benefit plan or any other plan or program to provide retirement income, fringe benefits or other benefits for former or current employees or directors of any Schaefer Company, to which any Schaefer Company currently contributes or has an obligation to contribute in the future (including without limitation employment agreements and any other agreements containing “golden parachute” provisions and deferred compensation agreements) or any plan or program under which any employee, former employee or director (or beneficiary of any employee, former employee or director) of any Schaefer Company has or may have any current or future right to benefits. “BOCP” shall mean BOCP, II, LLC, a Delaware limited liability company. “Bonus Plan” shall mean that certain Sale Bonus and Severance Plan adopted June 6, 2006, between the Company and the key management employees of Equipment Co. “Bonus Plan Releases” shall have the meaning specified in Section 5.1(k) hereof. “Business Day” shall mean any day except a Saturday, a Sunday or a day on which commercial banks in Chicago, Illinois are authorized or required by law to close. “Cash and Cash Equivalents” shall mean the sum of the fair market value, expressed in United States dollars, of all cash and cash equivalent assets (including marketable securities and short term instruments) of the Schaefer Companies as of immediately prior to the Closing. “CCP” shall mean CCP Limited Partnership, a Wisconsin limited partnership. “Closing” shall mean the conference to be held at 10:00 a.m., Eastern Daylight Time, on the Closing Date at the offices of Reed Smith LLP, 435 Sixth Avenue, Pittsburgh, Pennsylvania, or such other time and place as Sellers and Purchaser may mutually agree, at which time the transactions contemplated by this Agreement shall be consummated. “Closing Cash” shall mean the aggregate amount of Cash and Cash Equivalents of the Schaefer Companies on hand as of the Closing Date. “Closing Date” shall mean the date first written above. “Closing Funded Debt” shall mean (i) the aggregate amount of Funded Debt of the Schaefer Companies outstanding as of the Closing Date, plus (ii) the other long term liabilities (other than retiree health and retiree life insurance and unfunded death benefits) outstanding as of the Closing Date, plus (iii) the Purchase Price as defined and set forth in the Warrant Repurchase Agreement. “Closing Payment” shall have the meaning specified in Section 2.3 of this Agreement.   2 -------------------------------------------------------------------------------- “Closing Working Capital” shall mean the Net Working Capital of the Schaefer Companies determined as of the Closing Date. “Code” shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. “Company” shall be defined as set forth above. “Computer Systems” shall have the meaning specified in Section 3.26 of this Agreement. “Confidentiality Agreement” means that certain confidentiality agreement between the Company and Purchaser dated April 18, 2006. “Consent” shall mean any approval, consent, ratification, waiver, license, permit, certification, registration or other authorization of any Person, including any Governmental Authority. “Contract” shall mean (i) any written agreement, contract, obligation, promise or undertaking that is legally binding (a) under which any Schaefer Company has or may acquire any rights, (b) under which any Schaefer Company has or may become subject to any obligation or liability or (c) by which any Schaefer Company or any of the assets owned or used by it is or may become bound or (ii) any oral agreement, contract, obligation, promise or undertaking (whether express or implied) meeting the requirements of (i) of this definition that, to the Knowledge of any of the Sellers, exists. “Current Assets” shall mean as of the date of determination, the current assets of the Schaefer Companies as determined in accordance with GAAP, applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies, that were used in the preparation of the Reference Balance Sheet, other than Cash and Cash Equivalents and deferred Taxes. “Current Liabilities” shall mean as of the date of determination, the current liabilities of the Schaefer Companies as determined in accordance with GAAP, applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies, that were used in the preparation of the Reference Balance Sheet, other than Funded Debt and accrued Taxes. “Cut-off Date” shall have the meaning specified in Section 9.1(a) of this Agreement. “Dispute” shall have the meaning specified in Section 10.1 of this Agreement. “Dispute Notice” shall have the meaning specified in Section 10.3 of this Agreement.   3 -------------------------------------------------------------------------------- “Disputed Item” shall have the meaning specified in Section 2.4(e) of this Agreement. “Encumbrance” shall mean any lien, security interest, mortgage, pledge or other encumbrance of any nature, including without limitation any easement, right of way, charge, claim, community property interest, condition, equitable interest, option, right of first refusal or restriction or adverse claim of any kind, including without limitation any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership or any other encumbrance or exception to title of any kind, other than, with respect solely to any asset of a Schaefer Company, Permitted Encumbrances. “Environmental Claim” shall mean any claim, action, cause of action, investigation or notice by any Person alleging liability (including, without limitation, liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (i) the release by any Schaefer Company prior to Closing into the environment of any Hazardous Substances at any location, or (ii) any violation or alleged violation of any Environmental Law by any Schaefer Company prior to Closing. “Environmental Laws” shall mean all Laws in effect as of the Closing Date relating to pollution or protection of the environment (including ambient air, surface water, ground water, land surface or subsurface strata), including Laws relating to emission, discharge, release, or to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances and each individually, an “Environmental Law.” “Environmental Losses” means any of Purchaser’s Losses resulting from a breach of the representations and warranties in Section 3.16 of this Agreement. “Equipment Co.” shall be defined as set forth above. “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder. “Escrow Agent” shall mean Mellon Bank, N.A., a national banking association with its principal place of business at One Mellon Center, Pittsburgh, Pennsylvania 15258. “Escrow Agreement” shall mean the Escrow Agreement among Purchaser, Sellers’ Agent on behalf of Sellers, and the Escrow Agent in substantially the form of Exhibit “A” hereto. “Escrow Amount” shall have the meaning specified in Section 2.3(b) of this Agreement. “Existing Plans” shall mean the existing Benefit Plans with respect to employees of the Schaefer Companies, all of which are listed and described on the Sellers’ Disclosure Schedule.   4 -------------------------------------------------------------------------------- “Final Closing Balance Sheet” shall mean the Preliminary Closing Balance Sheet, as determined to be binding and conclusive upon, deemed accepted by, and as amended to reflect resolution of any disputes between the parties pursuant to Section 2.4 of this Agreement. “Final Closing Cash” shall mean the amount of Cash and Cash Equivalents as determined based on the Final Closing Balance Sheet. “Final Closing Working Capital” shall mean the amount of Net Working Capital as determined based on the Final Closing Balance Sheet. “Final Purchase Price” shall mean the Purchase Price as determined based on the Final Closing Balance Sheet. “Financial Statements” shall mean the Annual Financial Statements and Interim Financial Statements, collectively. “Funded Debt” shall mean indebtedness for borrowed money of any of the Schaefer Companies, including but not limited to the indebtedness listed on Exhibit “B” hereto. “GAAP” means United States generally accepted accounting principles, consistently applied in accordance with the historical practices of the Schaefer Companies. “Governmental Authority” means any United States federal, state or local government or political agency, division, subdivision thereof or any regulatory body, agency or authority or any authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, any court or tribunal (or any department, bureau or division thereof). “Hazardous Substances” means all hazardous substances, as that term is defined in CERCLA, solid waste, hazardous waste and any other individual or class of pollutants, contaminants, toxins, chemicals, substances, wastes or materials in their solid, liquid or gaseous phase, defined, regulated, classified or identified under any Environmental Law. “Improvements” shall have the meaning specified in Section 3.12(c)(iv) of this Agreement. “Indemnified Party” shall have the meaning specified in Section 9.4(a) of this Agreement. “Indemnifying Party” shall have the meaning specified in Section 9.4(a) of this Agreement. “Information” shall mean all nonpublic, confidential or proprietary information regarding any of the Schaefer Companies. “Intellectual Property” shall have the meaning specified in Section 3.15 of this Agreement.   5 -------------------------------------------------------------------------------- “Interim Balance Sheet” shall have the meaning specified in Section 3.5 of this Agreement. “Interim Financial Statement” shall mean the internally prepared interim monthly consolidated financial statement of the Company and its Subsidiaries (including balance sheets and income statements) for the seven-month period beginning January 1, 2006 through July 31, 2006, copies of which have previously been provided to Purchaser. “Inventory” shall mean goods, merchandise and other personal property, including without limitation all raw materials, work in progress, finished goods and materials and supplies of any kind or nature used in the business of the Equipment Co. or used in selling or furnishing such goods, merchandise or other personal property. “Knowledge” shall mean with respect to (i) a natural Person, the actual knowledge of such Person, (ii) Sellers who are not natural Persons, the actual knowledge of David Kostolansky, Barry Anderson, Richard Barnhart, David Rubino and Philip Oswald, including such knowledge as they would reasonably be expected to know in the normal course of their duties with the Equipment Co., and (iii) Purchaser, the actual knowledge of Al Neupaver, Alvaro Garcia-Tunon, Barry Pennypacker and Keith Hildum, including such knowledge as they would reasonably be expected to know in the normal course of their duties with Purchaser. “Law” shall mean any United States federal or state, local municipal or administrative order, constitution, law, rule, regulation, ordinance, principle of common law, court order, consent, decree, governmental license, permit, statute or treaty as in effect on the Closing Date. “Losses” shall mean damages, liabilities, judgments, losses, or costs and expenses of whatever kind or nature (including reasonable attorneys’ fees and reasonable costs of investigation and defense); provided, however, that Losses shall not include consequential, incidental or punitive damages unless the Losses are the result of a Third-Party Claim; provided further, that lost profits shall not be considered to be consequential damages. “Material Adverse Effect” shall mean a material adverse effect on (a) the business, operations, assets, results of operations or condition (financial or otherwise) of the Schaefer Companies taken as a whole or (b) the ability of any of the Sellers to consummate the transactions contemplated by this Agreement. “Material Contract” shall have the meaning specified in Section 3.14(a) of this Agreement. “Media” shall have the meaning specified in Section 9.3(e)(i) of this Agreement. “Named Representatives” shall mean Al Neupaver, Alvaro Garcia-Tunon, Barry Pennypacker and Keith Hildum. “Net Working Capital” shall mean for any date of determination, the excess of the Current Assets as of the close of business on such date of determination over the Current Liabilities as of such date of determination, calculated in all respects in accordance with GAAP   6 -------------------------------------------------------------------------------- applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Reference Balance Sheet. “O&G Properties” shall mean oil and gas wells and oil and gas fee or leasehold interests. “Objection Notice” shall have the meaning specified in Section 2.4(d)(i) of this Agreement. “Order” shall mean any award, decision, injunction, judgment order, ruling, subpoena or verdict entered, issued, made or rendered by any Governmental Authority or by any arbitrator as in effect on the Closing Date. “Organizational Documents” shall mean (a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the partnership agreement and any statement of partnership of a general partnership; (c) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (d) the certificate of organization and limited liability company agreement of a limited liability company; (e) any charter or similar document adopted or filed in connection with the creation, formation or organization of a Person; and (f) any amendment to any of the foregoing. “Other Real Estate” shall mean the Real Estate other than the Owned Real Estate. “Owned Real Estate” shall mean the Real Estate owned by the Schaefer Companies. “Parties” or “parties” shall mean, as the context requires, any of the Purchaser, the Sellers and/or the Sellers’ Agent. “Permissible Activities” shall have the meaning specified in Section 9.3(e)(i) of this Agreement. “Permitted Encumbrances” means any lien for current Taxes not yet due and payable, any lien securing Taxes or any lien of materialmen, carriers, landlords and similar Persons, in each case not yet due or payable, any minor interest in an asset in favor of another Person which does not materially impair the value, ownership or use of such asset to the extent that the foregoing are appropriately reflected on the Interim Balance Sheet and those Encumbrances which are identified as Permitted Encumbrances on Part 1(PE) of the Sellers’ Disclosure Schedule. “Person” shall mean a natural person, corporation (including any not-for-profit corporation), trust, estate, partnership, association, general or limited partnership, joint venture, limited liability company, governmental entity, agency or branch or department thereof, or any other legal entity. “Physical Inventory” shall have the meaning specified in Section 2.4(a) of this Agreement.   7 -------------------------------------------------------------------------------- “Preliminary Closing Balance Sheet” shall have the meaning specified in Section 2.4(c) of this Agreement. “Proceeding” shall mean any hearing, action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before or otherwise involving, any Governmental Authority or arbitrator. “Purchase Price” shall have the meaning specified in Section 2.2 of this Agreement. “Purchaser” shall mean Wabtec Holding Corporation, a Delaware corporation. “Purchaser Disclosure Schedule” shall mean the Purchaser Disclosure Schedule, dated the date of this Agreement, delivered by the Purchaser to the Sellers. “Purchaser Indemnified Persons” shall have the meaning specified in Section 9.3(a) of this Agreement. “Real Estate” shall mean the real estate owned or leased by the Schaefer Companies, including without limitation all O&G Properties, together with all buildings, structures, fixtures and improvements thereon and all of the rights thereto. “Real Estate Permit” shall have the meaning specified in Section 3.12(c)(ii) of this Agreement. “Reference Balance Sheet” shall have the meaning specified in Section 3.5 of this Agreement. “Release” has the meaning specified in 42 U.S.C. § 9601. “Remediation Action” means any action to mitigate, remediate, monitor or otherwise respond to a Release of Hazardous Substances on, in, at, upon or from the Real Estate. “Representatives” means, with respect to a particular Person, the affiliates, directors, officers, employees, agents, consultants, advisors or other representatives of such Person, including legal counsel, accountants and financial advisors. “Review Period” shall have the meaning specified in Section 2.4(d)(i) of this Agreement. “Schaefer Companies” shall mean the Company and the Equipment Co. “Securities Act” means the Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder. “Sellers” shall be defined as set forth above.   8 -------------------------------------------------------------------------------- “Sellers’ Agent” shall have the meaning specified in Section 13.18 of this Agreement. “Sellers’ Disclosure Schedule” shall mean the Sellers’ Disclosure Schedule, dated the date of this Agreement, delivered by the Sellers to Purchaser. “Shares” shall mean the issued and outstanding shares of capital stock of the Company. “Straddle Period” shall have the meaning specified in Section 6.1(a) of this Agreement. “Subsidiary” or “Subsidiaries” shall mean with respect to any Person (for the purposes of this definition, the “Owner”), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation’s or other Person’s board of directors (or similar governing body) or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Owner or one or more of its Subsidiaries. “Target Working Capital” shall mean $6,443,836 (which amount reflects the average Net Working Capital for the twelve month period ending July 31, 2006, as reflected in the internally prepared consolidated balance sheets of the Schaefer Companies as at the end of each calendar month during that period). “Tax” shall mean all United States federal, state, local, foreign and other taxes of any kind, levies or other like assessments, customs, duties, imposts or charges, including without limitation, income, gross receipts, ad valorem, value-added, excise, real or personal property, asset, transfer, sales, use, license, payroll, franchise, withholding, employment, occupation, premium, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind, whether disputed or not, and including obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person and in each instance such term shall include any interest, penalties or additions to tax attributable to any such Tax. “Tax Returns” shall mean all returns, declarations, reports, claims for refund and information returns and statements of any Person required to be filed or sent by or with respect to it regarding any Taxes, including any schedule or attachment thereto and any amendment thereof. “Third-Party Claim” shall have the meaning specified in Section 9.5(a) of this Agreement. “Title Commitment” shall have the meaning specified in Section 5.2(a) of this Agreement. “Title Company” shall have the meaning specified in Section 5.2(a) of this Agreement.   9 -------------------------------------------------------------------------------- “Trust” shall mean that certain Agreement of Trust for the Schaefer 401(k) Plan dated January 1, 1990, as amended. “Unrelated Accountant” shall mean Grant Thornton LLP, Cleveland, Ohio. “Warrant Repurchase Agreement” shall mean that certain Warrant Repurchase Agreement dated as of the date hereof among the Company, the Sellers’ Agent and BOCP. 2. PURCHASE AND SALE OF SHARES. 2.1 Purchase and Sale of Shares. Subject to the terms and conditions set forth in this Agreement, on the Closing Date, in consideration of the Purchase Price, Sellers shall sell to Purchaser, and Purchaser shall purchase from Sellers, the Shares, free and clear of all Encumbrances (except to the extent, if any, provided in Section 180.0622(2)(b) of the Wisconsin Business Corporation Law). The Parties agree that Sellers are solely responsible for satisfying the Closing Funded Debt and Purchaser shall not assume any portion of the Closing Funded Debt. The purchase and sale of the Shares pursuant to this Agreement shall be effective as of the close of business on the Closing Date. 2.2 Purchase Price. The Purchase Price to be paid by Purchaser to Sellers for the Shares shall be an amount equal to the sum of (i) Thirty Six Million Three Hundred Thousand and 00/100 Dollars ($36,300,000.00) (the “Base Amount”), plus (ii) an amount equal to the Closing Cash, and (iii) (A) plus an amount equal to the amount (if any) by which the Closing Working Capital shall exceed the Target Working Capital or (B) less an amount equal to the amount (if any) by which the Target Working Capital shall exceed the Closing Working Capital (the “Purchase Price”). Purchaser shall pay the Purchase Price in the manner provided in Sections 2.3 and 2.4. 2.3 Closing Payment and Escrow Deposits. (a) Closing Payment. At the Closing, Purchaser shall pay to Sellers’ Agent (or as Sellers’ Agent may direct in writing), by wire transfer in immediately available funds for the benefit of the Shareholders, an amount equal to the sum of (i) ninety percent (90%) of the Base Amount, plus (ii) the Closing Cash, plus (or minus) (iii) an agreed upon estimate of the amount (if any) by which the Closing Working Capital will exceed (or be less than) the Target Working Capital less (iii) the Closing Funded Debt (together with the Escrow Amount, the “Closing Payment”). (b) Escrow Deposits. At the Closing, Purchaser shall pay to the Escrow Agent, by wire transfer in immediately available funds, an amount equal to (i) ten percent (10%) of the Base Amount (the “Escrow Amount”), plus (ii) the Closing Funded Debt. The Escrow Agent shall retain the Escrow Amount for distribution in accordance with the terms of this Agreement, and shall immediately pay off the Closing Funded Debt with the remaining amount of the deposit.   10 -------------------------------------------------------------------------------- 2.4 Payment-Related Items; Post-Closing Purchase Price Adjustment. (a) Physical Inventory. At least five Business Days prior to Closing, the Company and Purchaser, with the assistance of the Company’s audit firm, shall conduct a complete physical inventory (the “Physical Inventory”) of Equipment Co.’s Inventory then on hand, which inventory shall be conducted following the methodologies and procedures set forth in Part 2.4 of the Sellers’ Disclosure Schedule. (b) Determination of Final Purchase Price. Following the Closing, the Parties shall determine the amount of the Closing Cash, the amount of the Closing Working Capital and, accordingly, the Purchase Price. The Closing Cash and the Closing Working Capital shall be determined in accordance with GAAP applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies, that were used in the preparation of the Reference Balance Sheet and, in the case of the Closing Working Capital, the determination of the Target Working Capital. (c) Closing Balance Sheet. Not later than ninety (90) calendar days following the Closing Date, Purchaser shall prepare and deliver or cause to be prepared and delivered to the Sellers’ Agent a consolidated balance sheet of the Company and its Subsidiaries as of the Closing Date prepared in accordance with GAAP (the “Preliminary Closing Balance Sheet”), and a statement of the proposed Final Closing Cash, the Final Closing Working Capital and, accordingly, the Final Purchase Price, in each case, as of immediately prior to the Closing and, if applicable, derived from the Preliminary Closing Balance Sheet. The Final Closing Cash and the Final Closing Working Capital shall be calculated in accordance with the provisions of this Section 2.4(c) and shall reflect the results of the Physical Inventory. (d) Preliminary Closing Balance Sheet Review. (i) The Sellers’ Agent shall have thirty (30) days following the delivery by the Purchaser to the Sellers’ Agent of the Preliminary Closing Balance Sheet (the “Review Period”) to review the Preliminary Closing Balance Sheet. The Preliminary Closing Balance Sheet shall be conclusive and binding upon the Parties as to items set forth therein unless, within ten (10) days following the expiration of the Review Period, the Sellers’ Agent notifies Purchaser in writing (the “Objection Notice”) that the Sellers’ Agent disputes any of the amounts set forth therein. The Objection Notice shall (a) clearly identify each item of the Preliminary Closing Balance Sheet to which the Sellers’ Agent objects and (b) describe in detail the nature of such objection and the Sellers’ Agent’s calculation of such disputed item. (ii)(A) If Sellers’ Agent does not deliver an Objection Notice to Purchaser within the Review Period or (B) following delivery of any Objection Notice to Purchaser on a timely basis in respect of which the Parties achieve resolution of any disputes set forth therein within the time period set forth in subsection (e) below, the Preliminary Closing Balance Sheet (as amended to the extent necessary to reflect the resolution of such disputes), shall be conclusive and binding on the Parties, and Purchaser shall prepare a schedule setting forth the calculation of the Final Closing Working Capital and the Final Purchase Price (each such calculation to be made in accordance with the provisions of this Agreement) and shall deliver such schedule to the Sellers’ Agent within ten (10) Business Days after the expiration of the Review Period (in the case of (A) above) or resolution of the disputes (in the case of (B)   11 -------------------------------------------------------------------------------- above). The date of such delivery shall be deemed the date of the determination of the Final Purchase Price for the purposes of subsection (g) below. Any item of the Preliminary Closing Balance Sheet as finally determined pursuant to this subparagraph shall be deemed to be final and binding. (e) Objection Notice and Disputes. If the Sellers’ Agent delivers an Objection Notice to Purchaser on a timely basis, Purchaser and the Sellers’ Agent shall during the twenty (20) Business Day period following receipt of such Objection Notice use commercially reasonable efforts to negotiate in good faith and reach agreement on each item of the Preliminary Closing Balance Sheet disputed pursuant to the Objection Notice. If during such period, Purchaser and Sellers’ Agent are unable to reach agreement, they shall immediately refer any such unresolved items to the Unrelated Accountant for resolution in accordance with subsection (f) below (any such referred item, a “Disputed Item”). (f) Determination of Dispute. Promptly, but no later than twenty (20) days after acceptance of his or her appointment as Unrelated Accountant, the Unrelated Accountant shall determine (it being understood that in making such determination, the Unrelated Accountant shall be functioning as an expert and not as an arbitrator), those Disputed Items and shall render a written report as to the resolution of the Disputed Items and the resulting computation of the Final Closing Cash, or the Final Closing Working Capital, as the case may be, which computation shall be conclusive and binding on the Parties. In the course of the Unrelated Accountant’s review, the Parties shall deliver written submissions to the Unrelated Accountant describing their respective positions. In addition, the parties shall be entitled to make oral presentations or arguments if either party so requests. In resolving any Disputed Item, the Unrelated Accountant (i) shall be bound by the provisions of this Section 2.4, (ii) may not assign a value to any item greater than the greatest value for such item claimed by either party or less than the lowest value for such item claimed by either party; provided, that if a value assigned to an item in dispute requires under GAAP that a corresponding or related adjustment or adjustments be made, the Unrelated Accountant shall have the authority to make such other adjustment or adjustments and (iii) may review (and the parties shall provide) any and all documents and records as the Unrelated Accountant deems appropriate. Upon receipt of the Unrelated Accountant’s written report, (A) the Preliminary Closing Balance Sheet, as modified to reflect the Unrelated Accountant’s determinations, shall be deemed accepted by, and such determinations shall be final and binding on, the Sellers’ Agent and Purchaser and enforceable as an arbitration award pursuant to the Federal Arbitration Act, 9 U.S.C. § 1-16, and (B) Purchaser shall prepare a schedule setting forth the calculation of the Final Closing Cash, the Final Closing Working Capital and the Final Purchase Price (each such calculation to be made in accordance with the procedures of this Agreement) and shall deliver such schedule to the Sellers’ Agent within ten (10) Business Days after Purchaser’s receipt of the Unrelated Accountant’s written report. The Unrelated Accountant’s fees and expenses shall be borne by Purchaser and the Sellers’ Agent in such proportion as the Unrelated Accountant may determine and, in the absence of such determination, equally. (g) Upon final determination of the Final Purchase Price as provided in subsections (d)(ii) or (f) above: (i) if the Final Purchase Price exceeds the Closing Payment, Purchaser shall pay to Sellers an amount equal to such excess by wire transfer of immediately available funds in such portions and to an account or accounts designated by Sellers’ Agent in   12 -------------------------------------------------------------------------------- writing, no later than five (5) Business Days after such final determination, or (ii) if the Closing Payment exceeds the Final Purchase Price, Purchaser shall withdraw an amount equal to such excess , plus any interest due and owing thereon, from the Escrow Amount. Interest shall accrue on any amount not paid by either party to the other within five (5) Business Days after such final determination at a rate of one percent (1%) per month. Sellers’ Agent hereby directs that 14.593% of any amount payable by Purchaser under clause (i) shall be paid to BOCP in accordance with its written instructions (which payment is attributable to the warrant being repurchased by Schaefer immediately prior to the Closing as described in the Warrant Purchase Agreement). The Parties may not amend the previous sentence without the written consent of BOCP. 3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Except as set forth in this Agreement and/or the Sellers’ Disclosure Schedule, each of the Sellers, jointly and severally, hereby make the following representations and warranties to Purchaser. Regardless of the foregoing, the representations and warranties of the Sellers set forth in Sections 3.1(b) and 3.3(a) are made severally by each Seller, with respect to such Seller only. 3.1 Organizational Matters. (a) Organization and Qualification; Power. Part 3.1(a) of the Sellers’ Disclosure Schedule contains a complete and accurate list for each Schaefer Company of its name, its jurisdiction of incorporation, other jurisdictions in which it is authorized to do business. Each Schaefer Company is a corporation duly organized and validly existing under the Laws of its jurisdiction of incorporation. Each Schaefer Company is duly qualified or licensed, as the case may be, to do business and is in good standing as a foreign corporation under the Laws of each jurisdiction where the nature of their respective activities or the ownership or use of properties owned or used by it require such qualification or licensing, except where the failure to be so qualified or licensed would not have a Material Adverse Effect. Each Schaefer Company has all requisite power and authority to own, lease and operate its properties and assets that it purports to own, lease or operate, to perform its obligations under any Contract to which it is a party or by which it is bound and to carry on its business as it is now being conducted. The Company has no assets other than the capital stock of Equipment Co., has no employees, has no business operations, has no contracts or other liabilities other than as disclosed in Part 3.1(a) of the Sellers’ Disclosure Schedule. Equipment Co. has no Subsidiaries. The Sellers have delivered to Purchaser copies of the Organizational Documents, as currently in effect, of each of the Schaefer Companies. (b) Authority; Validity. Each Seller warrants and represents that: (i) he or it has all requisite power and authority to enter into this Agreement and the related agreements referred to herein and to carry out his or its respective obligations hereunder and thereunder; (ii) his or its execution and delivery of this Agreement and the other documents and agreements to be executed by him or it pursuant hereto and (with respect to the Sellers, where such Seller is a business entity or trust) the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on its behalf; (iii) no further act or proceeding on the part of the Company or such Seller is necessary to authorize this Agreement or the other documents and instruments to be executed and delivered by him or it pursuant hereto or the consummation of the transactions contemplated hereby and   13 -------------------------------------------------------------------------------- thereby; (iv) this Agreement and the Ancillary Agreements to which such Seller is a party have been duly executed and delivered by such Seller and constitute the valid and binding obligations of the Company or such Seller enforceable against him or it in accordance with their respective terms except that enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally and by general equitable principles and (v) the execution and delivery of this Agreement and the Ancillary Agreements to which such Seller is a party, the sale and transfer of the Shares and the consummation of the transactions contemplated hereby does not and will not violate or conflict with any Law or Order to which the Company or such Seller, as the case may be, is bound. 3.2 Compliance; Binding Effect. The execution and delivery of this Agreement and the Ancillary Agreements which any of the Sellers is a party, the sale and transfer of the Shares and the consummation of the transactions contemplated hereby will not directly or indirectly (with or without notice or lapse of time): (a) (with respect to the Sellers, where such Seller is a business entity) violate any provision of the Organizational Documents of any Seller or either of the Schaefer Companies or any resolution adopted by the board of directors (or similar governing body) or the shareholders of such Seller or either of the Schaefer Companies; (b) contravene, conflict with, result in a violation or breach of any provision of, constitute a default under or constitute an event which with the giving of notice or the lapse of time or both would become a default or give any Person the right to declare a default or exercise any remedy under or to accelerate the maturity or performance of or to cancel, terminate or modify any material Contract to which any Seller or either of the Schaefer Companies is a party; (c) violate or conflict with any Law or Order to which any Seller or Schaefer Company is subject or bound; (d) contravene, conflict with or result in a violation of or give any Governmental Authority or other Person the right to challenge any of the transactions contemplated by this Agreement or to exercise any remedy or obtain any relief under any Law or any Order to which any Seller or Schaefer Company may be subject; (e) contravene, conflict with or result in a violation of any of the terms or requirements of or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any Consent of such Governmental Authority that is held by any Schaefer Company and which is necessary to the conduct of the business of such Schaefer Company or that is held by any Seller that otherwise relates to the business or assets of any Schaefer Company or (f) result in the imposition or creation of any Encumbrance upon or with respect to any of the Shares owned by any Seller or Schaefer Company or any of the assets owned or used by any Schaefer Company. 3.3 Shares. (a) Sellers own all of the issued and outstanding shares of the Company’s capital stock. The authorized capital stock of the Company consists of 8,000 Shares of $.01 par value Class A Voting Common Stock and 1,000 Shares of $.01 par value Class B Nonvoting Common Stock. None of the shares of Class B Nonvoting Common Stock is outstanding and the Class A Voting Common Stock and is owned of record as set forth in Part 3.3(a) of the Sellers’ Disclosure Schedule. Except as set forth in Part 3.3(a) of the Sellers’ Disclosure Schedule, no legend or other reference to any purported Encumbrance appears on any certificate representing the Shares. The Shares have been duly authorized and validly issued and are fully paid and nonassessable (except to the extent, if any, provided in Section 180.0622(2)(b) of the Wisconsin Business Corporation Law). Each Seller warrants and represents that he or it   14 -------------------------------------------------------------------------------- owns (or will own as of Closing) beneficially and of record all of the Shares attributed to such Seller on Part 3.3(a) of the Sellers’ Disclosure Schedule free and clear of all Encumbrances. Except as set forth on Part 3.3(a) of the Sellers’ Disclosure Schedule, such Seller has no other rights relating to the issuance, purchase, registration or transfer of any equity or other securities of the Company. Except as set forth in Part 3.3(a) of the Sellers’ Disclosure Schedule, such Seller does not have and is not bound by any outstanding subscriptions, warrants, options or other rights calling for the purchase of shares of Company capital stock or any other equity securities of the Company. None of the outstanding equity securities or other securities of the Company was issued in violation of any preemptive rights or the Securities Act or any state securities Law. (b) The Company owns, directly or indirectly, all of the issued and outstanding shares of capital stock or other equity ownership interests of Equipment Co. as set forth in Part 3.3(b) of the Sellers’ Disclosure Schedule, free and clear of all Encumbrances, and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable and were not issued in violation of any preemptive right. Except as set forth on Part 3.3(b) of the Sellers’ Disclosure Schedule, none of the Schaefer Companies has or is bound by any outstanding subscriptions, options, warrants, calls, purchase rights, exchange rights or other contracts or commitments of any character which require such Schaefer Company to issue, sell, or otherwise to cause to become outstanding any shares of capital stock of such Schaefer Company or any other equity security of such Schaefer Company or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Schaefer Company. Except as set forth in Part 3.3(b) of the Seller Schedule, there are no Contracts relating to the issuance, sale, registration or transfer of any equity securities or other securities of the Company. None of the outstanding equity securities or other securities of any Schaefer Company was issued in violation of any preemptive rights or the Securities Act or any state securities Law. None of the Schaefer Companies owns or has any Contract to acquire any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other company (other than Schaefer Companies). 3.4 Consents. No notice to or Consent or Order of any Governmental Authority or any other Person (including the spouse of any Seller) is required in connection with the execution and delivery of this Agreement or the consummation or performance of any of the transactions contemplated by this Agreement. 3.5 Financial Statements. The Sellers have delivered to the Purchaser: (a) the Annual Financial Statements, and the related consolidated statements of operations, changes in shareholders’ deficit and cash flows for the years then ended, together with the report thereon of Virchow, Krause & Company, LLP, independent public accountants (the December 31, 2005 consolidated balance sheet, together with the related notes thereto, is hereinafter referred to as the “Reference Balance Sheet”), (b) a combined audited balance sheet of the Schaefer Companies as of December 31, 2005, and the related combined statements of income, shareholders’ equity and cash flows for the year then ended, together with the report thereon of Virchow, Krause & Company, LLP, and (c) an unaudited consolidated balance sheet of the Schaefer Companies as of July 31, 2006 (the “Interim Balance Sheet”) and related unaudited consolidated statements of operations and cash flows for the seven months then ended, including in the case of (a) and (b), the related notes thereto. Such financial statements and related notes   15 -------------------------------------------------------------------------------- thereto present fairly in all material respects the financial position, results of operations and cash flows of the Schaefer Companies, taken as a whole, as of the respective dates and for the periods referred to in such financial statements, all in accordance with GAAP (except as otherwise indicated therein or in the notes thereto and, in the case of Interim Financial Statements, normal recurring year-end adjustments and the absence of notes and other presentation items). The financial statements referred to in this Section 3.5 reflect the consistent application of such accounting principles throughout the periods involved. No financial statements of any Person other than the Schaefer Companies are required by GAAP to be included in the consolidated financial statements of the Company. The warranties and representations herein related to financial statements other than audited financial statements are to the Knowledge of the Sellers. 3.6 No Material Adverse Changes. Since December 31, 2005, there has not been a material adverse change in the business, operations, assets, results of operations or condition (financial or otherwise) of the Schaefer Companies, taken as a whole, and no event has occurred or circumstance exists that would reasonably be expected to have a Material Adverse Effect on (a) the business, operations, assets, results of operations or condition (financial or otherwise) of the Schaefer Companies or (b) the ability of the Company or the Sellers to consummate the transactions contemplated by this Agreement. 3.7 Absence of Certain Changes. Except as set forth in Part 3.7 of the Sellers’ Disclosure Schedule, since December 31, 2005, the business of the Schaefer Companies has been operated in the ordinary course of business consistent with past practice and without limiting the generality of the foregoing, except as set forth in Part 3.7 of the Sellers’ Disclosure Schedule, since that date, neither of the Schaefer Companies: (a) has suffered any material damage, destruction or loss (not covered by insurance) affecting its assets; (b) has suffered any material increase or commitment to increase in either the rate of compensation or the actual compensation payable or to become payable to any employees of such Schaefer Company, except in the ordinary course of business; (c) has suffered the termination or received notice of termination of any Material Contract or license of such Schaefer Company, other than terminations or expirations of such Contracts or licenses in the ordinary course of business; (d) has suffered any cancellation of a Contract to purchase goods by a customer of such Schaefer Company; (e) has made any capital expenditures (other than in the ordinary course of business) in excess of $100,000 in the aggregate; (f) has created and no event has occurred or circumstance exists that would result in any Encumbrance on of any of its property or assets, other than Permitted Encumbrances;   16 -------------------------------------------------------------------------------- (g) has sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than for a fair consideration in the ordinary course of business consistent with past practice; (h) has entered into any transaction, commitment, Contract or license (or series of related transactions, commitments, Contracts or licenses) either involving more than $100,000 or outside the ordinary course of business; (i) has received notice of any acceleration, termination, modification or cancellation of any Contract or license (or series of related Contracts or licenses) involving more than $10,000 to which such Schaefer Company is a party or by which it is bound; (j) has failed to pay, delayed or postponed the payment of accounts payable or other liabilities in excess of $50,000 in any single instance or $100,000 in the aggregate; (k) has cancelled, compromised, waived, or released any debt, right or claim (or series of related rights and claims); (l) changed its authorized or issued capital stock, declared, set aside, or paid any dividend or made any distribution or other payment with respect to its capital stock (whether in cash or in kind), granted any stock option or right to purchase shares of capital stock, issued any security convertible into capital stock, granted any registration rights or redeemed, retired, purchased or otherwise acquired any of its capital stock; (m) has granted and no event has occurred or circumstance exists that would result in any change in the base compensation, commission, bonus or other direct or indirect remuneration payable, or paid or agreed or orally promised to pay, conditionally or otherwise, any bonus, incentive, retention or other compensation, retirement, welfare, fringe or severance benefit or vacation pay, to or in respect of any of its shareholders, directors, officers, employees, salesmen, distributors or agents outside the ordinary course of business; (n) has adopted, amended, modified or agreed to modify or terminate any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Benefit Plan) or adopted any plan, fund, program or arrangement falling within the definition of a Schaefer Benefit Plan; (o) has made any other change in employment terms for any of its directors, officers, and employees outside the ordinary course of business; (p) has made or pledged to make any charitable or other capital contribution outside the ordinary course of business; (q) discharged or satisfied any Encumbrance or liability other than those then required to be discharged or satisfied, or paid any obligation or liability, absolute, accrued, contingent or otherwise, whether due or to become due, other than capitalized leases,   17 -------------------------------------------------------------------------------- current liabilities shown on the Reference Balance Sheet and current liabilities incurred since the date thereof in the ordinary course of business; (r) has instituted, settled or agreed to settle any Proceeding relating to its property, assets or business other than (i) in the ordinary course of business consistent with past practice or (ii) in cases involving amounts in the aggregate not in excess of $100,000; or (s) has taken any action or omitted to take any action, and no event has occurred or circumstance exists, that would result in the occurrence of any of the foregoing. 3.8 Powers of Attorney. Except as set forth in Part 3.8 of the Sellers’ Disclosure Schedule, no Representative of either Schaefer Company holds any power of attorney to act with respect to such Schaefer Company. 3.9 Litigation. (a)(i) There are no facts, events or circumstances that have occurred on or prior to the Closing Date that would give rise to or result in a Third Party Claim against either Schaefer Company; (ii) there is no Proceeding pending or threatened against either Schaefer Company, and (iii) there is no Proceeding pending or threatened against either Schaefer Company or any Seller which challenges or questions the legality, validity or propriety of or that may have the effect of preventing, delaying, making illegal or otherwise interfering with the transactions contemplated by this Agreement. (b)(i) There is no outstanding Order against or involving either of the Schaefer Companies; and (ii) no shareholder, officer, director or employee of either Schaefer Company is subject to any Order that prohibits such shareholder, officer, director or employee from engaging in or continuing any conduct, activity or practice relating to the business or assets of such Schaefer Company. (c)(i) Each Schaefer Company is in compliance with all of the terms and requirements of each Order to which its business or assets is subject, (ii) each Schaefer Company has been in compliance with all of the terms and requirements of each Order to which its business or assets were, on the date of determination of such compliance, subject, (iii) no Schaefer Company has received notice of any present or past unremedied violation of any Order and (iv) no event has occurred or circumstance exists that may constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which any Schaefer Company or its business or assets is subject. 3.10 Licenses; Compliance With Laws and Regulations. (a) Governmental Licenses; Notices. Except as set forth in Part 3.10(a) of the Sellers’ Disclosure Schedule, to the Knowledge of Sellers, each Schaefer Company has all Consents from Governmental Authorities (for purposes of this Section 3.10, “Governmental Authorizations”) necessary to lawfully conduct and operate its business as conducted on the Closing Date and to permit such Schaefer Company to own and use its assets in the manner in which it currently owns and uses such assets. Part 3.10(a) of the Sellers’ Disclosure Schedule contains a complete and accurate list of each Governmental Authorization   18 -------------------------------------------------------------------------------- that is held by either Schaefer Company, and each such Governmental Authorization is in full force and effect. Except as set forth in Part 3.10(a) of the Sellers’ Disclosure Schedule, both of the Schaefer Companies are in compliance in all material respects with all such Governmental Authorizations, and neither of the Schaefer Companies has received notice of any asserted present, or past and unremedied, failure to obtain any Governmental Authorization. (b) Compliance With Laws and Regulations. Except as provided in Part 3.10(b) of the Sellers’ Disclosure Schedule, (i) each Schaefer Company is in material compliance with all Laws applicable to it or to the conduct or operation of its business or the ownership or use of any of the properties or assets owned or used by it and, to the Knowledge of Sellers, each Schaefer Company has been in compliance with each Law that was, on the date of determination of such compliance, applicable to it or to the conduct or operation of its business or the ownership or use of any of the properties owned or used by it; (ii) to the Knowledge of the Sellers, no event has occurred or circumstance exists that (with or without notice or lapse of time) (A) constitutes a violation by either Schaefer Company of or a failure on the part of either Schaefer Company to comply with, any Law, or (B) results in the imposition of any Encumbrance against either Schaefer Company or any of its property under any Law and (iii) neither Schaefer Company has received any written notice from any Governmental Authority or any other Person regarding any actual or alleged violation of or failure to comply with, any Law. 3.11 Title to and Condition of Personal Property. (a) Title. Except as provided in Part 3.11(a) of the Sellers’ Disclosure Schedule, each of the Schaefer Companies has good and marketable title to, or a valid leasehold interest in, all of its personal property free and clear of all Encumbrances other than Permitted Encumbrances. (b) Condition. Both of the Schaefer Companies’ personal property, taken as a whole, is in good operating condition, subject to normal wear and tear. 3.12 Real Estate. (a) Part 3.12(a) of the Sellers’ Disclosure Schedule contains a complete and correct list of the Real Estate. The Schaefer Companies own and have good and marketable fee simple title to the Owned Real Estate free and clear of all Encumbrances other than the Permitted Encumbrances. The Schaefer Companies hold a valid leasehold interest in and to the Other Real Estate. Except as set forth in Part 3.12(a) of the Sellers’ Disclosure Schedule, (i) (A) there are no commenced or, to the Knowledge of Sellers, planned public improvements related to the Owned Real Estate that may result in special assessments for which the owner of such Real Estate would be responsible, and (B) to the Knowledge of the Sellers, there are no commenced or planned public improvements related to the Other Real Estate that may result in special assessments for which the lessee of such Real Estate would be responsible; (ii) there is, to the Knowledge of Sellers, no planned condemnation or similar action or material change in any zoning or building ordinance materially and adversely affecting the Real Estate, (iii) to the Knowledge of the Sellers, the Real Estate is not in violation of any zoning law or use or occupancy restriction and (iv) (A) no part of the Owned Real Estate is located within a flood plain or lakeshore erosion hazard area and (B) to the Knowledge of Sellers, no part of the Other   19 -------------------------------------------------------------------------------- Real Estate is located within a flood plain or lakeshore erosion hazard area. No Schaefer Company has received any notice requiring material repairs, alterations or correction of any existing conditions of the Real Estate that have not been addressed. No Schaefer Company leases any real property, has options to purchase or lease real property or owns any real property interest therein other than the Real Estate. (b) The Sellers have furnished or made available to the Purchaser true, correct and complete copies of all (i) title reports, if any, (ii) surveys, if any and (iii) deeds (as recorded), title holding or trust agreements under which any of the Real Estate have been conveyed to the Sellers. (c) With respect to each parcel of Owned Real Estate: (i) the Schaefer Companies are in compliance with all applicable zoning laws, deed restrictions and building codes, except for non-compliance which would not materially interfere with the present use of such Real Estate. To the Knowledge of Sellers, if any building or improvement located on any parcel of such Real Estate is damaged or destroyed, the Purchaser or the Schaefer Companies (as the case may be) would have the unconditional right under applicable existing zoning laws to rebuild such building or improvement; (ii) the Schaefer Companies have all permits, licenses and approvals with respect to the ownership and the current use and occupancy of such Real Estate, other than those the lack of which would not materially interfere with the present use of such Real Estate (for purposes of this Section 3.12, individually, a “Real Estate Permit” and collectively, “Real Estate Permits”). All such Real Estate Permits are set forth on Part 3.12(c)(ii) of the Sellers’ Disclosure Schedule and are in full force and effect. The current use and occupancy of such Real Estate does not violate any such Real Estate Permits, and no Proceeding is pending or, to the Knowledge of the Sellers, threatened, to revoke, suspend, modify or limit any such Real Estate Permits. No such Real Estate Permits will be subject to revocation, suspension, modification or limitation as a result of this Agreement or the consummation of the transactions contemplated hereby; (iii) except as disclosed on Part 3.12(c)(iii) of the Sellers’ Disclosure Schedule, there are no defects with respect to any such Real Estate which would impair, in any material respect, the operation of the business of the Schaefer Companies or the day-to-day use of such Real Estate or which would subject the Schaefer Companies to any liability under applicable law; (iv) all buildings, structures, improvements, fixtures, building systems and equipment, pipelines, gathering systems, pumping systems, compression systems, and all components thereof (for purposes of this Section 3.12, the “Improvements”) are in good condition and repair, subject to normal wear and tear, and are usable in the ordinary course of business and, except as disclosed on Part 3.12(c)(iv) of the Sellers’ Disclosure Schedule, do not contain asbestos or other Hazardous Substances. To the Knowledge of the Sellers, there are no structural deficiencies affecting any of the Improvements, and there are no facts or conditions affecting any of the Improvements which would, individually or in the aggregate, interfere in any   20 -------------------------------------------------------------------------------- material respect with the use or occupancy of the Improvements or any portion thereof in the operation of the business of the Schaefer Companies therein. All of the Improvements lie wholly within the boundaries of such Real Estate and do not encroach upon the property of, or otherwise conflict with, the property rights of any other Persons; and (v) all facilities located on such Real Estate are supplied with utilities and other services necessary for the operation of such Real Estate as presently operated. (d) With respect to each parcel of Other Real Estate, to the Knowledge of Sellers: (i) the Schaefer Companies are in compliance with all applicable zoning laws, deed restrictions and building codes, except for non-compliance which would not materially interfere with the present use of such Real Estate. If any building or improvement located on any parcel of such Real Estate is damaged or destroyed, the Purchaser or the Schaefer Companies (as the case may be) would have the unconditional right under applicable existing zoning laws to rebuild such building or improvement; (ii) the Schaefer Companies have all Real Estate Permits, other than those the lack of which would not materially interfere with the present use of such Real Estate. All such Real Estate Permits are set forth on Part 3.12(d)(ii) of the Sellers’ Disclosure Schedule and are in full force and effect. The current use and occupancy of such Real Estate does not violate any such Real Estate Permits, and no Proceeding is pending or threatened, to revoke, suspend, modify or limit any such Real Estate Permits. No such Real Estate Permits will be subject to revocation, suspension, modification or limitation as a result of this Agreement or the consummation of the transactions contemplated hereby; (iii) there are no defects with respect to any such Real Estate which would impair, in any material respect, the operation of the business of the Schaefer Companies or the day-to-day use of such Real Estate or which would subject the Schaefer Companies to any liability under applicable law; (iv) all Improvements are in good condition and repair, subject to normal wear and tear, and are usable in the ordinary course of business and do not contain asbestos or other Hazardous Substances. There are no structural deficiencies affecting any of the Improvements, and there are no facts or conditions affecting any of the Improvements which would, individually or in the aggregate, interfere in any material respect with the use or occupancy of the Improvements or any portion thereof in the operation of the business of the Schaefer Companies therein. All of the Improvements lie wholly within the boundaries of such Real Estate and do not encroach upon the property of, or otherwise conflict with, the property rights of any other Persons; and (v) all facilities located on such Real Estate are supplied with utilities and other services necessary for the operation of such Real Estate as presently operated. (e) Except as disclosed on Part 3.12(e) of the Sellers’ Disclosure Schedule, there are no restrictions of any nature on the ability of the Schaefer Companies to assign and transfer their interests in the Real Estate to the Purchaser (or its designee) by operation by law and there are no consents of third parties necessary for such assignment or transfer.   21 -------------------------------------------------------------------------------- 3.13 Taxes. (a) The Schaefer Companies (i) have timely filed or has caused to be timely filed with the appropriate Governmental Authorities all Tax Returns required to be filed by them as of the date of this Agreement for all periods ended on or prior to the Closing Date and (ii) have paid or have caused to be paid all Taxes (whether or not shown on any Tax Returns). All Tax Returns filed by the Schaefer Companies are correct and complete in all material respects. All Taxes relating to either of the Schaefer Companies that either is required by Law to withhold or collect for all periods ending on or prior to the Closing Date have been withheld or collected and have been paid over to the proper authorities to the extent due and payable. (b) Neither of the Schaefer Companies is currently the subject of an audit or other examination of Taxes by the tax authorities of any nation, state or locality nor has either Schaefer Company received any written notices from any taxing authority that such an audit or examination is contemplated or pending. There is no material dispute or claim concerning any Tax liability of the Schaefer Companies claimed or raised by any tax authority in writing. (c) Neither of the Schaefer Companies (i) has entered into a written agreement or waiver extending any statute of limitations relating to the payment or collection of a material amount of Taxes of either Schaefer Company that has not expired or (ii) is presently contesting any material Tax liability of either Schaefer Company before any Governmental Authority. (d) As of the Closing Date, neither of the Schaefer Companies has received written notification from a Tax authority that threatens a Proceeding for collection of Taxes that could subject either Schaefer Company to any liability for such Taxes, except for Taxes properly recorded on the Financial Statements. (e) There are no Encumbrances for Taxes (other than Taxes not yet due and payable) upon any of the assets of either Schaefer Company. (f) Neither Schaefer Company is a party to any agreement, contract, arrangement, or plan that has resulted or would result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Code Section 280G (or any corresponding provision of state or local Tax law). (g) Neither Schaefer Company is a party to or bound by any Tax allocation or sharing agreement. (h) Neither Schaefer Company (i) has been a member of an Affiliated Group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) or (ii) has any liability for Taxes of any Person (other than any Schaefer Company) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign law), as transferee or successor, by contract, or otherwise. For purposes of   22 -------------------------------------------------------------------------------- this Section 3.13, the term “Affiliated Group” shall mean any affiliated group within the meaning of Code Section 1504(a) or any similar group defined under a similar provision of state, local or foreign law. (i) The unpaid Taxes of the Schaefer Companies (i) did not, as of the date of the Interim Financial Statements, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Interim Financial Statements and (ii) will not exceed that reserve as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of the Schaefer Companies in filing their Tax Returns. 3.14 Contracts and Commitments. (a) Part 3.14(a) of the Sellers’ Disclosure Schedule sets forth a list of the following Contracts to which either of the Schaefer Companies is a party (collectively, the “Material Contracts”): (i) a material agreement with any senior executive that is not cancelable by Equipment Co. on notice of not longer than thirty (30) days and without liability, penalty or premium; (ii) a lease of personal property involving consideration or other expenditure in excess of One Hundred Thousand Dollars ($100,000) per annum; (iii) except for purchase or sale orders for the purchase of materials or supplies or customer contracts entered into in the ordinary course of business, an agreement involving payment or other expenditure of more than One Hundred Thousand Dollars ($100,000) in the aggregate that is not cancelable on less than 12 months’ notice; (iv) an agreement providing for the disposition of a material asset, other than in the ordinary course of business; (v) an agreement which provides for severance benefits upon termination of employment; (vi) a material agreement with a sales representative, dealer or distributor; (vii) a material license agreement; (viii) a material agreement under which Equipment Co. is indebted for borrowed money; and (ix) an agreement with a customer of Equipment Co. (b) Neither of the Schaefer Companies is and, to the Knowledge of Sellers, none of the other parties to each Material Contract is, in breach, violation of or default under any provision of any Material Contract. Each Material Contract is in full force and effect and represents a valid and binding obligation of such Schaefer Company party thereto and, to the Knowledge of Sellers, each other party thereto. To the Knowledge of the Sellers, no event has occurred or circumstance exists that would give any Person the right (with or without notice or lapse of time) to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify such Material Contract. (c) There are no renegotiations of, attempts to renegotiate or outstanding rights to renegotiate any amounts paid or payable to either Schaefer Company under current or completed Material Contracts with any Person, and no such Person has made demand (written or otherwise) for such renegotiation. (d) The Material Contracts relating to the sale, design or provision of products or services by the Schaefer Companies have been entered into in the ordinary course of business consistent with past practice and have been entered into without the commission of any   23 -------------------------------------------------------------------------------- act alone or in concert with any other Person, or any consideration having been paid or promised, that is or would be in violation of any Law. (e) None of the Sellers has or may acquire any rights under, and none of the Sellers has or may become subject to any obligation or liability under, any Material Contract that relates to the business of, or any of the assets owned or used by, either Schaefer Company and (ii) to the Knowledge of the Sellers, no shareholder, officer, director, agent, employee, consultant or contractor of either Schaefer Company is bound by any Material Contract (other than those certain Wabtec Corporation Employee Non-Competition and Confidentiality Agreements referred to in Section 5.1(m) hereof) that purports to limit the ability of such shareholder, officer, director, agent, employee, consultant or contractor to (A) engage in or continue any conduct, activity, or practice relating to the business of either Schaefer Company or (B) assign to either Schaefer Company or to any other Person any rights to any invention, improvement, or discovery. 3.15 Intellectual Property. Part 3.15 of the Sellers’ Disclosure Schedule lists all patents, trademarks, trade names, trade dress, trade secrets, service marks, copyrights and licenses thereof used or owned by the Schaefer Companies and all pending applications therefor (collectively, the “Intellectual Property”), all of which are free and clear of any material adverse claims or interests. The Schaefer Companies own or have the right to use all items of Intellectual Property. To Sellers’ Knowledge, the Schaefer Companies’ use of the Intellectual Property does not infringe, and there exists no reasonable basis for any claim of infringement, of any patents, trademarks, trade names, service marks, or copyrights of others. There are no pending claims or litigation and, to Sellers’ Knowledge, there are no inquiries or investigations challenging or threatening to challenge the Schaefer Companies’ right, title and interest with respect to its continued use and right to preclude others from using any such Intellectual Property. To Sellers’ Knowledge, no other person is infringing on the Intellectual Property. 3.16 Environmental Matters. (a) The Sellers have delivered to Purchaser true and correct copies of all environmental reports and assessments with respect to any real property, including without limitation all O&G Properties, now or previously owned, leased or operated by either Schaefer Company. (b) Except as set forth on Part 3.16 of the Sellers’ Disclosure Schedule, as of the Closing Date: (i)(A) each Schaefer Company has at all times operated in material compliance with all applicable Environmental Laws with respect to any and all real property (other than the O&G Properties) now or previously owned, leased or operated by either of the Schaefer Companies, and (B) to the Knowledge of Sellers, each Schaefer Company has at all times operated in material compliance with all applicable Environmental Laws with respect to the O&G Properties now or previously owned, leased or operated by either of the Schaefer Companies;   24 -------------------------------------------------------------------------------- (ii)(A) no Schaefer Company has received any notice from a Governmental Authority alleging that either Schaefer Company is not in compliance with applicable Environmental Laws with respect to any and all real property (other than the O&G Properties) now or previously owned, leased or operated by either of the Schaefer Companies, and (B) to the Knowledge of Sellers, no Schaefer Company has received any notice from a Governmental Authority alleging that either Schaefer Company is not in compliance with applicable Environmental Laws with respect to the O&G Properties now or previously owned, leased or operated by either of the Schaefer Companies; (iii) all licenses and permits currently held by the Schaefer Companies pursuant to Environmental Laws in effect as of the Closing Date are identified on Part 3.16(b)(iii) of the Sellers’ Disclosure Schedule, and each of the Schaefer Companies is in compliance in all material respects with such licenses and permits; (iv) there is no Environmental Claim pending or, to the Knowledge of Sellers, threatened against either of the Schaefer Companies with respect to any real property, including without limitation the O&G Properties, now or previously owned, leased or operated by either of the Schaefer Companies; (v)(A) there are no Hazardous Substances or underground storage tanks in, on or under any real property (other than the O&G Properties) now or previously owned, leased or operated by either of the Schaefer Companies as of the Closing Date, and (B) to the Knowledge of Sellers, there are no Hazardous Substances or underground storage tanks in, on or under the O&G Properties now or previously owned, leased or operated by either of the Schaefer Companies as of the Closing Date, except (with respect to both (A) and (B) above) those that are both (i) in material compliance with all applicable Environmental Laws and environmental permits and (ii) disclosed on Part 3.16(b)(v) of the Sellers’ Disclosure Schedule; (vi) to the Knowledge of Sellers, there have been and are currently no releases or threatened releases of Hazardous Substances for which either of the Schaefer Companies has had or could have any material liability under any applicable Environmental Law at any real property, including, without limitation, all O&G Properties formerly used, owned, operated or leased by either of the Schafer Companies; or (vii) to the Knowledge of Sellers, there are no Hazardous Substances or contaminants located in, on, at, upon or under any surface soil, subsurface soil, surface water, groundwater, building material or any other media of any form or type at, in, on, under or from the O&G Properties, including but not limited to ground water contamination, brine ponds (if any) used to hold well liquids and/or surface contamination from or by oil removed from the wells. 3.17 Transactions with Affiliates. Except as contemplated by this Agreement, neither Schaefer Company is a party to any Contract with any Seller or its Representatives.   25 -------------------------------------------------------------------------------- 3.18 Benefit Plans. (a) Except for the Existing Plans set forth on Part 3.18(a) of the Sellers’ Disclosure Schedule, neither Schaefer Company maintains any other Benefit Plan. Sellers have made available to Purchaser true, complete and accurate copies of each of the Existing Plans, together with copies of any summary plan description thereof and, as applicable, copies of the current plan determination letters and most recent Form 5500 series form filed with respect to each such Existing Plan and most recent trustee or custodian report. (b) No Existing Plan is a “multiemployer plan” as that term is defined in Section 3(37) of ERISA, nor a “multiple employer welfare arrangement” as that term is defined in Section 3(40) of ERISA, nor a defined benefit plan subject to Title IV of ERISA. (c) Except as set forth on Part 3.18(c) of the Seller’s Disclosure Schedule, each Existing Plan that is an ERISA governed plan (as defined in Sections 3 (1), (2), (3), (37) and (40) of ERISA), is in compliance with all applicable provisions of ERISA and the regulations issued thereunder, and all Existing Plans are in compliance with all other applicable laws, and, in all material respects, have been administered, operated and managed in accordance with the governing documents. All Existing Plans that are intended to qualify (for purposes of this Section 3.18, the “Qualified Plans”) under Section 401(a) of the Code have been determined by the Internal Revenue Service to be so qualified. To the extent that any Qualified Plans have not been amended to comply with applicable law, the remedial amendment period permitting retroactive amendment of such Qualified Plans has not expired and will not expire within 120 days after the Closing Date. All Existing Plan reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, annual reports, summary annual reports, audits or tax returns) have been timely filed or distributed. As to the items set forth on Part 3.18(c) of the Sellers’ Disclosure Schedule concerning the Schaefer 401(k) Plan (the “401(k) Plan”) and its violations of the of the Average Deferral Percentage (“ADP”) test which may have occurred between January 1, 2000 and January 1, 2006 (“ADP Violations”), on or before the Closing Date Sellers or the Schaefer Companies: (i) have made all applicable corrections resulting from the ADP violations in accordance with the applicable provisions of the Employee Plan Compliance Resolution System (“EPCRS”) as set forth in Revenue Procedure 2006-27; and (ii) have filed, to the extent required, the applicable Federal excise tax return and paid the ten percent (10% ) excise tax required under Code Section 4979, including all applicable penalties and interest, resulting from the ADP violations ; and (iii) have issued any required Federal Forms 1099 and/or other Federal income tax forms, including filing with the Internal Revenue Service as necessary; and (iv) have provided Buyer with evidence of such EPCRS required corrections and payment of the applicable excise tax required under Code Section 4979. If items (i), (ii), (iii) and (iv) above are not satisfied prior to the Closing Date, Sellers covenant and agree that they shall , within thirty days after the Closing Date, take any and all actions required or requested by Buyer necessary to effectuate such EPCRS corrections as to the ADP   26 -------------------------------------------------------------------------------- violations and, as necessary, filing of the applicable Federal excise tax return and payment of the excise tax, including interest and penalties and issuance and filing of the applicable Forms 1099. Sellers further agree to indemnify Buyer for all costs associated with correction of the ADP failure (including but not limited to 401(k) Plan contributions, excise taxes, interest, penalties, legal fees, administration fees and accounting fees) incurred by the Buyer or the 401(k) Plan in connection with such ADP corrections without regard to the provisions of Section 9.3(d)(i) hereof. The provisions of this Section 3.18(c) are in addition to those indemnification obligations of Sellers set forth in Section 9.3(a) and (b) hereof. As to the items set forth on Part 3.18(c) of the Sellers’ Disclosure Schedule concerning the Schaefer Post-Retirement Health Benefit Plan and the Schaefer Post-Retirement Life Insurance Plan (collectively referred to as the “Retiree Plans”), each and every employee, former employee and/or retiree of either Schaefer Company who is, as of the date of Closing eligible to currently receive or in the future receive a benefits under either Retiree Plan is scheduled on Part 3.18(j) of the Sellers’ Disclosure Schedule, and effective as of December 31, 2003 participation into the Retiree Plans has been frozen. To Sellers’ knowledge, Seller has made no written or oral representations which would prohibit the Schaefer Companies, or either of them or their successors or assigns, Buyer from amending or terminating either of the Retiree Plans at any time as to all current or future participants in the Retiree Plans. (d) None of (i) the Sellers, (ii) any Existing Plan or (iii) either Schaefer Company has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. (e) There have been no “reportable events” (as that phrase is defined in Section 4043 of ERISA) with respect to any Existing Plan which was not properly reported. (f) There have been no terminations, partial terminations or discontinuance of contributions to any Qualified Plan since October 31, 2000 without notice to and approval by the Internal Revenue Service, and as applicable the PBGC and the Schaefer Companies have not incurred liability under Section 4062 of ERISA. (g) Except as set forth on Part 3.18(g) of the Sellers’ Disclosure Schedule, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (either alone or in conjunction with any other event) result in, cause the accelerated vesting or payment of, or materially increase the amount or value of, any payment or benefit to any employee, officer or director of the Schaefer Companies. (h) With respect to each Existing Plan, all contributions (including employee salary reduction contributions) and all material insurance premiums that have become due have been paid, and any such expense accrued but not yet due has been properly reflected in the Interim Financial Statements. Except as reflected in the Interim Financial Statements, there is no liability relating to any Benefit Plan that could have a Material Adverse Effect. (i) The Interim Financial Statements reflect the approximate total pension, medical and other benefit expense for all Existing Plans, and no material funding   27 -------------------------------------------------------------------------------- changes or irregularities are reflected thereon which would cause such Interim Financial Statements to be not representative of most prior periods. (j) Except as set forth on Part 3.18(j) of the Sellers’ Disclosure Schedule, neither Schaefer Company has any current or future obligations to provide retiree health and retiree life insurance and unfunded death benefits, whether under a Benefit Plan or employment agreement, for current employees, former employees or directors (or the beneficiaries of any current or former employees or directors). (k) As of the Closing Date, the sole trustees under the Trust are David J. Kostolansky, David A. Rubino and Barry L. Anderson, and no other individuals are authorized or required to act on behalf of the Trust. 3.19 Labor Matters. (a) Neither Schaefer Company is a party to or bound by any collective bargaining agreements or other union contracts. Within the last three (3) years, no Schaefer Company has experienced any material labor disputes, union organization attempts or work stoppages due to labor disagreements, and there is currently no labor strike, dispute, request for representation, slow down or stoppage actually pending or, to Sellers’ Knowledge, threatened against any of the Schaefer Companies. (b) No Schaefer Company is bound by any Order, settlement or attempt to organize a collective bargaining unit. Sellers have no Knowledge of any employment discrimination, safety or unfair labor practice or other employment-related investigation, claim or allegation against either of the Schaefer Companies or any set of facts which would reasonably be expected to constitute a basis for such an action. 3.20 Undisclosed Liabilities. To the Knowledge of the Sellers, none of the Schaefer Companies has any liability or obligation of the type required to be set forth on their respective balance sheets (and there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any of them giving rise to any such liability or obligation), except for (i) liabilities or obligations set forth on the face of the Reference Balance Sheet, Interim Balance Sheet or referenced in the notes thereto, and (ii) liabilities or obligations which have arisen after July 31, 2006 in the ordinary course of business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of law). 3.21 Product Warranties; Customers. (a) Since December 31, 2005, no warranty claim has been paid by any Schaefer Company in excess of $50,000. There are no pending claims against either Schaefer Company with respect to any warranty applicable to products of such Schaefer Company and, to the Knowledge of Sellers, there is no such claim threatened. (b) Part 3.21(b) of the Sellers’ Disclosure Schedule sets forth (i) the names and addresses of all customers of each Schaefer Company that ordered goods and services with an aggregate value for each such customer of $50,000 annually or more since December 31,   28 -------------------------------------------------------------------------------- 2003 and (ii) the amount for which each such customer was invoiced during such period. To the Knowledge of the Sellers, and neither Schaefer Company has received any notice (written or otherwise), that any of its customers has terminated or will terminate or has substantially reduced or will substantially reduce its use of products, goods or services of the Schaefer Company, except for such terminations or reduction as would not have a Material Adverse Effect. To the Knowledge of the Sellers, no customer has otherwise threatened to take any action described in the preceding sentence. 3.22 Insurance. Part 3.22 of the Sellers’ Disclosure Schedule contains a list of all the insurance coverage (including without limitation all general liability insurance coverage) maintained by or issued to the Schaefer Companies, including the name of the issuer, the policy number, the policy period, limits of liability and any self-insured retentions or deductibles that may apply, and such insurance coverage is in full force and effect with respect to the business of the Schaefer Companies. All premiums on policies due to the Closing Date have been paid, and no notice has been received that any such insurance is in default, will be canceled or not renewed and the Company is otherwise in material compliance with the terms of such policies. There is no material claim pending under any of such policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. Except as set forth in Part 3.22 of the Sellers’ Disclosure Schedule, the Sellers have no Knowledge of any threatened early termination of, or material premium increase with respect to, any such policies. Part 3.22 of the Sellers’ Disclosure Schedule contains a list of all agreements pursuant to which either of the Schaefer Companies has agreed to provide third parties with status as an insured or an additional insured under any insurance policy issued to such Schaefer Company. Part 3.22 of the Sellers’ Disclosure Schedule contains a list of all agreements pursuant to which a third party has agreed to provide either of the Schaefer Companies with status as an insured or an additional insured under any insurance policy issued to such third party. 3.23 Books and Records. The books of account, minute books, stock record books and other records of each of the Schaefer Companies, all of which have been made available to the Purchaser, are complete and correct in a material respects and have been maintained in accordance with (i) industry practices standard in the business in which such Schaefer Company is engaged and (ii) its Organizational Documents. The minute books of the Schaefer Companies contain accurate and complete records of all meetings held of and corporate action taken by, the shareholders, the boards of directors (or similar governing body) and committees of the boards of directors of the Schaefer Companies, and no meeting of any such shareholders, board of directors or committee has been held for which minutes have not been prepared and are not contained in such minute books, other than the meeting of the boards of directors of the Schaefer Companies held on or about September 14, 2006, which minutes the Sellers shall promptly provide subsequent to Closing. At the Closing, all of the books and records of the Schaefer Companies will be in the possession of the respective Schaefer Companies. 3.24 Accounts Receivable. All accounts receivable of the Schaefer Companies that are reflected on the Interim Balance Sheet or on the accounting records of the Schaefer Companies as of the Closing Date (for purposes of this Section 3.24, collectively, the “Accounts Receivable”) represent or will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business consistent with past practice.   29 -------------------------------------------------------------------------------- Part 3.24 of the Sellers’ Disclosure Schedule contains a complete and accurate list of all Accounts Receivable as of the date of the Interim Balance Sheet, which list sets forth the aging of such Accounts Receivable. The Accounts Receivable are current and collectible net of the respective reserves shown on the Interim Balance Sheet or accounting records of the Schaefer Companies as of the Closing Date (which reserves are adequate and calculated consistent with past practice and, in the case of the reserve as of the Closing Date, will not represent a greater percentage of the Accounts Receivable as of the Closing Date then the reserve reflected in the Interim Balance Sheet represented of the Accounts Receivable reflected therein and will not represent a material adverse change in the composition of such Accounts Receivable in terms of aging). Subject to such reserves, none of the Accounts Receivable as of the Closing Date have been outstanding for greater than 120 days. To the Knowledge of the Sellers, there is no contest, claim or right of set-off, other than returns in the ordinary course of business, under any Contract with any obligor of an Accounts Receivable relating to the amount of validity of such Accounts Receivable. 3.25 Inventory. All Inventory of the Schaefer Companies, whether or not reflected on the Interim Balance Sheet, consists of a quality and quantity usable and salable in the ordinary course of business, except for obsolete items and items of below-standard quality, all of which have been written off or written down to net realizable value in the Reference Balance Sheet or the Interim Balance Sheet or on the accounting records of the Schaefer Companies as of the Closing Date, as the case may be. All Inventory not written off has been priced at the lower of cost or market on a LIFO basis. The quantities of each item of Inventory are not excessive, but are reasonable in the present circumstances of the Schaefer Companies. 3.26 Computer Systems. (a) The computer systems (and each part of each of them) used by the Schaefer Companies (for purposes of this Section 3.26, the “Computer Systems”) have functioned without any material failures since being installed (except for pre-planned maintenance shut downs and additional development periods). (b) To the Knowledge of the Sellers, the data storage and transmittal capability, functionality and performance of the Computer Systems as a whole are reasonably satisfactory for the business of the Schaefer Companies. (c) The Computer Systems are either owned by or properly licensed or leased to a Schaefer Company and, with respect to licensed or leased software and Computer Systems, the Schaefer Companies shall be entitled to use such software and Computer Systems on the same terms as prior to the consummation of the transactions contemplated herein. (d) Each of the Schaefer Companies has taken commercially reasonable precautions to preserve the availability, security and integrity of the Computer Systems and the data and information stored on the Computer Systems, including, without limitation, the detection and remediation of viruses and bugs.   30 -------------------------------------------------------------------------------- (e) To the Knowledge of the Sellers, the Computer Systems do not contain third party software or systems which are not available from third party suppliers on arms length commercial terms. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 3, SELLERS MAKE NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE COMPANY, EQUIPMENT CO. OR ANY OF THEIR RESPECTIVE ASSETS, LIABILITIES OR OPERATIONS, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. To the extent that any of the Named Representatives has actual knowledge as of the Closing Date of a breach of any of Sellers’ representations or warranties set forth in this Agreement based upon his or her due diligence review of the Schaefer Companies and Purchaser elects to close the transaction notwithstanding such knowledge, Purchaser shall be deemed to have waived such breach of a representation or warranty. 4. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO PURCHASER. Purchaser represents and warrants to Sellers as follows: 4.1 Organizational Matters. (a) Organization; Power. Purchaser is a corporation duly organized and validly existing under the Laws of the State of Delaware. Purchaser has all requisite power and authority to own, lease and operate all of its properties and assets and to carry on its business as it is now being conducted. (b) Authorization; Validity. Purchaser has all requisite power and authority to enter into this Agreement and the Ancillary Agreements to which it is a party and to carry out its obligations hereunder and thereunder. The execution and delivery by Purchaser of this Agreement and the Ancillary Agreements to be executed by Purchaser pursuant hereto and the consummation by Purchaser of the transactions contemplated hereby and thereby have been duly authorized by the board of directors of Purchaser. No further act or proceeding on the part of Purchaser is necessary to authorize this Agreement or the Ancillary Agreements to be executed and delivered by Purchaser pursuant hereto or the consummation of the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements to which Purchaser is a party have been duly executed and delivered by Purchaser and constitute the valid and legally binding obligations of Purchaser, enforceable against it in accordance with their respective terms except that enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws relating to or affecting creditors’ rights generally and enforcement of this Agreement, including among other things the remedy of specific performance and injunctive or other forms of equitable relief, may be subject to equitable defenses and to the discretion of the court before which any action, hearing or similar proceeding therefor may be brought. The execution and delivery of this Agreement and the related Ancillary Agreements and the consummation of the transactions contemplated hereby will not violate or conflict with any Law, order, writ, injunction, judgment, arbitration award or   31 -------------------------------------------------------------------------------- decree to which Purchaser is bound except for violations, defaults or conflicts which would not have a Material Adverse Effect. (c) Compliance; Binding Effect. The execution and delivery of this Agreement and the Ancillary Agreements, the purchase of the Shares and the consummation of the transactions contemplated hereby will not: (i) violate any provisions of the Organizational Documents of Purchaser; (ii) constitute a default under, or constitute an event which with the giving of notice or the lapse of time or both would become a default under, any material contract to which Purchaser is a party or by which Purchaser is bound, or (iii) violate or conflict with any Law, Order or other restriction of any kind or character to which Purchaser is subject or by which Purchaser is bound. 4.2 Consents. Except as set forth on Part 4.2 of the Purchaser Disclosure Schedule, no notice to or Consent or Order of any Governmental Authority or any other Person is required in connection with the execution and delivery of this Agreement or the consummation or performance of any of the transactions contemplated by this Agreement. 4.3 Litigation. Except as set forth on Part 4.3 of the Purchaser Disclosure Schedule, there is no Proceeding pending or, to the Knowledge of Purchaser, threatened against Purchaser which questions the legality, validity or propriety of the transactions contemplated by this Agreement or otherwise would adversely affect Purchaser’s performance under this Agreement or the consummation of the transactions contemplated hereby. 4.4 Financing. Purchaser has cash reserves or committed financing sufficient to pay the Purchase Price and to consummate the transactions contemplated by this Agreement. 4.5 Investment Representation. Purchaser is purchasing the Shares for its own account with the present intention of holding the Shares for investment purposes and not with a view to or for sale in connection with any public distribution of the Shares in violation of any federal or state securities laws. Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Shares. Purchaser acknowledges that the Shares have not been registered under the Securities Act or any state or foreign securities laws and that the Shares may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is registered pursuant to the terms of an effective registration statement under the Securities Act and is registered under any applicable state or foreign securities laws or pursuant to an exemption from registration under the Securities Act and any applicable state or foreign securities laws. 4.6 Disclosure. To the Purchaser’s Knowledge, the Purchaser has had full access to the Schaefer Companies’ officers, directors, employees, records, physical plants and facilities to the extent the Purchaser has deemed necessary to enable the Purchaser to evaluate the transaction contemplated hereby. The Purchaser has notified Sellers in writing of any breach or default by Sellers under this Agreement of which the Named Representatives had actual knowledge prior to the Closing Date.   32 -------------------------------------------------------------------------------- 4.7 No Knowledge of Misrepresentations or Omissions. Except as notice has been provided under Section 4.6, the Named Representatives have no actual knowledge of any breach of this Agreement by Sellers as of the Closing Date. 5. CLOSING. 5.1 Sellers’ Deliveries. Sellers shall deliver to Purchaser at or prior to Closing the following: (a) at least ten (10) days prior to the Closing Date a commitment (the “Title Commitment”) for an ALTA owner’s policy of title insurance, issued by Chicago Title Insurance Company (for purposes of this Section 5.2, the “Title Company”), in an amount not less than $5,500,000 (without deduction for any applicable transfer fees), committing the Title Company to insure the Schaefer Companies’ fee ownership interest in the Owned Real Estate, and accompanied by legible copies of all underlying documents noted in the Title Commitment, which Title Commitment shall be satisfactory in all respects to Purchaser. (b) certificate(s) representing the Shares, duly endorsed in blank by Sellers or accompanied by stock powers duly endorsed in blank; (c) certificates of status with respect to the Company, issued by the Wisconsin Department of Financial Institutions, dated no earlier than 15 days prior to the Closing Date; (d) certificates of status with respect to Equipment Co., issued by the Secretary of State of Ohio, dated no earlier than 15 days prior to the Closing Date; (e) [reserved]; (f)(A) certificates from each Seller which is not a natural person, dated as of the Closing Date and signed on its behalf by its secretary or assistant secretary (or other comparable agent or representative), certifying the (i) the names, true signatures and incumbency of its officers, (ii) adoption of resolutions of such Seller’s board of directors (or other governing body) authorizing such Seller’s execution, delivery and performance of this Agreement and the Ancillary Agreements and (to the extent applicable) (iii) termination of the agreements referred to in subsection (j) below and (B) certificate of the Company as to the incumbency of the Trustees under the Schaefer 401(k) Plan; (g) written resignations of all directors and officers of the Company and its Subsidiaries; (h) the written resignation of David J. Kostolansky as employee of the Equipment Co.; (i) opinions of counsel to the Company and the Sellers in form and substance satisfactory to Purchaser;   33 -------------------------------------------------------------------------------- (j) each of the Schafer Companies shall have terminated any and all agreements between (i)(A) any and all Sellers or (B) any former shareholders of a Schaefer Company and (ii) such Schaefer Company, including without limitation the Bonus Plan; provided, however, that any agreements or provisions thereof by which a Schaefer Company is required to indemnify, defend or hold harmless any officer or director of such Schaefer Company in respect of his or her services as such shall terminate in accordance with their terms; (k) from each beneficiary of the Bonus Plan, an executed release in form and substance satisfactory to Purchaser (the “Bonus Plan Releases”); (l) the Escrow Agreement duly executed by the Sellers’ Agent; and (m) the Wabtec Corporation Employee Non-Competition and Confidentiality Agreements executed by each of Barry L. Anderson, Philip D. Oswald, Richard J. Barnhart and David A. Rubino. 5.2. Purchaser’s Deliveries. Purchaser shall deliver to Sellers at or prior to Closing the following: (a) certificate from Purchaser dated as of the Closing Date and signed on its behalf by its secretary or assistant secretary (or other comparable agent or representative), certifying the (i) the names, true signatures and incumbency of its officers, and (ii) adoption of resolutions of Purchaser’s board of directors authorizing Purchaser’s execution, delivery and performance of this Agreement and the Ancillary Agreements (b) the Closing Payment as provided in Section 2.3 of this Agreement; (c) a Certificate of Good Standing with respect to Purchaser issued by the Secretary of State of the State of Delaware dated no earlier than 15 days prior to the Closing Date; (d) the Consents identified in Part 4.2 of the Purchaser Disclosure Letter; and (e) the Escrow Agreement duly executed by Purchaser and Escrow Agent. 6. TAX MATTERS. 6.1 Allocation of Tax Liabilities; Indemnification. (a) Sellers shall, jointly and severally, be liable for and shall hold Purchaser harmless against any liability for Taxes of the Sellers, the Company or the Equipment Co. for any taxable year or other taxable period that begins before the Closing Date and, in the case of any taxable year or other taxable period that includes the Closing Date (a “Straddle Period”), that part of the taxable year or other taxable period that begins before the Closing Date. Purchaser shall be liable for and shall hold Sellers harmless against any liability for Taxes of Purchaser, the Company and the Equipment Co. for any taxable year or other taxable period that   34 -------------------------------------------------------------------------------- begins after the Closing Date and, in the case of a Straddle Period, that part of the taxable year or other taxable period that begins after the Closing Date. The provisions of this Section 6.1(a) are in addition to those indemnification obligations of Purchaser set forth in Section 9.2(a) and of Sellers set forth in Section 9.3(a) and (b) hereof. (b) Whenever it is necessary for purposes of this Section 6.1 to determine the liability for Taxes for a Straddle Period, the determination shall be made by assuming a taxable year or other period which ended at the close of business on the Closing Date, except that exemptions, allowances or deductions that are calculated on an annual basis (such as the deduction for depreciation) shall be apportioned on a time basis. (c) Each Party shall promptly notify the other Party in writing upon receipt by such Party of notice of any pending or threatened audits or assessments relating to Taxes for which such other Party would be required to indemnify pursuant to this Agreement (d) Sellers shall have the sole right to represent the Sellers’, the Company’s and the Equipment Co.’s interest in any audit or administrative or court proceeding relating to any such Tax that the Sellers are required to indemnify pursuant to this Agreement except for a Straddle Period and to employ counsel of their choice at their sole expense. Purchaser shall have the sole right to represent the Purchaser’s, the Company’s and the Equipment Co.’s interest in any audit or administrative or court proceeding relating to any such Tax that the Purchasers are required to indemnify pursuant to this Agreement including a Straddle Period and to employ counsel of its choice at its sole expense. Notwithstanding the foregoing, a Party shall not be entitled to settle, either administratively or after the commencement of litigation, any claim for such Taxes that would materially adversely affect the liability of the other Party for such Taxes without the prior written consent of such other Party, which consent shall not be unreasonably withheld, conditioned or delayed. If Sellers elect not to assume the defense of any claim for such Taxes which may be the subject of indemnification by Sellers pursuant to this Agreement or with respect to a Straddle Period, Sellers shall be entitled to participate in such defense at their sole expense. Neither Purchaser nor the Company nor the Equipment Co. may agree to settle any claim for such Taxes that may be the subject of indemnification by Sellers under this Agreement without the prior written consent of Sellers’ Agent, which consent shall not be unreasonably withheld, conditioned or delayed. 6.2 Returns and Reports. (a) Sellers’ Agent shall file or cause to be filed when due all Tax Returns with respect to Taxes that are required to be filed by or with respect to the Company and the Equipment Co. for taxable years or periods ending on or before the Closing Date and shall pay any Taxes due in respect of such Tax Returns. Purchaser shall file or cause to be filed when due all Tax Returns with respect to Taxes that are required to be filed by or with respect to the Company and the Equipment Co. for taxable years or periods ending after the Closing Date and shall pay any Taxes due in respect of such Tax Returns, subject to Section 6.1(a) above with respect to Straddle Periods. (b) With respect to any such Tax Return for a Straddle Period, a copy of such Tax Return shall be provided to Sellers’ Agent within 30 calendar days prior to the due   35 -------------------------------------------------------------------------------- date (including extensions) for the filing thereof, and Sellers’ Agent shall have the right to approve (which approval shall not be unreasonably withheld, conditioned or delayed) such Tax Return to the extent it relates to the portion of the period ending on the Closing Date. Sellers’ Agent shall promptly pay to Purchaser the amount of Taxes attributable to such period (as determined pursuant to Section 6.1(b) above) at the time such Tax Return is filed. 6.3 Cooperation; Access to Records. After the Closing Date, Sellers and Purchaser shall: (a) assist (and cause their respective affiliates to assist) the other Party in preparing any Tax Returns or reports which such other Party is responsible for preparing and filing in accordance with Section 6.2; (b) cooperate fully in preparing for and conducting any audits of, or disputes with taxing authorities regarding, any Tax Returns covered in this Article 6; (c) make available to the other Party and to any taxing authority as reasonably requested all applicable records, documents, accounting data and other information relating to Taxes and Tax Returns covered in this Article 6; (d) furnish the other Party with copies of all correspondence received from any taxing authority in connection with any tax audit or information request with respect to any such taxable period for which the other Party may have a liability under Section 6.1; and (e) execute and deliver such powers of attorney and other documents as are necessary to carry out the intent of this Article 6. 6.4 Refunds. Any refunds (including interest thereon) of Taxes paid or indemnified by Sellers pursuant to this Agreement or for which a reserve was included on the Reference Balance Sheet shall be for the account of Sellers. Any refunds (including interest thereon) of Taxes paid or indemnified by Purchaser pursuant to this Agreement (other than those for which a reserve was included on the Reference Balance Sheet) shall be for the account of Purchaser. Purchaser agrees to assign and promptly remit (and to cause the Company and the Equipment Co. to assign and promptly remit) to Sellers’ Agent all refunds (including interest thereon) of Taxes which any Seller is entitled to hereunder and which are received by Purchaser or any of its affiliates. Sellers agree to assign and promptly remit to Purchaser all refunds (including interest thereon) of Taxes which Purchaser is entitled to hereunder and which are received by any Seller or any of its affiliates. 6.5 Disputes. If Purchaser and Sellers’ Agent cannot agree on any calculation required to be made under this Article 6, Purchaser and Sellers’ Agent shall direct the Unrelated Accountant to make such calculation as promptly as practicable, but in any event not later than 30 calendar days after such direction, and to deliver a written notice to each of Purchaser and Sellers’ Agent setting forth the results of such calculation. The results of such calculation as made by the Unrelated Accountant shall be final and binding, and the fees and expenses of the Unrelated Accountant shall be paid 50% by Purchaser and 50% by Sellers.   36 -------------------------------------------------------------------------------- 6.6 Price Adjustment. Purchaser and Sellers agree that any payment made under this Article 6 will be treated by the Parties on its Tax Returns as an adjustment to the Purchase Price. 6.7 Survival; Indemnification. Any amounts owed to Purchaser pursuant to this Article 6 shall be subject to the provisions of Article 9 hereof. 7. COVENANTS OF PURCHASER AND SELLERS. 7.1 Access to Books and Records. Purchaser hereby covenants and agrees to maintain in a reasonably accessible place, during the three (3) year period after the Closing, the books and records made available by Sellers hereunder relating to the Company or Equipment Co. and to provide copies of such books and records to Sellers or their representatives upon request, for any reasonable purpose, at Sellers’ expense. 7.2 Reporting Assistance. Purchaser agrees to cooperate with Sellers in preparing information for various authorities after the Closing Date. This information includes, but is not limited to, accounting and tax workbooks, responses to audit requests and other filings with tax authorities. Sellers agree to provide the same reporting assistance to Purchaser. 7.3 Insurance Policies; Employee Benefits . Sellers agree to cooperate with and assist Purchaser with any and all efforts to obtain copies of (i) insurance policies previously issued to the Schaefer Companies, (ii) employee benefit plans previously adopted by the Schaefer Companies and/or (iii) information regarding the terms and conditions of such insurance policies or employee benefit plans. 8. MUTUAL COVENANTS AND WARRANTIES. 8.1 Publicity. No public announcement or other publicity regarding the transactions referred to herein shall be made by any Party hereto without the prior written approval of all Parties hereto as to form, timing and manner of distribution or publication, except to the extent otherwise required by Law on written advice of counsel. Unless such disclosure is required by applicable Law, no press release or public communication shall disclose the Purchase Price. 8.2 Brokerage. Sellers and Purchaser respectively warrant to each other, as to the warranting Party’s conduct and commitments, that no Person provided services as a broker, agent or finder in connection with the transactions contemplated hereby, other than Cleary Gull Inc. which provided investment banking and business brokerage services to Sellers, the Company and Equipment Co. Sellers and Purchaser shall respectively indemnify the other Party for any claim asserted by any other Person purporting to act on behalf of the respective indemnitor as a broker, agent or finder in connection with the transactions contemplated hereby. 8.3 Other Documents. Each party agrees to deliver such other documents as the other party may reasonably request for the purpose of facilitating the consummation or performance of any of the transactions contemplated by this Agreement.   37 -------------------------------------------------------------------------------- 9. SURVIVAL; INDEMNIFICATION. 9.1 Survival. (a) Each and every agreement and covenant (other than those set forth in Articles 6, 9, 10, 12 and 13 hereof) made by the Sellers or Purchaser in this Agreement, in any exhibits or schedules to this Agreement, or in any Disclosure Schedules, Ancillary Agreements, or instruments of transfer delivered hereunder shall survive the Closing for a period of thirty-six (36) months after the Closing Date and thereafter be of no further force and effect. Except as otherwise set forth in this Section 9.1, each and every representation and warranty made by the Sellers or Purchaser in this Agreement, in any exhibits or schedules to this Agreement, or in the Sellers’ Disclosure Schedules, Ancillary Agreements, or instruments of transfer delivered hereunder (other than those in Sections 3.1, 3.2, 3.3, 3.11(a), 3.12(a), 3.13 or 3.16 or Article 6) shall terminate on the date that is eighteen (18) months after the Closing Date and thereafter be of no further force or effect; provided, that (i) a claim pursuant to this Article 9 under Section 3.1, 3.2 or 3.3 may be made at any time; (ii) a claim made pursuant to this Article 9 under Section 3.13 or Article 6 may be made at any time prior to the expiration of the applicable statute of limitations and (iii) a claim made pursuant to this Article 9 under Sections 3.11(a), 3.12(a) or 3.16 may be made at any time prior to the third anniversary of the Closing Date (the date on which any covenant, agreement, representation or warranty terminates in accordance with this Article 9 being referred to herein as the “Cut-off Date” for such covenant, agreement, representation or warranty). (b) [Reserved] (c) Any representation, warranty, covenant or agreement that would otherwise terminate at the Cut-off Date with respect thereto shall survive if the notice referred to in Section 9.2(b) or Section 9.3(c), as the case may be, of the breach, inaccuracy, default or nonperformance thereof shall have been given on or prior to the Cut-off Date with respect thereto to the Party against whom indemnification may be sought. 9.2 Indemnification by Purchaser. (a) From and after the Closing Date, Purchaser shall indemnify and hold Sellers, and each of them, harmless from and against any and all Losses incurred or sustained by, or imposed upon, Sellers, or any of them, with respect to or by reason of (i) any breach of any representation or warranty made by Purchaser in Section 4 of this Agreement at and as of the Closing Date (or at and as of such different date or period specified in such representation or warranty), (ii) any breach by Purchaser of any of its agreements or covenants contained in this Agreement or (iii) any fact, event or circumstance occurring after the Closing Date that would give rise to or result in a Third Party Claim against the Sellers. (b) Maximum Amount of Purchaser’s Indemnification. In no event shall the aggregate liability of the Purchaser with respect to all of Seller’s claims for indemnification under this Section 9.2 (other than those based upon breaches of Section 4.1, Article 6 or claims based upon fraud) exceed, in the aggregate, Five Million Dollars ($5,000,000.00).   38 -------------------------------------------------------------------------------- (c) Notwithstanding anything to the contrary in this Agreement, Sellers shall not be entitled to indemnification under Section 9.2(a) with respect to any claim for indemnification thereunder, unless any Seller or Sellers’ Agent has given Purchaser written notice of such claim in reasonable specificity prior to the applicable Cut-off Date. 9.3 Indemnification by Sellers. (a) From and after the Closing Date, Sellers shall, jointly and severally, indemnify and hold Purchaser, the Company and their respective Representatives, shareholders and controlling Persons (for purposes of this Article 9, collectively, the “Purchaser Indemnified Persons”) harmless from and against any and all Losses (including without limitation any Environmental Losses) incurred or sustained by, or imposed upon, directly or indirectly, such Purchaser Indemnified Person with respect to, by reason of or arising out of (i) any breach of any representation or warranty made by the Sellers contained in this Agreement, (ii) any breach by the Schaefer Companies of any of their covenants or obligations contained in this Agreement or (iii) (A) the Warrant Repurchase Agreement, (B) that certain Amended and Restated Note and Warrant Purchase Agreement dated as of May 4, 2005, as amended, supplemented or otherwise modified through the date hereof, between the Company and BOCP, together with each of the Transaction Documents (as defined therein), (C) the Bonus Plan Releases; (D) that certain Waiver and Termination Agreement dated as of the date hereof by and among the Company, CCP, the Trust, each of Messrs. Kostolansky, Anderson, Rubino and Barnhart and BOCP with respect to the Shareholder Agreement (as defined therein) and (E) that certain Waiver and Termination Agreement dated as of the date hereof by and among the Company and each of Messrs. Kostolansky, Anderson, Rubino and Barnhart with respect to the SAR Plan (as defined therein). (b) From and after the Closing Date, each Seller hereby agrees individually and severally (based on each such Seller’s pro rata portion of the Final Purchase Price) to indemnify and hold the Purchaser Indemnified Persons harmless from and against any and all Losses incurred or sustained by or imposed upon, directly or indirectly, such Purchaser Indemnified Person with respect to, by reason of or arising from or in connection with (i) any breach of a representation or warranty made by that Seller contained in the Agreement or (ii) any breach of any covenant or obligation of that Seller in this Agreement. (c) Notwithstanding anything to the contrary in this Agreement, the Purchaser Indemnified Persons shall not be entitled to indemnification under Section 9.3(a) or (b): (i) in connection with any claim for indemnification hereunder with respect to which Purchaser or either of the Schaefer Companies has an enforceable contractual right of indemnification or right of set-off against any third party and Purchaser is enjoined by a court of competent jurisdiction or otherwise legally prevented from assigning any such rights to Seller; (ii) to the extent of the value of any net Tax benefit (less any tax burden imposed on Purchaser by any indemnity amount paid in excess of such net Tax benefit) realized (by reason of a Tax deduction, basis reduction, shifting of income, credits   39 -------------------------------------------------------------------------------- and/or deductions or otherwise) by Purchaser or either of the Schaefer Companies in connection with the Losses that form the basis of Purchaser’s claim for indemnification hereunder; (iii) with respect to any claim for indemnification hereunder, unless Purchaser has given the written notice to Sellers’ Agent of such claim, setting forth in reasonable detail the facts and circumstances pertaining thereto prior to the applicable Cut-off Date; (iv) to the extent of the proceeds received by Purchaser or either of the Schaefer Companies in respect of any insurance claim under which Purchaser or either of the Schaefer Companies is entitled in connection with the facts giving rise to such indemnification; provided, that the Purchaser Indemnified Persons shall be entitled to indemnification with respect to any Losses incurred by Purchaser in pursuing any such insurance claim without regard to the provisions of subsection (d)(i) hereof ; and (v) to the extent the Loss is reserved for in the Final Closing Balance Sheet. (d) In addition to the provisions of subsection (c) above and subject to the provisions of subsection (h) below, the indemnification obligations of Sellers under this Agreement shall be limited as follows: (i) Basket. Unless otherwise provided herein, the Sellers shall not be required to provide indemnification under this Section 9.3 unless the Losses for all of Purchaser’s claim(s) for indemnification (other than those based upon breaches of Sections 3.1, 3.2, 3.3 or 3.13, Article 6 or claims based upon fraud) shall exceed in the aggregate an amount equal to one-half of one percent (0.5%) of the sum of the Base Amount plus the amount of Final Closing Cash (the “Basket Amount”), after which the Sellers shall be liable for the full amount of Losses in excess of the Basket Amount. (ii) Maximum Amount of Sellers’ Indemnification. In no event shall the aggregate liability of the Sellers with respect to all of Purchaser’s claims for indemnification under this Section 9.3 (other than those based upon breaches of Sections 3.1, 3.2, 3.3 or 3.13, Article 6 or claims based upon fraud) exceed, in the aggregate, Five Million Dollars ($5,000,000.00); provided, that Seller’s failure to satisfy any or all of the Closing Funded Debt shall not be credited toward such maximum indemnification nor be subject to any maximum indemnification limit. The Sellers shall be liable for the full amount of Losses arising out of breaches of Sections 3.1, 3.2, 3.3 and 3.13, Article 6 and claims based upon fraud; provided, that the Sellers’ liability for Losses arising out of breaches of Sections 3.1, 3.2, 3.3 and 3.13 and Article 6 shall not exceed, in the aggregate, the Purchase Price. (e) Notwithstanding anything to the contrary in this Agreement, the obligation of Sellers with respect to Environmental Losses and breaches of the representations and warranties contained in Section 3.16 of this Agreement shall be subject to the following additional limitations: (i) Neither Purchaser nor its consultants, contractors, agents or representatives shall perform or undertake after the Closing Date any investigation or sampling   40 -------------------------------------------------------------------------------- of any Hazardous Substance or contaminants in, on, at upon or under any surface soil, subsurface soil, surface water, groundwater, building material or any other media of any form or type at, in, on, under or from the Real Estate (collectively “Media”) except to the extent that Purchaser, in its sole discretion, concludes that an investigation and/or sampling of any Media is (A) done in connection with a future sale of the Real Estate by Purchaser to a bona fide third party purchaser; (B) done in connection with a bona fide third party financing transaction in which Purchaser or any of its affiliates is the borrowing entity; (C) warranted by any future construction or development on the Real Estate by Purchaser (and then only to the extent related to the area of construction or development); (D) required by Law or (E) done in connection with a response to a bona fide Third Party Claim asserting liability for the Release of Hazardous Substances at the Real Estate (items (A) through (E) referred to as “Permissible Activities”). (ii) Any Environmental Losses incurred or sustained by or imposed upon the Purchaser Indemnified Persons other than as a result of the Permissible Activities shall, after giving effect to subsection (d)(i) hereof, be borne in the proportion of twenty-five percent (25%) by Purchaser and seventy-five percent (75%) by Sellers. (iii) With respect to Sellers’ indemnification obligations for Environmental Losses under Section 9.3(a) or (b) above as a result of a breach of a representation or warranty set forth in Section 3.16 above or otherwise, Purchaser shall: (A) provide Sellers or their Representatives access to the applicable Real Estate so that Sellers may conduct their own investigation, testing or corrective action with respect to the matter; (B) immediately provide Sellers with the results, including analytical data, of any investigation or testing conducted by Purchaser or, if available to Purchaser, any third party; (C) give Sellers the right to participate in any discussions or negotiations with any Governmental Authority concerning such matter; (D) if Remediation Action is required in any such matter, give Sellers the right to develop and implement a plan of corrective action, such plan to be paid for by Sellers and be subject to Purchaser’s approval, and, if requested by Sellers, cooperate with Sellers in the development and implementation of such plan on a cost effective basis; any such plan of action may, to the extent permitted under Environmental Laws, be based on the industrial use of the property and may rely on and utilize institutional controls (such as web-based GIS registrations, deed notices or restrictions) and shall contain reasonable steps so as to minimize disruption of or adverse effect on the ongoing operations of the business of the Schaefer Companies; and (E) cooperate fully and in good faith with Sellers in performing such tasks as Sellers and their technical professionals and Representatives may reasonably request as being necessary to complete any Remediation Action being undertaken by Sellers pursuant to this Agreement; and Purchaser shall promptly execute any and all documentation necessary or requested to facilitate “case closure” or a similar acknowledgement   41 -------------------------------------------------------------------------------- by any Governmental Authority having jurisdiction over the matter and, furthermore, without limiting the scope of the foregoing, Purchaser shall cause its employees to cooperate fully with Sellers and to afford Sellers, their agents, employees and technical professionals access to relevant records relating to the matters which may be Sellers’ responsibility under this Agreement; (iv) Upon issuance of a “No Further Action” (“NFA”) letter or similar acknowledgement from a Governmental Authority having jurisdiction over a particular Remediation Action, all obligations of Sellers under this Agreement with respect to the applicable Environmental Losses for that particular Remediation Action, if any, shall be terminated and concluded to the extent such NFA letter releases Purchaser from all future liability with regard to such matter. (f) If Purchaser is indemnified under this Section 9.3 with respect to any Losses incurred or sustained by it as a result of the breach of the representation and warranty made by Sellers in the penultimate sentence of Section 3.24 (relative to Accounts Receivable outstanding for greater than 120 days), Purchaser shall assign its right to any such Account Receivable to Sellers. (g) Indemnification amounts finally determined to be payable by Sellers shall be satisfied first from the Escrow Amount to the extent available. The Escrow Agreement shall continue for three years except as extended with respect to pending claims as set forth in the Escrow Agreement. The funds being held in escrow shall be disbursed as follows: (i) one-third of the amount then held in the escrow fund shall be released to Sellers at the one year anniversary of the Closing Date; (ii) one-half of amount then held in the escrow fund shall be released to Sellers at the two year anniversary of the Closing Date and (iii) the remainder of the funds held in the escrow fund shall be released at the third anniversary of the Closing Date except as may be extended as set forth in the Escrow Agreement. Procedures for obtaining disbursements of the amounts held in the escrow fund shall be as set forth in the Escrow Agreement. (h) The indemnification obligations of Sellers under subsection 9.3(a)(iii) above shall be without regard to the provisions of subsection (d) hereof. 9.4 Procedures for Indemnification. (a) Subject to Section 9.5, if a Party seeking indemnification pursuant to this Section 9 (an “Indemnified Party”) shall claim to have suffered a Loss for which indemnification is available under Sections 9.2 or 9.3, as the case may be (for purposes of this Section 9.4, regardless of whether such Indemnified Party is entitled to receive a payment in respect of such claim), the Indemnified Party shall notify the Party from whom indemnification with respect to such claim is sought (the “Indemnifying Party”) in writing of such claim within the applicable Cut-Off Date, which written notice shall describe the nature of such claim, the facts and circumstances that give rise to such claim to the extent then known by the Indemnified Party and the amount of such claim if reasonably ascertainable at the time such claim is made (or if not then reasonably ascertainable, the maximum amount of such claim reasonably estimated by the Indemnified Party).   42 -------------------------------------------------------------------------------- (b) In the event of a claim by an Indemnified Party involves Losses that do not result from a Third-Party Claim, then the Parties shall follow the procedures set forth in Section 10 with respect to the resolution of such matter. 9.5 Procedures for Third-Party Claims. (a) Any Indemnified Party seeking indemnification pursuant to this Section 9 in respect of any Proceeding instituted by any third Person (in each case, a “Third-Party Claim”) shall give the Indemnifying Party from whom indemnification with respect to such claim is sought (i) prompt written notice (but in no event more than ten (10) days after the Indemnified Party acquires knowledge thereof) of such Third-Party Claim and (ii) copies of all documents and information relating to any such Third-Party Claim within ten (10) days of their being obtained by the Indemnified Party; provided, that the failure by the Indemnified Party to so notify or provide copies to the Indemnifying Party shall not relieve the Indemnifying Party from any liability to the Indemnified Party for any liability hereunder except to the extent that such failure shall have actually prejudiced the defense of such Third-Party Claim. (b) The Indemnifying Party shall have the right, at its option and expense, to defend against, negotiate, settle or otherwise deal with any Third-Party Claim with respect to which it is the Indemnifying Party and to be represented by counsel reasonably acceptable to the Indemnified Party (unless (i) the Indemnifying Party is also party to such Proceeding and the Indemnified Party determines in good faith that joint representation would be inappropriate or (ii) the Indemnifying Party fails to provide reasonable assurance to the Indemnified Party of its financial capacity to defend such Proceeding and provide indemnification with respect to such Proceeding). The Indemnifying Party shall notify the Indemnified Party of its election to assume the defense of such Proceeding and thereafter neither the Indemnifying Party nor the Indemnified Party will admit any liability with respect thereto or settle, compromise, pay or discharge the same without the written consent of the other party. The Indemnified Party may participate in any Third-Party Claim with counsel of its choice and at its expense. If notice is given to an Indemnifying Party of the commencement of any Proceeding and the Indemnifying Party does not, within twenty days after such notice is given, give notice to the Indemnified Party of its election to assume the defense of such Proceeding, the Indemnified party (upon further notice to the Indemnifying Party) will have the right to undertake the defense, compromise or settlement of such Proceeding and the Indemnifying Party will be bound by any determination made in such Proceeding or any compromise or settlement effected by the Indemnified Party. Notwithstanding the foregoing, if an Indemnified Party determines in good faith that there is a reasonable probability that a Proceeding may adversely affect it or its affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the Indemnified Party may, by written notice to the Indemnifying Party, assume the exclusive right to defend, compromise or settle such Proceeding, but the Indemnifying Party will not be bound by any determination of a Proceeding so defended or any compromise or settlement effected without its written consent. (c) If a firm good faith written offer is made to settle any such Third-Party Claim and the Indemnifying Party proposes to accept such settlement and the Indemnified Party refuses to consent to such settlement, then: (i) the Indemnifying Party shall be excused from, and the Indemnified Party shall be solely responsible for, all further defense of such   43 -------------------------------------------------------------------------------- Third-Party Claim; (ii) the maximum liability of the Indemnifying Party relating to such Third-Party Claim shall be the amount of the proposed settlement if the amount thereafter recovered from the Indemnified Party on such Third-Party Claim is greater; and (iii) the Indemnified Party shall pay all attorneys’ fees and legal costs and expenses incurred after rejection of such settlement by the Indemnified Party, but if the amount thereafter recovered by such third party from the Indemnified Party is less than the amount of the proposed settlement, the Indemnified Party shall be reimbursed by the Indemnifying Party for such attorneys’ fees and legal costs and expenses up to a maximum amount equal to the difference between the amount recovered by such third party and the amount of the proposed settlement. (d) Purchaser and Sellers shall make available to each other, their counsel and accountants all information and documents reasonably available to them which relate to any claim subject to indemnity hereunder and to render to each other such assistance as may reasonably be required in order to ensure the proper and adequate defense of any such claim. (e) If required for joinder purposes, the Sellers and Purchaser hereby consent to the non-exclusive jurisdiction in which a Proceeding is brought against any Indemnified Party for purposes of any claim that an Indemnified Party may have under this Agreement with respect to such Proceeding or the matters alleged therein and agree that process may be served on the Sellers and Purchaser with respect to such claim anywhere in the world. 9.6 Exclusive Remedy. In the absence of fraud, bad faith or willful breach, the indemnification obligations of Purchaser and Sellers under this Section 9 shall constitute the sole and exclusive remedies of Sellers and Purchaser, respectively, and their respective Representatives, shareholders and controlling Persons, for the breach of any covenant, agreement, representation or warranty included in this Agreement by the Sellers or Purchaser, as the case may be, and Sellers and Purchaser shall not be entitled to rescission of this Agreement or to any further indemnification rights or claims of any nature whatsoever in respect thereof, all of which Purchaser and Sellers waive. 10. DISPUTE RESOLUTION. 10.1 Dispute. As used in this Agreement, “Dispute” shall mean any dispute or disagreement between Purchaser and Sellers concerning the interpretation of this Agreement, the validity of this Agreement, any breach or alleged breach by any Party under this Agreement or any other matter relating in any way to this Agreement; provided, that “Dispute” shall not include any dispute (i) relating to the Preliminary Closing Balance Sheet, which shall be resolved in accordance with Section 2.4(f), (ii) arising under Article 6 hereof, which shall be resolved in accordance with Section 6.5 or (iii) any dispute arising under Section 12 of this Agreement. 10.2 Process. If a Dispute arises, the Parties to the Dispute shall follow the procedures specified in Sections 10.3, 10.4 and 10.5. 10.3 Negotiations. The Parties shall promptly attempt to resolve any Dispute by negotiations between Purchaser and Sellers’ Agent. Purchaser or Sellers’ Agent, as the case may be, shall give the other Party written notice (the “Dispute Notice”) of any Dispute not   44 -------------------------------------------------------------------------------- resolved in the normal course of business. Purchaser and Sellers’ Agent (or their Representatives) shall meet at a mutually acceptable time and place within thirty (30) days after receipt of the Dispute Notice by the party to whom such Notice was delivered, and thereafter as often as they reasonably deem necessary, to exchange relevant information and to attempt to resolve the Dispute. If Purchaser or Sellers’ Agent intends to be accompanied at any such meeting by legal counsel, the other Party shall be given at least three (3) Business Days’ prior written notice of such intention and may also be accompanied by legal counsel. If the Dispute has not been resolved by the Parties (A) within ninety (90) days of receipt of a Dispute Notice, or (B) if the Parties fail to meet within thirty (30) days of receipt of such Dispute Notice, either Purchaser or Sellers’ Agent may initiate binding arbitration as provided in Section 10.4. 10.4 Arbitration. If the Dispute is not resolved by negotiations pursuant to Section 10.3, all Disputes shall be determined by binding arbitration in Chicago, Illinois in accordance with the commercial rules of the AAA then in effect unless the parties mutually agree in writing to waive this provision. This agreement to arbitrate shall be specifically enforceable under the laws of the State of Illinois. The Party initiating arbitration shall file written notice of the demand for arbitration with the other Party to the Dispute and with the AAA in Chicago, Illinois. Such demand for arbitration shall be made within sixty (60) days after the expiration of the applicable time period set forth in the last sentence of Section 10.3, and in no event shall such demand be made after the date when an institution of legal or equitable proceedings based upon such Dispute would be barred by this Agreement or the applicable statute of limitations. The arbitration shall be before a single arbitrator chosen in accordance with the rules of the AAA, who shall interpret this Agreement in accordance with the internal laws of the Commonwealth of Pennsylvania without reference to any rule or provision thereof which would cause the application of the law of any other state. The award rendered by the arbitrator shall be final and binding and may not be appealed, and any judgment may be entered upon it in accordance with the applicable law in any court having jurisdiction thereof. In no event shall any Party be awarded punitive damages. 10.5 General. (a) Provisional Remedies. At any time during the procedures specified in Sections 10.3 and 10.4, a Party may seek a preliminary injunction or other provisional judicial relief in the courts of Cook County, Illinois or the U.S. District Court for the Northern District of Illinois if in the judgment of such party such action is necessary to avoid irreparable harm. Each party hereto consents to the exclusive jurisdiction of such courts with respect to this Section 10.5 and waive any objection to venue laid therein. Process in any Proceeding referred to in this Section 10.5 may be served on any party anywhere in the world. (b) Performance to Continue. Each Party shall use its commercially reasonable efforts to perform its obligations under this Agreement pending final resolution of any Dispute. (c) Extension of Deadlines. All deadlines specified in this Section 10 may be extended by mutual written agreement between Purchaser and Sellers’ Agent.   45 -------------------------------------------------------------------------------- (d) Enforcement. The Parties regard the obligations in this Section 10 to constitute an essential provision of this Agreement and one that is legally binding on them. In case of a violation of the obligations in this Section 10 by either Purchaser or any of Sellers or the Sellers’ Agent, the other Party may bring an action to seek enforcement of such obligations in any court of law having jurisdiction thereof. (e) Costs. The Parties to the dispute shall pay their own costs, fees, and expenses incurred in connection with the application of the provisions of this Section 10, and fifty percent (50%) of the fees and expenses of the AAA and the arbitrator in connection with the application of the provisions of Section 10.4. 10.6. Waiver of Jury Trial. In any court action under this Section 10 as contemplated above (whether to enforce an arbitration award as contemplated in Section 10.4, to seek provisional remedies as contemplated in Section 10.5(a), to enforce the arbitration provisions contained in this Section 10 as contemplated in Section 10.5 (d), or otherwise), the Purchaser and Sellers hereby voluntarily, knowingly, irrevocably and unconditionally waive any right to have a jury participate in resolving the dispute which is the subject of such court action. 11. [RESERVED] 12. NONCOMPETITION. 12.1 Acknowledgments by Shareholders. Each Seller acknowledges, to the extent applicable to such Seller, that: (a) such Seller has occupied a position of trust and confidence with the Company prior to the Closing Date and has become familiar with the Information; (b) Purchaser has required that each Seller make the covenants set forth in Sections 12.2 and 12.3 as a condition to the Purchaser’s purchase of the Shares; (c) the provisions of Sections 12.2 and 12.3 are reasonable and necessary to protect and preserve the Company’s business; and (d) the Company would be irreparably damaged if any Seller were to breach the covenants set forth in Sections 12.2 and/or 12.3. 12.2 Confidential Information. Each Seller acknowledges and agrees that all Information known or obtained by such Seller, whether before or after the Closing Date, is the property of the Company. Therefore, each Seller agrees that such Seller will not, at any time, disclose to any unauthorized Persons or use for its or his own account or for the benefit of any Person any Information, whether such Seller has such Information in its or his memory or embodied in writing or other physical form, without Purchaser’s prior written consent. Each Seller agrees to deliver to Purchaser within 30 days after execution of this Agreement, and at any other time Purchaser may reasonably request, all physical embodiments of any Information that such Seller may then possess or have under its or his control.   46 -------------------------------------------------------------------------------- 12.3 Noncompetition. As a material inducement for Purchaser to enter into this Agreement and as additional consideration for the consideration to be paid hereunder, each Seller agrees that: (a) For a period of twenty-four (24) months after the Closing: (i) such Seller will not, directly or indirectly, 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 its or his name or any similar name to, lend its or his credit to, or render services or advice to any business that competes with any business conducted by any of the Schaefer Companies in the United States; provided, that such Seller may purchase or otherwise acquire up to (but not more than) one percent 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. Each Seller agrees that this covenant is reasonable with respect to its duration, geographical area, and scope; (ii) such Seller will not, directly or indirectly, either for itself or himself or any other Person, (A) induce or attempt to induce any employee of any of the Schaefer Companies to leave the employ of such Company, (B) in any way interfere with the relationship between any such Company and any employee of such Company, (C) employ, or otherwise engage as an employee, independent contractor, or otherwise, any employee of any such Company, or (D) induce or attempt to induce any customer, supplier, licensee, or business relation of any such Company to cease doing business with such Company, or in any way interfere with the relationship between any customer, supplier, licensee, or business relation of any such Company; and (iii) such Seller will not, directly or indirectly, either for itself or himself or any other Person, solicit the business of any Person known to such Seller to be a customer of any of the Schaefer Companies, whether or not such Seller had personal contact with such Person, with respect to products or activities which compete with the business of any of the Schaefer Companies. (b) In the event of a breach by any Seller of any covenant set forth in subsection (a) above, the term of such covenant will be extended by the period of the duration of such breach. 13. MISCELLANEOUS PROVISIONS. 13.1 Governing Law; Jurisdiction. This Agreement shall be governed by and construed under and in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to any conflict of law provisions to the contrary. In furtherance of the foregoing, the internal law of the Commonwealth of Pennsylvania will control the interpretation and construction of this Agreement, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply. Any Proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be   47 -------------------------------------------------------------------------------- brought against any party hereto in the courts of Cook County, Illinois or the U.S. District Court for the Northern District of Illinois. Each of the parties hereby consent to the exclusive jurisdiction of such courts in any such Proceeding and waives any objection to venue laid therein. Process in any Proceeding referred to in this Section 13.1 may be served on any party anywhere in the world. 13.2 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be considered delivered in all respects when it has been delivered by hand or overnight courier, by acknowledged facsimile transmission followed by the original mailed by certified mail, return receipt requested, or three (3) days after it is mailed by certified mail, return receipt requested, first class postage prepaid, addressed as follows:   If to Purchaser:    With a copy to: Wabtec Corporation    Reed Smith LLP 1001 Air Brake Avenue    435 Sixth Avenue Wilmerding, PA 15148    Pittsburgh, PA 15219 Attention: Legal Department    Attention: Lee van Egmond, Esq. Telephone: 412-825-1000    Telephone: (412) 288-3824 Facsimile: 412-825-1305    Facsimile: (412) 288-3063 If to Sellers:    With a copy to: CCP Limited Partnership, as Sellers’ Agent 10936 North Port Washington Road #180 Mequon, WI 53092 Attention: Daniel J. Jagla Telephone: (414) 272-5506    Thomas A. Myers, Esq. Reinhart Boerner Van Deuren s.c. 1000 North Water Street Suite 2100 Milwaukee, WI 53202 Telephone: (414) 298-8120 Facsimile: (414) 298-8097 or such other addresses as shall be similarly furnished in writing by either party. 13.3. Exhibits. All exhibits, schedules and the Seller’ Disclosure Schedules hereto are by reference incorporated herein and made a part of this Agreement. 13.4. Entire Agreement; Binding Effect. This Agreement (including all exhibits, schedules and the Sellers’ Disclosure Schedules attached hereto) contains the entire agreement between the Parties hereto with respect to the transactions contemplated herein, and supersedes all prior oral or written statements, representations, warranties, covenants or agreements between the parties with respect to its subject matter (excluding the Confidentiality Agreement) and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement among the parties with respect to its subject matter. Any information that is disclosed in any part of the Sellers’ Disclosure Schedule or in any other schedule to this Agreement is deemed disclosed for all Sections of this Agreement. There are no agreements or understandings between the Parties other than those set forth herein or executed simultaneously or in connection herewith. This Agreement shall be   48 -------------------------------------------------------------------------------- binding upon and inure to the benefit of the Parties hereto and their respective heirs, legal representatives, successors and permitted assigns. 13.5. Headings. The headings in this Agreement are inserted for convenience only and shall not constitute a part of this Agreement. 13.6. Expenses. Except as otherwise specifically provided herein, each of the Parties hereto shall be solely responsible for and pay its own consulting, accounting, legal, and other charges and expenses incurred by such Party in connection with the negotiation, execution and performance of this Agreement, the related agreements and the transactions contemplated hereby and thereby without obligation to pay or contribute to the expenses incurred by any other Party. The reasonable fees and expenses of Reinhart Boerner Van Deuren s.c., Cleary Gull, Inc., Sellers’ Agent other professional advisor fees shall be paid by the Company prior to the Closing. All transfer taxes incurred by the Company as a result of the transactions contemplated by this Agreement shall be borne equally by the Seller and the Purchaser. 13.7. Amendment. This Agreement may be amended, modified, superseded or cancelled, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed on behalf of all of the Parties or, in the case of a waiver, by the party waiving compliance. 13.8. Waiver. The failure of any Party at any time or times to require performance of any provision of this Agreement shall in no manner affect the right to enforce that provision or any other provision of hereof at any time thereafter, except as specifically limited herein. 13.9. Time of the Essence. Time is deemed to be of the essence with respect to all of the terms, covenants, representations and warranties of this Agreement. 13.10. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by any Party hereto without the prior written consent of the other Parties, and any purported assignment in violation hereof shall be null and void. 13.11. No Third Party Beneficiary. Neither this Agreement nor any provision hereof, nor any exhibit, statement, schedule, Sellers’ Disclosure Schedule, certificate, instrument or other document delivered or to be delivered pursuant hereto, nor any agreement entered into or to be entered into pursuant hereto or any provision thereof, is intended to create any right, claim or remedy in favor of, or impose any obligation upon, any Person other than the Parties hereto and their respective successors and permitted assigns. 13.12. Counterparts; Facsimile Signature. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same agreement. Each of the Parties to this Agreement agrees that a signature affixed to a counterpart of this Agreement and delivered by facsimile by any Person is intended to be its, his or her signature and shall be valid, binding and enforceable against such Person. 13.13. Interpretation. Each party having participated in the negotiation and preparation of this Agreement and having been represented by counsel of its choosing, there   49 -------------------------------------------------------------------------------- shall be no presumption that any ambiguities herein be construed against any particular party. When a reference is made in this Agreement to Sections, exhibits or schedules, such reference shall be to a Section of or exhibit or schedule to this Agreement unless otherwise indicated. The section headings, table of contents and indexes 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.” 13.14 Amendment and Severability. This Agreement may only be amended by a written agreement of the Parties. If any provision, clause or part of this Agreement or the application thereof under certain circumstances, is held invalid, the remainder of this Agreement, or the applications of each provision, clause or part under other circumstances, shall not be affected thereby. 13.15 Further Assurances. Upon reasonable request, from time to time, Sellers and Purchaser shall execute and deliver all documents, make all rightful oaths, testify in any proceedings and do all other acts which may be necessary or desirable in the reasonable judgment of the requesting party to consummate the transactions contemplated by this Agreement. 13.16 Use of Words. The use of words of the masculine gender is intended to include, wherever appropriate, the feminine or neuter gender and vice versa. The use of words of the singular is intended to include, wherever appropriate, the plural and vice versa. 13.17 Accounting Terms. As used in this Agreement or any Ancillary Agreement, accounting terms relating to the Schaefer Companies defined in Section 1, and accounting terms partly defined in Section 1 to the extent not defined, shall have the respective meanings given to them under GAAP. 13.18 Sellers’ Agent. (a) Appointment. Each Seller hereby irrevocably constitutes and appoints CCP as such Seller’s agent (the “Sellers’ Agent”) for the purpose of performing and consummating the transactions contemplated by this Agreement. The appointment of CCP as Sellers’ Agent is coupled with an interest and all authority hereby conferred shall be irrevocable and shall not be terminated by any or all of Sellers without the consent of Purchaser, which consent may be withheld for any reason, and Sellers’ Agent is hereby authorized and directed to perform and consummate on behalf of Sellers all of the transactions contemplated by this Agreement. (b) Authority. Not by way of limiting the authority of Sellers’ Agent, each and all of Sellers, for themselves and their respective heirs, executors, administrators, successors and assigns, hereby authorize Sellers’ Agent to: (i) waive any provision of this Agreement which Sellers’ Agent deems necessary or desirable;   50 -------------------------------------------------------------------------------- (ii) execute and deliver on Sellers’ behalf all documents and instruments which may be executed and delivered pursuant to this Agreement, including without limitation the Shares and the stock powers with respect thereto; (iii) receive the Preliminary Closing Balance Sheet and request (or not request) any adjustments thereto; (iv) make and receive notices and other communications pursuant to this Agreement and service of process in any Proceeding arising out of or related to this Agreement or any of the transactions contemplated hereunder; (v) settle any dispute, claim, action, suit or proceeding arising out of or related to this Agreement or any of the transactions hereunder; (vi) as necessary in furtherance of the provisions of Section 2, receive and distribute the Purchase Price; (vii) appoint or provide for successor agents; and (viii) pay expenses incurred or which may be incurred by or on behalf of Sellers in connection with this Agreement. In the event of the failure or refusal of CCP to act as Sellers’ Agent, Sellers shall promptly appoint one of Sellers as their agent for purposes of this Section 13.18, and failing such appointment within ten (10) days, Purchaser may, by written notice to Sellers at the last address of Sellers applicable for purposes of this Agreement, designate one of Sellers as Sellers’ Agent. (c) Disputes. Any claim, action, suit or other proceeding, whether in law or equity, to enforce any right, benefit or remedy granted to Sellers under this Agreement may be asserted, brought, prosecuted or maintained only by Sellers’ Agent. Any claim, action, suit or other proceeding, whether in law or equity, to enforce any right, benefit or remedy granted to Purchaser under this Agreement, including any right of indemnification provided in Section 9, may be asserted, brought, prosecuted or maintained by Purchaser against Sellers or Sellers’ Agent by service of process on Sellers’ Agent and without the necessity of serving process on, or otherwise joining or naming as a defendant in such claim, action, suit or other proceeding, any Seller. With respect to any matter contemplated by this Section 13.18, Sellers shall be bound by any determination in favor of or against Sellers’ Agent or the terms of any settlement or release to which Sellers’ Agent shall become a party. *     *     *     *     *     *     *     *     *     *     * [Signatures on following pages]   51 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, each of the parties hereto has executed this Stock Purchase Agreement all as of the day and year first above written.   SELLERS: CCP LIMITED PARTNERSHIP   By:   Cedar Creek Partners LLC, its general partner     By:   /s/ Daniel J. Jagla     Its:   Managing Member TRUSTEES OF THE SCHAEFER 401(k) PLAN f/b/o David J. Kostolansky TRUSTEES OF THE SCHAEFER 401(k) PLAN f/b/o David A. Rubino TRUSTEES OF THE SCHAEFER 401(k) PLAN f/b/o Richard J. Barnhart TRUSTEES OF THE SCHAEFER 401(k) PLAN f/b/o Barry L. Anderson   By:   /s/ David J. Kostolansky   David J. Kostolansky, as Trustee and Beneficial Owner By:   /s/ Barry L. Anderson   Barry L. Anderson, as Trustee and Beneficial Owner By:   /s/ David A. Rubino   David A. Rubino, as Trustee and Beneficial Owner By:   /s/ Richard J. Anderson   Richard J. Barnhart, as Beneficial Owner   /s/ Barry L. Anderson     Darl J. Anderson Barry L. Anderson     Spouse   PURCHASER: WABTEC HOLDING CORPORATION By:   /s/ Alvaro Garcia-Tunon Its:   Senior Vice President, Chief Financial Officer and Secretary [Signatures continued on following page]   52 -------------------------------------------------------------------------------- SELLERS’ AGENT: CCP LIMITED PARTNERSHIP   By:   Cedar Creek Partners LLC, its general partner     By:   /s/ Daniel J. Jagla     Its:   Managing Director   53 -------------------------------------------------------------------------------- LIST OF SCHEDULES AND EXHIBITS Schedule “A” – List of Sellers Sellers’ Disclosure Schedules Purchaser’s Disclosure Schedules Exhibit “A” – Form of Escrow Agreement Exhibit “B” – Schedule of Funded Debt   54

Exhibit 10.26 DATAWATCH CORPORATION Non-Qualified Stock Option Agreement Datawatch Corporation, a Delaware corporation (the “Company”), hereby grants as of [Date] to [Director] (the “Optionee”), an option to purchase a maximum of [# of shares] shares (the “Option Shares”) of its Common Stock, $.01 par value (“Common Stock”), at the price of [Price] per share, on the following terms and conditions: 1.                                      Grant Under 2006 Equity Compensation and Incentive Plan.  This option is granted pursuant to and is governed by the Company’s 2006 Equity Compensation and Incentive Plan (the “Plan”) and, unless the context otherwise requires, terms used herein shall have the same meaning as in the Plan.  Determinations made in connection with this option pursuant to the Plan shall be governed by the Plan as it exists on this date. 2.                                      Grant as Non-Qualified Stock Option; Other Options.  This option shall be treated as a Non-Qualified Stock Option (rather than an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”)).  This option is in addition to any other options heretofore or hereafter granted to the Optionee by the Company or any Related Corporation (as defined in the Plan), but a duplicate original of this instrument shall not effect the grant of another option. 3.                                      Extent of Option if Business Relationship Continues.  If the Optionee has continued to serve the Company or any Related Corporation in the capacity of an employee, officer, director or consultant (such service is described herein as maintaining or being involved in a “Business Relationship” with the Company) on the following dates, the Optionee may exercise this option for the number of shares of Common Stock set opposite the applicable date: Prior to [Date]   -   - 0 - shares           On [Date] and at the end of each three month period thereafter   -   an additional [  ] shares (or such smaller number of shares at the end of the last three month period so that the total does not exceed [# of shares] shares)   In accordance with the foregoing schedule, a total of [# of shares] shares shall be vested and exercisable on the third anniversary of [Date].  Notwithstanding the foregoing, in accordance with and subject to the provisions of the Plan, the Committee may, in its discretion, accelerate the date that any installment of this Option becomes exercisable.  The foregoing rights are cumulative and, while the Optionee continues to maintain a Business Relationship with the Company, may be exercised on or before the date which is seven years from the date this option is granted.  All the foregoing rights are subject to Sections 4 and 5, as appropriate, if the Optionee ceases to maintain a Business Relationship with the Company. 4.                                      Termination of Business Relationship.  If the Optionee ceases to maintain a Business Relationship with the Company, other than by reason of death or disability as defined in Section 5, no further installments of this option shall become exercisable, and this option shall terminate (and may no longer be exercised) (i) after the passage of twelve months from the date the Business Relationship ceases, but in no event later than the scheduled expiration date, if the Optionee has been involved in a Business Relationship with the Company as a Director on the Company’s Board of Directors for less than five years or (ii) after the passage of twenty-four months from the date the Business Relationship ceases, but in no event later than the scheduled expiration date, if the Optionee has been involved in a Business Relationship with the Company as a Director on 1 -------------------------------------------------------------------------------- the Company’s Board of Directors for five years or more.  In such a case, the Optionee’s only rights hereunder shall be those which are properly exercised before the termination of this option. 5.                                      Death; Disability.  If the Optionee dies while involved in a Business Relationship with the Company, this option may be exercised, to the extent of the number of shares with respect to which the Optionee could have exercised it on the date of his or her death, by his or her estate, personal representative or beneficiary to whom this option has been assigned pursuant to Section 9, at any time within 180 days after the date of death, but not later than the scheduled expiration date.  If the Optionee’s Business Relationship with the Company is terminated by reason of his or her disability (as defined in the Plan), this option may be exercised, to the extent of the number of shares with respect to which the Optionee could have exercised it on the date the Business Relationship was terminated, at any time within 180 days after the date of such termination, but not later than the scheduled expiration date.  At the expiration of such 180-day period or the scheduled expiration date, whichever is the earlier, this option shall terminate and the only the rights hereunder shall be those as to which the option was properly exercised before such termination. 6.                                      Partial Exercise.  This option may be exercised in part at any time and from time to time within the above limits, except that this option may not be exercised for a fraction of a share unless such exercise is with respect to the final installment of stock subject to this option and cash in lieu of a fractional share must be paid, in accordance with Paragraph 13(G) of the Plan, to permit the Optionee to exercise completely such final installment.  Any fractional share with respect to which an installment of this option cannot be exercised because of the limitation contained in the preceding sentence shall remain subject to this option and shall be available for later purchase by the Optionee in accordance with the terms hereof. 7.                                      Payment of Price.  (a) The option price shall be paid in the following manner: (i)                                     in United States dollars in cash or by check; (ii)                                  subject to Section 7(b) below, by delivery of shares of the Company’s Common Stock having a fair market value (as determined by the Committee) as of the date of the exercise equal to the cash exercise price of this option; (iii)                               by delivery of an assignment satisfactory in form and substance to the Company of a sufficient amount of the proceeds from the sale of the Option Shares and an instruction to the broker or selling agent to pay that amount to the Company; or (iv)                              by any combination of the foregoing. (b)                                  Limitations on Payment by Delivery of Common Stock.  If the Optionee delivers Common Stock held by the Optionee (“Old Stock”) to the Company in full or partial payment of the option price, and the Old Stock so delivered is subject to restrictions or limitations imposed by agreement between the Optionee and the Company, an equivalent number of Option Shares shall be subject to all restrictions and limitations applicable to the Old Stock to the extent that the Optionee paid for the Option Shares by delivery of Old Stock, in addition to any restrictions or limitations imposed by this Agreement.  Notwithstanding the foregoing, the Optionee may not pay any part of the exercise price hereof by transferring Common Stock to the Company unless such Common Stock has been owned by the Optionee free of any substantial risk of forfeiture for at least six months. 8.                                      Method of Exercising Option.  Subject to the terms and conditions of this Agreement, this option may be exercised by written notice to the Company at its principal executive office,  or to such transfer agent as the Company shall designate.  Such notice shall state the election to exercise this option and the number of Option Shares for which it is being exercised and shall be signed by the person or persons so exercising this option.  Such notice shall be accompanied by payment of the full purchase price of such shares, and the Company shall deliver a certificate or certificates representing such shares as soon as practicable after the notice shall be received.  Such certificate or certificates shall be registered in the name of the person or persons so exercising this 2 -------------------------------------------------------------------------------- option (or, if this option shall be exercised by the Optionee and if the Optionee shall so request in the notice exercising this option, shall be registered in the name of the Optionee and another person jointly, with right of survivorship). In the event this option shall be exercised, pursuant to Section 5 hereof, by any person or persons other than the Optionee, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise this option. 9.                                      Option Not Transferable.  This option is not transferable or assignable except by will or by the laws of descent and distribution.  During the Optionee’s lifetime only the Optionee can exercise this option. 10.                               No Obligation to Exercise Option.  The grant and acceptance of this option imposes no obligation on the Optionee to exercise it. 11.                               No Obligation to Continue Business Relationship.  Neither the Plan, this Agreement, nor the grant of this option imposes any obligation on the Company or any Related Corporation to continue to maintain a Business Relationship with the Optionee. 12.                               No Rights as Stockholder until Exercise.  The Optionee shall have no rights as a stockholder with respect to the Option Shares until such time as the Optionee has exercised this option by delivering a notice of exercise and has paid in full the purchase price for the shares so exercised in accordance with Section 8.  Except as is expressly provided in the Plan with respect to certain changes in the capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to such date of exercise. 13.                               Capital Changes and Business Successions.  The Plan contains provisions covering the treatment of options in a number of contingencies such as stock splits and mergers.  Provisions in the Plan for adjustment with respect to stock subject to options and the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and are incorporated herein by reference. 14.                               Withholding Taxes.  If the Company or any Related Corporation in its discretion determines that it is obligated to withhold any tax in connection with the exercise of this option, or in connection with the transfer of, or the lapse of restrictions on, any Common Stock or other property acquired pursuant to this option, the Optionee hereby agrees that the Company or any Related Corporation may withhold from the Optionee’s wages or other remuneration the appropriate amount of tax.  At the discretion of the Company or Related Corporation, the amount required to be withheld may be withheld in cash from such wages or other remuneration or in kind from the Common Stock or other property otherwise deliverable to the Optionee on exercise of this option.  The Optionee further agrees that, if the Company or any Related Corporation does not withhold an amount from the Optionee’s wages or other remuneration sufficient to satisfy the withholding obligation of the Company or Related Corporation, the Optionee will make reimbursement on demand, in cash, for the amount underwithheld. 15.                               Provision of Documentation to Optionee.  By signing this Agreement the Optionee acknowledges receipt of a copy of this Agreement and a copy of the Plan. 16.                               Acceleration of Vesting upon Change in Control.  Notwithstanding Section 3 hereof, in the event of a Change in Control of the Company while this option is in effect, this option shall, immediately prior to the consummation of such Change in Control, become fully vested and all unexercised options shall be exercisable by the Optionee; provided, however, that the Board, in its sole discretion, may require that the Optionee’s rights under this Section 16 shall be conditioned on approval by the stockholders of the Company in accordance with Section 280G(b)5(B) of the Code and regulations thereunder.  For purposes of this Agreement, a “Change in Control” means the occurrence of any of the following events: (a)                  The Company is merged or consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such surviving, resulting or reorganized corporation or person immediately after such transaction is held in the aggregate by the holders of the then-outstanding 3 -------------------------------------------------------------------------------- securities entitled to vote generally in the election of directors of the Company (“Voting Stock”) immediately prior to such transaction; (b)                  The Company sells or otherwise transfers all or substantially all of its assets to any other corporation or other legal person, and as a result of such sale or transfer less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale or transfer; (c)                  There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosing that any “person” (as such term is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the “beneficial owner” (as such term is used in Rule 13d-3 under the Exchange Act) of securities representing 35% or more of the Voting Stock of the Company; (d)                  The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has occurred; or (e)                  If during any period of two consecutive years, individuals who at the beginning of any such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of each director of the Company first elected during such period was approved by a vote of at least a majority of the directors then still in office who were directors of the Company at the beginning of any such period; provided, however, that a “Change in Control” shall not be deemed to have occurred for purposes of this Agreement solely because (x) the Company, (y) an entity in which the Company directly or indirectly beneficially owns 50% or more of the voting securities, or (z) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company, either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock or because the Company reports that a change in control of the Company has occurred by reason of such beneficial ownership. 17.                               Miscellaneous. (a)                                  Notices.  All notices hereunder shall be in writing and shall be deemed given when sent by certified or registered mail, postage prepaid, return receipt requested, to the address set forth below.  The addresses for such notices may be changed from time to time by written notice given in the manner provided for herein. (b)                                  Entire Agreement; Modification.  This Agreement constitutes the entire agreement between the parties relative to the subject matter hereof, and supersedes all proposals, written or oral, and all other communications between the parties relating to the subject matter of this Agreement.  This Agreement may be modified, amended or rescinded only by a written agreement executed by both parties. (c)                                  Severability.  The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision. (d)                                  Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, subject to the limitations set forth in Section 9 hereof. 4 -------------------------------------------------------------------------------- (e)                                  Governing Law.  This Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the principles of the conflicts of laws thereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 5 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Company and the Optionee have caused this instrument to be executed as of the date first above written. COMPANY:       DATAWATCH CORPORATION   Quorum Office Park   271 Mill Road   Chelmsford, MA 01824           By:         Robert W. Hagger,     President and Chief Executive Officer           OPTIONEE:                 [Name]             Street Address             City State Zip Code   6 --------------------------------------------------------------------------------

IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING. SIGNIFICANT REPRESENTATIONS ARE CALLED FOR HEREIN. SUBSCRIPTION AGREEMENT and LETTER OF INVESTMENT INTENT The securities in the form of Series A Convertible Preferred Stock of SkyLynx Communications, Inc. have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or under any state securities laws, and are being issued in reliance upon an exemption from the registration requirements of the Securities Act. Such securities cannot be sold, transferred, assigned, or otherwise disposed of, except, pursuant to an effective registration statement under the Securities Act, or pursuant to an available exemption from the registration requirements of the Securities Act, and applicable state securities laws. SkyLynx Communications, Inc. 1502 Stickney Point Road, Unit 501 Sarasota, Florida 34231 Gentlemen: The undersigned ("Subscriber") agrees as follows:      1. Subscriber is currently a shareholder of VETCO Hospitals, Inc., a California corporation, ("Vetco") and is the record and beneficial owner of ________shares of the common stock of Vetco (the "Shares") as of the date hereof. Subscriber represents and warrants that other than the Shares, subscriber would not be deemed to be the beneficial owner, as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") of any additional equity securities of Vetco, or options or warrants exercisable to purchase equity securities of Vetco, or securities convertible into equity securities of Vetco, except as follows: ______________________________________________________________________________________________      2. Subscriber represents and warrants that no third party claims an interest in Subscriber's Shares and Subscriber exercises the sole power to vote and invest such Shares, except the following: ________________________________________________________________________________________________________      3. If Subscriber exercises the shared power to vote or invest such Shares, Subscriber represents and warrants that the elections and subscriptions contained herein have been ratified and approved by all persons exercising the shared power to vote or invest such Shares.      4. Subscriber irrevocably and unconditionally agrees to tender each Share for conversion into shares of Series A Convertible Preferred Stock of SkyLynx Communications, Inc., a Delaware corporation, (the "Merger Securities" or "Securities" and the "Company" or "SkyLynx," respectively). -1- --------------------------------------------------------------------------------      5. The subscription contained herein and the tender by Subscriber of the Shares for conversion into the Merger Securities is, in all respects, subject to the terms and conditions of that certain Agreement and Plan of Merger by and between Vetco, the Company and SkyLynx Acquisition Corp. dated as of November 29, 2005, together with Amendments Nos. l , 2 and 3 thereto (the "Agreement"), and the ancillary agreements provided for therein, including, without limitation, the Closing Escrow Agreement. Subscriber acknowledges that he, she or it has been provided with a copy of the Agreement and that Subscriber has read, understands and accepts the terms and conditions contained therein.      6. Subscriber acknowledges receipt of a copy of the Agreement, the Company's Annual Report on Form 10-KSB for the year ended June 30, 2005 and its Quarterly Report on Form 10-QSB for the interim period through and ended December 31, 2005, (hereafter the foregoing documents shall collectively be referred to as the "Disclosure Package"), and agrees that no information has been given to him, her or it by the Company, or its agents, in connection with this investment other than information contained in the Disclosure Package. The undersigned represents that he, she or it has relied exclusively on the information contained in the Disclosure Package in connection with this investment decision.      7. The undersigned represents and warrants that the undersigned either never received a certificate representing the Shares and the Shares are not and never have been certificated or that the undersigned has lost the stock certificate representing the Shares. The undersigned agrees that this Subscription Agreement may be delivered as evidence of the Shares under the Closing Escrow Agreement described more fully in the Agreement. The undersigned represents and warrants that he, she or it has not sold, assigned, pledged, transferred, deposited under any agreement or hypothecated such Shares or any interest therein; and no person, firm, corporation, agency or government has or has asserted any right, title, claim, equity or interest in, to or respecting such Shares. The undersigned agrees to indemnify, defend and hold harmless the Company, and any person, firm or corporation acting as its transfer agent, registrar or trustee or in any other capacity and also any successors in any such capacities from and against any and all liability, loss, damage or expense in connection with or arising out of their reliance upon the representations and warranties contained herein.      8. Subscriber acknowledges that the Company is offering the Merger Securities in reliance upon an exemption from the registration requirements of the Securities Act contained in Regulation D thereunder. Subscriber agrees that all offers and sales of the Merger Securities, shall be made only, pursuant to registration of the securities under the Securities Act, or pursuant to an available exemption from the registration requirements of the Securities Act.      9. The undersigned represents and warrants that the undersigned may come within at least one category marked below, and that for any category marked the undersigned has truthfully set forth the factual basis or reason the undersigned comes within that category. ALL INFORMATION IN RESPONSE TO THIS PARAGRAPH WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish any additional information which the Company deems necessary in order to verify the answers set forth below. [Check one, if applicable] Category I  ________   The undersigned is an individual (not a partnership, corporation, etc.) whose      individual net worth, or joint net worth with the undersigned's spouse, presently      exceeds $1,000,000.        Explanation. In calculation of net worth the undersigned may include equity in      personal property and real estate, including the undersigned's principal residence,      cash, short term investments, stocks and securities. Equity in personal property and      real estate should be based on the fair market value of such property less debt secured      by such property.    -2- -------------------------------------------------------------------------------- Category II     _______   The undersigned is an individual (not a partnership, corporation, etc.) who had an individual income in excess of $200,000      in 2004 and 2005, or joint income with his/her spouse in excess of $300,000 in 2004and 2005, and has a reasonable       expectation of reaching the same income level in 2006.    Category III     _______   The undersigned is an executive officer or director of the Company.    Category IV     _______   The undersigned is a bank, as defined in section 3(a)(2) of the Securities Act of 1933,  as amended, (the "Act");     or a savings and loan institution or other institution defined  in Section 3(a)(5)(A) of the Act.  _________________________________________________________________________________________________________ _________________________________________________________________________________________________________                                                                                    (describe entity) Category V      _______   The undersigned is an insurance company, as defined in section 2(13) of the Securities Act of 1933, as amended.  _________________________________________________________________________________________________________ _________________________________________________________________________________________________________                                                                                    (describe entity) Category VI       ______   The undersigned is an investment company registered under the Investment Company  Act of 1940 or a business development     company as defined in section 2(a)(48) of that Act. _________________________________________________________________________________________________________ _________________________________________________________________________________________________________                                                                                    (describe entity) Category VII      _______   The undersigned is a Small Business Investment Company licensed by the U.S. Small Business Administration under     section 301(c) or (d) of the Small Business  Investment Act of 1958. -3- --------------------------------------------------------------------------------   ____________________________________________________________________________________ ____________________________________________________________________________________                                                         (describe entity) Category VIII    _______   The undersigned is a broker or dealer registered pursuant to Section 15 of the       Security Exchange Act of 1934 (the "Exchange Act").  ____________________________________________________________________________________ ____________________________________________________________________________________                                                         (describe entity) Category IX      _______   The undersigned is an employee benefit plan within the meaning of Title I of the  Employee Retirement Income Security Act of 1974 and (1) the decision to invest      in  the security was made by a plan fiduciary, as defined in section 3(21) of such Act,      which is a bank, savings and loan association, insurance company or registered  investment adviser, or (2)     the employee benefit plan has total assets in excess of  $5,000,000, or (3) if a self-directed plan,     with investment decisions made solely by  persons that are accredited investors.  ____________________________________________________________________________________ ____________________________________________________________________________________                                                         (describe entity)   Category X     _______   The undersigned is a private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940.   ____________________________________________________________________________________ ____________________________________________________________________________________                                                         (describe entity)  Category XI      _______   The undersigned is an organization described in section 501(c)(3) of the Internal  Revenue Code, corporation, Massachusetts or similar business trust, or partnership,     not formed for the specific purpose of acquiring the securities offered, with total      assets in excess of $5,000,000.  -4- -------------------------------------------------------------------------------- ______________________________________________________________________________________________ ______________________________________________________________________________________________                                                                               (describe entity) Category XII    ________   The undersigned is any trust, with total assets in excess of $5,000,000, not formed for      the specific purpose of acquiring the securities offered, whose purchase is directed by      a sophisticated person as described in Rule 506(b)(2)(ii) under the Act. [A COPY      OF THE DECLARATION OF TRUST OR TRUST AGREEMENT AND A      REPRESENTATION AS TO THE NET WORTH OR INCOME OF THE      GRANTOR IS ENCLOSED.]  ______________________________________________________________________________________________ ______________________________________________________________________________________________                                                                               (describe entity) Category XIII     ______   The undersigned is an entity in which all of the equity owners are Accredited      Investors. [IF RELYING UPON THIS CATEGORY ALONE, EACH EQUITY      OWNER MUST COMPLETE A SEPARATE COPY OF THIS      AGREEMENT.]  ______________________________________________________________________________________________ ______________________________________________________________________________________________                                                                               (describe entity) 10.      The undersigned makes the following representations and warranties:      (a) That the undersigned is in a financial position to hold the Securities for an indefinite period of time and is able to bear the economic risk and withstand a complete loss of the undersigned's investment in the Securities;      (b) That the undersigned has such knowledge and experience in financial and business matters that the undersigned is capable of reaching and interpreting financial statements and evaluating the merits and risk of an investment in the Securities and has the net worth to undertake such risks;      (c) That the undersigned has obtained, to the extent the undersigned deems necessary, the undersigned's own personal professional advice with respect to the risks inherent in the investment in the securities, and the suitability of an investment in the Securities in light of the undersigned's financial condition and investment needs;      (d) That the undersigned believes that an investment in the Securities is suitable for the undersigned based upon the undersigned's investment objectives and financial needs, and the undersigned has adequate means for providing for the undersigned's current financial needs and personal contingencies and has no need for liquidity of investment with respect to the Securities;      (e) That the undersigned has received and had the opportunity to review the Disclosure Package and has been given access to full and complete information regarding the Company and has utilized such access to the undersigned's satisfaction for the purpose of obtaining such information regarding the Company as the -5- -------------------------------------------------------------------------------- undersigned has reasonably requested; and, particularly, the undersigned has been given reasonable opportunity to ask questions of, and receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and to obtain any additional information, to the extent reasonably available;      (f) That the undersigned recognizes that the Company has an unprofitable operating history and that the Merger Securities as an investment involve a high degree of risk, including but not limited to the risk of economic losses from operations of the Company;      (g) That the undersigned realizes that (i) the purchase of the Securities is a long-term investment; (ii) the purchaser of the Securities must bear the economic risk of investment for an indefinite period of time because the Securities have not been registered under the Securities Act or under the securities laws of any state and, therefore, the Securities cannot be resold unless they are subsequently registered under said laws or exemptions from such registrations are available; (iii) the securities are "restricted securities" within the meaning of Rule 144 under the Securities Act and are subject to restrictions on transfer imposed by or on account of federal and state securities laws. The undersigned may be unable to liquidate the undersigned's investment in the event of an emergency, or pledge the Securities as collateral for a loan; and (iv) the transferability of the Securities is restricted and legends will be placed on the certificate(s) representing the Securities referring to the applicable restrictions on transferability;      (h) The undersigned has carefully reviewed and understands the various risks of an investment in the Company and can afford to bear the risks of such an investment;      (i) That the undersigned certifies, under penalties of perjury, that the undersigned is NOT subject to the backup withholding provisions of Section 3406(a)(i)(C) of the Internal Revenue Code. (Please note: You are subject to backup withholding if (i) you fail to furnish your Social Security Number or Taxpayer Identification Number herein, (ii) the Internal Revenue Services notifies the Company that you furnished an incorrect Social Security Number or Taxpayer Identification Number, (iii) you are notified that you are subject to backup withholding, or (iv) you failed to certify that you are not subject to backup withholding, or you fail to certify your Social Security Number or Taxpayer Identification Number); and      (j) That a legend may be placed on any certificate representing the Securities substantially to the following effect: THE SECURITIES IN THE FORM OF SERIES A CONVERTIBLE PREFERRED STOCK OF SKYLYNX COMMUNICATIONS, INC. HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND ARE BEING ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUCH SECURITIES CANNOT BE SOLD, TRANSFERRED, ASSIGNED, OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND APPLICABLE STATE SECURITIES LAWS.      12. The undersigned has been advised that the Securities have not been registered under the Securities Act of 1933 or applicable state securities laws and that the Securities are being offered and sold pursuant to exemptions from such laws and that the Company's reliance upon such exemptions is predicated in part on the undersigned's representations as contained herein. The undersigned represents, warrants and agrees that the Securities are being acquired by the undersigned solely for the undersigned's own account, for investment purposes only, and not with a view to the distribution or resale thereof. The undersigned has no agreement or other arrangement with any person to sell, transfer or pledge any part of the Securities or which would guarantee the undersigned of any profit or against any loss with respect to the Securities; and the undersigned has no plans to -6- -------------------------------------------------------------------------------- enter into any such agreement or arrangement. The undersigned further represents that the undersigned's financial condition is such that he or it is not under any present necessity or constraint to dispose of such shares to satisfy any existing or contemplated debt or undertaking. The undersigned is aware that, in the view of the Securities and Exchange Commission, a purchase of such securities with an intent to resell by reason of any foreseeable specific contingency or anticipated change in market value, or any change in the condition of the Company, or in connection with a contemplated liquidation settlement of any loan obtained for the acquisition of such securities and for which such securities were pledged, would represent an intent inconsistent with the representations set forth above. The undersigned further represents and agrees that if, contrary to the foregoing intentions, the undersigned should later desire to dispose of or transfer any of such securities any of such securities in any manner, the undersigned shall not do so without first obtaining (i) the opinion of counsel to the Company that such proposed disposition or transfer may be lawfully made without the registration of such Securities pursuant to the Securities Act of 1933, as then amended, and applicable state securities laws, or (ii) such registration has been completed and is currently in effect.      13. The undersigned represents and warrants that the undersigned is a bona fide resident of, is domiciled in and received the offer and made the decision to invest in the Securities in the state or country set forth on the signature page hereof, and the Securities are being purchased by the undersigned in the undersigned's name solely for the undersigned's own beneficial interest and not as nominee for, or on behalf of, or for the beneficial interest of, or with the intention to transfer to, any other person, trust or organization.      14. The undersigned is informed of the significance to the Company of the foregoing representations, agreements and consents, and they are made with the intention that the Company will rely on them.     15.  The undersigned, if other than an individual, makes the following additional representations:         (a)  The undersigned was not organized for the specific purpose of acquiring the Securities;             and        (b)   This Subscription Agreement and Letter of Investment Intent has been duly authorized by  all necessary action on the part of the undersigned, has been duly executed by an authorized officer or representative of the undersigned, and is a legal, valid and binding obligation of the undersigned enforceable in accordance with its terms.      16.   The undersigned is aware that there can be no assurance regarding the tax consequences of an investment in the Company. The undersigned acknowledges that he, she or it has been advised to consult with his, her or its own attorney regarding legal matters concerning the investment and to consult with independent tax counsel or advisors regarding the tax consequences of such investment.      17.   All of the foregoing information which the undersigned has provided concerning the undersigned, the undersigned's financial position and the undersigned's knowledge of financial and business matters, or, in the case of a corporation, partnership, trust or other entity, concerning the knowledge of financial and business matters of the person making the investment decision on behalf of such entity, is correct and complete as of the date set forth at the end hereof, and if there should be any adverse change in such information prior to this subscription being accepted, the undersigned will immediately provide the Company with such information.     18. NASD Affiliation. The undersigned represents and warrants that the information set forth below in response to the questions regarding NASD affiliation is accurate and complete.           (a) Is the undersigned a member of the NASD1, a person associated with a member2 of the NASD, or an affiliate of a member? Yes ______  No ______ -7- --------------------------------------------------------------------------------       If "Yes," please list all members of the NASD with whom the undersigned is associated or affiliated. ____________________________________________________________________________________________________________________________________________ ____________________________________________________________________________________________________________________________________________ ____________________________________________________________________________________________________________________________________________ 1      The NASD defines a "member" as being any broker or dealer admitted to membership in the NASD, or any officer or partner of such a member, or the executive representative of such a member or the substitute for such representative.   2      The NASD defines a "person associated with a member" as being every sole proprietor, general or limited partner, officer, director or branch manager of such member, or any natural person occupying a similar status or performing similar functions, or any natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by such member (for example, any employee), whether or not any such person is registered or exempt for registration with the NASD. Thus, "person associated with a member" includes a sole proprietor, general or limited partner, officer, director or branch manager or an organization of any kind (whether a corporation, partnership or other business entity) which itself is a "member" or a "person associated with a member." In addition, an organization of any kind is a "person associated with a member" if its sole proprietor or anyone of its general or limited partners, officers, director or branch managers is a "member" or "person associated with a member."   -8- --------------------------------------------------------------------------------      (b) If the undersigned is a corporation, are any of its officers, directors or 5% shareholders a member of the NASD, a person associated with a member of the NASD, or an affiliate of a member? Yes ______  No ______ If "Yes," please list the name of each such officer, director or 5% shareholder and all members of the NASD with whom they are associated or affiliated. _________________________________________________________________________________________________________________________________________________ _________________________________________________________________________________________________________________________________________________      19. Number of Shares. The undersigned hereby tenders the Shares for the Merger Securities in connection with the consummation of the transactions described in the Agreement.      20. Manner in Which Title is to be Held.   Place an "X" in one space below: (a)    _____   Individual Ownership  (b)    _____   Joint Tenant with Right of Survivorship (both parties must sign)  (c)    _____   Partnership  (d)    _____   Tenants in Common  (e)    _____   Corporation  (f)    _____   Trust  (g)    _____   Other (Describe):       21. My state or country of residence and the state I received the offer to invest and made the decision to invest in the Securities: _____________________________________ __________________________________________________________________ Please print above the exact names(s) in which the Securities are to be held. -9- -------------------------------------------------------------------------------- SIGNATURES The undersigned hereby represents that he or she has read this entire Subscription Agreement and the Disclosure Package provided herewith.     Dated:    _______________________________________       INDIVIDUAL        Address to Which Correspondence        Should be Directed  -------------------------------------------------------------------------------- ________________________________________ Signature (Individual)        ________________________________________ -------------------------------------------------------------------------------- Signature (All record holders should sign)      City, State and Zip Code  -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Names(s) Typed or Printed      Tax Identification or Social Security Number        ( )  _____________________________________       Telephone Number  CORPORATION, PARTNERSHIP, TRUST, OR OTHER ENTITY                                                                                                              Address to Which Correspondence      Should be Directed  _____________________________________ _______________________________________________________ Name of Entity    _______________________________________________________ By:  _________________________________   _______________________________________________________                    Signature*    City, State and Zip Code  Its:  ________________________________     _______________________________________________                    Title    Tax Identification or Social Security Number      ( )  ____________________________________________________ Name Typed or Printed    Telephone Number  * If Securities are being subscribed for by an entity, the Certificate of Signatory must also be completed. -10- -------------------------------------------------------------------------------- CERTIFICATE OF SIGNATORY To be completed if Securities are being subscribed for by an entity. I, ________________________________, am the _____________________________ of _________________________________ (the "Entity").                  I certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of the Subscription Agreement and Letter of Investment Intent and to purchase and hold the Securities, and certify that the Subscription Agreement and Letter of Investment Intent has been duly and validly executed on behalf of the Entity and constitutes a legal and binding obligation of the Entity.                IN WITNESS WHEREOF, I have hereto set my hand this _____ day of ______________, 2006.                                                                                                                                                                             ________________________________________                                                                                                                                                                                    Signature ACCEPTANCE                 This Subscription Agreement is accepted as of _______________________, 2006.                                                            SKYLYNX COMMUNICATIONS, INC. By: ______________________________ Authorized Officer                               Date: _____________________________   -11- --------------------------------------------------------------------------------

Exhibit 10.4 Supplemental Agreement No. 3 to Purchase Agreement No. 2484 between The Boeing Company and Continental Airlines, Inc. Relating to Boeing Model 787-8 Aircraft     THIS SUPPLEMENTAL AGREEMENT, entered into as of May 3, 2006, by and between THE BOEING COMPANY (Boeing) and CONTINENTAL AIRLINES, INC. (Customer); WHEREAS, the parties hereto entered into Purchase Agreement No. 2484 dated December 29, 2004 (the Purchase Agreement), as amended and supplemented, relating to Boeing Model 787-8 aircraft (the Aircraft); WHEREAS, Boeing and Customer have agreed to [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] with delivery positions as follows: [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] WHEREAS, Boeing and Customer have mutually agreed to the offering of [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] with delivery positions as follows: [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] WHEREAS, Boeing and Customer have agreed to revise the date to complete definition of the Aircraft's final configuration, and; WHEREAS, Boeing has agreed to update the number of training points to which Customer is entitled, based on the additional [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] Model 787-8 Aircraft. NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties agree to amend the Purchase Agreement as follows: 1. Table of Contents, Articles, Tables and Exhibits: 1.1 Remove and replace, in its entirety, the "Table of Contents", with the Table of Contents attached hereto, to reflect the changes made by this Supplemental Agreement No. 3. 1.2 Add a new page 2 to Table 1 entitled "Purchase Agreement 2484 Aircraft Deliveries, Description, Price and Advance Payments", for the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] Aircraft added by this Supplemental Agreement No. 3. Table 1 page 1 is unchanged by this Supplemental Agreement No. 3. 1.3 Remove and replace, in its entirety, the Supplemental Exhibit CS1 entitled, "787 Customer Support Document", with the Supplemental Exhibit CS1 attached hereto, with the training point amount updated based on the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] Aircraft added by this Supplemental Agreement No. 3. 2. Letter Agreements: 2.1 Remove and replace, in its entirety, Letter Agreement 6-1162-MSA-546R1, "Open Configuration Matters", with the revised Letter Agreement 6-1162-MSA-546R2 attached hereto. 2.2 Remove and replace, in its entirety, Letter Agreement 6-1162-MSA-547R1, "Option Aircraft", with the revised Letter Agreement 6-1162-MSA-547R2 attached hereto. 2.3 Remove and replace, in its entirety, Letter Agreement 6-1162-MSA-552R2, "Special Matters", with the revised Letter Agreement 6-1162-MSA-552R3 attached hereto. 2.4 Remove and replace, in its entirety, Letter Agreement 6-1162-MSA-554R1, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT], with the revised Letter Agreement 6-1162-MSA-554R2 attached hereto.   3. Payment: Customer previously paid to Boeing a Deposit for the additional [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] firm Aircraft in the amount of [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]. In connection with execution of this Supplemental Agreement No. 3, Customer will make a payment to Boeing in the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 4. Effectiveness: Except for the payment Section 3 above, this Supplemental Agreement No. 3 and the amendments to the Purchase Agreement effected hereby shall not be effective or enforceable by either party unless and until (i) Customer's Board of Directors approves the transactions contemplated hereby at its scheduled meeting in June 2006 and (ii) any conditions to the approval by Customer's Board of Directors have been satisfied. Customer shall notify Boeing in writing promptly of its Board of Directors' decision and whether such conditions have been satisfied. 4.1 If such approval is obtained at Customer's June 2006 Board of Directors meeting and if such conditions (if any) have been satisfied prior to June 23, 2006, the Purchase Agreement will be deemed to be supplemented to the extent herein provided as of the date of such Customer notification to Boeing and as so supplemented will continue in full force and effect. 4.2 If such approval is not obtained at Customer's June 2006 Board of Directors meeting or if such conditions have not been satisfied prior to June 23, 2006, (a) this Supplemental Agreement No. 3 and the amendments to the Purchase Agreement effected hereby shall be of no force or effect, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]. Supplemental Agreement No. 2 and the amendments to the Purchase Agreement will continue in full force and effect. EXECUTED IN DUPLICATE as of the day and year first written above.   THE BOEING COMPANY CONTINENTAL AIRLINES, INC.       By: /s/ Michael S. Anderson By: /s/ Gerald Laderman Its: Attorney-In-Fact __ Its: Senior Vice President - Finance and Treasurer     TABLE OF CONTENTS   SA ARTICLES NUMBER 1. Quantity, Model and Description 2 2. Delivery Schedule 2 3. Price 2 4. Payment 2 5. Additional Terms 2   TABLE 1. Aircraft Information Table 3   EXHIBIT A. Aircraft Configuration 1 B. Aircraft Delivery Requirements and Responsibilities 1   SUPPLEMENTAL EXHIBITS AE1. Escalation Adjustment/Airframe and Optional Features 1 BFE1. Buyer Furnished Equipment Variables 1 CS1. Customer Support Document 3 EE1. Engine Escalation/Engine Warranty and Patent Indemnity 2 SLP1. Service Life Policy Components 1   TABLE OF CONTENTS   SA LETTER AGREEMENTS NUMBER 6-1162-MSA-546R2 Open Configuration Matters 3 6-1162-MSA-547R2 Option Aircraft 3 6-1162-MSA-549 Spares Initial Provisioning 1     TABLE OF CONTENTS SA CONFIDENTIAL LETTER AGREEMENTS NUMBER 6-1162-MSA-550 Spare Parts Commitment 1 6-1162-MSA-551R1 [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2 6-1162-MSA-552R3 Special Matters 3 6-1162-MSA-553R1 Open Matters 1 6-1162-MSA-554R2 [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 3 6-1162-MSA-555 Promotion Support 1     TABLE OF CONTENTS   SUPPLEMENTAL AGREEMENTS DATED AS OF: Supplemental Agreement No. 1 June 30, 2005 Supplemental Agreement No. 2 January 20, 2006 Supplemental Agreement No. 3 May 3, 2006 Table 1 Purchase Agreement 2484 Aircraft Delivery, Description, Price and Advance Payments (787-8 / [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] / 2004$s / [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]   [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 787 CUSTOMER SUPPORT DOCUMENT between THE BOEING COMPANY and CONTINENTAL AIRLINES, INC.   Supplemental Exhibit CS1 to Purchase Agreement Number 2484   This document contains : Part 1: Boeing Maintenance and Flight Training Programs; Operations Engineering Support Part 2: Field Services and Engineering Support Services Part 3: Technical Information and Materials Part 4: Alleviation or Cessation of Performance Part 5: Protection of Proprietary Information and Proprietary Materials 787 CUSTOMER SUPPORT DOCUMENT PART 1: BOEING MAINTENANCE AND FLIGHT TRAINING PROGRAMS; OPERATIONS ENGINEERING SUPPORT   1. Boeing Training Programs. Boeing will provide maintenance training, cabin attendant training, and flight training programs to support the introduction of the Aircraft into service as provided in this Supplemental Exhibit CS1. 1.1 Customer is awarded 2,045 points (Training Points) [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]. At any time before 24 months after delivery of Customer's last Aircraft (Training Program Period) Customer may exchange Training Points for any of the training courses described on Attachment A at the point values described on Attachment A or for other training Boeing may identify at specified point values. At the end of the Training Program Period any unused Training Points will expire. For clarity, the Training Program Period is estimated to start no earlier than 6 months prior to Customer's initial Aircraft deliveries. Actual start dates and schedules will be coordinated at the planning conference, which per Article 2.1 below is estimated to occur approximately 12 months prior to Aircraft entry into service. 1.2 In addition to the training provided in Article 1.1, Boeing will provide to Customer the following training and services: 1.2.1 Flight dispatcher model specific instruction; 2 classes of 6 students; 1.2.2 Performance engineer model specific instruction in Boeing's regularly scheduled courses; schedules are published yearly. 1.2.3 Additional Flight Operations Services: a. Boeing flight crew personnel to assist in ferrying the first Aircraft to Customer's main base; b. Instructor pilots for 90 Man Days (as defined in Article 5.4, below) for revenue service training assistance; c. An instructor pilot to visit Customer 6 months after revenue service training to review Customer's flight crew operations for a 2 week period. If any part of the training described in this Article 1.2 is not completed by Customer within 24 months after the delivery of the last Aircraft, Boeing will have no obligation to provide such training. 2. Training Schedule and Curricula. 2.1 Customer and Boeing will together conduct planning conferences approximately 12 months before the scheduled delivery month of the first Aircraft of a model to define and schedule the maintenance, flight training and cabin attendant training programs. At the conclusion of each planning conference the parties will document Customer's course selection, training schedule, and, if applicable, Training Point application and remaining Training Point balance. 2.2 Customer may also request training by written notice to Boeing identifying desired courses, dates and locations. Within 15 days of Boeing's receipt of such request Boeing will provide written response to Customer confirming whether the requested courses are available at the times and locations requested by Customer. 3. Location of Training. 3.1 Boeing will conduct all training at any of its or its wholly-owned subsidiaries' training facilities equipped for the model of Aircraft. Customer shall decide on the location or mix of locations for training, subject to space being available in the desired courses at the selected training facility on the dates desired. 3.2 If requested by Customer, Boeing will conduct the classroom portions of the maintenance and flight training (except for the Performance Engineer training courses) at a mutually acceptable alternate training site, subject to the following conditions: 3.2.1 Customer will provide acceptable classroom space, simulators (as necessary for flight training) and training equipment required to present the courses; 3.2.2 Customer will pay Boeing's portal to portal actual expenses for lodging, ground transportation, laundry, baggage handling, communication costs and per diem meal charge for each Boeing instructor for each day, or fraction thereof, that the instructor is away from his home location, including travel time; 3.2.3 Customer will provide, or will reimburse Boeing for the actual costs of round-trip transportation for Boeing's instructors and the shipping costs of training Materials (as defined in Part 3 paragraph 1 of this Supplemental Exhibit CS1), which must be shipped to the alternate training site; 3.2.4 Customer will be responsible for all taxes, fees, duties, licenses, permits and similar expenses incurred by Boeing and its employees as a result of Boeing's providing training at the alternate site or incurred as a result of Boeing providing revenue service training; and 3.2.5 Those portions of training that require the use of training devices not available at the alternate site will be conducted at Boeing's facility or at some other alternate site. Customer will be responsible for additional expenses, if any, which result from the use of such alternate site. 4. Training Materials. Boeing will provide training Materials will be provided for each student (Training Materials). In addition, if requested by Customer, one complete set of Training Materials will be provided for use in Customer's own training program. Training Materials may be used only for either (i) the individual student's reference during Boeing provided training and for review thereafter or (ii) Customer's provision of training to individuals directly employed by the Customer. 5. Additional Terms and Conditions. 5.1 All training will reflect an airplane configuration defined by (i) Boeing's standard configuration specification for 787 aircraft, (ii) Boeing's standard configuration specification for the minor model of 787 aircraft selected by Customer, and (iii) any Optional Features selected by Customer from Boeing's standard catalog of Optional Features. Upon Customer's request, Boeing may provide training customized to reflect other elements of Customer's Aircraft configuration subject to a mutually acceptable price, schedule, scope of work and other applicable terms and conditions. 5.2 All training will be provided in the English language. If translation is required, Customer will provide interpreters. 5.3 Customer will be responsible for all expenses of Customer's personnel except that in the Puget Sound region of Washington State Boeing will transport Customer's personnel between their local lodgings and Boeing's training facility. 5.4 Boeing flight instructor personnel will not be required to work more than 5 days per week, or more than 8 hours in any one 24-hour period (Man Day), of which not more than 5 hours per 8-hour workday will be spent in actual flying. These foregoing restrictions will not apply to ferry assistance or revenue service training services, which will be governed by FAA rules and regulations. 5.5 Normal Line Maintenance is defined as line maintenance that Boeing might reasonably be expected to furnish for flight crew training at Boeing's facility, and will include ground support and Aircraft storage in the open, but will not include provision of spare parts. Boeing will provide Normal Line Maintenance services for any Aircraft while the Aircraft is used for flight crew training at Boeing's facility in accordance with the Boeing Maintenance Plan (Boeing document D6-82076) and the Repair Station Operation and Inspection Manual (Boeing document D6-25470). Customer will provide such services if flight crew training is conducted elsewhere. Regardless of the location of such training, Customer will be responsible for providing all maintenance items (other than those included in Normal Line Maintenance) required during the training, including, but not limited to, fuel, oil, landing fees and spare parts. 5.6 If the training is based at Boeing's facility and the Aircraft is damaged during such training, Boeing will make all necessary repairs to the Aircraft as promptly as possible. Customer will pay Boeing's reasonable charge, including the price of parts and materials, for making the repairs. If Boeing's estimated labor charge for the repair exceeds [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT], Boeing and Customer will enter into an agreement for additional services before beginning the repair work. 5.7 If the flight training is based at Boeing's facility, several airports in the surrounding area may be used, at Boeing's option, which shall be identified by Boeing at the flight training planning conference. Unless otherwise agreed in the flight training planning conference, it will be Customer's responsibility to make arrangements for the use of such airports. 5.8 If Boeing agrees to make arrangements on behalf of Customer for the use of airports for flight training, Boeing will pay on Customer's behalf any landing fees charged by any airport used in conjunction with the flight training. At least 30 days before flight training, Customer will provide Boeing an open purchase order against which Boeing will invoice Customer for any landing fees Boeing paid on Customer's behalf. The invoice will be submitted to Customer approximately 60 days after flight training is completed, when all landing fee charges have been received and verified. Customer will pay the invoiced amount to Boeing within 30 days of the date of the invoice. 5.9 If requested by Boeing, in order to provide the flight training or ferry flight assistance, Customer will make available to Boeing an Aircraft after delivery to familiarize Boeing instructor or ferry flight crew personnel with such Aircraft. If flight of the Aircraft is required for any Boeing instructor or ferry flight crew member to maintain an FAA license for flight proficiency or landing currency, Boeing will be responsible for the costs of fuel, oil, landing fees and spare parts attributable to that portion of the flight.   787 CUSTOMER SUPPORT DOCUMENT PART 2: FIELD AND ENGINEERING SUPPORT SERVICES   1. Field Service Representation. Boeing will furnish field service representation to advise Customer with respect to the maintenance and operation of the Aircraft (Field Service Representatives). 1.1 Field Service Representatives will be available at or near Customer's main maintenance or engineering facility beginning before the scheduled delivery month of the first Aircraft and ending [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] after delivery of the last Aircraft covered by a specific purchase agreement. 1.2 When a Field Service Representative is positioned at Customer's facility, Customer will provide, at no charge to Boeing, suitable furnished office space and office equipment, including internet capability for electronic access of data, at the location where Boeing is providing Field Service Representatives. As required, Customer will assist each Field Service Representative with visas, work permits, customs, mail handling, identification passes and formal introduction to local airport authorities. 1.3 Boeing's Field Service Representatives are assigned to various airports and other locations around the world. Whenever Customer's Aircraft are operating through any such airport, the services of Boeing's Field Service Representatives are available to Customer. 2. Engineering Support Services. 2.1 Boeing will, if requested by Customer, provide technical advisory assistance from the Seattle area or at a base designated by Customer as appropriate for any Aircraft or Boeing Product (as defined in Part 1 of Exhibit C of the AGTA). Technical advisory assistance provided will include: 2.1.1 Analysis of the information provided by Customer to determine the probable nature and cause of operational problems and suggestion of possible solutions. 2.1.2 Analysis of the information provided by Customer to determine the nature and cause of unsatisfactory schedule reliability and the suggestion of possible solutions. 2.1.3 Analysis of the information provided by Customer to determine the nature and cause of unsatisfactory maintenance costs and the suggestion of possible solutions. 2.1.4 Analysis and commentary on Customer's engineering releases relating to structural repairs not covered by Boeing's Structural Repair Manual including those repairs requiring advanced composite structure design. 2.1.5 Analysis and commentary on Customer's engineering proposals for changes in, or replacement of, systems, parts, accessories or equipment manufactured to Boeing's detailed design. Boeing will not analyze or comment on any major structural change unless Customer's request for such analysis and comment includes complete detailed drawings, substantiating information (including any information required by applicable government agencies), all stress or other appropriate analyses, and a specific statement from Customer of the substance of the review and the response requested. 2.1.6 One (1) evaluation of Customer's technical facilities, tools and equipment for servicing and maintaining 787 aircraft, recommendation of changes where necessary and assistance in the formulation of an initial maintenance plan for the introduction of the first Aircraft into service. 2.1.7 Assistance with the analysis and preparation of performance data to be used in establishing operating practices and policies for Customer's operation of Aircraft. 2.1.9 Assistance with interpretation of the minimum equipment list, the definition of the configuration deviation list and the analysis of individual Aircraft performance. 2.1.9 Assistance with solving operational problems associated with delivery and route-proving flights. 2.1.10 Information regarding significant service items relating to Aircraft performance or flight operations. 2.1.11 Operations engineering support during the ferry flight of an Aircraft. 2.1.12 Assistance in developing an Extended Twin Operations (ETOPs) plan for regulatory approval. 2.2 Boeing will, if requested by Customer, perform work on an Aircraft after delivery but prior to the initial departure flight or upon the return of the Aircraft to Boeing's facility prior to completion of that flight. The following conditions will apply to Boeing's performance: 2.2.1 Boeing may rely upon the commitment authority of the Customer's personnel requesting the work. 2.2.2 As title and risk of loss has passed to Customer, the insurance provisions of Article 8.2 of the AGTA apply. 2.2.3 The provisions of the Boeing Warranty in Part 2 of Exhibit C of the AGTA apply. 2.2.4 Customer will pay Boeing for requested work not covered by the Boeing Warranty, if any. 2.2.5 The DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES provisions in Article 11 of Part 2 and Article 3.8 of Part 6 of Exhibit C of the AGTA apply. 2.3 Boeing may, at Customer's request, provide services other than those described in Articles 2.1 and 2.2 of this Supplemental Exhibit CS1 for an Aircraft after delivery, which may include, but not be limited to, retrofit kit changes (kits and/or information), training, flight services, maintenance and repair of Aircraft (Additional Services). Such Additional Services will be subject to a mutually acceptable price, schedule, scope of work and other applicable terms and conditions. The DISCLAIMER AND RELEASE and the EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES provisions in Article 11 of Part 2 of Exhibit C of the AGTA and the insurance provisions in Article 8.2 of the AGTA will apply to any such work. Title to and risk of loss of any such Aircraft will always remain with Customer.     787 CUSTOMER SUPPORT DOCUMENT PART 3: TECHNICAL INFORMATION AND MATERIALS   1. General. Materials are defined as any and all items that are created by Boeing or a third party, which are provided directly or indirectly from Boeing and serve primarily to contain, convey or embody information. Materials may include either tangible embodiments (for example, documents or drawings), or intangible embodiments (for example, software and other electronic forms) of information but excludes Aircraft Software. Aircraft Software is defined as software that is installed on and used in the operation of the Aircraft. Customer Information is defined as that data provided by Customer to Boeing which falls into one of the following categories: (i) aircraft operational information (including, but not limited to, flight hours, departures, schedule reliability, engine hours, number of aircraft, aircraft registries, landings, and daily utilization and schedule interruptions for Boeing model aircraft); (ii) summary and detailed shop findings data; (iii) aircraft readiness log data; (iv) non-conformance reports; (v) line maintenance data; (vi) airplane message data, (vii) scheduled maintenance data, and (viii) service bulletin incorporation. Upon execution by Customer of Boeing's standard form Customer Services General Terms Agreement and Supplemental Agreement for Electronic Access Boeing will provide to Customer through electronic access certain Materials to support the maintenance and operation of the Aircraft. Such Materials will, if applicable, be prepared generally in accordance with Air Transport Association of America (ATA) iSpec 2200, entitled "Specification for Manufacturers" Technical Data." Materials not covered by iSpec 2200 will be provided in a structure suitable for the Material's intended use. Materials will be in English and in the units of measure used by Boeing to manufacture an Aircraft. 2. Materials Planning Conferences. Customer and Boeing will conduct planning conferences approximately [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] before the scheduled delivery month of the first Aircraft in order to mutually determine (i) the Materials to be furnished to Customer in support of the Aircraft, (ii) the Customer Information to be furnished by Customer to Boeing, (iii) the update cycles of the Materials to be furnished to Customer, (iv) the update cycles of the Customer Information to be furnished to Boeing, (v) any Customer preparations necessary for Customer's transmittal of Customer Information to Boeing, and (vi) any Customer preparations necessary for Customer's electronic access to the Materials. 3. Technical Data and Maintenance Information. Boeing will provide technical data and maintenance information equivalent to that traditionally provided in the following manuals and documents. The format for this data and information is not yet determined in all cases. Whenever possible Boeing will provide such data and information through electronic access. a) Flight Operations Information. Airplane Flight Manual Operations Manual and Checklist Planning and Performance Manual Weight and Balance Manual Dispatch Deviation Procedures Guide and Master Minimum Equipment List Flight Crew Training Manual Fault Reporting Manual Performance Engineer's Manual Jet Transport Performance Methods FMC Supplemental Data Document Operational Performance Software ETOPS Guide Vol. III Flight Planning and Performance Manual b) Maintenance Information. Maintenance Manual Wiring Diagram Manual Systems Schematics Manual Structural Repair Manual Component Maintenance Manual Standard Overhaul Practices Manual Standard Wiring Practices Manual Non-Destructive Test Manual Service Bulletins and Index Corrosion Prevention Manual Fault Isolation Manual Power Plant Buildup Manual (except Rolls Royce) In Service Activity Report All Operators Letters Service Letters Structural Item Interim Advisory Combined Index Maintenance Tips Configuration Data Base Generator User Guide Production Management Data Base Baggage/Cargo Loading Manual Maintenance Planning . Maintenance Review Board Report Maintenance Planning Data Document Maintenance Task Cards and Index Maintenance Inspection Intervals Report ETOPS Guide Vol. II Configuration Maintenance and Procedures for Extended Range Operations d) Spares Information. Illustrated Parts Catalog Standards Books e) Airplane & Airport Information. Facilities and Equipment Planning Document Special Tool & Ground Handling Equipment Drawings & Index Supplementary Tooling Documentation Illustrated Tool and Equipment List/Manual Aircraft Recovery Document Airplane Characteristics for Airport Planning Document Airplane Rescue and Fire Fighting Document Engine Ground Handling Document ETOPS Guide Vol. I f) Shop Maintenance. Service Bulletins Component Maintenance Manuals and Index Publications Index Product Support Supplier Directory Supplier Product Support and Assurance Agreements g) Fleet Statistical Data and Reporting. Fleet Message and Fault Data views, charts, and reports 4. Advance Representative Materials. Boeing will select all advance representative Materials from available sources and whenever possible will provide them through electronic access. Such advance Materials will be for advance planning purposes only. 5. Customized Materials. All customized Materials will reflect the configuration of each Aircraft as delivered. 6. Revisions. 6.1 The schedule for updating certain Materials will be identified in the planning conference. Such updates will reflect changes to Materials developed by Boeing. 6.2 If Boeing receives written notice that Customer intends to incorporate, or has incorporated, any Boeing service bulletin in an Aircraft, Boeing will update Materials reflecting the effects of such incorporation into such Aircraft. 7. Supplier Technical Data. 7.1 For supplier-manufactured programmed airborne avionics components and equipment classified as Seller Furnished Equipment (SFE) or Seller Purchased Equipment (SPE) or Buyer Designated Equipment (BDE) which contain computer software designed and developed in accordance with Radio Technical Commission for Aeronautics Document No. RTCA/DO-178 dated January 1982, No. RTCA/DO-178A dated March 1985, or later as available, Boeing will request that each supplier of the components and equipment make software documentation available to Customer. 7.2 The provisions of this Article will not be applicable to items of BFE. 7.3 Boeing will furnish to Customer a document identifying the terms and conditions of the product support agreements between Boeing and its suppliers requiring the suppliers to fulfill Customer's requirements for information and services in support of the Aircraft. 8. Buyer Furnished Equipment Data. Boeing will incorporate BFE line maintenance information into the customized Materials providing Customer makes the information available to Boeing at least six (6) months prior to the scheduled delivery month of each Aircraft. Boeing will incorporate such BFE line maintenance information into the Materials prior to delivery of each Aircraft reflecting the configuration of that Aircraft as delivered. Upon Customer's request, Boeing may provide update service after delivery to such information subject to the terms of Part 2, Article 2.3 relating to Additional Services. Customer agrees to furnish all BFE line maintenance information in Boeing's standard digital format. 9. Customer's Shipping Address. From time to time Boeing may furnish certain Materials or updates to Materials by means other than electronic access. Customer will specify a single address and Customer shall promptly notify Boeing of any change to that address. Boeing will pay the reasonable shipping costs of the Materials. Customer is responsible for any customs clearance charges, duties, and taxes. 787 CUSTOMER SUPPORT DOCUMENT PART 4: ALLEVIATION OR CESSATION OF PERFORMANCE   Boeing will not be required to provide any Materials, services, training or other things at a facility designated by Customer if any of the following conditions exist and those conditions would prevent Boeing from performing its services or make the performance of such services impracticable or inadvisable: 1. a labor stoppage or dispute in progress involving Customer; 2. wars or warlike operations, riots or insurrections in the country where the facility is located; 3. any condition at the facility which, in the opinion of Boeing, is detrimental to the general health, welfare or safety of its personnel or their families; 4. the United States Government refuses permission to Boeing personnel or their families to enter into the country where the facility is located, or recommends that Boeing personnel or their families leave the country; or 5. the United States Government refuses permission to Boeing to deliver Materials, services, training or other things to the country where the facility is located. After the location of Boeing personnel at the facility, Boeing further reserves the right, upon the occurrence of any of such events, to immediately and without prior notice to Customer relocate its personnel and their families.     787 CUSTOMER SUPPORT DOCUMENT PART 5: PROTECTION OF PROPRIETARY INFORMATION AND PROPRIETARY MATERIALS   1. General. All Materials provided by Boeing to Customer and not covered by a Boeing CSGTA or other agreement between Boeing and Customer defining Customer's right to use and disclose the Materials and included information will be covered by and subject to the terms of the AGTA as amended by the terms of the Purchase Agreement. Title to all Materials containing, conveying or embodying confidential, proprietary or trade secret information (Proprietary Information) belonging to Boeing or a third party (Proprietary Materials), will at all times remain with Boeing or such third party. Customer will treat all Proprietary Materials and all Proprietary Information in confidence and use and disclose the same only as specifically authorized in the AGTA as amended by the terms of the Purchase Agreement, or the CSGTA, and except to the extent required by law. 2. License Grant. 2.1 Boeing grants to Customer a perpetual worldwide, non-exclusive, non-transferable license to use and disclose Proprietary Materials in accordance with the terms and conditions of the AGTA as amended by the terms of the Purchase Agreement. Customer is authorized to make copies of Materials (except for Materials bearing the copyright legend of a third party), and all copies of Proprietary Materials will belong to Boeing and be treated as Proprietary Materials under the AGTA as amended by the terms of the Purchase Agreement. Customer will preserve all proprietary legends, and all copyright notices on all Materials and insure the inclusion of those legends and notices on all copies. 2.2 Customer grants to Boeing a perpetual, world-wide, non-exclusive, non-transferable license to use and disclose Customer Information or derivative works thereof in Boeing data and information products and services provided indicia identifying Customer Information as originating from Customer is removed from such Customer Information. 3. Use of Proprietary Materials and Proprietary Information. Customer is authorized to use Proprietary Materials and Proprietary Information for the purpose of: (a) operation, maintenance, repair, or modification of Customer's Aircraft for which the Proprietary Materials and Proprietary Information have been specified by Boeing and (b) development and manufacture of training devices and maintenance tools for use by Customer. 4. Providing of Proprietary Materials to Contractors. Customer is authorized to provide Proprietary Materials to Customer's contractors for the sole purpose of maintenance, repair, or modification of Customer's Aircraft for which the Proprietary Materials have been specified by Boeing. In addition, Customer may provide Proprietary Materials to Customer's contractors for the sole purpose of developing and manufacturing training devices and maintenance tools for Customer's use. Before providing Proprietary Materials to its contractor, Customer will first obtain a written agreement from the contractor by which the contractor agrees (a) to use the Proprietary Materials only on behalf of Customer, (b) to be bound by all of the restrictions and limitations of this Part 5, and (c) that Boeing is a third party beneficiary under the written agreement. Customer agrees to provide copies of all such written agreements to Boeing upon request. A sample agreement acceptable to Boeing is attached as Appendix VII to the AGTA. 5. Providing of Proprietary Materials and Proprietary Information to Regulatory Agencies. 5.1 When and to the extent required by a government regulatory agency having jurisdiction over Customer or an Aircraft, Customer is authorized to provide Proprietary Materials and to disclose Proprietary Information to the agency for use in connection with Customer's operation, maintenance, repair, or modification of such Aircraft. Customer agrees to take all reasonable steps to prevent the agency from making any distribution, disclosure, or additional use of the Proprietary Materials and Proprietary Information provided or disclosed. Customer further agrees to notify Boeing immediately upon learning of any (a) distribution, disclosure, or additional use by the agency, (b) request to the agency for distribution, disclosure, or additional use, or (c) intention on the part of the agency to distribute, disclose, or make additional use of Proprietary Materials or Proprietary Information. 5.2 In the event of an Aircraft or Aircraft systems-related incident, the Customer may suspend, or block access to Customer Information pertaining to its Aircraft or fleet. Such suspension may be for an indefinite period of time.   May 3, 2006 6-1162-MSA-546R2     Continental Airlines, Inc. 1600 Smith Street Houston, Texas 77002   Subject: Open Configuration Matters Reference: Purchase Agreement No. 2484 (the Purchase Agreement) between The Boeing Company (Boeing) and Continental Airlines, Inc. (Customer) relating to Model 787-8 aircraft (the Aircraft) Ladies and Gentlemen:   This Letter Agreement amends and supplements the Purchase Agreement. All terms used and not defined in this Letter Agreement have the same meaning as in the Purchase Agreement. This Letter Agreement supersedes and replaces in its entirety Letter Agreement 6-1162-MSA-546R1 dated June 30, 2005. 1. Aircraft Configuration. Due to the developing design of the 787 Aircraft and the long period of time between the Purchase Agreement signing and delivery of Customer's first Aircraft, the configuration of Customer's Aircraft has not yet been defined. The parties agree to complete defining the configuration of the Aircraft no later than [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT], using the configuration elements defined in 787 Airplane Description and Selections Document Number 787B1-0227, which includes available Optional Features for selection (Configuration). 2. Effect on Purchase Agreement. By [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT], Boeing will provide Customer a written amendment to the Purchase Agreement reflecting the Configuration, including, without limitation, the effects of the Configuration on those portions of the Purchase Agreement described in Articles 2.1 through 2.4, below. In advance of the final Configuration by [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT], the parties agree to the following advanced configuration releases: Preliminary Configuration - LOPA YS5509 dated 10/4/04, used to define a preliminary Performance Guarantees release (reference Article 2.3 below). This has been completed per Supplemental Agreement No. 1 to the Purchase Agreement. Interim Configuration - to be released by September 2006, used to define the final Performance Guarantees release (reference Article 2.3 below) and update the pricing (reference Article 2.4 below). 2.1 Exhibit A. The Configuration will be incorporated into Exhibit A of the Purchase Agreement. 2.2 Basic Specification. Changes applicable to the basic Model 787 aircraft which are developed by Boeing between the date of signing of the Purchase Agreement and completion of the Configuration will be incorporated into Exhibit A of the Purchase Agreement. 2.3 [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]. Boeing will provide to Customer revisions to Letter Agreement 6-1162-MSA-551, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT], to reflect the effects of the Configuration, if any, on [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]. 2.4 Price Adjustments. The Aircraft Basic Price and Advance Payment Base Price of each Aircraft set forth on Table 1 to the Purchase Agreement is based in part on an estimate of the value of the Optional Features and any related Seller Purchased Equipment. The Aircraft Basic Price and the Advance Payment Base Price of each Aircraft will be adjusted as required and agreed by the parties in a supplemental agreement to the Purchase Agreement to reflect the difference between such estimate and the actual price of such elements of the Configuration. Other Letter Agreements . Boeing and Customer acknowledge that as the definition of the Aircraft progresses, there will be a need to execute letter agreements addressing one or more of the following subjects: 3.1 Customer Software. Additional provisions relating to the loading of software owned by or licensed to Customer on the Aircraft at delivery. 3.2 Installation of Cabin Systems Equipment. Additional provisions relating to the terms on which Boeing will offer and install in-flight entertainment systems and cabin communications systems in the Aircraft. 3.3 Buyer Furnished Equipment (BFE) and Seller Purchased Equipment (SPE). Provisions relating to the terms on which Boeing may offer or install BFE and SPE in the Aircraft. 3.4 Connexion by Boeing. Provisions relating to the terms under which Boeing may offer or install Connexion by Boeing in the Aircraft.         Very truly yours, THE BOEING COMPANY     By /s/ Michael S. Anderson Its Attorney-In-Fact   ACCEPTED AND AGREED TO this Date: May 3, 2006 CONTINENTAL AIRLINES, INC.     By /s/ Gerald Laderman Its__ Senior Vice President - Finance and Treasurer May 3, 2006 6-1162-MSA-547R2   Continental Airlines, Inc. 1600 Smith Street Houston, TX 77002     Subject: Option Aircraft Reference: Purchase Agreement 2484 (the Purchase Agreement) between The Boeing Company (Boeing) and Continental Airlines, Inc. (Customer) relating to Model 787-8 aircraft (the Aircraft)   Ladies and Gentlemen: This Letter Agreement amends and supplements the Purchase Agreement. This Letter Agreement supersedes and replaces in its entirety Letter Agreement 6-1162-MSA-547R1 dated January 20, 2006. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement. Boeing agrees to manufacture and sell to Customer up to [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] additional Model 787-8 aircraft as Option Aircraft. The delivery months, number of aircraft, Advance Payment Base Price per aircraft and advance payment schedule are listed in the Attachment to this Letter Agreement (the Attachment). 1. Aircraft Description and Changes 1.1 Aircraft Description: The Option Aircraft are described by the Detail Specification listed in the Attachment, and subject to the items in section 1.2 below. 1.2 Changes: The Detail Specification will be revised to include: (i) Changes applicable to the basic Model 787 aircraft which are developed by Boeing between the date of the Detail Specification and the signing of the definitive agreement to purchase the Option Aircraft; (ii) Changes required to obtain required regulatory certificates; and (iii) Changes mutually agreed upon. 2. Price 2.1 The pricing elements of the Option Aircraft are listed in the Attachment. 2.2 Price Adjustments. 2.2.1 Optional Features. The Optional Features Prices selected for the Option Aircraft will be adjusted to Boeing's current prices as of the date of execution of the definitive agreement for the Option Aircraft. 2.2.2 Escalation Adjustments. The Airframe Price and the Optional Features Prices for Option Aircraft will be escalated on the same basis as the Aircraft, and will be adjusted to Boeing's then-current escalation provisions as of the date of execution of the definitive agreement for the Option Aircraft. The engine manufacturer's current escalation provisions, listed in Exhibit Supplement EE1 to the Purchase Agreement, have been estimated to the months of scheduled delivery using commercial forecasts to calculate the Advance Payment Base Price listed in the Attachment to this Letter Agreement. The engine escalation provisions will be revised if they are changed by the engine manufacturer prior to the signing of a definitive agreement for the Option Aircraft. 2.2.3 Base Price Adjustments. The Airframe Price and the Engine Price of the Option Aircraft will be adjusted to Boeing's and the engine manufacturer's then current prices as of the date of execution of the definitive agreement for the Option Aircraft. 3. Payment. 3.1 Customer will pay a deposit to Boeing in the amount shown in the Attachment for each Option Aircraft (Option Deposit), on the date of this Letter Agreement. If Customer exercises an option, the Option Deposit will be credited against the first advance payment due. If Customer does not exercise an option, Boeing will retain the Option Deposit for that Option Aircraft. 3.2 If Customer exercises its option to acquire an Option Aircraft, advance payments in the amounts and at the times listed in the Attachment will be payable for that Option Aircraft. The remainder of the Aircraft Price for that Option Aircraft will be paid at the time of delivery. 4. Option Exercise. Customer may exercise an option to acquire an Option Aircraft by giving written notice to Boeing on or before the date [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] months prior to the first business day of the applicable delivery month listed in the Attachment (Option Exercise Date). 5. Contract Terms. Boeing and Customer will use their best efforts to reach a definitive agreement for the purchase of an Option Aircraft, including the terms and conditions contained in this Letter Agreement, in the Purchase Agreement, and other terms and conditions as may be agreed upon to add the Option Aircraft to the Purchase Agreement as an Aircraft. If the parties have not entered into a definitive agreement within 30 days following option exercise, either party may terminate the purchase of such Option Aircraft by giving written notice to the other within 5 days. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]     Very truly yours, THE BOEING COMPANY     By /s/ Michael S. Anderson Its Attorney-In-Fact   ACCEPTED AND AGREED TO this Date: May 3, 2006 CONTINENTAL AIRLINES, INC.     By /s/ Gerald Laderman Its__ Senior Vice President - Finance and Treasurer   Attachment Attachment to Option Aircraft Letter Agreement 6-1162-MSA-547R2 Option Aircraft Delivery, Description, Price and Advance Payments (787-8 / [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] / 2004 $s / [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]   [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]   May 3, 2006 6-1162-MSA-552R3     Continental Airlines, Inc. 1600 Smith Street Houston, Texas 77002   Subject: Special Matters Reference: Purchase Agreement No. 2484 (the Purchase Agreement) between The Boeing Company (Boeing) and Continental Airlines, Inc. (Customer) relating to Model 787-8 aircraft (the Aircraft) Ladies and Gentlemen: This Letter Agreement amends and supplements the Purchase Agreement. This Letter Agreement supersedes and replaces in its entirety Letter Agreement 6-1162-MSA-552R2 dated January 20, 2006. All terms used and not defined in this Letter Agreement have the same meaning as in the Purchase Agreement. 1. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 3. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 4. Option Aircraft [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]. 4.1 [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 4.2 [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 4.3 [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 5. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 6. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 7. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 8. Aircraft Invoices. Upon Customer request, at the time of Aircraft delivery Boeing agrees to provide a separate invoice addressed to the owner/trustee of such Aircraft specifying the dollar amount to be received at the time of delivery. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 9. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 10. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 11. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 12. Confidential Treatment. Boeing and Customer understand that certain information contained in this Letter Agreement, including any attachments hereto, is considered by both parties to be confidential. Boeing and Customer agree that each party will treat this Letter Agreement and the information contained herein as confidential and will not, without the other party's prior written consent, disclose this Letter Agreement or any information contained herein to any other person or entity except as may be required by applicable law or governmental regulations. Very truly yours, THE BOEING COMPANY     By /s/ Michael S. Anderson Its Attorney-In-Fact   ACCEPTED AND AGREED TO this Date: May 3, 2006 CONTINENTAL AIRLINES, INC.     By /s/ Gerald Laderman Its__ Senior Vice President - Finance and Treasurer May 3, 2006 6-1162-MSA-554R2 Continental Airlines, Inc. 1600 Smith Street Houston, Texas 77002   Subject: [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] Reference: Purchase Agreement No. 2484 (the Purchase Agreement) between The Boeing Company (Boeing) and Continental Airlines, Inc. (Customer) relating to Model 787-8 aircraft (the Aircraft) Ladies and Gentlemen: This Letter Agreement amends and supplements the Purchase Agreement. This Letter Agreement supersedes and replaces in its entirety Letter Agreement 6-1162-MSA-554R1 dated January 20, 2006. All terms used and not defined in this Letter Agreement have the same meaning as in the Purchase Agreement. 1. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2. Confidential Treatment. Boeing and Customer understand that certain information contained in this Letter Agreement, including any attachments hereto, is considered by both parties to be confidential. Boeing and Customer agree that each party will treat this Letter Agreement and the information contained herein as confidential and will not, without the other party's prior written consent, disclose this Letter Agreement or any information contained herein to any other person or entity except as may be required by applicable law or governmental regulations.   Very truly yours, THE BOEING COMPANY     By /s/ Michael S. Anderson Its Attorney-In-Fact   ACCEPTED AND AGREED TO this Date: May 3, 2006 CONTINENTAL AIRLINES, INC.     By /s/ Gerald Laderman Its__ Senior Vice President - Finance and Treasurer Attachment Attachment A to Model Substitution Letter Agreement 6-1162-MSA-554R2 Price (787-9, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 2004 $s)   [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

AGREEMENT FOR CONTRIBUTION OF PROPERTY              This AGREEMENT FOR CONTRIBUTION OF PROPERTY (this “Agreement”) is made and entered into as of this 3rd day of May, 2006, by and between the entities identified on Schedule 1 hereto (each a "Seller" and collectively the "Sellers"), and IRET PROPERTIES, A NORTH DAKOTA LIMITED PARTNERSHIP (the “Buyer”).  The current address of each party is set forth in Section 16 below. WHEREAS, Sellers are the owners of the Properties (as hereinafter defined); and WHEREAS, Sellers wish to contribute to Buyer, and Buyer wishes to acquire from Sellers, the Properties upon the terms and conditions hereinafter set forth.  AGREEMENT              In consideration of the Earnest Money and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:             Section 1.       Definitions.  For purposes of this Agreement, each of the following terms, when used herein with an initial capital letter, shall have the meaning ascribed to it as follows: (a)       Accredited Investor.  An “Accredited Investor,” as such term is defined in rule 501(a) of Regulation D of the Act. (b)       Act.  The Securities Act of 1933, as amended. (c)       Building.  The buildings located on the Land. (d)       Buyer’s Broker.  Buyer is not represented by a broker in this transaction. (e)       CAM Payments.  Reimbursements, payments, or escalations due under the Leases from the Tenants for Operating Expenses, real estate taxes, and special or general assessments. (f)       Closing.  The closing and consummation of the contribution of the Properties pursuant hereto. (g)       Closing Date.  The date on which the Closing occurs as provided in Section 10 hereof. (h)       Closing Year.  The calendar year in which the Closing occurs. (i)       Code.  The Internal Revenue Code of 1986, as amended. (j)       Contract Date.  The date upon which this Agreement shall be deemed effective, which shall be the date first above written. (k)       Debt.  The debt of Sellers to Lender, as listed and organized by Property on attached Exhibit J.  Said exhibit shall include a description of the general terms and conditions of the Debt on each Property, including identity of Lender, -------------------------------------------------------------------------------- approximate principal amount outstanding, interest rate, maturity date, and assumption provisions. (l)       Deed.  The special warranty deeds to be executed by Sellers, in form approved by Buyer in its sole but reasonable discretion. (m)       Due Diligence Documents.  The documents and information set forth on Exhibit E, to be provided to Buyer by Sellers pursuant to Section 6.1 below. (n)       Environmental Laws.  Any applicable statute, code, enactment, ordinance, rule, regulation, permit, consent, approval, authorization, license, judgment, order, writ, common law rule (including, but not limited to, the common law respecting nuisance), decree, injunction, or other requirement having the force and effect of law, whether local, state, territorial or national, at any time in force or effect relating to:  (i) emissions, discharges, spills, releases or threatened releases of Hazardous Substances into ambient air, surface water, ground water, watercourses, publicly or privately owned treatment works, drains, sewer systems, wetlands, septic systems or onto land; (ii) the use, treatment, storage, disposal, handling, manufacturing, transportation or shipment of Hazardous Substances; (iii) the regulation of storage tanks or sewage disposal systems; or (iv) otherwise relating to pollution or the protection of human health or the environment. (o)       Escrow Agent.  Stewart Title of Colorado, Inc., 50 South Steele Street, Suite 600, Denver, CO 80209, Attn: Carma Allen & Brianna Hern, Fax No. (303) 331-9867, acting as Escrow Agent pursuant to the terms and conditions of this Agreement. (p)       Estoppel Certificates.  The estoppel certificates to be delivered to Buyer, as provided in Sections 6.5 and 9 hereof. (q)       Hazardous Substances.  All substances, wastes, pollutants, contaminants and materials regulated, or defined or designated as hazardous, extremely or imminently hazardous, dangerous, or toxic, under the following federal statutes and their state counterparts, including any implementing regulations:  the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. §§ 136 et seq.; the Atomic Energy Act, 42 U.S.C. §§ 2011 et seq.; the Hazardous Materials Transportation Act, 42 U.S.C. §§ 1801 et seq.; or any other federal, state, or municipal statute, law or ordinance regulating or otherwise dealing with or affecting materials deemed dangerous or hazardous to human health or the environment; with petroleum and petroleum products including crude oil and any fractions thereof; with asbestos; and with natural gas, synthetic gas, and any mixtures thereof. (r)       Improvements.  The Building and any other structures, sidewalks, drives, parking lots, landscaping and improvements located upon the Land, including all systems, facilities, fixtures, machinery, equipment and conduits to provide fire protection, security, heat, exhaust, ventilation, air conditioning, electrical power, light, plumbing, refrigeration, gas, sewer, and water thereto (including all replacements or additions thereto between the Contract Date and the Closing Date). -------------------------------------------------------------------------------- (s)       IRET.  Investors Real Estate Trust, a North Dakota Business Trust. (t)       Intangibles.  Each Seller’s right, title and interest in, to and under the following: (i) the Warranties; (ii) rights under construction and equipment and material guarantees and warranties, if any, relating to the Land and pertaining to the Improvements; (iii) all assignable licenses and other governmental permits and permissions, if any, relating to the Land, the Improvements, the Personal Property, and the operation thereof; (iv) any current tenant prospect lists for vacant space in the Improvements, and any leasing brochures, booklets, manuals, and advertising materials relating to the Land and Improvements; and (v)  the final plans and specifications for the Improvements. (u)       Land.  The fee estate in each tract or parcel of land described in Exhibit A and all privileges, rights, easements, hereditaments and appurtenances thereto belonging, and all right, title and interest of each Seller, if any, in and to any streets, alleys, passages and other rights of way included therein or adjacent thereto (before or after the vacation thereof). (v)       Leases.  All leases and other agreements granting third parties rights of possession or occupancy of the Properties or any part thereof, whether executed before, on, or after the Contract Date. (w)       Lender.  Collectively, the lending institutions to which the Debt is owed with respect to the Properties, as set forth on Exhibit J. (x)       Major Tenants.  All Tenants under the Leases that lease in the aggregate at least 3,000 square feet of the Properties. (y)       Operating Expenses.  Utility charges (including without limitation water, electricity, sewer, gas, and telephone), operation expenses, maintenance expenses, fees paid or payable under any licenses and permits in respect to any Property, and any other recurring costs or expenses relating or pertaining to any Property. (z)       Partnership Agreement.  The Buyer’s Agreement of Limited Partnership dated January 31, 1997, as amended to date, and as the same may be amended form time to time.  A copy of the Partnership Agreement, as amended to date, is attached as Exhibit L hereto. (aa)     Personal Property.  The personal property located at the Properties, if any, as listed and organized by Property on attached Exhibit B, together with all replacements or additions made thereto in the ordinary course of operating the Properties between the Contract Date and the Closing Date. (bb)     Properties.  Each Seller’s right, title and interest in, to and under the following (insofar as the same relate to a single parcel of Land, a “Property”): (i) the Land; (ii) the Improvements; (iii) the Leases; (iv) the Intangibles; and (v) the Personal Property. (cc)      Prorate.  The division of income and expenses of the Properties between Sellers and Buyer based on their respective periods of ownership during the Closing Year and as of 12:01 a.m. on the Closing Date. -------------------------------------------------------------------------------- (dd      Rent.  All rent payable by Tenants pursuant to Leases, including fixed, minimum and base rents, parking revenues and all other revenues derived from the Properties, including, but not limited to, CAM Payments. (ee)      Security Deposits.  Any and all security deposits, including any accrued interest as required by contract or applicable law, held by Sellers pursuant to the Leases that have not been properly applied toward Tenant defaults as of Closing, but specifically including any such deposit that a Tenant alleges to have been improperly or wrongfully applied to Tenant defaults. (ff)      Seller’s Broker.  NP Dodge Company, who is representing Seller. (gg)      Service Contracts.  All of the service contracts that relate to the Properties, or the operation or maintenance thereof, as listed and organized by Property on attached Exhibit C. (hh)      Shares.  Common shares of beneficial interest of IRET. (ii)      Share Value.  The average closing price for the Shares on the NASDAQ National Market for the thirty (30) trading days preceding the date that is two (2) business days prior to the Closing Date (excluding the two (2) highest and two (2) lowest closing prices). (jj)      Taxes.  All general real estate, ad valorem and personal property taxes assessed against the Properties. (kk)      Tenants.  The tenants under the Leases. (ll)      Title Commitment.  A commitment for a current form ALTA Owner’s Title Insurance Policy for each Property issued by the Title Company, agreeing to insure title to each Property on or after the Contract Date, showing Seller as owner of each Property, and indicating the conditions upon which the Title Company will issue full extended coverage over all general title exceptions contained in each such policy, including any endorsements that Buyer may require.  The Title Company shall issue separate commitments for each individual Property, and all such commitments shall aggregate to the full amount of the Consideration. (mm)      Title Company.  Stewart Title Guaranty Company, 50 South Steele Street, Suite 600, Denver, CO 80209, Attn: Carma Allen & Brianna Hern, Fax No. (303) 331-9867. (nn)      Units.  Units of limited partnership interest in the Buyer, defined as “Partnership Units” in the Partnership Agreement. (oo)      Warranties.  Any and all warranties, guaranties and similar contracts in favor of Sellers relating or pertaining to the Properties.              Section 2.      Contribution Agreement.  Subject to and in accordance with the terms, conditions and provisions hereof, Sellers agree to contribute the Properties to Buyer, and Buyer agrees to accept Sellers' contribution of the Properties.   --------------------------------------------------------------------------------             Section 3.       Earnest Money.  Within two (2) business days after the Inspection Date (as defined in Section 6.3 below), if this Agreement has not been terminated, Buyer will deposit with the Escrow Agent the cash sum of Two Hundred Fifty Thousand Dollars ($250,000.00).  Said sum together with all income earned on the investment thereof is herein collectively referred to as the “Earnest Money.”  The Earnest Money shall be invested by Escrow Agent in a money market or other daily interest account.  The Earnest Money shall be held by the Escrow Agent until disbursed as set forth in this Agreement.  Buyer shall execute any appropriate W-9 forms and deliver the same to the Escrow Agent.  If Buyer acquires some or all of the Properties pursuant to this Agreement, the Earnest Money shall be returned by the Escrow Agent to Buyer.  If all of the conditions precedent set forth in this Agreement are not satisfied or waived by Buyer, or if Buyer terminates this Agreement as expressly permitted pursuant to the provisions hereof, then the Earnest Money shall be returned by the Escrow Agent to Buyer.  If all of the conditions precedent set forth in this Agreement have been satisfied or waived by Buyer, and thereafter Buyer fails to acquire the Properties pursuant to the terms of this Agreement and Sellers are not in default, then the Earnest Money shall be delivered to Sellers and shall be retained by Sellers as liquidated damages.  If there is a dispute between Buyer and Sellers as to the distribution of the Earnest Money, or if for any other reason the Escrow Agent in good faith elects not to make any such disbursement, the Escrow Agent shall continue to hold the Earnest Money until otherwise directed by written instructions executed by Sellers and Buyer, or by a final judgment of a court of competent jurisdiction.             Section 4.       Consideration and Prorations. 4.1       Consideration.  The agreed value of the Properties (the “Consideration”) is One Hundred Forty Million Eight Hundred Thousand Dollars ($140,800,000.00), subject to the prorations and allocations provided for herein, which shall be added or subtracted as the case may be.  The allocation of the Consideration among the Properties is set forth on Exhibit M.  Buyer’s assumption of the Debt as provided in Section 4.5 below shall be a credit toward the Consideration.  The consideration for the conveyance and contribution of the Properties to Buyer by Sellers shall be the issuance to each Seller of Units equal in amount to the Consideration allocated to the Property of such Seller divided by the Share Value, but not less than $9.50 ("Minimum Value") and not more than $10.15 per Unit except as set forth below.  Seller and Buyer agree, conclusively and unconditionally, that if the Closing occurs such determination as to the number of Units to be issued in consideration for the Properties shall be made based upon the Share Value, regardless of the price at which Shares trade on the Contract Date or Closing Date, or at any time before or after the Contract Date or Closing Date.  If such calculation would result in a fractional number of Units to be delivered to a Seller, the Buyer, at its option, may pay the fractional amount in cash so as to provide for delivery of a whole number of Units.  Notwithstanding anything to the contrary contained herein, in the event the Share Value is less than $9.00 per Unit, the Minimum Value shall be reduced to Fifty Cents ($.50) in excess of the Share Value.  On or before the Closing, Sellers shall deliver written notice to Buyer allocating the Units among Sellers.  Each Seller shall be issued certificates for the Units allocated to it within ten (10) business days following the Closing.  The Units shall be convertible into cash or, at the sole discretion of IRET, Shares, in accordance with the Partnership Agreement.  Each Seller acknowledges and agrees that its ownership of the Units and rights to transfer and exchange the Units shall be subject to all of the limitations, terms, provisions and restrictions set forth in this Agreement and in the Partnership Agreement, as well as a two (2) year restriction on conversion of such Units from the date of issuance.  Notwithstanding the foregoing, under no circumstances will Units be issued to any individual or entity that is not an Accredited Investor.  At Closing, each Seller will deliver to Buyer an executed Accredited Investor Certificate, a form of which is attached hereto as Exhibit K, that provides information concerning such Seller’s -------------------------------------------------------------------------------- status as an Accredited Investor, and such other information and documentation as may reasonably be requested by Buyer in furtherance of the issuance of the Units.             4.2       Prorations. (a)       General.  Each Seller and Buyer shall make the prorations set forth in this section, as a credit or debit to the Consideration.  For purposes of calculating prorations, Buyer shall be deemed to be in title to the Property, and therefore entitled to the income therefrom and responsible for the expenses thereof, for the entire day upon which the Closing occurs.  All prorations shall be made on the basis of the actual number of days of the year and month that shall have elapsed prior to the Closing Date. (b)       Rent.  The parties shall Prorate all Rent (including without limitation CAM Payments) other than Delinquent Rent (which is defined and covered in Section 4.2(e) below).  At Closing, to the extent received by a Seller prior to Closing, such Seller shall pay to Buyer any and all prepaid Rent relating or pertaining to the Property.  If a Seller receives payment for Rent after Closing, such Seller shall immediately pay to Buyer the portion of such payment which relates to the period on and after the Closing Date, and any portion of such payment which relates to the period prior to Closing which was credited to such Seller at Closing. (c)       Taxes and Special Assessments.  The parties shall Prorate all Taxes in accordance with Exhibit R.  If, in those applicable circumstances described on Exhibit R, final tax bills are not available, the parties shall Prorate Taxes on the basis of the projected Taxes if a projection is available from the applicable taxing authority or, if a projection is not available, on the basis of the most recent final tax bills.  If after Closing either party receives a refund of any Taxes that were prorated pursuant to this Agreement, then the parties shall equitably share the refund (subject to any portion of the refund that is due to the Tenants pursuant to the Leases).  Seller shall pay all pending or levied municipal or special district assessments related or pertaining to the Property (including any fines, interest or penalties thereon due to the non‑payment thereof), and shall indemnify, defend and save Buyer from any claims therefor or any liability, loss, cost or expenses arising therefrom; provided, if such special assessments may be paid in installments, Sellers and Buyer shall prorate those special assessments becoming delinquent in the Closing Year. (d)       Operating Expenses and Service Contracts.  Except for Taxes and special assessments, which shall be covered as set forth in Section 4.2(c) above, the parties shall Prorate all Operating Expenses.  To the extent not already prorated as Operating Expenses, the parties shall also Prorate amounts paid or payable under the Surviving Service Contracts.  The prorations under this subsection shall be based on actual invoices if reasonably possible.  If actual invoices are not available in advance of Closing, then the prorations shall be calculated based on Seller's and Buyer's good faith estimates thereof. (e)       Delinquent Rent.  For purposes of this Section 4.2, “Delinquent Rent” shall mean any Rent that, under the terms of the applicable Lease, was more than thirty (30) days past due as of the Closing Date, and which has not been received in good funds by Seller on or prior to the Closing Date.  Delinquent Rent shall not be accrued or prorated at Closing.  Any Delinquent Rent that is received -------------------------------------------------------------------------------- by Buyer after the Closing Date shall be paid to Seller; provided, however, that all Rent collected after the Closing Date shall be applied first to payment of all Rent due Buyer from the applicable Tenant and second to all Delinquent Rent due to Seller.  Following Closing, Buyer shall use good faith commercially reasonable efforts to collect any Delinquent Rent, provided that Buyer shall not be required to incur any material cost, to commence any legal proceedings, or to terminate any Lease.  If Buyer commences any action or proceeding against any Tenant and as a result thereof collects any Delinquent Rent which Buyer is required to remit to Seller, Buyer shall be entitled to deduct and retain a portion of the amount collected which is equal to the pro rata share of the reasonable third party expenses incurred by Buyer in connection with the collection of any such Delinquent Rent.  Buyer shall not waive any Delinquent Rent or modify or amend any Lease so as to reduce the Delinquent Rent owed by the Tenant for any period in which Seller is entitled to receive such Delinquent Rent, without first obtaining Seller’s consent (which consent may not be unreasonably withheld or conditioned). (f)       Tenant Obligations.  Notwithstanding anything in this Section 4.2 to the contrary, if any Tenant is obligated under its Lease to directly pay any Operating Expenses (including without limitation Taxes), then any such Operating Expenses shall not be prorated between the parties. (g)       Proration Statement.  As soon as reasonably possible prior to Closing, Seller and Buyer shall work together in good faith to prepare a joint statement of the prorations required by this Section (“Proration Statement”), and shall deliver the Proration Statement to the Escrow Agent for use in preparing the final settlement statements. (h)       Post-Closing Reconciliation.  As soon as reasonably possible after Closing, but in no event more than ninety (90) days after Closing, the parties shall work in good faith to complete a reconciliation of all prorations and of Seller’s receipt of CAM Payments (“Reconciliation”).  If there is an error on the Proration Statement used at Closing or, if after the actual figures are available as to any items that were estimated on the Proration Statement, then the proration or apportionment shall be adjusted based on the actual figures.  As soon as reasonably possible, but in no event more than sixty (60) days after Closing, Seller shall provide to Buyer an accounting (and any supporting documentation reasonably requested by Buyer), certified as complete and materially accurate, detailing both the CAM Payments actually collected by Seller in the Closing Year, and all of the Operating Expenses attributable to the Closing Year that were actually paid by Seller.  As part of the Reconciliation, Seller shall pay to Buyer, or Buyer shall pay to Seller, as the case may be, the difference between the actual CAM Payments collected by Seller from each Tenant and that Tenant’s proportionate share of the Operating Expenses for the corresponding period.  Either party owing the other party a sum of money based on the Reconciliation shall pay said sum to the other party within five (5) business days of the completion of the Reconciliation.  Seller and Buyer shall each be responsible for the accounting and validity of billings to Tenants for those Operating Expenses incurred during each of Seller’s and Buyer’s respective periods of ownership of the Property. -------------------------------------------------------------------------------- 4.3       Security Deposits.  The Security Deposits and any interest due thereon pursuant to the Leases shall be credited to the Consideration at Closing.  Buyer shall assume responsibility for such assigned Security Deposits and shall indemnify, defend and hold Sellers harmless from any loss or damage that Sellers suffer due to a claim by Tenant for any such Security Deposits, but only to the extent that the Security Deposits in dispute were actually credited by Sellers to Buyer. 4.4       Debt Assumption.  It is understood and agreed that, at Closing, Buyer shall take title to the Properties subject to the Debt, Buyer shall assume the Debt, and Sellers (and any guarantors of the Debt) shall be released and discharged of liability for the Debt from and after Buyer's assumption.  Sellers agree to cooperate with Buyer concerning the assumption of the Debt, including if necessary the giving of proper notices of assumption.  Sellers and Buyer shall each pay one-half of all costs and expenses (including lender fees and any resulting assumption fees) associated with Buyer’s assumption of the Debt.  Sellers shall provide all necessary cooperation to assist Buyer in its applications to assume the Debt on terms acceptable to Buyer and Sellers in their respective sole and absolute discretion.  In the event the Lender holding the Debt on a Property does not consent to Buyer’s assumption of the Debt on such Property, on terms acceptable to Buyer in its sole and absolute discretion, or does not agree to release such Seller (and any guarantor of such Debt) from liability on terms acceptable to such Seller in its sole and absolute discretion, each at least five (5) business days prior to the Closing Date, then either Buyer or such Seller shall have the right to elect by written notice to terminate this Agreement in its entirety or with respect to such Property only.  All tax, insurance, tenant improvement, leasing commissions and other escrows held by Lender in connection with the Debt (”Escrows") shall be assigned by Sellers to Buyer at Closing and the Consideration shall be increased by the amount of such Escrows so assigned. Section 5. 5.1       Title Commitment.  As soon as reasonably possible after Buyer’s receipt of the Due Diligence Documents, Buyer shall order the Title Commitment from the Title Company in the amount of the Consideration, showing the condition of title to the Land and Improvements, and naming Buyer as the proposed insured, together with legible copies of all recorded exceptions and covenants, conditions, easements, and restrictions affecting each Property.  The Title Commitment shall contain the conditions upon which the title insurance policies that will be issued at Closing pursuant to the Title Commitment (the “Title Policy”) will provide extended coverage insurance that shall result in the deletion of the following exceptions:  (a) liens for labor or materials, whether or not of record; (b) parties in possession (other than specified Tenants under the Leases, solely as such tenants); (c) unrecorded easements; and (d) exceptions that an accurate survey would disclose.  Each Title Commitment shall include an ALTA Form 3.1 zoning endorsement, an ALTA Form 18.1 (Multiple Tax Parcel) endorsement, an appropriate owner’s comprehensive endorsement, and any other endorsements required by Buyer. 5.2       Survey.  As soon as reasonably possible after Buyer’s receipt of a Title Commitment (including legible copies of all recorded exception documents) for each Property, Buyer shall order an ALTA-ACSM as-built survey of each Property (collectively, the “Survey”).  Sellers shall provide any cooperation reasonably necessary to assist in the preparation and delivery of the Survey to Buyer.  In the event this Agreement is terminated prior to Closing with respect to a Property for any reason other than Buyer’s default, Sellers shall reimburse Buyer for the reasonable costs of the Survey of such Property, and Buyer shall provide Sellers with all original copies of such Survey in Buyer’s possession. -------------------------------------------------------------------------------- 5.3       Title Notice.  If the Title Commitment or Survey disclose matters that are not acceptable to Buyer with respect to a Property (“Unpermitted Exceptions”), then Buyer shall notify Seller owning such Property in writing (the “Title Notice”) of Buyer’s objections within fifteen (15) days after Buyer has received both a Title Commitment and Survey for such Property.  In the event that Buyer notifies such Seller of any objections within such fifteen (15) day period, then such Seller shall notify Buyer in writing, within five (5) business days following the date of receipt of Buyer’s notice of such objections, that either: (a) such Seller will attempt to have, prior to Closing, the Unpermitted Exceptions removed from the Title Commitment and/or Survey, insured over by the Title Company pursuant to an endorsement to the Title Policy, or otherwise cured to Buyer’s reasonable satisfaction; or (b) such Seller declines to arrange to have the Unpermitted Exceptions removed, insured over, or otherwise cured.  If such Seller fails to deliver such written notice to Buyer within such five (5) business day period, then such Seller shall be deemed to have elected to attempt to remove, insure over, or otherwise cure the Unpermitted Exceptions.  If such Seller declines to arrange to remove, insure over, or otherwise cure any of the Unpermitted Exceptions, or if such Seller has attempted unsuccessfully to remove, insure over or otherwise cure any of the Unpermitted Exceptions, then Buyer shall elect, by written notice to such Seller within five (5) business days after Buyer’s receipt of such Seller’s written declination, or at, or at any time prior to the Closing if Seller has unsuccessfully attempted to remove, insure over or otherwise cure such Unpermitted Exceptions, to:  (a) terminate this Agreement in its entirety or as to such Property only; or (b) waive such objections and take title to such Property subject to the Unpermitted Exceptions that such Seller has declined or attempted unsuccessfully to remove, insure over, or otherwise cure.  The Closing Date shall be adjusted, if necessary, to allow for any elections allowed or required by this Section.  Notwithstanding anything to the contrary contained herein, each Seller shall be obligated to remove as a title exception (x) all mortgages, security deeds, mechanic’s liens, or other security instruments encumbering the Property owned by such Seller, excluding those instruments and agreements evidencing or securing the Debt with respect to such Property or those otherwise expressly to be assumed by Buyer herein, and (y) all delinquent ad valorem taxes and assessments (excluding future installments of special assessments being paid in installments).  In addition, each Seller shall be obligated to remove, bond over or insure over any judgments or tax liens against such Seller (which do not result from acts or omissions on the part of Buyer) which have attached to and become a lien against the Property owned by such Seller. 5.4       Pre-Closing “Gap” Title Defects.  Buyer may, at or prior to Closing, notify Sellers in writing (the “Gap Notice”) of any objections to title raised by the Title Company after Buyer’s receipt of the initial Title Commitment; provided that Buyer must notify Sellers of such objection to title within ten (10) business days of being made aware of the existence of such exception.  If Buyer sends a Gap Notice to a Seller, Buyer and such Seller shall have the same rights and obligations with respect to such notice as apply to a Title Notice under Section 5.3 hereof.             Section 6.       Buyer’s Inspection.             6.1       Document Inspection.  Buyer and Sellers acknowledge that Buyer (by itself or through such agents, consultants and others as Buyer shall designate) may inspect, test and analyze the Properties, and may examine, review and inspect all books, records and files relating to the Properties (or Sellers' operation of the Properties) including without limitation income and expense statements, repair and maintenance invoices and records, Tenant correspondence files, and drawings and specifications for construction of the Improvements.  As -------------------------------------------------------------------------------- soon as reasonably possible after the Contract Date, Sellers shall deliver to Buyer complete copies of all Due Diligence Documents within their possession or control.             6.2       Physical Inspection.  Buyer and its consultants and agents shall have the right, from time to time prior to the earlier of the Closing or termination of this Agreement, to enter upon the Properties to examine the same and the condition thereof, and to conduct such inspections, investigations, tests and studies (“Inspections”) as Buyer shall determine to be reasonably necessary.  Buyer shall carry out the Inspections during normal business hours to the extent practicable.  Buyer shall pay all costs of the Inspections.  Buyer hereby indemnifies, defends and holds Sellers harmless from and against any claims for injury or death to persons or damage to property arising out of any action of any person or firm entering the Properties on Buyer’s behalf during the Inspections, which indemnity shall survive the Closing and any termination of this Agreement without the Closing having occurred.  Notwithstanding the foregoing, Buyer shall not be liable hereunder for the discovery of any preexisting condition at the Properties, or for the consequences of any such discovery but shall be liable for any aggravation of such pre-existing condition.             6.3       Formal Inspection Period.  Notwithstanding Buyer’s continuing right of inspection contained in Section 6.2 above, Buyer shall have until 4:00 p.m. CDT on that date which is sixty (60) days after the date on which Buyer receives from Sellers the Due Diligence Certification (the 60th day being the “Inspection Date”) in which to make such Inspections permitted herein with respect to the Properties, the Due Diligence Documents, and any other thing or matter relating to the Properties as Buyer deems appropriate and, at the sole discretion of Buyer, to terminate this Agreement in its entirety or terminate this Agreement as to one or more, but less than all, Properties on or before said time on the Inspection Date if Buyer is not satisfied with the Properties for any reason (or for no reason).  The sixty (60) day formal inspection period shall not commence until the Sellers certify in writing to Buyer that Sellers have provided Buyer with all of the Due Diligence Documents in their possession or control (the “Due Diligence Certification”).  If Buyer terminates this Agreement with respect to all Properties on or before the Inspection Date, the Earnest Money shall be returned to Buyer and neither party shall have any further obligation to the other except as to provisions herein which are to survive termination.  This Section 6.3 shall not be deemed to limit Buyer’s additional termination rights under any other section of this Agreement.             6.4       Surviving Service Contracts.  On or before the Inspection Date, Buyer shall provide written notice to each Seller identifying the Service Contracts relating to the Property owned by such Seller that Buyer wishes to have terminated at or before Closing.  If such Seller declines to terminate any of the Service Contracts designated by Buyer for termination, then such Seller shall provide Buyer, within five (5) business days of receiving Buyer’s notice, with written notice of the Service Contracts that such Seller declines to have terminated.  If such Seller fails to provide written notice declining to terminate a Service Contract, then all Service Contracts requested by Buyer to be terminated shall be terminated by such Seller, effective on or before the Closing.  If such Seller declines to terminate any of the Service Contracts, then Buyer may elect, through written notice to such Seller within five (5) business days after Buyer’s receipt of such Seller’s notice, to terminate this Agreement in its entirety or as to such Property only.  If Buyer does not elect to terminate this Agreement with respect to such Property, then Buyer shall be deemed to have elected to take title subject to the Service Contracts that such Seller has declined to have terminated.  Sellers shall indemnify Buyer for any cost or expense (including reasonable attorney’s fees) associated with the Service Contracts terminated by Sellers.  The Service Contracts that are not terminated pursuant to this Section 6.4 shall be herein referred to as the “Surviving Service Contracts.” --------------------------------------------------------------------------------             6.5       Estoppel Certificates.  Each Seller shall obtain and deliver to Buyer an estoppel certificate, in the specific form attached hereto as Exhibit I (“Estoppel Certificate”), from all Major Tenants.  Each Seller shall also use its reasonable good faith efforts to obtain and deliver an Estoppel Certificate from all Tenants other than Major Tenants.  In the event a Seller cannot, despite its reasonable good faith efforts, obtain an Estoppel Certificate from any Tenant (other than any of the Major Tenants), then such Seller may, at its option, deliver and Buyer shall accept an Estoppel Certificate, signed by such Seller in its capacity as landlord of the relevant Leases, covering all Leases signed by any Tenant failing to sign an Estoppel Certificate.  Any Estoppel Certificate signed by a Seller in its capacity as landlord shall certify to the knowledge (actual and constructive) of such Seller as to all of the matters set forth in the form of estoppel certificate attached hereto as Exhibit I, and the representations of such Seller contained in any such Estoppel Certificate from such Seller shall survive the Closing.  Notwithstanding anything contained herein to the contrary, the failure of a Seller to deliver Estoppel Certificates from Major Tenants, or the declination of a Seller to sign and deliver an Estoppel Certificate in its capacity as landlord as allowed by this Section 6.5, shall not constitute a breach or default by such Seller, but shall result in the failure of the condition set forth in Section 9.1.             6.6       Appraisal.  Buyer may obtain, at its sole cost and expense, an appraisal of any Property (the “Appraisal”), to be performed by an appraiser acceptable to Buyer in its sole discretion.  In the event Buyer has a Property appraised, Sellers shall provide all reasonable cooperation necessary to the appraiser conducting the Appraisal. 6.7       Independent Audit.  Before or after the Closing Date, Buyer may retain an independent auditing firm selected by Buyer in its sole discretion to prepare any audited financial statements requested by Buyer for the Properties for the three year period prior to the Closing Date.  Sellers shall provide all necessary cooperation to Buyer’s designated independent auditor.  At any time before or after the Closing Date, Sellers agree to provide to Buyer’s designated independent auditor: (a) full and complete access to the books and records of the Properties and all related information regarding the Properties for the three-year period prior to the Closing Date; and (b) a representation letter, in form consistent with Statement on Auditing Standards No. 85, Management Representations, Appendix B, and acceptable to Buyer’s designated independent auditor and Sellers in their respective sole but reasonable discretion, delivered by Sellers (and/or, if applicable, by Seller’s managing agent of any Property), regarding the books and records of the Properties, in connection with the normal course of auditing the Properties in accordance with generally accepted auditing standards.             Section 7.       Sellers' Representations and Warranties.  In addition to any other representations and warranties provided by Sellers to Buyer elsewhere in this Agreement, Sellers represent and warrant to Buyer as of the Contract Date: 7.1.          Leases – Complete Copies.  The Leases made available to Buyer pursuant to Section 6.1 hereof are complete and accurate copies of all of the Leases currently in effect with respect to the Properties, and there are no written or oral promises, understandings or commitments with Tenants other than as set forth in such Leases as delivered to Buyer. 7.2.          Leases – Default.  The Leases are in full force and effect, and, except as may be set forth in Exhibit D, no Tenant is in default under any Lease.  Sellers have completed and/or paid for all tenant improvements and other inducements required to be completed or paid by Sellers as landlords under the Leases, and have paid all leasing and broker commissions applicable to the Leases, except as identified on Exhibit D attached hereto; and, except as specified on Exhibit D, have no further obligations with respect thereto.  Except as specifically set forth in the Leases or on the rent rolls delivered to Buyer pursuant to this Agreement, no -------------------------------------------------------------------------------- Tenant has any right to extend the term of such Tenant’s Lease, and no Tenant has any option or right of first refusal to purchase any of the Properties. 7.3.          Service Contracts.  A complete and accurate list and description of all of the Service Contracts currently relating or pertaining to the Properties is set forth in Exhibit C hereto.  No party is in default under any of the Service Contracts except as may be set forth on Exhibit C. 7.4.          Authority.  Each Seller is formed pursuant to, and in good standing under, the laws of the state where it was incorporated or organized.  Each Seller is authorized to own and operate real estate in the state in which its Land is located.  Sellers are not subject to any proceedings in bankruptcy or any proceedings for dissolution or liquidation.  This Agreement and all exhibits and documents to be delivered by Sellers pursuant to this Agreement have been duly executed and delivered by Sellers and constitute the valid and binding obligations of Sellers, enforceable in accordance with their terms.  Sellers have all necessary authority and have taken all action necessary, to enter into this Agreement, to consummate the transactions contemplated hereby, and to perform their obligations hereunder.  The execution, delivery, and performance of this Agreement will not conflict with or constitute a breach or default under (i) the organizational documents of Sellers; (ii) any material instrument, contract, or other agreement to which any Seller is a party which affects any of the Properties; or (iii) any statute or any regulation, order, judgment, or decree of any court or governmental or regulatory body. 7.5.          Environmental Matters.  Except as may be set forth in any environmental assessments or reports included within the Due Diligence Documents and on Exhibit N, to Sellers' knowledge:  (i) Hazardous Substances have not been used, generated, transported, treated, stored, released, discharged or disposed of in, onto, under or from any of the Properties in violation of any Environmental Laws by Sellers, by any predecessor-in-title or agent of Seller, by any Tenants, or by any other person at any time; (ii) there are no above-ground or underground tanks or any other underground storage facilities located on any of the Properties, and there have never been such tanks or facilities on any of the Properties; and (iii) there are no wells or private sewage disposal or treatment facilities located on any of the Properties and there have never been such wells or private sewage disposal or treatment facilities located on any of the Properties. 7.6.          Non-Foreign Status.  No Seller is a “foreign person” as that term is defined in the Code and the regulations promulgated pursuant thereto. 7.7.          Anti-Terrorism Laws.  Neither Sellers, nor any of their affiliated entities, are in violation of any laws relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the United and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law No. 107-56.  Neither Sellers nor, to the knowledge of Sellers, any of their affiliated entities, or their respective brokers or agents acting or benefiting in any capacity in connection with the purchase of the Properties, are any of the following:  (i) a person or entity that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (ii) a person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a person or entity with which Sellers are prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Laws; (iv) a person or entity that commits, threatens, or conspires to commit or supports “terrorism” as defined in the Executive Order; or (v) a person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of -------------------------------------------------------------------------------- Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list.  Neither Sellers nor, to the knowledge of Sellers, any of their brokers or other agents acting in any capacity in connection with the purchase of the Properties:  (x) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any person as described above; (y) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order; or (z) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any of the Anti-Terrorism Laws. 7.8.          Governmental Matters.  Except as may be set forth on Exhibit O, Sellers have not received written notice from any governmental body having jurisdiction over the Properties, and have no knowledge, of:  (a) any pending or contemplated annexation or condemnation proceedings, or purchase in lieu of the same, affecting or which may affect all or any part of the Properties; (b) any proposed or pending proceeding to change or redefine the zoning classification of all or any part of the Properties; (c) any proposed change(s) in any road patterns or grades which would adversely and materially affect ingress or egress to or from the Properties; (d) any uncured violation of any legal requirement, restriction, condition, covenant or agreement affecting the Properties or the use, operation, maintenance or management of the Properties; (e) any uncured violations of laws, codes or ordinances affecting the Properties; or (f) violation of the terms of any permit required for the operation of the Properties as presently operated, or threatening to revoke, cancel, suspend or not renew any such permit.  7.9.          Litigation.  Except as may be set forth on Exhibit P, there is no controversy, investigation, complaint, protest, proceeding, suit, litigation or claim relating to the Properties or any part thereof, or relating to Sellers, pending, or to Sellers' knowledge threatened, which is reasonably likely to adversely affect the Properties.  7.10.      Mechanics’ Liens.  All bills and claims for labor performed and materials furnished to or for the benefit of the Properties prior to the date of execution hereof have been paid in full.  7.11.      No Bankruptcy.  No Seller:  (a) is in receivership or dissolution; (b) has made any assignment for the benefit of creditors or admitted in writing its inability to pay its debts as they mature; (c) has been adjudicated a bankrupt or filed a petition in voluntary bankruptcy or a petition or answer seeking reorganization or an arrangement with creditors under the federal bankruptcy law or any other similar law or statute of the United States or any jurisdiction and no such petition has been filed against any Seller or any of its property or affiliates, if any; and none of the foregoing are pending or, to Sellers' knowledge, threatened.  7.12.      Documentation.  To Sellers' knowledge, all documentation provided to Buyer by Sellers under this Agreement is true, correct, and complete in all material respects. 7.13.      Material Defects.  Except as may be set forth in the budgets for the Properties indicating necessary repair or replacement and delivered to Buyer as part of the Due Diligence Documents, to Sellers' knowledge, there is no material defect existing with respect to any of the Improvements or any part or portion thereof.  For the purposes of the foregoing, a “material defect” is one which can be reasonably anticipated to cost more than Twenty Thousand Dollars ($20,000.00) to cure. --------------------------------------------------------------------------------   It shall be a condition of Closing that the representations and warranties contained in this Section are true and correct at Closing.  If Sellers learn that any of said representations or warranties has become inaccurate between the Contract Date and the Closing Date, Sellers shall immediately notify Buyer in writing of such change.  The Closing Date shall be automatically extended for ten (10) days in order to allow Sellers to cure such change.  If Sellers cure such change, then this Agreement shall continue and the parties shall proceed to Closing.  If Sellers do not cure such change, Buyer shall either (a) terminate this Agreement in its entirety or, at Buyer's option, only as to the Property affected by such change, by written notice to Sellers, or (b) waive such right to terminate and proceed with the transaction pursuant to the remaining terms and conditions of this Agreement.  If Buyer elects option (b) in the preceding sentence, the representations and warranties shall be deemed to be automatically amended to reflect said change.  Each Seller’s execution of the Deed shall be deemed such Seller’s certification that all of the foregoing representations and warranties remain true and correct as of the Closing Date, as if made on such date.  The representations and warranties contained in this Section 7 shall survive Closing for a period of two (2) years ("Survival Period").             Section 8.       Buyer’s Representations and Warranties.  Buyer represents and warrants to Sellers as of the Contract Date: 8.1.          Buyer is a validly formed limited partnership under the laws of North Dakota, is in good standing in the state of North Dakota, and is or will be at Closing) qualified to do business in each state in which the Land is located.  The parties executing this Agreement on behalf of Buyer are duly authorized to so do.  This Agreement and all documents to be delivered by Buyer pursuant to this Agreement have been duly executed and delivered by Buyer and constitute the valid and binding obligations of Buyer, enforceable in accordance with their terms.  Buyer has all necessary authority and has taken all action necessary, to enter into this Agreement, to consummate the transactions contemplated hereby, and to perform its obligations hereunder.  The execution, delivery, and performance of this Agreement will not conflict with or constitute a breach or default under (i) the organizational documents of Buyer; (ii) any material instrument, contract, or other agreement to which Buyer is a party; or (iii) any statute or any regulation, order, judgment, or decree of any court or governmental or regulatory body. 8.2.          Buyer: (a) is not in receivership or dissolution; (b) has not made any assignment for the benefit of creditors or admitted in writing its inability to pay its debts as they mature; (c) has not been adjudicated a bankrupt or filed a petition involuntary bankruptcy or a petition or answer seeking reorganization or an arrangement with creditors under the federal bankruptcy law or any other similar law or statute of the United States or any jurisdiction and no such petition has been filed against Buyer or any of its properties or affiliates, and none of the foregoing are pending or, to Buyer's knowledge, threatened. 8.3.          (i) IRET is subject to the reporting requirements of Sections 13 and 15(d) of the Exchange Act; (ii) IRET has filed all reports, forms and documents required to be filed by it with the Securities and Exchange Commission ("SEC") in the three (3) years preceding the Contract Date; and (iii) all reports, forms and documents filed by IRET with the SEC were prepared in accordance with the requirements of the Act and the Exchange Act, as the case may be, and the rules and regulations thereunder, and did not at the time they were filed 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 made therein, in the light of the circumstances under which they were made, not misleading. -------------------------------------------------------------------------------- 8.4.          The SEC has not issued any temporary or permanent administrative sanction against or in respect of IRET, including any injunction or cease and desist order.  IRET has not received any notice from the SEC of the initiation or proposed initiation of proceedings against it.  The SEC has not entered an order against or in respect of IRET converting a preliminary investigation into a formal investigation.  IRET has not received a Wells Notice from the staff of the SEC.  No suspension of trading of Shares has occurred at any time. 8.5.          IRET has met all requirements in respect of the Shares for listing of the Shares on the NASDAQ National Market.  IRET has not received notice from NASDAQ that it is deficient in meeting the listing requirements for the NASDAQ National Market. It shall be a condition of Closing that the representations and warranties contained in this Section are true and correct at Closing.  If Buyer learns that any of said representations or warranties has become inaccurate between the Contract Date and the Closing Date, Buyer shall immediately notify Sellers in writing of such change.  The Closing Date shall be automatically extended for ten (10) days in order to allow Buyer to cure such change.  If Buyer cures such change, then this Agreement shall continue and the parties shall proceed to Closing.  If Buyer does not cure such change, Sellers shall either (a) terminate this Agreement by written notice to Buyer, or (b) waive such rights to terminate and proceed with the transaction pursuant to the remaining terms and conditions of this Agreement.  If Sellers elect option (b) in the preceding sentence, the representations and warranties shall be deemed to be automatically amended to reflect said change.  Buyer's acceptance of the Deed shall be deemed Buyer's certification that all of the foregoing representations and warranties remain true and correct as of the Closing Date, as if made on such date.  The representations and warranties contained in this section 8 shall survive Closing for the Survival Period.              Section 9.       Conditions to Closing. 9.1       Buyer Conditions.  Buyer’s obligation to proceed to Closing under this Agreement is subject to the following conditions precedent with respect to each Property: (a)       Buyer shall have received, within the timeframe set forth in Section 6.5,  all Estoppel Certificates required by Section 6.5, each fully and properly signed, and each with content acceptable to IRET in its sole but reasonable discretion; (b)       Buyer shall have waived or be deemed to have waived its right to terminate pursuant to any provision in this Agreement; (c)       None of the Major Tenants shall be the subject of any proceedings under state or federal law relating to bankruptcy or any similar proceedings; (d)       Sellers shall have made all deliveries as required by Section 10.4 below; (e)       At least three (3) business days prior to Closing, Buyer shall have received a marked-up Title Commitment from the Title Company, obligating the issuance of the Title Policy in accordance therewith showing (effective upon Closing) title in Buyer subject only to such exceptions as have been approved by Buyer pursuant to this Agreement; -------------------------------------------------------------------------------- (f)       No notice or citation from any governmental authority alleging any violation of any law, ordinance, code, rule, regulation or order regarding such Property or the use thereof shall be outstanding and uncured; (g)       Buyer shall have received, at least five (5) business days prior to the Closing Date, the written consent of Lender to Buyer’s assumption of the Debt, on terms acceptable to Buyer in its sole and absolute discretion; and (h)       Each Seller shall have performed and complied with all of its covenants, agreements and obligations under this Agreement which are to be performed or complied with by it at or prior to the Closing. If any of the foregoing conditions are not satisfied or waived by Buyer on or before the Closing Date, then Buyer may on written notice to Sellers terminate this Agreement in its entirety (and receive refund of the Earnest Money) or as to such Property only. 9.2              Sellers' Conditions.  Sellers' obligation to proceed to Closing under this Agreement is subject to the conditions precedent with respect to each Property: (a)       Such Seller shall have waived or be deemed to have waived its right to terminate pursuant to any provision of this Agreement; (b)       Buyer shall have made all deliveries as required by Section 10.5 below; (c)       Such Seller shall have received, at least five (5) business days prior to the Closing Date, the written agreement to release such Seller (and any guarantors of the Debt) from all liability for the Debt on terms acceptable to such Seller in its sole and absolute discretion; (d)       The average closing price for the Shares on the NASDAQ National Market for the ten (10) trading days preceding the Closing Date shall not have been less than $9.00 per Share; (e)       During the period between the Contract Date and the Closing Date, no investigation or proceeding shall have been commenced by any governmental authority concerning accounting or securities irregularities or fraud by Buyer or IRET; and  (f)        Buyer shall have performed and complied with all of its covenants, agreements and obligations under this Agreement which are to be performed or complied with by it at or prior to the Closing.  If any of the foregoing conditions are not satisfied or waived by such Seller on or before the Closing Date, then such Seller may terminate this Agreement with respect to the Property owned by such Seller on written notice to Buyer, and, in such event, this Agreement shall cease and terminate as to such Property.  In the event Sellers fail to close this transaction due to a failure to satisfy the condition precedent set forth in subsections (d) and (e) of this Section 9.2, then Sellers shall reimburse Buyer upon demand for all of Buyer’s reasonable thirty party out-of-pocket costs and expenses related to this transaction, including without limitation title, survey and engineering costs, as well as any sums paid by Buyer (or any sums which Buyer is irrevocably obligated to pay) to Lender; provided, the maximum reimbursement for which Sellers shall be obligated under this Section 9.2 shall be limited to $135,000.00. --------------------------------------------------------------------------------             Section 10.     Closing.             10.1     Time and Place.  Provided that all of the conditions set forth in this Agreement are theretofore fully satisfied, performed or waived, the Closing shall be held on the first business day that is sixty (60) days after the Inspection Date, or such other date as agreed to in writing by Buyer and Sellers (the “Closing” or “Closing Date”).  If Closing has not occurred within ninety (90) days after the Inspection Date, for any reason other than Buyer’s material default under this Agreement, then Buyer in its sole discretion may at any time thereafter terminate this Agreement and the Earnest Money shall be returned to Buyer.  Closing shall occur through mail escrow with the Escrow Agent, or in another mutually agreeable manner.             10.2     Buyer’s Costs.  Buyer shall pay: (a)       all recording and filing charges in connection with the Deed; (b)       one-half (1/2) of all escrow and closing agent charges; (c)       the premium for any extended coverage and endorsements to each Title Policy requested by Buyer; (d)       subject to Section 5.2 above, the cost of the Survey; (e)        its share of the Debt assumption costs, as set forth in Section 4.5 above; (f)       all costs of Buyer’s due diligence; and (g)       its own attorneys.             10.3     Sellers' Costs.  Sellers shall pay: (a)       one-half (1/2) of all escrow and closing agent charges; (b)       the cost of the Title Commitment and the premium for the Title Policy (excluding premiums attributable to any extended coverage and endorsements requested by Buyer); (c)       the cost of preparation and recording of all documents (other than the Deed and documents relating to the assumption of the Debt) necessary to place record title in the condition warranted by Seller in this Agreement; (d)       any form of deed tax or personal property tax imposed by any state or federal entity by virtue of the sale of the Properties, or recording of the Deed, to Buyer; (e)       its share of the Debt assumption costs, as set forth in Section 4.5 above; and (f)       its own attorneys.             10.4     Sellers' Closing Deliveries.  Sellers shall obtain and deliver to Buyer at the Closing the following documents (all of which shall be duly executed and, if required for recording, acknowledged, which documents Buyer agrees to execute and acknowledge where required): -------------------------------------------------------------------------------- (a)       The Deed, conveying to Buyer each Seller’s right, title and interest in and to the Property owned by such Seller, subject only to the Debt and those title exceptions approved or deemed approved by Buyer pursuant to this Agreement; (b)       The Bill of Sale for the Personal Property (if any) in the form attached as Exhibit F hereto; (c)       A General Assignment and Assumption Agreement in the form attached as Exhibit G hereto; (d)       A Non-Foreign Certificate in the form attached as Exhibit H hereto; (e)       Original executed counterparts (or copies if Sellers do not have originals) of the Leases (including any guaranty of any Lease) and each Surviving Service Contract; (f)       Evidence of the termination of all Service Contracts other than the Surviving Service Contracts, in form satisfactory to Buyer in its sole but reasonable discretion; (g)       To the extent in Sellers' possession or control:  (i) originals or copies of all certificates of occupancy, licenses, permits, authorizations and approvals issued by governmental authorities having jurisdiction over the Properties; (ii) each bill of current real estate taxes, sewer charges and assessments, water charges and other utilities to the extent proratable herein; (iii) all keys and combinations to locks, equipment manuals, technical data and other documentation relating to building systems, equipment and any other personal property forming the Properties; and (iv) originals of the Warranties; (h)       An Accredited Investor Certificate, with content acceptable to Buyer in its sole but reasonable discretion, in the form attached as Exhibit K; (i)       The documents and consents required in connection with the assignment and assumption of the Debt and the release of Sellers (and any guarantor of the Debt) from liability for the Debt as may be required by Lender to be executed by Sellers as a condition to the assumption and release; and (j)                  Such further documents as Buyer or the Title Company may reasonably request to carry out the provisions of this Agreement. --------------------------------------------------------------------------------             10.5     Buyer’s Closing Deliveries.  Buyer shall deliver to Sellers at Closing: (a)       The Consideration, as computed, prorated and allocated pursuant to this Agreement; (b)       The documents and consents required in connection with the assignment and assumption of the Debt and the release of Sellers (and any guarantor of the Debt) from liability for the Debt as may be required by Lender to be executed by Buyer as a condition to the assumption and release; (c)       IRET shall have executed and delivered to Sellers the Inducement Agreement attached as Exhibit Q; and (d)       Such further documents as Sellers or the Title Company may reasonably request to carry out the provisions of this Agreement. Section 11.  General Indemnification.             11.1     Seller’s General Indemnity.  Subject to the express provisions of this Agreement, each Seller agrees to indemnify, to defend, and to hold Buyer harmless from, all claims, demands, causes of action, and suit or suits of any nature whatsoever arising out of or relating to its ownership and/or operation of the Property owned by such Seller prior to the Closing and any activities related thereto (whether any such claims, demands, causes of actions, or suits are asserted prior to or after the Closing). 11.2     Buyer’s General Indemnity.  Subject to the express provisions of this Agreement, Buyer agrees to indemnify, to defend, and to hold each Seller harmless from all claims, demands, causes of action, and suit or suits of any nature whatsoever arising out of or relating to its ownership and/or operation of the Property owned by such Seller after the Closing and any and all activities relating thereto; provided, however, nothing herein shall constitute an indemnity as to environmental matters except as to environmental liability arising out of the acts or omissions of Buyer, its agents, employees, or contractors.             Section 12.     Operations Pending Closing.  Sellers, at their expense, shall use reasonable efforts to operate the Properties until the Closing Date or until the termination of this Agreement, whichever is earlier, in accordance with past practices.  Sellers shall not, without the prior written consent of Buyer, which consent shall not be unreasonably withheld: (a)       enter into or agree to enter into any lease or other agreement concerning occupancy or use of any of the Properties; (b)       enter into any other agreements concerning operation or ownership of the Properties; (c)       modify or amend any existing Lease, Service Contract (unless said Service Contract can be terminated without cause on written notice of thirty or less days), or any other agreement relating to the Properties which would survive Closing; or (d)       initiate any summary or other eviction proceeding or action against any Tenant or occupant of the Properties. --------------------------------------------------------------------------------             In connection with leases or renewals of existing Leases executed by Sellers after the Contract Date, Buyer shall be responsible for payment of only the unamortized portion (amortized without interest on a straight line basis over the Lease term) of any Tenant finish allowance, commissions and concessions, and leasing costs including design costs granted under such Leases and attributable to the portion of the Lease term after the Closing Date, provided Buyer has approved in writing a Seller’s execution of any such Lease or amendment and the amount of the costs to be incurred thereby.  The portion of such Tenant finish allowance and commissions attributable to the period on or prior to the Closing Date shall be paid by such Seller.             Sellers agree, through and including the Closing Date and at Sellers' sole cost and expense, to: (aa)     keep all existing insurance policies affecting the Properties or any portion thereof in full force and effect; (bb)      use commercially reasonable efforts to keep in full force and effect and/or to renew all licenses and permits, if any, pertaining to Sellers' ownership or operation of the Properties or any portion thereof; and (cc)      use commercially reasonable efforts to continue to provide all services currently provided by Sellers with respect to the Properties or any portion thereof, and to continue to operate, manage and maintain the Properties in substantially the same manner as Sellers currently operate, manage, repair, replace and maintain the Properties.             Sellers agree to give Buyer written notice of any citation or other notice which Sellers may receive, subsequent to the Contract Date and prior to the Closing Date, from any governmental authority and alleging any violation of any law, ordinance, code rule, regulation or order regulating the Properties or the use thereof.  If, prior to the Closing Date, Sellers fail at their expense to cure the matter raised by any such citation or notice, then Buyer may terminate this Agreement in its entirety or as to the affected Property only. Section 13.     Default and Remedies. 13.1     Seller’s Default.  Subject to Section 7 hereof, should a Seller breach any of such Seller’s covenants, representations, or warranties contained in this Agreement at or prior to the Closing, and if Buyer is not in default hereunder, Buyer may, upon twenty (20) days written notice to such Seller, and provided such breach or failure is not cured within such twenty (20) day period, as its sole and exclusive remedy, either: (a)       terminate this Agreement in its entirety, without further liability on Buyer’s part and, in such event, Buyer shall be entitled to a return of the Earnest Money and shall have no further liability hereunder as to the Property owned by such Seller only; or (b)       enforce specific performance of this Agreement, provided such action is commenced within one hundred twenty (120) days after the date of Buyer’s written notice to such Seller pursuant to this Section. Buyer shall have the right to bring an action against a Seller for damages after Closing based on the breach of a representation or warranty by such Seller but only if Buyer first learns of the -------------------------------------------------------------------------------- breach after Closing and provides such Seller with written notice of such breach within the Survival Period and institutes such action against such Seller within sixty (60) days after the expiration of the Survival Period. 13.2     Buyer’s Default.  Subject to Section 8 hereof, should Buyer, after the Inspection Date and at or prior to Closing, breach any of Buyer's covenants, representations, or warranties contained in this Agreement, and if Sellers are not in default hereunder, Sellers shall, as their sole and exclusive remedy, either (a) waive such breach, or (b) terminate this Agreement without further liability on Sellers' part, in which event Sellers shall have the right to the Earnest Money, which shall be considered liquidated damages, it being agreed that the damages which Seller would incur would be difficult, if not impossible, to calculate, but that such liquidated damages are a reasonable estimate of the damages that would be incurred by Sellers.  Sellers shall have the right to bring an action against Buyer for damages after Closing based on the breach of a representation or warranty by Buyer, but only if Sellers first learn of the breach after Closing and provide Buyer with written notice of such breach within the Survival Period and institute such action against Buyer within sixty (60) days after the expiration of the Survival Period. 13.3     Post-Closing Obligations.  Should any party to this Agreement fail to observe and perform its covenants and agreements to be observed and performed following the Closing, any party damaged by such failure shall be entitled to exercise every remedy allowed by law and/or equity including, without limitation, specific performance. Section 14.     Condemnation.  If, between the Contract Date and the Closing Date, any condemnation or eminent domain proceedings are initiated or threatened that might result in the taking of any part of the Improvements or the Land or access to the Land from adjacent roadways, Buyer, at its sole discretion, may elect to terminate this Agreement in its entirety or as to the affected Property only without cost, obligation, or liability on the part of Buyer.  If this Agreement is not terminated, such Seller shall assign to Buyer all of such Seller’s right, title, and interest in and to any award pertaining to the Property made in connection with such condemnation or eminent domain proceedings.  Buyer shall notify such Seller within fifteen (15) days after its receipt of written notice from such Seller of such condemnation or eminent domain proceeding, whether it elects to exercise its right to terminate.  If Buyer fails to notify such Seller of its election within said fifteen (15) day period, such failure shall constitute an election to terminate this Agreement as to the affected Property only.  The Closing Date shall be adjusted, if necessary, to allow for such election. Section 15.     Damage or Destruction.  Sellers shall bear all risk of loss to the Properties until the Closing Date.  If, between the Contract Date and the Closing Date, all or any portion of the Properties is damaged or destroyed by fire or other casualty and the cost to repair and restore the Property is more than Seventy-Five Thousand Dollars ($75,000.00) or the amount of such damage would give any Tenant the right to terminate its Lease, Buyer, at its sole option, may elect to terminate this Agreement in its entirety or as to the affected Property only without cost, obligation, or liability on Buyer’s part.  If either this Agreement is not terminable in accordance with the foregoing, or is terminable but is not terminated, the Seller owning the affected Property shall, upon Closing, assign to Buyer all of such Seller’s right, title, and interest in and to any insurance proceeds, including, without limitation, rent loss insurance proceeds, if any, except for proceeds for rent losses prior to Closing, payable as a result of such -------------------------------------------------------------------------------- damage or destruction plus such Seller shall pay to Buyer the amount of any deductible under such insurance policies and at Closing shall have no further repair or restoration obligations.  Such Seller shall fully advise Buyer regarding the insurance policies covering such damage or destruction and the probable amount of any insurance proceeds payable as a result of such damage or destruction.  Buyer shall notify such Seller within fifteen (15) days after receipt of written notice from such Seller of such damage or destruction of its election.  If Buyer fails to notify such Seller of its election within said fifteen (15) day period, such failure shall constitute an election to terminate this Agreement as to the affected Property only.  The Closing Date shall be adjusted, if necessary, to allow for such election.             Section 16.     Notices.  Wherever any notice or other communication is required or permitted hereunder, such notice or other communication shall be in writing and shall be delivered by hand, by nationally-recognized overnight express delivery service, by U.S. registered or certified mail (return receipt requested, postage prepaid), or by electronic “fax” transfer (conditioned on prompt telephone confirmation, with copy to follow by regular mail) to the addresses set out below or at such other addresses as are specified by written notice delivered in accordance herewith: SELLER:                     11422 Miracle Hills Drive, Suite 400                                     Omaha, NE  68154                                     Attn:  Kelly A. Walters                                     Telephone:  (402) 997-7500                                     Fax:  (402) 997-7525   BUYER:                       12 South Main Street                                     P.O. Box 1988                                     Minot, ND  58702-1988                                     Attn:  General Counsel                                     Telephone:  (701) 837-4738                                     Fax:  (701) 838-7785   ESCROW AGENT:     50 South Steele Street, Suite 600                                     Denver, CO  80209                                     Attn: Carma Allen & Brianna Hern                                     Telephone:  (303) 331-0333                                     Fax:  (303) 331-9867   Such notices shall be deemed received (a) as of the date of delivery, if delivered by hand by 4:00 p.m. CDT on a business day, (b) as of the next business day, if tendered to an overnight express delivery service by the applicable deadline for overnight service, (c) as of the fifth business days after mailing, if sent by regular mail, or (d) as of the date of fax transmission, if properly transmitted by fax prior to 2:00 p.m. CDT (if transmitted after said time, any such fax transmission shall be deemed received as of the next business day).             Section 17.     Buyer Termination Rights.  Notwithstanding anything contained herein to the contrary if, under any provision of this Agreement, Buyer is given a right to terminate this Agreement in its entirety or to terminate this Agreement as to only one or more Properties, including, without limitation, Sections 4.5, 5.3, 6.3, 6.4, 7, 9.1, 12, 13.1, 14 and 15, if Buyer terminates this Agreement in its entirety, the Earnest Money shall be returned to Buyer and each party shall be released of all duties and obligations hereunder (except those which are expressly stated to survive such termination).  If, however, Buyer shall elect to terminate this Agreement as to a particular Property only, the Consideration shall be reduced by the amount allocated to such particular Property on Exhibit M, the Earnest Money shall remain with Escrow Agent, each party shall be released and discharged of all duties and obligations with respect to -------------------------------------------------------------------------------- such particular Property (except those which are expressly stated to survive such termination), and this Agreement shall continue in effect with respect to the remaining Properties. Section 18.     Miscellaneous. 18.1.     Governing Law; Headings; Rules of Construction.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Nebraska, without reference to the conflicts of laws or choice of law provisions thereof.  The titles of sections and subsections herein have been inserted as a matter of convenience of reference only and shall not control or affect the meaning or construction of any of the terms or provisions herein.  All references herein to the singular shall include the plural, and vice versa.  The parties agree that this Agreement is the result of negotiation by the parties, each of whom was represented by counsel, and thus, this Agreement shall not be construed against the maker thereof. 18.2.     Assignment.  Neither Buyer nor Sellers shall assign any of their rights hereunder without the prior written consent of the other. 18.3.     Brokers.  Buyer and Sellers each warrant and represent to the other that such representing and warranting party has not employed or made any commitment to a broker or agent (including without limitation any real estate or securities broker, agent, dealer, or salesperson) in connection with the transaction contemplated hereby, except for Seller's Broker.  At the Closing, Seller's Broker shall be paid a commission equal to the product obtained when (i) $55,555.00, is multiplied by (ii) the number of Properties contributed to Buyer pursuant to this Agreement, not to exceed $500,000.00; such commission to Seller's Broker shall be paid one-half by Sellers and one-half by Buyer.  Each party agrees to indemnify and hold the other harmless from any loss or cost suffered or incurred by it as a result of the indemnifying parties’ representation herein being untrue. 18.4.     No Waiver.  Neither the failure of any party to exercise any power given such party hereunder or to insist upon strict compliance by the other party with its obligations hereunder, nor any custom or practice of the parties at variance with the terms hereof shall constitute a waiver of either party’s right to demand exact compliance with the terms hereof, except the Closing of this Agreement shall constitute waiver of all conditions to Closing except to the extent otherwise agreed in writing at Closing. 18.5.     Entire Agreement.  This Agreement contains the entire agreement of the parties hereto with respect to the Properties, and no representations, inducements, promises or agreements, oral or otherwise, between the parties not embodied herein or incorporated herein by reference shall be of any force or effect. 18.6.     Binding Effect.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and assigns. 18.7.     Amendments.  No amendment to this Agreement shall be binding on any of the parties hereof unless such amendment is in writing and is executed by the party against whom enforcement of such amendment is sought. 18.8.     Possession.  Possession of the Properties shall be given by Sellers to Buyer at Closing. -------------------------------------------------------------------------------- 18.9.             Date for Performance.  If the time period by which any right, option or election provided under this Agreement must be exercised, or by which any act required hereunder must be performed, or by which the Closing must be held, expires on a Saturday, Sunday or legal or bank holiday, then such time period shall be automatically extended through the close of business on the next regular business day. 18.10.         Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which, when taken together, shall constitute but one and the same instrument. 18.11.         Time of the Essence.  Time shall be of the essence of this Agreement and each and every term and condition hereof. 18.12.         Severability.  This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations, and is intended, and shall for all purposes be deemed to be, a single, integrated document setting forth all of the agreements and understandings of the parties hereto, and superseding all prior negotiations, understandings and agreements of such parties.  If any term or provision of this Agreement or the application thereof to any person or circumstance shall for any reason and to any extent be held to be invalid or unenforceable, then such term or provision shall be ignored, and to the maximum extent possible, this Agreement shall continue in full force and effect, but without giving effect to such term or provision. 18.13.         Survival.  Except as otherwise expressly provided herein, neither this Agreement nor any provision contained herein shall be cancelled or merged with any deed or other instrument on, as of, at or by reason of the Closing, and the covenants and obligations of the parties shall survive the Closing. 18.14.         Further Assurances.  After the Closing, Buyer and Sellers shall execute, acknowledge, and deliver, or cause to be executed, acknowledged, and delivered, such instruments and take such other actions as may be reasonably necessary or advisable to carry out their respective obligations under this Agreement and under any Exhibit, document, certificate, or other instrument delivered pursuant thereto. 18.15.         Exhibits.  Attached hereto and forming an integral part of this Agreement are the following exhibits, all of which are incorporated into this Agreement as fully as if the contents thereof were set out in full herein at each point of reference thereto: Exhibit A                   Legal Description of Land Exhibit B                   List of Personal Property Exhibit C                   List of Service Contracts Exhibit D                   Uncompleted Lease Obligations Exhibit E                   Due Diligence Documents Exhibit F                   Bill of Sale Exhibit G                   General Assignment and Assumption Agreement Exhibit H                   Non-Foreign Certificate Exhibit I                     Tenant Estoppel Certificate Exhibit J                    Debt Information Exhibit K                   Accredited Investor Certificate Exhibit L                   Partnership Agreement Exhibit M                   Allocation of Consideration Exhibit N                   Environmental Exceptions -------------------------------------------------------------------------------- Exhibit O                  Governmental Exceptions Exhibit P                   Litigation Exceptions Exhibit Q                  Inducement Agreement Exhibit R                   Tax Proration               Section 19.     Additional Provisions Regarding Units and Shares. 19.1.      Sellers recognize that the issuance of the Units is intended to be exempt from registration under the Act, and that Buyer is relying on such recognition in issuing the Units to Sellers.  In furtherance thereof, each Seller represents and warrants to Buyer that: (a)        Each Seller is acquiring the Units solely for its own account for the purpose of investment and not with a view to, or for offer or sale in connection with, any distribution thereof; (b)       Each Seller has such knowledge and experience in financial and business matters so as to be fully capable of evaluating the merits and risks of an investment in the Units; (c)       Each Seller recognizes that it is not permitted to offer, transfer, sell, assign or otherwise dispose of (“Transfer”) any of the Units, except as expressly provided in the Partnership Agreement; (d)       Each Seller has received and reviewed the Partnership Agreement and such other documents, if any, that it has requested from Buyer (collectively, if any, the “Additional Documents”), and understands the contents thereof; (e)       Each Seller has been given the opportunity to obtain such additional information or documents and to ask such questions and receive answers about such Additional Documents, the Buyer and IRET, and the business and prospects of the Buyer and IRET, that Sellers deems necessary to evaluate the merits and risks related to Sellers' investment in the Units; and (f)       As of both the Contract Date and the Closing Date, each Seller is and will be an Accredited Investor. 19.2.      Sellers represent and warrant to Buyer that Sellers have consulted their own financial, legal and tax advisors with respect to the economic, legal and tax consequences of this transaction and delivery of the Units, and that Sellers have not relied on the Additional Materials, Buyer, IRET or any of the officers, directors, affiliates or professional advisors of Buyer or IRET for advice as to such consequences.  19.3.      Buyer acknowledges that each Seller intends to treat the transfer of the Properties in exchange for Units (the “721 Exchange”) as a partnership contribution pursuant to Section 721 of the Code, and Buyer agrees to cooperate in all reasonable respects with Sellers to effectuate such 721 Exchange; provided, however, that each Seller acknowledges, covenants, and agrees that: (a)       The Closing shall not be extended or delayed by reason of such 721 Exchange, unless Buyer has breached its material obligations to Seller under this Agreement; -------------------------------------------------------------------------------- (b)       Buyer shall not be required to incur any additional cost or expense as a result of the 721 Exchange.  Seller shall, on demand, reimburse Buyer for any additional cost or expense (including, but not limited to, reasonable attorneys’ fees) incurred by Buyer as a result of any audit or tax litigation to which Seller is or may be a party or which is or may be otherwise directly attributable to the 721 Exchange; (c)       Subject to Buyer’s performance and fulfillment of the express covenants and conditions contained in this Agreement, and except for the express obligations and liabilities of Buyer under this Agreement, Buyer and IRET shall incur no additional liability under any document or agreement required in connection with the 721 Exchange, and Buyer and IRET shall not be required to execute any such document or agreement that does not expressly exculpate and release Buyer and IRET (including the successors, assigns, affiliates, officers, employees, agents and representatives of each) from any liability or obligation arising out of, or in connection with, the 721 Exchange; and (d)       Subject to Buyer’s performance and fulfillment of the express covenants and conditions contained in this Agreement, Buyer does not warrant, and shall not be responsible for, the tax or legal consequences to Seller of the transactions contemplated by this Agreement or any actions the Seller may have taken prior to and/or in anticipation of the transactions contemplated by this Agreement. 19.4.      Each Seller acknowledges that it has been advised that:  (a) the Units must be held indefinitely, and Seller will continue to bear the economic risk of the investment in the Units unless and until they are converted pursuant to the Partnership Agreement into cash or, at the sole discretion of IRET, into Shares, or are subsequently registered under the Act or an exemption from such registration is available; (b) it is not anticipated that there will be any public market for the Units at anytime; (c) Rule 144 promulgated under the Act (“Rule 144”) may not be available with respect to the sale of any securities of Buyer (and that upon conversion of the Units into Shares, if IRET fails to effectively register the Shares, a new holding period under Rule 144 may commence); (d) a restrictive legend as set forth in Section 19.5 below shall be placed on the certificates representing the Units; and (e) the conversion of the Units for Shares is subject to certain restrictions contained in this Agreement and in the Partnership Agreement; and (f) the Shares that may be received upon such a conversion, if IRET fails to effectively register the Shares, may be restricted securities and subject to limitations as to Transfer. 19.5.      Each Seller acknowledges and agrees that each Certificate representing the Units shall bear the following legend: “THE UNITS OF PARTNERSHIP INTEREST REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933 OR THE SECURITIES LAW OF ANY STATE.  THESE UNITS MAY NOT BE SOLD OR OFFERED FOR SALE UNLESS THEY HAVE FIRST BEEN SO REGISTERED OR UNLESS THE PARTNERSHIP’S COUNSEL (OR OTHER COUNSEL SATISFACTORY TO THE GENERAL PARTNER OF THE PARTNERSHIP) HAS GIVEN AN OPINION THAT SUCH REGISTRATIONS ARE NOT REQUIRED.  THE UNITS REPRESENTED BY THIS CERTIFICATE ARE HELD SUBJECT TO, AND CANNOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH, THE PROVISIONS OF THE AGREEMENT OF LIMITED PARTNERSHIP OF IRET PROPERTIES, AS AMENDED OR RESTATED AND -------------------------------------------------------------------------------- THE TERMS OF THE WRITTEN PARTNERSHIP CONTRIBUTION AGREEMENT UNDER WHICH THE HOLDER OF THIS CERTIFICATE DIRECTLY OR INDIRECTLY ACQUIRED THE UNITS REPRESENTED BY THIS CERTIFICATE.”   19.6.      Notwithstanding anything in this Agreement or in the Partnership Agreement to the contrary, each Seller acknowledges and agrees that it may not, until after the date which is two (2) years from the Closing Date, convert the Units pursuant to the terms of the Partnership Agreement.  Any conversion request concerning the Units must be directed in writing to Buyer at least sixty (60) days before the anticipated conversion date, must specify an anticipated conversion date that is the first business day of a calendar month, and must comply with all of the provisions of the Partnership Agreement. 19.7.      Each Seller acknowledges that:  (a) prior to the date upon which the Units may first be converted into Shares, IRET will file a registration statement under the Act relating to the possible issuance of Shares in exchange for the Units and the offer and sale, from time to time, by Seller of the Shares to be received upon conversion of the Units; and (b) Seller will be specifically identified in such registration statement as a selling stockholder.  Prior to the time that IRET files said registration statement, IRET may request information from Seller that IRET reasonably believes is required in connection with the filing of said registration statement.  If Seller does not provide the requested information within twenty (20) days after the request for such information, then Seller will not be entitled to use any prospectus prepared by IRET in connection with the sale of Shares until the later of (x) ten (10) business days after the receipt by IRET of the requested information, and (y) the effective date of the registration statement, in each case subject to any other requirements and limitations on the Transfer of Shares set forth in this Agreement, the Partnership Agreement or any other governing documents of Buyer or IRET. 19.8.      Each Seller acknowledges and agrees that, upon receipt of prior written notice, it may not effect any Transfer of Shares, including a sale under Rule 144 under the Act, during the ten (10) days prior to, and during the ninety (90) day period beginning on, the effective date of a registration statement filed in connection with an equity offering by IRET, if and to the extent requested in writing by IRET, in the case of a non-underwritten public offering, or if and to the extent requested in writing by the managing underwriter or underwriters administering such offering, in the case of an underwritten offering.  Nothing in this Section will be read to limit the ability of Sellers to convert the Units to Shares in accordance with this Agreement and the Partnership Agreement. 19.9.      Within ten (10) days after a request by Buyer (whether before or after the Closing Date), each Seller shall provide Buyer with information required to (a) compute the beginning tax basis tax capital accounts of each entity or person receiving Units under this Agreement, and (b) schedules detailing the allocation of “built-in-gain” under Section 704(c) of the Code for each property contributed and each entity or person receiving Units pursuant to this Agreement.  Buyer shall be entitled to withhold all distributions relating to the Units from the Contributor until this Section is complied with. 19.10.    Each Seller acknowledges and agrees that the first quarterly distribution payable after the Closing Date with respect to the Units shall be prorated based on the number of days in the calendar quarter that Seller owned the Units.  For purposes of this section, each Seller shall be deemed to own the Units as of the actual Closing Date.  In the event that the Closing Date is after the applicable record date for the quarterly distribution, but before the first day of -------------------------------------------------------------------------------- the next calendar quarter, then Sellers shall not receive any portion of the quarterly distribution for the calendar quarter in which Closing occurs. 19.11.    Buyer represents, warrants and covenants that, as of the Contract Date and the Closing Date: (a)       The Partnership Agreement attached hereto as Exhibit L is a full, true and correct copy of the Partnership Agreement; (b)       None of the Units to be delivered to a Seller at the Closing, when delivered to such Seller, will be subject to any lien, claim, encumbrance (except, if viewed as an encumbrance, Partnership transfer restrictions and any applicable registration requirements under federal or state securities laws), preemption right or other claim of any third party; and (c)       To the extent consistent with, and subject in all events to, its fiduciary, statutory, and other obligations to all of its partners (present and future), and to all owners of IRET’s Shares:  (i) unless it has obtained the prior written consent of Seller (or its successor(s) in interest) who then hold the Units issued pursuant to this Agreement, Buyer shall not sell, transfer or otherwise dispose of any of the Properties for ten (10) years from the date of the Closing, unless such transaction is a non-recognition transaction (such as an exchange under Section 1031 of the Code); and (ii) Buyer will take such actions as are reasonably within its power to cause to be allocated to Seller pursuant to Section 752 of the Code and Treasury Regulations sections 1.752-1(a)(2) and 1.752-3 a portion of Buyer’s debt that is not less than the Debt on each Property allocable to the Seller as of the Closing Date.             IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed and sealed by its duly authorized signatory, effective as of the day and year first above written.     BUYER:   IRET PROPERTIES, A NORTH DAKOTA LIMITED PARTNERSHIP     By:    IRET, Inc., a North Dakota corporation   Its:    Sole General Partner   By: /s/ Timothy P. Mihalick Timothy P. Mihalick  Its: Senior Vice President   By: /s/ Thomas A Wentz, Jr. Thomas A. Wentz, Jr. Its: Senior Vice President -------------------------------------------------------------------------------- SELLERS:   MR INC. NO. 2, a Nebraska corporation   By /s/ W. David Scott      Title: President & CEO     TETRAD CORPORATION, a Wyoming corporation   By /s/ W. David Scott      Title: President     108 FARNAM, L.L.C., a Nebraska limited liability company   By: 108 Farnam, Inc., a Nebraska corporation, Manager   By /s/ W. David Scott      Title: President     MR NO. 14, L.L.C., a Nebraska limited liability company   By: Magnum Resources, Inc., a Wyoming corporation, Manager   By /s/ W. David Scott      Title: President & CEO     MR NO. 15, L.L.C., a Missouri limited liability company   By: Magnum Resources, Inc., a Wyoming corporation, Manager   By /s/ W. David Scott      Title: President & CEO       13690 RIVERPORT, L.L.C., a Missouri limited liability company   By: 13690 Riverport, Inc., a Nebraska corporation, Manager   By /s/ W. David Scott      Title: President     114 TIMBERLANDS, LLC, a Kansas limited liability company   By: 114 Timberlands Corp., a Nebraska corporation, Manager   By /s/ W. David Scott      Title: President     FLAGSHIP BUILDING, L.L.C., a Minnesota limited liability company   By: Magnum Resources, Inc., a Wyoming corporation, Manager   By /s/ W. David Scott      Title: President & CEO     MR. NO. 18, L.L.C., a Minnesota limited liability company   By: Magnum Resources, Inc., a Wyoming corporation, Manager   By /s/ W. David Scott      Title: President & CEO      

  Exhibit 10.1 SEQUOIA RESIDENTIAL FUNDING, INC. Depositor WELLS FARGO BANK, N.A. Master Servicer and Securities Administrator and HSBC BANK USA, NATIONAL ASSOCIATION Trustee   POOLING AND SERVICING AGREEMENT Dated as of August 1, 2006   SEQUOIA MORTGAGE TRUST 2006-1   --------------------------------------------------------------------------------   TABLE OF CONTENTS               Page ARTICLE I DEFINITIONS     5             Section 1.01. Definitions     5   Section 1.02. Calculations Respecting Mortgage Loans     35             ARTICLE II DECLARATION OF TRUST; ISSUANCE OF CERTIFICATES     36             Section 2.01. Creation and Declaration of Trust Fund; Conveyance of Mortgage Loans     36   Section 2.02. Acceptance of Trust Fund by Trustee; Review of Documentation for Trust Fund     39   Section 2.03. Representations and Warranties of the Depositor     40   Section 2.04. Discovery of Breach; Repurchase or Substitution of Mortgage Loans     42   Section 2.05. [Reserved]     44   Section 2.06. Grant Clause     44             ARTICLE III THE CERTIFICATES     46             Section 3.01. The Certificates     46   Section 3.02. Registration     46   Section 3.03. Transfer and Exchange of Certificates     47   Section 3.04. Cancellation of Certificates     50   Section 3.05. Replacement of Certificates     50   Section 3.06. Persons Deemed Owners     51   Section 3.07. Temporary Certificates     51   Section 3.08. Appointment of Paying Agent     52   Section 3.09. Book-Entry Certificates     52             ARTICLE IV ADMINISTRATION OF THE TRUST FUND     53             Section 4.01. Collection Accounts; Distribution Account     53   Section 4.02 [Reserved]     55   Section 4.03 [Reserved]     55   Section 4.04. Reports to Trustee and Certificateholders     55     ARTICLE V DISTRIBUTIONS TO HOLDERS OF CERTIFICATES     57     Section 5.01. Distributions Generally     58   Section 5.02. Distributions from the Distribution Account     58   Section 5.03. Allocation of Losses     62   Section 5.04. Advances by Master Servicer     63   Section 5.05. Compensating Interest Payments     63   193158 Sequoia 2006-1 Pooling and Servicing Agmt. i  --------------------------------------------------------------------------------                 Page ARTICLE VI CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR; EVENTS OF DEFAULT     63             Section 6.01. Duties of Trustee and the Securities Administrator     64   Section 6.02. Certain Matters Affecting the Trustee and the Securities Administrator     67   Section 6.03. Trustee and Securities Administrator Not Liable for Certificates     68   Section 6.04. Trustee and the Securities Administrator May Own Certificates     69   Section 6.05. Eligibility Requirements for Trustee and Securities Administrator     69   Section 6.06. Resignation and Removal of Trustee and the Securities Administrator     69   Section 6.07. Successor Trustee and Successor Securities Administrator     71   Section 6.08. Merger or Consolidation of Trustee or the Securities Administrator     71   Section 6.09. Appointment of Co-Trustee, Separate Trustee or Custodian     72   Section 6.10. Authenticating Agents     73   Section 6.11. Indemnification of the Trustee and the Securities Administrator     74   Section 6.12. Fees and Expenses of Securities Administrator and the Trustee     75   Section 6.13. Collection of Monies     75   Section 6.14. Events of Default; Trustee To Act; Appointment of Successor     75   Section 6.15. Additional Remedies of Trustee Upon Event of Default     79   Section 6.16. Waiver of Defaults     79   Section 6.17. Notification to Holders     80   Section 6.18. Directions by Certificateholders and Duties of Trustee During Event of Default     80   Section 6.19. Action Upon Certain Failures of the Master Servicer and Upon Event of Default     80   Section 6.20. Preparation of Tax Returns and Other Reports     80   Section 6.21. Reporting to the Commission     81   Section 6.22. Annual Statements of Compliance     87   Section 6.23. Annual Assessments of Compliance     88   Section 6.24. Accountant’s Attestation     89             ARTICLE VII PURCHASE OF MORTGAGE LOANS AND TERMINATION OF THE TRUST FUND     90             Section 7.01. Purchase of Mortgage Loans; Termination of Trust Fund Upon Purchase or Liquidation of All Mortgage Loans     90   Section 7.02. Procedure Upon Redemption and Termination of Trust Fund.     91   Section 7.03. Additional Trust Fund Termination Requirements     92             ARTICLE VIII RIGHTS OF CERTIFICATEHOLDERS     93             Section 8.01. Limitation on Rights of Holders     93   Section 8.02. Access to List of Holders     94   193158 Sequoia 2006-1 Pooling and Servicing Agmt. ii  --------------------------------------------------------------------------------                 Page Section 8.03. Acts of Holders of Certificates     95             ARTICLE IX ADMINISTRATION AND SERVICING OF MORTGAGE LOANS BY THE MASTER SERVICER     96             Section 9.01. Duties of the Master Servicer; Enforcement of Servicer’s and Master Servicer’s Obligations     96   Section 9.02 Assumption of Master Servicing by Trustee     98   Section 9.03. Representations and Warranties of the Master Servicer     99   Section 9.04. Compensation to the Master Servicer     100   Section 9.05. Merger or Consolidation     101   Section 9.06. Resignation of Master Servicer     101   Section 9.07. Assignment or Delegation of Duties by the Master Servicer     102   Section 9.08. Limitation on Liability of the Master Servicer and Others     102   Section 9.09. Indemnification; Third-Party Claims     103   Section 9.10. Master Servicer Fidelity Bond and Master Servicer Errors and Omissions Insurance Policy     103             ARTICLE X REMIC ADMINISTRATION     103             Section 10.01. REMIC Administration     103   Section 10.02. Prohibited Transactions and Activities     105   Section 10.03. Indemnification with Respect to Prohibited Transactions or Loss of REMIC Status     106   Section 10.04. REO Property     106             ARTICLE XI MISCELLANEOUS PROVISIONS     107             Section 11.01. Binding Nature of Agreement; Assignment     107   Section 11.02. Entire Agreement     107   Section 11.03. Amendment     107   Section 11.04. Voting Rights     109   Section 11.05. Provision of Information     109   Section 11.06. Governing Law     109   Section 11.07. Notices     110   Section 11.08. Severability of Provisions     110   Section 11.09. Indulgences; No Waivers     110   Section 11.10. Headings Not To Affect Interpretation     111   Section 11.11. Benefits of Agreement     111   Section 11.12. Special Notices to the Rating Agencies     111   Section 11.13. Conflicts     112   Section 11.14. Counterparts     112   Section 11.15 No Petitions     112   Section 11.16 Intention of the Parties and Interpretation; Indemnification     112   193158 Sequoia 2006-1 Pooling and Servicing Agmt. iii  --------------------------------------------------------------------------------              ATTACHMENTS       Exhibit A   Forms of Certificates Exhibit B   Form of Residual Certificate Transfer Affidavit (Transferee) Exhibit C   Form of Residual Certificate Transfer Affidavit (Transferor) Exhibit D   Form of Custody Agreement Exhibit E   List of Servicing Agreements Exhibit F   List of Purchase Agreements Exhibit G   List of Limited Purpose Surety Bonds Exhibit H   Form of Rule 144A Transfer Certificate Exhibit I   Form of Purchaser’s Letter for Institutional Accredited Investors Exhibit J   Form of ERISA Transfer Affidavit Exhibit K   Form of Letter of Representations with the Depository Trust Company Exhibit L   Additional Disclosure Notification Exhibit M   Form of Annual Certification Exhibit N   Servicing Criteria to Be Addressed in Assessment of Compliance Exhibit O   Additional Form 10-D Disclosure Exhibit P   Additional Form 10-K Disclosure Exhibit Q   Additional Form 8-K Disclosure       Schedule A   Mortgage Loan Schedule 193158 Sequoia 2006-1 Pooling and Servicing Agmt. iv  --------------------------------------------------------------------------------        This POOLING AND SERVICING AGREEMENT, dated as of August 1, 2006 (the “Agreement”), by and among SEQUOIA RESIDENTIAL FUNDING, INC., a Delaware corporation, as depositor (the “Depositor”), HSBC Bank USA, National Association, a national banking association, as trustee (the “Trustee”), and WELLS FARGO BANK, N.A., in its dual capacities as master servicer (the “Master Servicer”) and securities administrator (the “Securities Administrator”) and acknowledged by RWT HOLDINGS, INC., a Delaware corporation, as seller (the “Seller”), for purposes of Section 2.04. PRELIMINARY STATEMENT      The Depositor has acquired the Mortgage Loans from the Seller and at the Closing Date is the owner of the Mortgage Loans and related property being conveyed by the Depositor to the Trustee hereunder for inclusion in the Trust Fund. On the Closing Date, the Depositor will acquire the Certificates from the Trustee as consideration for the Depositor’s transfer to the Trust Fund of the Mortgage Loans, and the other property constituting the Trust Fund. The Depositor has duly authorized the execution and delivery of this Agreement to provide for the conveyance to the Trustee of the Mortgage Loans and the related property constituting the Trust Fund. All covenants and agreements made by the Seller in the Mortgage Loan Purchase and Sale Agreement and in this Agreement and by the Depositor, the Master Servicer, the Securities Administrator and the Trustee herein, with respect to the Mortgage Loans and the other property constituting the Trust Fund, are for the benefit of the Holders from time to time of the Certificates. The Depositor, the Trustee, the Master Servicer and the Securities Administrator are entering into this Agreement, and the Trustee is accepting the Trust Fund created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged.      As provided herein, the Trustee shall elect that the Trust Fund be treated for federal income tax purposes as comprising two real estate mortgage investment conduits (each, a “REMIC” or, in the alternative, the “Lower-Tier REMIC,” and the “Upper-Tier REMIC,” respectively). Each Certificate, other than the Class 1-AR Certificate and the Class LT-R Certificate, is hereby designated as a regular interest in the Upper-Tier REMIC, as described herein. The Class 1-AR Certificate is hereby designated as the sole class of residual interest in the Upper-Tier REMIC.      The Class LT-R Certificate evidences ownership of the sole class of residual interest in the Lower-Tier REMIC (the “LT-R Interest”). The Lower-Tier REMIC shall hold as its assets all property of the Trust Fund, other than the interests in any REMIC formed hereby. Each Lower-Tier Interest other than the LT-R Interest is hereby designated as a regular interest in the Lower-Tier REMIC and the LT-R Interest is hereby designated as the sole Class of residual interest in the Lower-Tier REMIC. The Upper-Tier REMIC shall hold as its assets the Lower-Tier Interests other than the LT-R Interest.      The Lower-Tier REMIC Interests      The following table sets forth (or describes) the Class designation, interest rate, and initial Class Principal Amount for each Class of Lower-Tier Interests: 193158 Sequoia 2006-1 Pooling and Servicing Agmt.   --------------------------------------------------------------------------------                             Corresponding Pool Lower-Tier           or Corresponding REMIC Interest       Initial Class   Class of Designation   Interest Rate   Principal Amount   Certificates LT-Pool 1   (1)   (5)   1 LT-Pool 1 PSA   (1)   (6)   1 LT-Pool 2   (2)   (5)   2 LT-Pool 2 PSA   (2)   (6)   2 LT-Pool 3   (3)   (5)   3 LT-Pool 3 PSA   (3)   (6)   3 LT-R   (4)   (4)   Class LT-R   (1)   The interest rate with respect to any Distribution Date (and the related Accrual Period) for each of these Lower-Tier Interests will be a per annum rate equal to the Pool 1 Net WAC.   (2)   The interest rate with respect to any Distribution Date (and the related Accrual Period) for each of these Lower-Tier Interests will be a per annum rate equal to the Pool 2 Net WAC.   (3)   The interest rate with respect to any Distribution Date (and the related Accrual Period) for each of these Lower-Tier Interests will be a per annum rate equal to the Pool 3 Net WAC.   (4)   The LT-R Interest is the sole class of residual interest in the Lower-Tier REMIC. It does not have a principal balance and does not bear interest.   (5)   The Class Principal Amount with respect to any Distribution Date (and the related Accrual Period) for each of these Lower-Tier Interests will be an amount equal to the excess of (i) the Aggregate Stated Principal Balance of the Corresponding Pool over (ii) the Class Principal Amount of the Lower Tier Interest having “PSA” in its designation that corresponds to the same Mortgage Pool.   (6)   The Class Principal Amount with respect to any Distribution Date (and the related Accrual Period) for each of these Lower-Tier Interests will be an amount equal to one percent of the Pool Subordinate Amount of the Corresponding Pool.      On each Distribution Date, the Available Distribution Amount distributable as interest shall be distributed as interest with respect to the Lower-Tier Interests based on the interest rates described above. On each Distribution Date, Interest Shortfalls shall be allocated among the related Lower-Tier Interests based on the relative amounts of interest otherwise accrued for the related Accrual Period on each such Lower-Tier Interest.      On each Distribution Date, the remaining Available Distribution Amount shall be distributed as principal on the Lower-Tier Interests as follows:   (1)   first, from the remaining Available Distribution Amount for Pool 1, to the LT-Pool 1 PSA Interest until its Class Principal Amount equals one percent of the Pool Subordinate Amount for Pool 1 after such Distribution Date;     (2)   second, from the remaining Available Distribution Amount for Pool 2, to the LT-Pool 2 PSA Interest until its Class Principal Amount equals one percent of the Pool Subordinate Amount for Pool 2 after such Distribution Date;     (3)   third, from the remaining Available Distribution Amount for Pool 3, to the LT-Pool 3 PSA Interest until its Class Principal Amount equals one percent of the Pool Subordinate Amount for Pool 3 after such Distribution Date; 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 2 --------------------------------------------------------------------------------     (4)   fourth, to the LT-Pool 1 PSA, LT-Pool 2 PSA, or LT-Pool 3 PSA Interest, from the remaining Available Distribution Amount, the minimum amount necessary to cause the ratio of the Class Principal Amount of each such Lower-Tier REMIC Interest to the sum of the Class Principal Amounts of the other two such Lower-Tier REMIC Interests to equal the ratio of the Pool Subordinate Amount related to such interest to the sum of the Pool Subordinate Amounts related to the other two Lower-Tier REMIC Interest immediately after such Distribution Date;     (5)   fifth, from the remaining Available Distribution Amount for Pool 1, to the LT-Pool 1 Interest, until its Class Principal Amount is reduced to zero;     (6)   sixth, from the remaining Available Distribution Amount for Pool 2, to the LT-Pool 2 Interest, until its Class Principal Amount is reduced to zero;     (7)   seventh, from the remaining Available Distribution Amount for Pool 3, to the LT-Pool 3 Interest, until its Class Principal Amount is reduced to zero; and     (8)   finally, to the Class LT-R Interest, any remaining amounts.      The Certificates and the Upper-Tier REMIC      The following table sets forth (or describes) the Class designation, Certificate Interest Rate, initial Class Principal Amount and minimum denomination for each Class of Certificates comprising interests in the Trust Fund created hereunder. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 3 --------------------------------------------------------------------------------                                 Initial Class   Minimum     Certificate   Class Principal   Denominations or Class Designation   Interest Rate   Amount   Percentage Interest Class 1-A1A   (1)   $ 81,000,000.00     $ 25,000.00   Class 1-A1B   (2)   $ 105,297,000.00     $ 25,000.00   Class 1-A2   (3)   $ 8,653,000.00     $ 25,000.00   Class 1-AR   (3)   $ 100.00       100 % Class 2-A1   (4)   $ 105,230,000.00     $ 25,000.00   Class 2-A2   (4)   $ 7,506,000.00     $ 25,000.00   Class 3-A1   (5)   $ 378,716,000.00     $ 25,000.00   Class 3-A2   (5)   $ 27,013,000.00     $ 25,000.00   Class B-1   (6)   $ 16,765,000.00     $ 100,000.00   Class B-2   (6)   $ 5,589,000.00     $ 100,000.00   Class B-3   (6)   $ 3,352,000.00     $ 100,000.00   Class B-4   (6)   $ 2,236,000.00     $ 100,000.00   Class B-5   (6)   $ 1,862,000.00     $ 100,000.00   Class B-6   (6)   $ 1,863,624.36     $ 100,000.00   Class LT-R   (7)     (7 )     100 %   (1)   The Certificate Interest Rate with respect to any Distribution Date (and the related Accrual Period) for the Class 1-A1A Certificates on or prior to the Distribution Date in September 2011 will equal the Pool 1 Net WAC plus 0.564912% and for all Distribution Dates thereafter, will equal the Pool 1 Net WAC.   (2)   The Certificate Interest Rate with respect to any Distribution Date (and the related Accrual Period) for the Class 1-A1B Certificates on or prior to the Distribution Date in September 2011 will equal the greater of (i) the Pool 1 Net WAC minus 0.434560% and (ii) 0.000%, and for all Distribution Dates thereafter, will equal the Pool 1 Net WAC.   (3)   The Certificate Interest Rate with respect to any Distribution Date (and the related Accrual Period) for the Class 1-A2 and Class 1-AR Certificates will equal the Pool 1 Net WAC.   (4)   The Certificate Interest Rate with respect to any Distribution Date (and the related Accrual Period) for the Class 2-A1 and Class 2-A2 Certificates will equal the Pool 2 Net WAC.   (5)   The Certificate Interest Rate with respect to any Distribution Date (and the related Accrual Period) for the Class 3-A1 and Class 3-A2 Certificates will equal the Pool 3 Net WAC.   (6)   The Certificate Interest Rates with respect to any Distribution Date (and the related Accrual Period) for the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates will equal the Subordinate Net WAC.   (7)   The Class LT-R Certificate does not have a Class Principal Amount or a Certificate Interest Rate.      As of the Cut-off Date, the Mortgage Loans had an Aggregate Stated Principal Balance of $742,508,524.36.      In consideration of the mutual agreements herein contained, the Depositor, the Master Servicer, the Securities Administrator and the Trustee hereby agree as follows. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 4 --------------------------------------------------------------------------------   ARTICLE I DEFINITIONS      Section 1.01 Definitions. The following words and phrases, unless the context otherwise requires, shall have the following meanings:      10-K Filing Deadline: As defined in Section 6.21(b)(i) hereof.      Accepted Servicing Practices: With respect to any Mortgage Loan, those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located.      Accountant: A Person engaged in the practice of accounting who (except when this Agreement provides that an Accountant must be Independent) may be employed by or affiliated with the Depositor or an Affiliate of the Depositor.      Accountant’s Attestation: As defined in Section 6.24.      Accrual Period: With respect to any Distribution Date and any Class of Certificates and to each Lower-Tier Interest is the calendar month preceding the month in which the Distribution Date occurs. Interest shall accrue on all Classes of Certificates and on all Lower-Tier Interests on the basis of a 360-day year consisting of twelve 30-day months.      Acknowledgements: The Assignment, Assumption and Recognition Agreements, each dated August 1, 2006, assigning rights under the Purchase Agreements and the Servicing Agreements from the Seller to the Depositor and from the Depositor to the Trustee, for the benefit of the Certificateholders.      Additional Collateral: Not applicable.      Additional Collateral Mortgage Loan: Not applicable.      Additional Form 10-D Disclosure: As defined in Section 6.21(a)(i).      Additional Form 10-K Disclosure: As defined in Section 6.21(b)(i).      Additional Servicer: Each affiliate of a Servicer that Services any of the Mortgage Loans and each Person who is not an affiliate of the Depositor, who Services 10% or more of the Mortgage Loans (measured by aggregate Stated Principal Balance of the Mortgage Loans, annually at the commencement of the calendar year prior to the year in which an Item 1123 Certificate is required to be delivered). For clarification purposes, the Master Servicer and the Securities Administrator are Additional Servicers.      Adjustment Date: As to any Mortgage Loan, the date on which the related Mortgage Rate adjusts in accordance with the terms of the related Mortgage Note. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 5 --------------------------------------------------------------------------------        Advance: With respect to a Mortgage Loan, the payments required to be made by the Master Servicer or the applicable Servicer with respect to any Distribution Date pursuant to this Agreement or the Servicing Agreements, as applicable, the amount of any such payment being equal to the aggregate of the payments of principal and interest (net of the Master Servicing Fee and/or the applicable Servicing Fee and net of any net income in the case of any REO Property) on the Mortgage Loans that were due on the related Due Date and not received as of the close of business on the related Determination Date, less the aggregate amount of any such delinquent payments that the Master Servicer or the Servicers have determined would constitute Nonrecoverable Advances if advanced.      Adverse REMIC Event: Either (i) loss of status as a REMIC, within the meaning of Section 860D of the Code, for any group of assets identified as a REMIC in the Preliminary Statement to this Agreement, or (ii) imposition of any tax, including the tax imposed under Section 860F(a)(1) on prohibited transactions, and the tax imposed under Section 860G(d) on certain contributions to a REMIC, on any REMIC created hereunder to the extent such tax would be payable from assets held as part of the Trust Fund.      Affiliate: With respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.      Aggregate Expense Rate: With respect to any Mortgage Loan, the sum of the Master Servicing Fee Rate, the applicable Servicing Fee Rate and the premium rate of any lender-paid Primary Mortgage Insurance Policy, expressed as an annual rate.      Aggregate Senior Percentage: As to any Distribution Date, the percentage equivalent of a fraction, the numerator of which is the aggregate of the Class Principal Amounts of the Class 1-A1A, Class 1-A1B, Class 1-A2, Class 1-AR, Class 2-A1, Class 2-A2, Class 3-A1 and Class 3-A2 Certificates and the denominator of which is the Aggregate Stated Principal Balance for such date, but in no event greater than 100%.      Aggregate Subordinate Percentage: As to any Distribution Date, the excess of 100% over the Aggregate Senior Percentage for such Distribution Date, but in no event less than zero.      Aggregate Stated Principal Balance: As to any Distribution Date, the aggregate of the Stated Principal Balances for all Mortgage Loans (and when such term is used with respect to a particular Mortgage Pool, the aggregate of the Stated Principal Balances of the Mortgage Loans in such Mortgage Pool) which were outstanding on the Due Date in the month preceding the month of such Distribution Date.      Aggregate Voting Interests: The aggregate of the Voting Interests of all the Certificates under this Agreement. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 6 --------------------------------------------------------------------------------        Agreement: This Pooling and Servicing Agreement and all amendments and supplements hereto.      Applicable Credit Support Percentage: As to any Class of Subordinate Certificates and any Distribution Date, the sum of the Class Percentages of all Classes of Certificates that rank lower in priority than such Class.      Apportioned Principal Balance: As to any Distribution and each Class of Subordinate Certificates, the Class Principal Amount thereof multiplied by a fraction, the numerator of which is the applicable Pool Subordinate Amount (i.e., the Pool 1 Subordinate Amount, the Pool 2 Subordinate Amount or the Pool 3 Subordinate Amount, as the case may require), and the denominator of which is the sum of the Pool Subordinate Amounts, in each case, on such date.      Appraised Value: With respect to any Mortgage Loan, the Appraised Value of the related Mortgaged Property shall be: (i) with respect to a Mortgage Loan other than a Refinancing Mortgage Loan, the lesser of (a) the value of the Mortgaged Property based upon the appraisal made at the time of the origination of such Mortgage Loan and (b) the sales price of the Mortgaged Property at the time of the origination of such Mortgage Loan; and (ii) with respect to a Refinancing Mortgage Loan, the value of the Mortgaged Property based upon the appraisal made at the time of the origination of such Refinancing Mortgage Loan.      Assessment of Compliance: As defined in Section 6.23(a).      Assignment of Mortgage: An assignment of the Mortgage, notice of transfer or equivalent instrument, in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the sale of the Mortgage to the Trustee, which assignment, notice of transfer or equivalent instrument may be in the form of one or more blanket assignments covering the Mortgage Loans secured by Mortgaged Properties located in the same jurisdiction, if permitted by law; provided, however, that the Trustee shall not be responsible for determining whether any such assignment is in recordable form.      Authenticating Agent: Any authenticating agent appointed by the Trustee pursuant to Section 6.10 until any successor authenticating agent for the Certificates is named, and thereafter “Authenticating Agent” shall mean any such successor. The initial Authenticating Agent shall be the Securities Administrator under this Agreement.      Authorized Officer: Any Person who may execute an Officer’s Certificate on behalf of the Depositor.      Available Distribution Amount: With respect to any Distribution Date and each Mortgage Pool, the total amount of all cash, including the Redemption Price (if applicable) received by the Master Servicer on the Mortgage Loans in such Mortgage Pool from each Servicer or otherwise through the Distribution Account Deposit Date for deposit into the Distribution Account in respect of such Distribution Date, including (1) all scheduled installments of interest (net of the related Servicing Fees and Master Servicing Fees) and principal collected on the related Mortgage Loans and due during the Due Period related to such Distribution Date, together with any Advances in respect thereof, (2) all Insurance Proceeds, 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 7 --------------------------------------------------------------------------------   Liquidation Proceeds, Subsequent Recoveries and the proceeds of any Additional Collateral from the related Mortgage Loans, in each case for such Distribution Date, (3) all partial or full Principal Prepayments, together with any accrued interest thereon, identified as having been received from the related Mortgage Loans during the related Prepayment Period, (4) any amounts paid by the Master Servicer and/or received from the Servicers in respect of Prepayment Interest Shortfalls with respect to the related Mortgage Loans; (5) the aggregate Purchase Price of all Defective Mortgage Loans in such Mortgage Pool purchased from the Trust Fund during the related Prepayment Period and (6) in the case of Pool 1 and for the first Distribution Date only, an initial amount of $2,130,000, and in the case of Pool 3, an initial amount of $444,200, in each case deposited by the Seller in the Collection Account on the Closing Date, minus: (A) an amount equal to the product of (a) the applicable Pool Percentage and (b) the sum of (i) all related fees, charges and other amounts (other than the Master Servicing Fees) payable or reimbursable to the Master Servicer, the Securities Administrator and the Trustee under this Agreement (subject to an aggregate maximum amount of $300,000 annually (per year from the Closing Date to the first anniversary of the Closing Date and each subsequent anniversary year thereafter) to be paid to such parties collectively, whether from collections from Pool 1, Pool 2 or Pool 3, in the order claims for payment of such amounts are received by the Securities Administrator, provided, however, that if a claim is presented for an amount that, when combined with the amount of prior claims paid during that year, would exceed $300,000, then only a portion of such claim will be paid that will make the total amount paid during that year equal to $300,000 and the excess remaining unpaid, together with any additional claims received during that year, will be deferred until the following anniversary year and if the total amount of such deferred claims exceeds $300,000 then payment in such following anniversary year (and each subsequent anniversary year as may be needed until such deferred claims are paid in full) shall be apportioned between the Master Servicer and the Securities Administrator, on the one hand, and the Trustee on the other hand, in proportion to the aggregate amount of deferred claims submitted by such group as of the last day of the prior year, and (ii) all charges and other amounts payable to the Servicers under the Servicing Agreements; (B) in the case of (2), (3), (4) and (5) above, any related unreimbursed expenses incurred by the related Servicers in connection with a liquidation or foreclosure and any unreimbursed Advances or Servicer Advances due to the Master Servicer or the related Servicers; (C) any related unreimbursed Nonrecoverable Advances due to the Master Servicer or the Servicers; and (D) in the case of (1) through (4) above, any related amounts collected which are determined to be attributable to a subsequent Due Period or Prepayment Period. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 8 --------------------------------------------------------------------------------        Back-Up Certification: As defined in Section 6.21(e).      Bankruptcy: As to any Person, the making of an assignment for the benefit of creditors, the filing of a voluntary petition in bankruptcy, adjudication as a bankrupt or insolvent, the entry of an order for relief in a bankruptcy or insolvency proceeding, the seeking of reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief, or seeking, consenting to or acquiescing in the appointment of a trustee, receiver or liquidator, dissolution, or termination, as the case may be, of such Person pursuant to the provisions of either the Bankruptcy Code or any other similar state laws.      Bankruptcy Code: The United States Bankruptcy Code of 1986, as amended.      BBA: The British Banker’s Association.      Benefit Plan Opinion: An Opinion of Counsel satisfactory to the Trustee and Certificate Registrar to the effect that any proposed transfer will not (i) cause the assets of the Trust Fund to be regarded as plan assets for purposes of the Plan Asset Regulations or (ii) give rise to any fiduciary duty on the part of the Depositor or the Trustee.      Book-Entry Certificates: Beneficial interests in Certificates designated as “Book-Entry Certificates” in this Agreement, ownership and transfers of which shall be evidenced or made through book entries by a Clearing Agency as described in Section 3.09; provided, that after the occurrence of a Book-Entry Termination whereupon book-entry registration and transfer are no longer permitted and Definitive Certificates are to be issued to Certificate Owners, such Book-Entry Certificates shall no longer be “Book-Entry Certificates.” As of the Closing Date, the following Classes of Certificates constitute Book-Entry Certificates: Class 1-A1A, Class 1-A1B, Class 1-A2, Class 2-A1, Class 2-A2, Class 3-A1, Class 3-A2, Class B-1, Class B-2 and Class B-3.      Book-Entry Termination: As defined in Section 3.09(c).      Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in New York, New York or, if other than New York, the city in which the Corporate Trust Office of the Trustee is located, or the States of Maryland or Minnesota, are authorized or obligated by law or executive order to be closed.      Certificate: Any one of the certificates signed by the Trustee and authenticated by the Securities Administrator as Authenticating Agent in substantially the forms attached hereto as Exhibit A.      Certificate Group: Each of the Group 1 Certificates, the Group 2 Certificates and the Group 3 Certificates.      Certificate Interest Rate: With respect to each Class of Certificates and any Distribution Date, the applicable per annum rate described in the Preliminary Statement to this Agreement. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 9 --------------------------------------------------------------------------------        Certificate Owner: With respect to a Book-Entry Certificate, the Person who is the owner of such Book-Entry Certificate, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly or as an indirect participant, in accordance with the rules of such Clearing Agency).      Certificate Principal Amount: With respect to any Certificate (other than any Interest-Only Certificate), at the time of determination, the maximum specified dollar amount of principal to which the Holder thereof is then entitled hereunder, such amount being equal to the initial principal amount set forth on the face of such Certificate, less (i) the amount of all principal distributions previously made with respect to such Certificate; (ii) all Realized Losses allocated to such Certificate; provided, however, that on any Distribution Date on which a Subsequent Recovery is distributed, the Certificate Principal Amount of any Class of Certificates then outstanding to which a Realized Loss amount has been applied will be increased, in order of seniority, by an amount equal to the aggregate amount of any Subsequent Recovery distributed on such date to Holders of the Certificates, after application (for this purpose) to more senior Classes of Certificates pursuant to this Agreement and (iii) in the case of a Subordinate Certificate, any Subordinate Certificate Writedown Amount allocated to such Certificates. For purposes of Article V hereof, unless specifically provided to the contrary, Certificate Principal Amounts shall be determined as of the close of business of the immediately preceding Distribution Date, after giving effect to all distributions made on such date. Interest-Only Certificates, if applicable, are issued without Certificate Principal Amounts.      Certificate Register and Certificate Registrar: The register maintained and the registrar appointed pursuant to Section 3.02. The Securities Administrator will act as the initial Certificate Registrar.      Certificateholder: The meaning provided in the definition of “Holder.”      Certification Parties: As defined in Section 6.21(e).      Certifying Person: As defined in Section 6.21(e).      Civil Relief Act: The Servicemembers Civil Relief Act, as amended, or any similar state or local law.      Class: Collectively, Certificates bearing the same class designation. In the case of the Lower-Tier REMIC, the term “Class” refers to all Lower-Tier Interests having the same alphanumeric designation.      Class 1-AR Certificate: The Class 1-AR Certificate executed by the Trustee, and authenticated and delivered by the Authenticating Agent, substantially in the form annexed hereto as Exhibit A, and evidencing the ownership of the residual interest in the Upper-Tier REMIC.      Class LT-R Certificate: The Class LT-R Certificate executed by the Trustee and authenticated and delivered by the Authenticating Agent, substantially in the form annexed as Exhibit A and evidencing ownership of the LT-R Interest. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 10 --------------------------------------------------------------------------------        Class Notional Amount: Not applicable.      Class Principal Amount: With respect to each Class of Certificates (other than any Interest-Only Certificate), the aggregate of the Certificate Principal Amounts of all Certificates of such Class at the date of determination. With respect to any Lower-Tier Interest, the initial Class Principal Amount as shown or described in the table set forth in the Preliminary Statement to this Agreement for the issuing REMIC, as reduced by principal distributed with respect to such Lower-Tier Interest and Realized Losses allocated to such Lower-Tier Interest at the date of determination.      Class Subordination Percentage: With respect to each Class of Subordinate Certificates, for each Distribution Date, the percentage obtained by dividing the Class Principal Amount of such Class immediately prior to such Distribution Date by the aggregate of the Class Principal Amounts of all Classes of Certificates immediately prior to such Distribution Date.      Class X Certificates: Not applicable.      Clearing Agency: An organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act. As of the Closing Date, the Clearing Agency shall be The Depository Trust Company.      Clearing Agency Participant: A broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency.      Closing Date: August 30, 2006.      Code: The Internal Revenue Code of 1986, as amended, and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.      Collection Accounts: Each collection account (other than an Escrow Account) established and maintained by a Servicer pursuant to a Servicing Agreement.      Commission: U.S. Securities and Exchange Commission.      Compensating Interest Payment: As to any Distribution Date, the lesser of (1) the Master Servicing Fee for such date and (2) any Prepayment Interest Shortfall for such date.      Component: Not applicable.      Component Interest Rate: Not applicable.      Component Notional Amount: Not applicable.      Cooperative Corporation: The entity that holds title (fee or an acceptable leasehold estate) to the real property and improvements constituting the Cooperative Property and which 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 11 --------------------------------------------------------------------------------   governs the Cooperative Property, which Cooperative Corporation must qualify as a Cooperative Housing Corporation under Section 216 of the Code.      Cooperative Loan: Any Mortgage Loan secured by Cooperative Shares and a Proprietary Lease.      Cooperative Property: The real property and improvements owned by the Cooperative Corporation, that includes the allocation of individual dwelling units to the holders of the shares of the Cooperative Corporation.      Cooperative Shares: Shares issued by a Cooperative Corporation.      Corporate Trust Office: With respect to the Trustee, the principal corporate trust office of the Trustee located at 452 Fifth Avenue, New York, New York 10018, Attention: Trustee Sequoia Mortgage Trust 2006-1, or at such other address as the Trustee may designate from time to time by notice to the Certificateholders, the Depositor, the Master Servicer and the Securities Administrator or the principal corporate trust office of any successor Trustee. With respect to the Certificate Registrar and presentment of Certificates for registration of transfer, exchange or final payment, Wells Fargo Bank, N.A., Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: Corporate Trust, Sequoia Mortgage Trust 2006-1.      Corresponding Class of Certificates: With respect to each Lower-Tier Interest, the Class or Classes of Certificates appearing opposite such Lower-Tier Interest, as described in the Preliminary Statement to this Agreement.      Credit Support Depletion Date: The first Distribution Date, if any, on which the aggregate of the Class Principal Amounts of the Subordinate Certificates has been reduced to zero.      Current Interest: With respect to each Class of Certificates and any Distribution Date, the aggregate amount of interest accrued at the applicable Certificate Interest Rate during the related Accrual Period on the Class Principal Amount of such Class immediately prior to such Distribution Date.      Custodian: A Person who is at anytime appointed by the Trustee and the Depositor as a custodian of all or a portion of the Mortgage Documents and the related Trustee Mortgage Files and listed on the Mortgage Loan Schedule as the Custodian of such Mortgage Documents and related Trustee Mortgage Files. The initial Custodian is Wells Fargo Bank, N.A.      Custody Agreement: The Custody Agreement, dated as of August 1, 2006, among the Depositor, the Seller, the Trustee and Wells Fargo Bank, N.A., as Custodian. A copy of the Custody Agreement is attached hereto as Exhibit D.      Cut-off Date: August 1, 2006.      Cut-off Date Balance: With respect to the Mortgage Loans in the Trust Fund on the Closing Date, the Aggregate Stated Principal Balance as of the Cut-off Date. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 12 --------------------------------------------------------------------------------        Debt Service Reduction: With respect to any Mortgage Loan, a reduction by a court of competent jurisdiction in a proceeding under the Bankruptcy Code in the Scheduled Payment for such Mortgage Loan which became final and non-appealable, except such a reduction resulting from a Deficient Valuation or any reduction that results in a permanent forgiveness of principal.      Defective Mortgage Loan: The meaning specified in Section 2.04.      Deficient Valuation: With respect to any Mortgage Loan, a valuation of the related Mortgaged Property by a court of competent jurisdiction in an amount less than the then outstanding indebtedness under the Mortgage Loan, or any reduction in the amount of principal to be paid in connection with any Scheduled Payment that results in a permanent forgiveness of principal, which valuation or reduction results from an order of such court which is final and non-appealable in a proceeding under the Bankruptcy Code.      Definitive Certificate: A Certificate of any Class issued in definitive, fully registered, certificated form.      Deleted Mortgage Loan: As defined in the applicable Purchase Agreement.      Delinquent: Any Mortgage Loan with respect to which the Scheduled Payment due on a Due Date is not received, based on the MBS method of calculating delinquency.      Depositor: Sequoia Residential Funding, Inc., a Delaware corporation having its principal place of business in California, or its successors in interest.      Determination Date: With respect to each Distribution Date, the 18th day of the month in which such Distribution Date occurs, or, if such 18th day is not a Business Day, the next succeeding Business Day; provided, however, that with respect to a Servicer, the Determination Date is the date set forth in the related Servicing Agreement.      Disqualified Organization: A “disqualified organization” as defined in Section 860E(e)(5) of the Code.      Distribution Account: The separate Eligible Account created and maintained by the Securities Administrator, on behalf of the Trustee, pursuant to Section 4.01. Funds in the Distribution Account (exclusive of any earnings on investments made with funds deposited in the Distribution Account) shall be held in trust for the Trustee and the Certificateholders for the uses and purposes set forth in this Agreement.      Distribution Account Deposit Date: The 18th day of each calendar month after the initial issuance of the Certificates or, if such 18th day is not a Business Day, the immediately preceding Business Day, commencing in September 2006.      Distribution Date: The 20th day of each month or, if such 20th day is not a Business Day, the next succeeding Business Day, commencing in September 2006.      Distribution Date Statement: As defined in Section 4.04. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 13 --------------------------------------------------------------------------------        Due Date: With respect to any Mortgage Loan, the date on which a Scheduled Payment is due under the related Mortgage Note as indicated in the applicable Servicing Agreement.      Due Period: As to any Distribution Date, the period beginning on the second day of the month preceding the month of such Distribution Date, and ending on the first day of the month of such Distribution Date.      Effective Loan-to-Value Ratio: Not applicable.      Eligible Account: Any of (i) an account or accounts maintained with a federal or state chartered depository institution or trust company the short-term unsecured debt obligations of which (or, in the case of a depository institution or trust company that is the principal subsidiary of a holding company, the debt obligations of such holding company) have the highest short-term ratings of each Rating Agency at the time any amounts are held on deposit therein, or (ii) an account or accounts in a depository institution or trust company in which such accounts are insured by the FDIC or the SAIF (to the limits established by the FDIC or the SAIF) and the uninsured deposits in which accounts are otherwise secured such that, as evidenced by an Opinion of Counsel delivered to the Trustee, the Securities Administrator and to each Rating Agency, the Certificateholders have a claim with respect to the funds in such account or a perfected first priority security interest against any collateral (which shall be limited to Permitted Investments) securing such funds that is superior to claims of any other depositors or creditors of the depository institution or trust company in which such account is maintained, or (iii) a trust account or accounts maintained with the trust department of a federal or state chartered depository institution or trust company, acting in its fiduciary capacity or (iv) any other account acceptable to each Rating Agency. Eligible Accounts may bear interest, and may include, if otherwise qualified under this definition, accounts maintained with the Trustee, the Paying Agent, the Securities Administrator or the Master Servicer.      ERISA: The Employee Retirement Income Security Act of 1974, as amended.      ERISA-Qualifying Underwriting: A best efforts or firm commitment underwriting or private placement that meets the requirements of an Underwriter’s Exemption.      ERISA-Restricted Certificate: The Class 1-AR, Class LT-R, Class B-4, Class B-5 or Class B-6 Certificates, and any Certificate that does not satisfy the applicable rating requirement under the Underwriter’s Exemption.      Escrow Account: As defined in Section 1 of each Servicing Agreement.      Event of Default: Any one of the conditions or circumstances enumerated in Section 6.14.      Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 14 --------------------------------------------------------------------------------        Fannie Mae: The Federal National Mortgage Association, a federally chartered and privately owned corporation organized and existing under the Federal National Mortgage Association Charter Act, or any successor thereto.      FDIC: The Federal Deposit Insurance Corporation or any successor thereto.      FHLMC: The Federal Home Loan Mortgage Corporation, a corporate instrumentality of the United States created and existing under Title III of the Emergency Home Finance Act of 1970, as amended, or any successor thereto.      Fitch Ratings: Fitch, Inc., or any successor in interest.      Form 8-K Disclosure Information: As defined in Section 6.21(c)(i).      Global Securities: The global certificates representing the Book-Entry Certificates.      Group 1: All of the Group 1 Certificates.      Group 1 Certificate: Any Class 1-A1A, Class 1-A1B, Class 1-A2 or Class 1-AR Certificate.      Group 2: All of the Group 2 Certificates.      Group 2 Certificate: Any Class 2-A1 or Class 2-A2 Certificate.      Group 3: All of the Group 3 Certificates.      Group 3 Certificate: Any Class 3-A1 or Class 3-A2 Certificate.      Holder or Certificateholder: The registered owner of any Certificate as recorded on the books of the Certificate Registrar except that, solely for the purposes of taking any action or giving any consent pursuant to this Agreement, any Certificate registered in the name of the Depositor, the Trustee, the Master Servicer, the Securities Administrator and any Servicer, or any Affiliate thereof shall be deemed not to be outstanding in determining whether the requisite percentage necessary to effect any such consent has been obtained, except that, in determining whether the Trustee shall be protected in relying upon any such consent, only Certificates which a Responsible Officer of the Trustee knows to be so owned shall be disregarded. The Trustee, the Certificate Registrar and the Securities Administrator may request and conclusively rely on certifications by the Depositor, the Master Servicer, the Securities Administrator or any Servicer in determining whether any Certificates are registered to an Affiliate of the Depositor, the Master Servicer, the Securities Administrator or any Servicer.      HUD: The United States Department of Housing and Urban Development, or any successor thereto.      Independent: When used with respect to any Accountants, a Person who is “independent” within the meaning of Rule 2-01(b) of the Securities and Exchange Commission’s 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 15 --------------------------------------------------------------------------------   Regulation S-X. When used with respect to any other Person, a Person who (a) is in fact independent of another specified Person and any Affiliate of such other Person, (b) does not have any material direct financial interest in such other Person or any Affiliate of such other Person, and (c) is not connected with such other Person or any Affiliate of such other Person as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions.      Index: As to each Mortgage Loan, the index from time to time in effect for adjustment of the Mortgage Rate as set forth as such on the related Mortgage Note.      Initial Trust Receipt. With respect to any Mortgage Loan, as defined in the Custody Agreement.      Insurance Policy: With respect to any Mortgage Loan, any insurance policy, including all names and endorsements thereto in effect, including any replacement policy or policies for any Insurance Policies.      Insurance Proceeds: Proceeds paid by any Insurance Policy (excluding proceeds required to be applied to the restoration and repair of the related Mortgaged Property or released to the Mortgagor), in each case other than any amount included in such Insurance Proceeds in respect of Insured Expenses and (i) the proceeds from any Limited Purpose Surety Bond.      Insured Expenses: Expenses covered by an Insurance Policy or any other insurance policy with respect to the Mortgage Loans.      Interest Distribution Amount: For each Class of Certificates on any Distribution Date, the Current Interest for such Class as reduced by such Class’s share of Net Prepayment Interest Shortfalls and Relief Act Shortfalls. Any such shortfalls and reductions shall be allocated among the Group 1 Certificates, Group 2 Certificates, Group 3 Certificates, and to all Classes of Subordinate Certificates proportionately based on the amount of Net Prepayment Interest Shortfalls and Relief Act Shortfalls experienced by the related Mortgage Pool and related Current Interest otherwise distributable thereon on such Distribution Date, in the case of the Subordinate Certificates, the amount of Net Prepayment Interest Shortfalls and Relief Act Shortfalls experienced by all the Mortgage Loans and interest accrued on their Apportioned Principal Balances before taking into account any reductions in such amounts from shortfalls for that Distribution Date.      Interest-Only Certificates: Not applicable.      Interest Shortfall: As to any Class of Certificates and any Distribution Date, (i) the amount by which the Interest Distribution Amount for such Class on such Distribution Date and all prior Distribution Dates exceeds (ii) amounts distributed in respect thereof to such Class on prior Distribution Dates.      Interest Transfer Amount: For any Distribution Date and for any Undercollateralized Group, an amount equal to one month’s interest on the applicable Principal Transfer Amount at the Pool 1 Net WAC (if Pool 1 is an Undercollateralized Group), the Pool 2 Net WAC (if Pool 2 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 16 --------------------------------------------------------------------------------   is an Undercollateralized Group) or the Pool 3 Net WAC (if Pool 3 is an Undercollateralized Group), plus any interest accrued on such Undercollateralized Group remaining unpaid from prior Distribution Dates.      Intervening Assignments: The original intervening assignments of the Mortgage, notices of transfer or equivalent instrument.      Item 1123 Certificate: As defined in Section 6.22.      Latest Possible Maturity Date: The Distribution Date occurring in September 2046.      LIBOR: Not applicable.      LIBOR Business Day: Not applicable.      LIBOR Certificate: Not applicable.      LIBOR Determination Date: Not applicable.      Limited Purpose Surety Bond: Any Limited Purpose Surety Bond listed in Exhibit G.      Liquidated Mortgage Loan: With respect to any Distribution Date, a defaulted Mortgage Loan (including any REO Property) which was liquidated in the calendar month preceding the month of such Distribution Date and as to which the related Servicer has certified (in accordance with its Servicing Agreement) that it has received all amounts it expects to receive in connection with the liquidation of such Mortgage Loan including the final disposition of an REO Property.      Liquidation Proceeds: Amounts, including Insurance Proceeds, received in connection with the partial or complete liquidation of defaulted Mortgage Loans, whether through trustee’s sale, foreclosure sale or otherwise or amounts received in connection with any condemnation or partial release of a Mortgaged Property and any other proceeds received in connection with an REO Property.      Loan-To-Value Ratio: With respect to any Mortgage Loan and as to any date of determination, the fraction (expressed as a percentage) the numerator of which is the principal balance of the related Mortgage Loan at such date of determination and the denominator of which is the Appraised Value of the related Mortgaged Property.      Lower-Tier Interest: Any one of the interests in the Lower-Tier REMIC as described in the Preliminary Statement to this Agreement.      Lower-Tier REMIC: As described in the Preliminary Statement to this Agreement.      LT-R Interest: The residual interest in the Lower-Tier REMIC, as described in the Preliminary Statement to this Agreement.      Margin: As to each Mortgage Loan, the percentage amount set forth on the related Mortgage Note added to the Index in calculating the Mortgage Rate thereon. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 17 --------------------------------------------------------------------------------        Master Servicer: Wells Fargo Bank, N.A., a national banking association organized under the laws of the United States in its capacity as Master Servicer and any Person succeeding as Master Servicer hereunder or any successor in interest, or if any successor master servicer shall be appointed as herein provided, then such successor master servicer.      Master Servicing Fee: With respect to any Distribution Date, an amount equal to the product of one-twelfth of the Master Servicing Fee Rate and the Stated Principal Balance of each Mortgage Loan as of the first day of the related Due Period.      Master Servicing Fee Rate: 0.0075% per annum.      Maximum Rate: As to any Mortgage Loan, the maximum rate set forth on the related Mortgage Note at which interest can accrue on such Mortgage Loan.      MERS: Mortgage Electronic Registration Systems, Inc., or its successors or assigns.      MERS Designated Mortgage Loan: Each Mortgage Loan that has been originated in the name of, or assigned to, MERS and registered under the MERS System.      MERS System: The system of recording transfers of mortgages electronically maintained by MERS.      Middle-Tier Interest: Not applicable.      Middle-Tier REMIC: Not applicable.      Moody’s: Moody’s Investors Service, Inc., or any successor in interest.      Mortgage: A mortgage, deed of trust or other instrument encumbering a fee simple interest in real property securing a Mortgage Note, together with improvements thereto.      Mortgage Documents: With respect to each Mortgage Loan, the mortgage documents required to be delivered to the Custodian pursuant to the Custody Agreement.      Mortgage Loan: A Mortgage and the related notes or other evidences of indebtedness secured by each such Mortgage conveyed, transferred, sold, assigned to or deposited with the Trustee pursuant to Section 2.01 (including any Replacement Loan and REO Property), including without limitation, each Mortgage Loan listed on the Mortgage Loan Schedule, as amended from time to time.      Mortgage Loan Purchase and Sale Agreement: The mortgage loan purchase and sale agreement, dated as of August 1, 2006, between the Seller and the Depositor.      Mortgage Loan Schedule: The schedule attached hereto as Schedule A, which shall identify each Mortgage Loan, as such schedule may be amended by the Depositor or the Servicer from time to time to reflect the addition of Replacement Mortgage Loans to, or the deletion of Deleted Mortgage Loans from, the Trust Fund. Such schedule shall, among other 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 18 --------------------------------------------------------------------------------   things (i) designate the Servicer servicing such Mortgage Loan and the applicable Servicing Fee Rate (and the rate of any subservicing fee, if applicable); (ii) identify the designated Mortgage Pool in which such Mortgage Loan is included; (iii) separately identify Six-Month LIBOR Loans, One-Year LIBOR Loans and One-Year CMT Loans; (iv) separately identify Additional Collateral Mortgage Loans; and (v) designate the rate of any lender-paid Primary Mortgage Insurance Policy.      Mortgage Note: The original executed note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage under a Mortgage Loan.      Mortgage Pool: Each of Pool 1, Pool 2 and Pool 3.      Mortgaged Property: The underlying property, including any Additional Collateral, securing a Mortgage Loan which, with respect to a Cooperative Loan, is the related Cooperative Shares and Property Lease.      Mortgage Rate: As to any Mortgage Loan, the annual rate of interest borne by the related Mortgage Notes.      Mortgagor: The obligor on a Mortgage Note.      MT-R Interest: Not applicable.      Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan or any other disposition of related Mortgaged Property, the related Liquidation Proceeds net of Advances, Servicer Advances, related Servicing Fees and/or Master Servicing Fees and any other accrued and unpaid servicing fees received and retained in connection with the liquidation of such Mortgage Loan or Mortgaged Property.      Net Mortgage Rate: With respect to any Mortgage Loan and any Distribution Date, the related Mortgage Rate as of the Due Date in the month preceding the month of such Distribution Date reduced by the Aggregate Expense Rate for such Mortgage Loan.      Net Prepayment Interest Shortfall: With respect to any Mortgage Loan and any Distribution Date, the amount by which any Prepayment Interest Shortfall for such date exceeds the amount of Compensating Interest Payment paid by the Master Servicer and related amounts paid by the applicable Servicer in respect of such shortfall.      Net WAC Shortfall: Not applicable.      Non-Book-Entry Certificate: Any Certificate other than a Book-Entry Certificate.      Non-permitted Foreign Holder: As defined in Section 3.03(f).      Non-Redemption Event: Not applicable. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 19 --------------------------------------------------------------------------------        Nonrecoverable Advance: Any portion of an Advance or Servicer Advance previously made or proposed to be made by the Master Servicer and/or a Servicer (as certified in an Officer’s Certificate of the Servicer), which in the good faith judgment of such party, shall not be ultimately recoverable by such party from the related Mortgagor, related Liquidation Proceeds or otherwise.      Non-Upper-Tier REMIC: As defined in Section 10.01(d).      Non-U.S. Person: Any person other than a “United States person” within the meaning of Section 7701(a)(30) of the Code.      Notional Amount: Not applicable.      Officer’s Certificate: A certificate signed by two Authorized Officers of the Depositor or the Chairman of the Board, any Vice Chairman, the President, any Vice President or any Assistant Vice President of the Master Servicer or the Securities Administrator, and in each case delivered to the Trustee or the Securities Administrator, as provided in this Agreement.      Officer’s Certificate of the Servicer: A certificate (i) signed by the Chairman of the Board, the Vice Chairman of the Board, the President, a Managing Director, a Vice President (however denominated), an Assistant Vice President, the Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant Secretaries of a Servicer, or (ii) if provided for herein, signed by a Servicing Officer, as the case may be, and delivered to the Trustee, the Securities Administrator or the Master Servicer, as required hereby.      One-Month LIBOR: Not applicable.      One-Month LIBOR Loan: Each Mortgage Loan bearing a Mortgage Rate that adjusts in accordance with LIBOR for one-month U.S. dollar deposits.      One-Year CMT Loan: Each Mortgage Loan bearing a Mortgage Rate that adjusts in accordance with CMT for one-year U.S. dollar deposits.      One-Year LIBOR Loan: Each Mortgage Loan bearing a Mortgage Rate that adjusts in accordance with LIBOR for one-year U.S. dollar deposits.      Opinion of Counsel: A written opinion of counsel, reasonably acceptable in form and substance to the Trustee, the Securities Administrator or the Master Servicer, as required hereby, and who may be in-house or outside counsel to the Depositor, the Master Servicer, the Securities Administrator or the Trustee but which must be Independent outside counsel with respect to any such opinion of counsel concerning the transfer of any Residual Certificate or concerning certain matters with respect to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or the taxation, or the federal income tax status, of each REMIC.      Original Applicable Credit Support Percentage: With respect to each Class of Subordinate Certificates, the corresponding approximate percentage set forth in the table below opposite its Class designation: 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 20 --------------------------------------------------------------------------------             Class B-1     4.25 % Class B-2     2.00 % Class B-3     1.25 % Class B-4     0.80 % Class B-5     0.50 % Class B-6     0.25 %      Original Subordinate Principal Amount: The aggregate of the initial Class Principal Amounts of the Classes of Subordinated Certificates.      Overcollateralized Group: On any Distribution Date, the Certificate Group which is not the Undercollateralized Group.      Paying Agent: Any paying agent appointed pursuant to Section 3.08. The initial Paying Agent shall be the Securities Administrator under this Agreement.      Percentage Interest: With respect to any Certificate, its percentage interest in the undivided beneficial ownership interest in the Trust Fund evidenced by all Certificates of the same Class as such Certificate. With respect to any Certificate, other than an Interest-Only Certificate, if applicable, or the Class 1-AR and Class LT-R Certificates, the Percentage Interest evidenced thereby shall equal the initial Certificate Principal Amount thereof divided by the initial Class Principal Amount of all Certificates of the same Class. With respect to each of the Class 1-AR and the Class LT-R Certificates, the Percentage Interest evidenced thereby shall be as specified on the face thereof, or otherwise, be equal to 100%. With respect to any Interest-Only Certificate, the Percentage Interest evidenced thereby shall equal its initial Notional Amount as set forth on the face thereof divided by the initial Class Notional Amount of such Class.      Permitted Investments: At any time, any one or more of the following obligations and securities:      (i) obligations of the United States or any agency thereof, provided that such obligations are backed by the full faith and credit of the United States;      (ii) general obligations of or obligations guaranteed by any state of the United States or the District of Columbia receiving the highest long-term debt rating of each Rating Agency, or such lower rating as shall not result in the downgrading or withdrawal of the ratings then assigned to the Certificates by the Rating Agencies, as evidenced by a signed writing delivered by each Rating Agency;      (iii) commercial or finance company paper which is then receiving the highest commercial or finance company paper rating of each Rating Agency rating such paper, or such lower rating as shall not result in the downgrading or withdrawal of the ratings then assigned to the Certificates by the Rating Agencies, as evidenced by a signed writing delivered by each Rating Agency; 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 21 --------------------------------------------------------------------------------        (iv) certificates of deposit, demand or time deposits, or bankers’ acceptances issued by any depository institution or trust company incorporated under the laws of the United States or of any state thereof and subject to supervision and examination by federal and/or state banking authorities, provided that the commercial paper and/or long-term unsecured debt obligations of such depository institution or trust company (or in the case of the principal depository institution in a holding company system, the commercial paper or long-term unsecured debt obligations of such holding company, but only if Moody’s is not the applicable Rating Agency) are then rated one of the two highest long-term and the highest short-term ratings of each Rating Agency for such securities, or such lower ratings as shall not result in the downgrading or withdrawal of the ratings then assigned to the Certificates by the Rating Agencies, as evidenced by a signed writing delivered by each Rating Agency;      (v) demand or time deposits or certificates of deposit issued by any bank or trust company or savings institution to the extent that such deposits are fully insured by the FDIC;      (vi) guaranteed reinvestment agreements issued by any bank, insurance company or other corporation acceptable to the Rating Agencies at the time of the issuance of such agreements, as evidenced by a signed writing delivered by each Rating Agency;      (vii) repurchase obligations with respect to any security described in clauses (i) and (ii) above, in either case entered into with a depository institution or trust company (acting as principal) described in clause (iv) above;      (viii) securities (other than stripped bonds, stripped coupons or instruments sold at a purchase price in excess of 115% of the face amount thereof) bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States or any state thereof which, at the time of such investment, have one of the two highest long-term ratings of each Rating Agency (except if the Rating Agency is Moody’s, such rating shall be the highest commercial paper rating of Moody’s for any such series), or such lower rating as shall not result in the downgrading or withdrawal of the ratings then assigned to the Certificates by the Rating Agencies, as evidenced by a signed writing delivered by each Rating Agency;      (ix) interests in any money market fund which at the date of acquisition of the interests in such fund and throughout the time such interests are held in such fund has the highest applicable rating by each Rating Agency rating such fund or such lower rating as shall not result in a change in the rating then assigned to the Certificates by each Rating Agency as evidenced by a signed writing delivered by each Rating Agency, including funds for which the Trustee, the Master Servicer, the Securities Administrator or any of its Affiliates is investment manager or adviser;      (x) short-term investment funds sponsored by any trust company or national banking association incorporated under the laws of the United States or any state thereof 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 22 --------------------------------------------------------------------------------   which on the date of acquisition has been rated by each applicable Rating Agency in their respective highest applicable rating category or such lower rating as shall not result in a change in the rating then specified stated maturity and bearing interest or sold at a discount acceptable to each Rating Agency as shall not result in the downgrading or withdrawal of the ratings then assigned to the Certificates by the Rating Agencies as evidenced by a signed writing delivered by each Rating Agency; and      (xi) such other investments having a specified stated maturity and bearing interest or sold at a discount acceptable to the Rating Agencies as shall not result in the downgrading or withdrawal of the ratings then assigned to the Certificates by the Rating Agencies as evidenced by a signed writing delivered by each Rating Agency; provided, that no such instrument shall be a Permitted Investment if (i) such instrument evidences the right to receive interest only payments with respect to the obligations underlying such instrument, (ii) such instrument would require the Depositor to register as an investment company under the Investment Company Act of 1940, as amended or (iii) the rating of such instrument contains a “t” or “r” notation therein.      Person: Any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof.      Plan: An employee benefit plan or other retirement arrangement which is subject to Section 406 of ERISA and/or Section 4975 of the Code or any entity whose underlying assets include such plan’s or arrangement’s assets by reason of their investment in the entity.      Plan Asset Regulations: The Department of Labor regulations set forth in 29 C.F.R. 2510.3-101.      Pool 1: The aggregate of Mortgage Loans identified on the Mortgage Loan Schedule as being included in Pool 1.      Pool 1 Mortgage Loan: Any Mortgage Loan in Pool 1.      Pool 1 Net WAC: With respect to any Distribution Date, the weighted average of the Net Mortgage Rates of the Pool 1 Mortgage Loans as of the first day of the calendar month immediately preceding the calendar month of such Distribution Date, weighted on the basis of their Stated Principal Balances.      Pool 1 Subordinate Amount: For any Distribution Date, the excess of the Aggregate Stated Principal Balance of the Pool 1 Mortgage Loans over the aggregate of the Class Principal Amounts of the Class 1-A1A, Class 1-A1B, Class 1-A2 and Class 1-AR Certificates immediately before such Distribution Date.      Pool 2: The aggregate of Mortgage Loans identified on the Mortgage Loan Schedule as being included in Pool 2. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 23 --------------------------------------------------------------------------------        Pool 2 Mortgage Loan: Any Mortgage Loan in Pool 2.      Pool 2 Net WAC: With respect to any Distribution Date, the weighted average of the Net Mortgage Rates of the Pool 2 Mortgage Loans as of the first day of the calendar month immediately preceding the calendar month of such Distribution Date, weighted on the basis of their Stated Principal Balances.      Pool 2 Subordinate Amount: For any Distribution Date, the excess of the Aggregate Stated Principal Balance of the Pool 2 Mortgage Loans over the aggregate of the Class Principal Amount of the Class 2-A1 and Class 2-A2 Certificates immediately before such Distribution Date.      Pool 3: The aggregate of Mortgage Loans identified on the Mortgage Loan Schedule as being included in Pool 3.      Pool 3 Mortgage Loan: Any Mortgage Loan in Pool 3.      Pool 3 Net WAC: With respect to any Distribution Date, the weighted average of the Net Mortgage Rates of the Pool 3 Mortgage Loans as of the first day of the calendar month immediately preceding the calendar month of such Distribution Date, weighted on the basis of their Stated Principal Balances.      Pool 3 Subordinate Amount: For any Distribution Date, the excess of the Aggregate Stated Principal Balance of the Pool 3 Mortgage Loans over the aggregate of the Class Principal Amount of the Class 3-A1 and Class 3-A2 Certificates immediately before such Distribution Date.      Pool Percentage: With respect to each Mortgage Pool and any Distribution Date, a fraction, expressed as a percentage, the numerator of which is the Aggregate Stated Principal Balance of such Mortgage Pool, and the denominator of which is the Aggregate Stated Principal Balance as of such Due Date.      Pool Subordinate Amount: Either of the Pool 1 Subordinate Amount, the Pool 2 Subordinate Amount or the Pool 3 Subordinate Amount.      Prepayment Interest Shortfall: With respect to any full or partial Principal Prepayment of a Mortgage Loan, the excess, if any, of (i) one full month’s interest at the applicable Mortgage Rate on the Stated Principal Balance of such Mortgage Loan immediately prior to such Principal Prepayment over (ii) the amount of interest actually received with respect to such Mortgage Loan in connection with such Principal Prepayment.      Prepayment Period: With respect to each Distribution Date, the calendar month immediately preceding the month in which the Distribution Date occurs.      Primary Mortgage Insurance Policy: Each policy of primary mortgage guaranty insurance or any replacement policy therefor with respect to any Mortgage Loan. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 24 --------------------------------------------------------------------------------        Principal Distribution Amount: With respect to any Mortgage Pool and any Distribution Date, the sum of (a) each Scheduled Payment of principal collected or advanced on the related Mortgage Loans (before taking into account any Deficient Valuations or Debt Service Reductions) and due during the related Due Period, (b) that portion of the Purchase Price representing principal of any Mortgage Loans in such Mortgage Pool purchased in accordance with Section 2.04 hereof and received during the related Prepayment Period, (c) the principal portion of any related Substitution Amount received during the related Prepayment Period, (d) any Subsequent Recoveries and the principal portion of all Insurance Proceeds received during the related Prepayment Period with respect to Mortgage Loans in such Mortgage Pool that are not yet Liquidated Mortgage Loans, (e) the principal portion of all Net Liquidation Proceeds received during the related Prepayment Period with respect to Liquidated Mortgage Loans in such Mortgage Pool, (f) the principal portion of the proceeds of any Additional Collateral with respect to the Mortgage Loans in such Mortgage Pool and (g) the principal portion of all partial and full principal prepayments of Mortgage Loans in such Mortgage Pool applied by the Servicers during the related Prepayment Period and (h) on the Distribution Date on which the Trust Fund is to be terminated pursuant to Article X hereof, that portion of the Redemption Price in respect of principal for such Mortgage Pool.      Principal Prepayment: Any Mortgagor payment of principal or other recovery of principal on a Mortgage Loan that is recognized as having been received or recovered in advance of its scheduled Due Date and applied to reduce the principal balance of the Mortgage Loan in accordance with the terms of the Mortgage Note or the Servicing Agreement.      Principal Prepayment In Full: Any Principal Prepayment of the entire principal balance of the Mortgage Loans.      Principal Transfer Amount: For any Distribution Date and for any Undercollateralized Group, the excess, if any, of the aggregate Class Principal Amount of the Senior Certificates related to such Undercollateralized Group immediately prior to such Distribution Date, over the Aggregate Stated Principal Balance of the related Mortgage Pool immediately prior to such Distribution Date.      Pro Rata Senior Percentage: With respect to each Distribution Date and each Mortgage Pool, the percentage equivalent of a fraction, the numerator of which is the aggregate Class Principal Amount of the Class or Classes of Senior Certificates of the Related Certificate Group immediately prior to such Distribution Date, and the denominator of which is the Aggregate of the Stated Principal Balance of the related Mortgage Pool for such Distribution Date.      Proceeding: Any suit in equity, action at law or other judicial or administrative proceeding.      Proprietary Lease: With respect to any Cooperative Property, a lease or occupancy agreement between a Cooperative Corporation and a holder of related Cooperative Shares.      Prospectus: The prospectus supplement dated August 28, 2006 and the accompanying prospectus dated July 26, 2006, relating to the Class 1-A1A, Class 1-A1B, Class 1-A2, Class 1- 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 25 --------------------------------------------------------------------------------   AR, Class 2-A1, Class 2-A2, Class 3-A1, Class 3-A2, Class B-1, Class B-2 and Class B-3 Certificates, together with any supplement thereto.      Purchase Agreements: The mortgage purchase agreements listed in Exhibit F hereto, as each such agreement may be amended or supplemented from time to time as permitted hereunder.      Purchase Price: With respect to any Mortgage Loan required or permitted to be purchased by the Seller or Depositor pursuant to this Agreement, by the Servicers pursuant to the Servicing Agreements, or by the Seller pursuant to the Purchase Agreements, an amount equal to the sum of (i) 100% of the unpaid principal balance of the Mortgage Loan on the date of such purchase, (ii) accrued interest thereon at the applicable Net Mortgage Rate from the date through which interest was last paid by the Mortgagor to the Due Date in the month in which the Purchase Price is to be distributed to Certificateholders, or such other amount as may be specified in the related Servicing Agreement or Purchase Agreement and (iii) the amount of any costs and damages incurred by the Trust Fund as a result of any violation of any applicable federal, state, or local predatory or abusive lending law arising from or in connection with the origination of such Mortgage Loan.      Rapid Prepayment Conditions: As to any Distribution Date, if (1) the Aggregate Subordinate Percentage on such date is less than 200% of the Aggregate Subordinate Percentage on the Closing Date; or (2) the outstanding Stated Principal Balance of the Mortgage Loans in any Mortgage Pool delinquent 60 days or more (including Mortgage Loans in REO, foreclosure and bankruptcy status) (averaged over the preceding six month period), as a percentage of such Mortgage Pool’s Pool Subordinate Amount, is greater than or equal to 50%.      Rating Agency: Each of Fitch Ratings and S&P.      Realized Loss: With respect to each Liquidated Mortgage Loan, an amount (not less than zero or more than the Stated Principal Balance of the Mortgage Loan) as of the date of such liquidation, equal to (i) the Stated Principal Balance of the Liquidated Mortgage Loan as of the date of such liquidation, plus (ii) interest at the Net Mortgage Rate from the Due Date as to which interest was last paid or advanced (and not reimbursed) to Certificateholders up to the Due Date in the month in which Liquidation Proceeds are required to be distributed on the Stated Principal Balance of such Liquidated Mortgage Loan from time to time, minus (iii) the Liquidation Proceeds and the proceeds of any Additional Collateral, if any, received during the month in which such liquidation occurred, to the extent applied as recoveries of interest at the Net Mortgage Rate and to principal of the Liquidated Mortgage Loan. With respect to each Mortgage Loan which has become the subject of a Deficient Valuation, if the principal amount due under the related Mortgage Note has been reduced, the difference between the principal balance of the Mortgage Loan outstanding immediately prior to such Deficient Valuation and the principal balance of the Mortgage Loan as reduced by the Deficient Valuation.      Record Date: As to any Distribution Date and any Class of Certificates, the last Business Day of the month preceding the month of each Distribution Date (or the Closing Date, in the case of the first Distribution Date). 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 26 --------------------------------------------------------------------------------        Redemption Price: With respect to any Class of Certificates to be redeemed, an amount equal to 100% of the related Class Principal Amount of the Certificates to be so redeemed, together with interest on such amount at the applicable Certificate Interest Rate through the related Accrual Period (as increased by any Interest Shortfalls), and including, in the case of the Redemption Price payable in connection with the redemption and retirement of all of the Certificates, the payment of all amounts (including, without limitation, all previously unreimbursed Advances and Servicer Advances and accrued and unpaid Servicing Fees) payable or reimbursable to the Trustee, the Securities Administrator, the Master Servicer and the Servicers pursuant to this Agreement and the Servicing Agreements, or to the Custodian under the Custody Agreement (to the extent such amounts are not paid to the Custodian by the Seller).      Refinancing Mortgage Loan: Any Mortgage Loan originated in connection with the refinancing of an existing mortgage loan.      Regulation AB: Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123, as such may be amended from time to time, and subject to such clarifications and interpretations as have been provided by the Commission in the adopting release (Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005)) or by the staff of the Commission, or as may be provided by the Commission or its staff from time to time.      Relevant Servicing Criteria: The Servicing Criteria applicable to each party, as set forth on Exhibit N attached hereto. Multiple parties can have responsibility for the same Relevant Servicing Criteria. With respect to a Servicing Function Participant engaged by the Master Servicer, the Securities Administrator or any Servicer, the term “Relevant Servicing Criteria” may refer to a portion of the Relevant Servicing Criteria applicable to such parties.      Related Certificate Group: The Certificate Group related to a particular Mortgage Pool as indicated by the same numerical designation (i.e., Group 1 Certificates are related to Pool 1, the Group 2 Certificates are related to Pool 2 and the Group 3 Certificates are related to Pool 3).      Relief Act Shortfalls: With respect to any Distribution Date and any Mortgage Loan as to which there has been a reduction in the amount of interest collectible thereon for the most recently ended calendar month as a result of the application of the Civil Relief Act, the amount, if any, by which (i) interest collectible on such Mortgage Loan for the most recently ended calendar month is less than (ii) interest accrued thereon for such month pursuant to the Mortgage Note.      REMIC: Each pool of assets in the Trust Fund designated as a REMIC as described in the Preliminary Statement to this Agreement.      REMIC Provisions: The provisions of the federal income tax law relating to real estate mortgage investment conduits, which appear at sections 860A through 860G of the Code, and related provisions, and regulations, including proposed regulations and rulings, and administrative pronouncements promulgated thereunder, as the foregoing may be in effect from time to time. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 27 --------------------------------------------------------------------------------        REO Property: A Mortgaged Property acquired by the Trust Fund through foreclosure or deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan or otherwise treated as having been acquired pursuant to the REMIC Provisions.      Replacement Mortgage Loan: A mortgage loan substituted by the Seller for a Deleted Mortgage Loan which must, on the date of such substitution, as confirmed in a Request for Release, substantially in the form attached to the Custody Agreement, (i) have a Stated Principal Balance, after deduction of the principal portion of the Scheduled Payment due in the month of substitution, not in excess of, and not more than 10% less than, the Stated Principal Balance of the Deleted Mortgage Loan; (ii) have a Maximum Rate not less than (and not more than two percentage points greater than) the Maximum Rate of the Deleted Mortgage Loan; (iii) have a gross margin not less than that of the Deleted Mortgage Loan and, if Mortgage Loans equal to 1% or more of the balance of the related Mortgage Pool as of the Cut-off Date have become Deleted Mortgage Loans, not more than two percentage points more than that of the Deleted Mortgage Loan; (iv) have a Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan; (v) have Adjustment Dates that are no more or less frequent than the Deleted Mortgage Loan; (vi) have a remaining term to maturity no greater than (and not more than one year less than that of) the Deleted Mortgage Loan; (vii) not permit conversion of the related Mortgage Rate to a permanent fixed Mortgage Rate; (viii) not be a Cooperative Loan unless the Deleted Mortgage Loan was a Cooperative Loan; (ix) have the same or better Fair, Isaac & Company (FICO) credit score; (x) have an initial interest adjustment date no earlier than five months before (and no later than five months after) the initial adjustment date of the Deleted Mortgage Loan, (xi) comply with each representation and warranty set forth in Article III of each Purchase Agreement; and (xii) shall be accompanied by an Opinion of Counsel that such Replacement Mortgage Loan would not adversely affect the REMIC status of the Trust Fund or would not otherwise be prohibited by this Agreement.      Reportable Event: As defined in Section 6.21(c)(i).      Reporting Servicer: As defined in Section 6.21(b)(i).      Required Reserve Fund Deposit: Not applicable.      Reserve Fund: Not applicable.      Residual Certificate: Each of the Class 1-AR and Class LT-R Certificates.      Responsible Officer: With respect to the Trustee, any officer in the corporate trust department or similar group of the Trustee with direct responsibility for the administration of this Agreement and also, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject.      Restricted Certificate: Any Class B-4, Class B-5, Class B-6 or Class LT-R Certificate.      Restricted Global Security: As defined in Section 3.01(c). 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 28 --------------------------------------------------------------------------------        S&P: Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor in interest.      SAIF: The Saving’s Association Insurance Fund, or any successor thereto.      Sarbanes Oxley Act: The Sarbanes-Oxley Act of 2002 and the rules and regulations of the Commission promulgated thereunder (including any interpretations thereof by the Commission’s staff).      Sarbanes-Oxley Certification: As defined in Section 6.21(e).      Schedule of Exceptions: With respect to any Mortgage Loan, as defined in the Custody Agreement.      Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due on any Due Date allocable to principal and/or interest on such Mortgage Loan which, unless otherwise specified in the Servicing Agreements, shall give effect to any related Debt Service Reduction and any Deficient Valuation that affects the amount of the monthly payment due on such Mortgage Loan.      Securities Act: The Securities Act of 1933, as amended, and the rules and regulations thereunder.      Securities Administrator: Wells Fargo Bank, N.A., not in its individual capacity but solely as Securities Administrator, or any successor in interest, or if any successor Securities Administrator shall be appointed as herein provided, then such successor Securities Administrator. Wells Fargo Bank, N.A. shall act as Securities Administrator for so long as it is Master Servicer under this Agreement.      Seller: RWT Holdings, Inc., a Delaware corporation.      Senior Certificate: Any one of the Class 1-A1A, Class 1-A1B, Class 1-A2, Class 1-AR, Class LT-R, Class 2-A1, Class 2-A2, Class 3-A1 or Class 3-A2 Certificates, as applicable.      Senior Percentage: Except as provided in this definition, with respect to any Distribution Date and Mortgage Pool before September 2013, 100%. The Senior Percentage for any Mortgage Pool and any Distribution Date occurring (i) before the Distribution Date in September 2013 but in or after September 2009 on which the Two Times Test is satisfied, or (ii) in or after September 2013, is the related Pro Rata Senior Percentage. If the Two Times Test is satisfied with respect to any Distribution Date prior to the Distribution Date in September 2009, the Senior Percentage is the related Pro Rata Senior Percentage plus 50% of an amount equal to 100% minus the related Pro Rata Senior Percentage. With respect to any Distribution Date after the Senior Termination Date, the Senior Percentage for such Mortgage Pool will equal zero. If on any Distribution Date the allocation to the Senior Certificates then entitled to distributions of principal of full and partial principal prepayments and other amounts in the percentage required above would reduce the aggregate of the Class Principal Amounts of those Certificates to below 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 29 --------------------------------------------------------------------------------   zero, the Senior Percentage for such Distribution Date shall be limited to the percentage necessary to reduce that Class Principal Amount to zero.      Senior Prepayment Percentage: With respect to any Distribution Date and each Mortgage Pool, during the ten years beginning on the first Distribution Date, 100%. Except as provided herein, the Senior Prepayment Percentage for each Mortgage Pool and any Distribution Date occurring on or after the tenth anniversary of the first Distribution Date shall be as follows: (i) from September 2013 through August 2014, the related Senior Percentage plus 70% of the related Subordinate Percentage for that Distribution Date; (ii) from September 2014 through August 2015, the related Senior Percentage plus 60% of the related Subordinate Percentage for that Distribution Date; (iii) from September 2015 through August 2016, the related Senior Percentage plus 40% of the related Subordinate Percentage for that Distribution Date; (iv) from September 2016 through August 2017, the related Senior Percentage plus 20% of the related Subordinate Percentage for that Distribution Date; and (v) from and after September 2017, the related Senior Percentage for that Distribution Date; provided, however, that there shall be no reduction in the Senior Prepayment Percentage for the related Certificate Group unless both Step Down Conditions are satisfied; and provided, further, that if on any such Distribution Date on or after the Distribution Date in September 2013, the related Pro Rata Senior Percentage for any Mortgage Pool exceeds the initial related Pro Rata Senior Percentage, the Senior Prepayment Percentage for all Mortgage Pools for that Distribution Date shall again equal 100%.      Notwithstanding the above, if on any Distribution Date on or after the Distribution Date in September 2009 the Two Times Test is satisfied, the Senior Prepayment Percentage with respect to any Mortgage Pool shall equal the related Senior Percentage for such Distribution Date. In addition, if on any Distribution Date the allocation to the Senior Certificates then entitled to distributions of principal of full and partial principal prepayments and other amounts in the percentage required above would reduce the aggregate of the Class Principal Amounts of those Certificates to below zero, the related Senior Prepayment Percentage for such Distribution Date shall be limited to the percentage necessary to reduce that Class Principal Amount to zero.      Senior Principal Distribution Amount: With respect to each Mortgage Pool and any Distribution Date, the sum of:      (1) the related Senior Percentage of all amounts described in clause (a) of the definition of “Principal Distribution Amount” for that Distribution Date;      (2) with respect to each related Mortgage Loan which became a Liquidated Mortgage Loan during the related Prepayment Period, the lesser of      (x) the related Senior Prepayment Percentage of the Stated Principal Balance of that Mortgage Loan and      (y) Net Liquidation Proceeds allocable to principal received with respect to that Mortgage Loan; 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 30 --------------------------------------------------------------------------------        (3) the related Senior Prepayment Percentage of the amounts described in clauses (b), (c), (d) and (g) of the definition of “Principal Distribution Amount” for that Mortgage Pool; and      (4) any amounts described in clauses (1) through (3) for any previous Distribution Date that remain unpaid.      Senior Termination Date: With respect to each Mortgage Pool, the date on which the aggregate Class Principal Amount of the Senior Certificates related to such Mortgage Pool is reduced to zero.      Servicers: Each Servicer under a Servicing Agreement.      Servicer Advance: A “Servicing Advance” as defined in the applicable Servicing Agreement.      Servicer Remittance Date: The 18th day of each calendar month after the initial issuance of the Certificates or, if such 18th day is not a Business Day, the immediately preceding Business Day, commencing in September 2006.      Service(s)(ing): In accordance with Regulation AB, the act of servicing and administering the Mortgage Loans or any other assets of the Trust Fund by an entity that meets the definition of “servicer” set forth in Item 1101 of Regulation AB and is subject to the disclosure requirements set forth in Item 1108 of Regulation AB. Any uncapitalized occurrence of this term shall have the meaning commonly understood by participants in the residential mortgage-backed securitization market.      Servicing Agreement: The agreements listed in Exhibit E, as each such agreement has been modified by the related Acknowledgement and as it may be amended or supplemented from time to time as permitted thereby.      Servicing Criteria: The criteria set forth in paragraph (d) of Item 1122 of Regulation AB, as such may be amended from time to time.      Servicing Fee: As to any Distribution Date and each Mortgage Loan, an amount equal to the product of (a) one-twelfth of the Servicing Fee Rate and (b) the Stated Principal Balance of such Mortgage Loan as of the first day of the related Due Period.      Servicing Fee Rate: With respect to each Mortgage Loan and any Distribution Date, the rate specified in the related Servicing Agreement.      Servicing Function Participant: Any Subservicer or Subcontractor, other than each Servicer, the Master Servicer and the Securities Administrator, that is participating in the servicing function within the meaning of Regulation AB, unless such Person’s activities relate only to 5% or less of the Mortgage Loans. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 31 --------------------------------------------------------------------------------        Servicing Officer: Any officer of the Servicers involved in, or responsible for, the administration and servicing of the Mortgage Loans whose name and facsimile signature appear on a list of servicing officers furnished to the Master Servicer by the Servicers on the Closing Date pursuant to the Servicing Agreements, as such list may from time to time be amended.      Six-Month LIBOR: Not applicable.      Startup Day: The day designated as such pursuant to Section 10.01(b) hereof.      Stated Principal Balance: As to any Mortgage Loan and Due Date, the unpaid principal balance of such Mortgage Loan as of such Due Date as specified in the amortization schedule at the time relating thereto (before any adjustment to such amortization schedule by reason of any moratorium or similar waiver or grace period) after giving effect to any previous partial Principal Prepayments and Liquidation Proceeds allocable to principal (other than with respect to any Liquidated Mortgage Loan) and to the payment of principal due on such Due Date and irrespective of any delinquency in payment by the related Mortgagor.      Step Down Conditions: As of the first Distribution Date as to which any decrease in any Senior Prepayment Percentage applies, (i) the outstanding Stated Principal Balance of all Mortgage Loans 60 days or more Delinquent (including Mortgage Loans in REO, foreclosure and bankruptcy status) (averaged over the preceding six month period), as a percentage of the aggregate of the Class Principal Amounts of the Classes of Subordinate Certificates on such Distribution Date, does not equal or exceed 50% and (ii) cumulative Realized Losses with respect to the Mortgage Loans do not exceed (a) with respect to each Distribution Date from September 2013 through August 2014, 30% of the Original Subordinate Principal Amount, (b) with respect to each Distribution Date from September 2014 through August 2015, 35% of the Original Subordinate Principal Amount, (c) with respect to each Distribution Date from September 2015 through August 2016, 40% of the Original Subordinate Principal Amount, (d) with respect to each Distribution Date from September 2016 through August 2017, 45% of the Original Subordinate Principal Amount and (e) with respect to each Distribution Date from and after September 2017, 50% of the Original Subordinate Principal Amount.      Sub Account: Not applicable.      Subcontractor: Any vendor, subcontractor or other Person that is not responsible for the overall servicing of Mortgage Loans but performs one or more discrete functions identified in Item 1122(d) of Regulation AB with respect to Mortgage Loans under the direction or authority of any Servicer (or a Subservicer of any Servicer), the Master Servicer or the Securities Administrator.      Subordinate Certificate: Any of the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 or Class B-6 Certificates.      Subordinate Certificate Writedown Amount: The amount described in Section 5.03(c).      Subordinate Class Percentage: As to any Distribution Date and any Class of Subordinate Certificates, a fraction, expressed as a percentage, the numerator of which is the Class Principal 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 32 --------------------------------------------------------------------------------   Amount of such Class on such date, and the denominator of which is the aggregate Class Principal Amount of all Classes of Subordinate Certificates on such date.      Subordinate Net WAC: For any Distribution Date, the weighted average of the Pool 1 Net WAC, the Pool 2 Net WAC and the Pool 3 Net WAC, in each case weighted on the basis of the relative Pool Subordinate Amounts for Pool 1, Pool 2 and Pool 3, respectively, immediately prior to such Distribution Date.      Subordinate Percentage: With respect to each Mortgage Pool and any Distribution Date, the difference between 100% and the related Senior Percentage for such Mortgage Pool for such Distribution Date.      Subordinate Prepayment Percentage: With respect to any Distribution Date and for each Mortgage Pool, the difference between 100% and the related Senior Prepayment Percentage for such Mortgage Pool for that Distribution Date.      Subordinate Principal Distribution Amount: With respect to any Distribution Date and each Mortgage Pool, an amount equal to the sum of:      (1) the related Subordinate Percentage of all amounts described in clause (a) of the definition of “Principal Distribution Amount” for that Distribution Date;      (2) with respect to each Mortgage Loan that became a Liquidated Mortgage Loan during the related Prepayment Period the amount of the Net Liquidation Proceeds allocated to principal received with respect thereto remaining after application thereof pursuant to clause (2) of the definition of “Senior Principal Distribution Amount” for that Distribution Date, up to the Subordinate Percentage of the Stated Principal Balance of such Mortgage Loan;      (3) the related Subordinate Prepayment Percentage of all amounts described in clauses (b), (c), (d) and (g) of the definition of “Principal Distribution Amount” for that Mortgage Pool and that Distribution Date; and      (4) any amounts described in clauses (1) through (3) for any previous Distribution Date that remain unpaid,      minus the sum of:      (a) any Principal Transfer Amount paid from the Available Distribution Amount of the Related Certificate Group to the Undercollateralized Group; and      (b) the amount of principal distributions made to the Senior Certificates pursuant to Section 5.02(l).      Subsequent Recovery: Any amount recovered by a Servicer with respect to a Liquidated Mortgage Loan (after reimbursement of any unreimbursed Advances or expenses of the Servicer) 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 33 --------------------------------------------------------------------------------   with respect to which a Realized Loss was incurred after the liquidation or disposition of such Mortgage Loan.      Subservicer: Any Person that (i) services Mortgage Loans on behalf of any Servicer, and (ii) is responsible for the performance (whether directly or through sub-servicers or Subcontractors) of Servicing functions required to be performed under this Agreement, any related Servicing Agreement or any sub-servicing agreement that are identified in Item 1122(d) of Regulation AB.      Substitution Amount: As defined in the second paragraph of Section 2.04(b).      Tax Matters Person: The “tax matters person” as specified in the REMIC Provisions which shall initially be the Holder of the Class LT-R Certificate.      Telerate Page 3750: The display currently so designated as “Page 3750” on the Bridge Telerate Service (or such other page selected by the Securities Administrator as may replace Page 3750 on that service for the purpose of displaying daily comparable rates on prices).      Trust Fund: The corpus of the trust created pursuant to this Agreement, consisting of the Mortgage Loans and all interest and principal received thereon on or after the Cut-off Date (other than Scheduled Payments due on or prior to the Cut-off Date), the Depositor’s rights assigned to the Trustee under the Purchase Agreements and the Servicing Agreements, as modified by the Acknowledgements and the Mortgage Loan Purchase and Sale Agreement, the Insurance Policies relating to the Mortgage Loans, all cash, instruments or property held or required to be held in the Collection Accounts, the Distribution Account, property that secured a Mortgage Loan, the pledge, control and guaranty agreements and any Limited Purpose Surety Bond relating to the Additional Collateral Mortgage Loans and, if applicable, the Reserve Fund.      Trustee: HSBC Bank USA, National Association, a national banking association organized and existing under the laws of the United States of America and any Person succeeding the Trustee hereunder, or if any successor trustee or any co-trustee shall be appointed as herein provided, then such successor trustee and such co-trustee, as the case may be.      Trustee Mortgage Files: With respect to each Mortgage Loan, the Mortgage Documents to be retained in the custody and possession of the Trustee or the Custodian on behalf of the Trustee.      Two Times Test: As to any Distribution Date, (i) the Aggregate Subordinate Percentage is at least two times the Aggregate Subordinate Percentage as of the Closing Date; (ii) the aggregate of the Stated Principal Balances of all Mortgage Loans Delinquent 60 days or more (including Mortgage Loans in REO, foreclosure and bankruptcy status) (averaged over the preceding six month period), as a percentage of the aggregate of the Class Principal Amount of the Subordinate Certificates on such Distribution Date, does not equal or exceed 50%; and (iii) on or prior to the Distribution Date in August 2009, cumulative Realized Losses with respect to the Mortgage Loans do not exceed 20% of the Original Subordinate Principal Amount, and thereafter, cumulative Realized Losses with respect to the Mortgage Loans do not exceed 30% of the Original Subordinate Principal Amount. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 34 --------------------------------------------------------------------------------        UCC: The Uniform Commercial Code as enacted in the relevant jurisdiction.      Undercollateralized Group: With respect to any Distribution Date, any Certificate Group with respect to which the aggregate Class Principal Amount of such Certificate Group is greater than the aggregate Stated Principal Balance of the Mortgage Loans in the related Mortgage Pool immediately prior to such Distribution Date.      Underwriters: Banc of America Securities LLC and Countrywide Securities Corporation.      Underwriter’s Exemption: Prohibited Transaction Exemption (“PTE”) 93-31 (58 Fed. Reg. 28620 (1993)) and PTE 2000-55 (65 Fed. Reg. 67,774 (2000)), respectively, as most recently amended and restated by PTE 2002-41, or any substantially similar administrative exemption granted by the U.S. Department of Labor to the Underwriters.      Underwriting Agreement: The Underwriting Agreement, dated August 28, 2006, among the Seller, the Depositor and the Underwriters.      Uniform Commercial Code: The Uniform Commercial Code as in effect in any applicable jurisdiction from time to time.      Upper-Tier REMIC: As described in the Preliminary Statement to this Agreement.      Voting Interests: The portion of the voting rights of all the Certificates that is allocated to any Certificate for purposes of the voting provisions of this Agreement. At all times during the term of this Agreement, 99.00% of all Voting Interests shall be allocated to the Class 1-A1A, Class 1-A1B, Class 1-A2, Class 2-A1, Class 2-A2, Class 3-A1, Class 3-A2 Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates. Voting Interests shall be allocated among such Certificates based on the product of (i) 99% and (ii) the fraction, expressed as a percentage, the numerator of which is the aggregate Class Principal Amounts for each Class then outstanding and the denominator of which is the Aggregate Stated Principal Balance outstanding. At all times during the term of this Agreement, 1.00% of all Voting Interests shall be allocated to the Class 1-AR Certificates. Voting Interests shall be allocated among such Certificates based on the product of (i) 1% and (ii) the fraction, expressed as a percentage, the numerator of which is the aggregate Class Principal Amounts for each Class then outstanding and the denominator of which is the Aggregate Stated Principal Balance outstanding. The Class LT-R Certificate shall not have any voting rights.      Section 1.02 Calculations Respecting Mortgage Loans.      Calculations required to be made pursuant to this Agreement with respect to any Mortgage Loan in the Trust Fund shall be made based upon current information as to the terms of the Mortgage Loans and reports of payments received from the Mortgagor on such Mortgage Loans and payments to be made to the Securities Administrator as supplied to the Securities Administrator by the Master Servicer. The Securities Administrator shall not be required to recompute, verify or recalculate the information supplied to it by the Master Servicer or any Servicer. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 35 --------------------------------------------------------------------------------   ARTICLE II DECLARATION OF TRUST; ISSUANCE OF CERTIFICATES      Section 2.01 Creation and Declaration of Trust Fund; Conveyance of Mortgage Loans.      (a) Concurrently with the execution and delivery of this Agreement, the Depositor does hereby transfer, assign, set over, deposit with and otherwise convey to the Trustee, without recourse, subject to Sections 2.02 and 2.04, in trust, all the right, title and interest of the Depositor in and to the Trust Fund. Such conveyance includes, without limitation, (i) the Mortgage Loans, including the right to all payments of principal and interest received on or with respect to the Mortgage Loans on and after the Cut-off Date (other than Scheduled Payments due on or before such date), and all such payments due after such date but received prior to such date and intended by the related Mortgagors to be applied after such date; (ii) all of the Depositor’s right, title and interest in and to all amounts from time to time credited to and the proceeds of the Distribution Account, any Collection Accounts or any Escrow Account established with respect to the Mortgage Loans; (iii) all of the Depositor’s rights under the Purchase Agreements and the Servicing Agreements as modified by the Acknowledgements and the Mortgage Loan Purchase and Sale Agreement; (iv) all of the Depositor’s right, title or interest in REO Property and the proceeds thereof; (v) all of the Depositor’s rights under any Insurance Policies related to the Mortgage Loans; and (vi) the Depositor’s security interest in any collateral pledged to secure the Mortgage Loans, including the Mortgaged Properties and any Additional Collateral relating to the Additional Collateral Mortgage Loans, including, but not limited to, the pledge, control and guaranty agreements and any related Limited Purpose Surety Bond to have and to hold, in trust; and the Trustee declares that, subject to the review provided for in Section 2.02, it has received and shall hold the Trust Fund, as trustee, in trust, for the benefit and use of the Holders of the Certificates and for the purposes and subject to the terms and conditions set forth in this Agreement, and, concurrently with such receipt, has caused to be executed, authenticated and delivered to or upon the order of the Depositor, in exchange for the Trust Fund, Certificates in the authorized denominations evidencing the entire ownership of the Trust Fund.      The foregoing sale, transfer, assignment, set-over, deposit and conveyance does not and is not intended to result in the creation or assumption by the Trustee of any obligation of the Depositor, the Seller or any other Person in connection with the Mortgage Loans or any other agreement or instrument relating thereto except as specifically set forth therein.      Notwithstanding anything to the contrary contained herein, the parties hereto acknowledge that the functions of the Trustee with respect to the custody, acceptance, inspection and release of Mortgage Files, including but not limited to certain insurance policies and documents contemplated by this Agreement, and preparation and delivery of the certifications shall be performed by the Custodian pursuant to the terms and conditions of the Custody Agreement. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 36 --------------------------------------------------------------------------------        In connection with such transfer and assignment of the Mortgage Loans, the Depositor does hereby deliver to, and deposit with, or cause to be delivered to and deposited with, the Custodian acting on the Trustee’s behalf, the following documents or instruments with respect to each related Mortgage Loan (each, a “Trustee Mortgage File”) so transferred and assigned:      (i) with respect to each Mortgage Loan, the original Mortgage Note endorsed without recourse in proper form to the order of the Trustee, or in blank (in each case, with all necessary intervening endorsements, as applicable); provided that any such endorsement may be stamped or generated electronically, if acceptable under all applicable laws and regulations and the endorsing entity had adopted appropriate authorizing resolutions prior to such stamped or electronic endorsement.      (ii) with respect to each Mortgage Loan (other than a Cooperative Loan), the original mortgage, deed of trust or other instrument creating a first lien on the underlying property securing the Mortgage Loan and bearing evidence that such instrument has been recorded in the appropriate jurisdiction where the Mortgaged Property is located (or, in lieu of the original of the Mortgage, a true copy of the Mortgage certified by the originator, or a duplicate or conformed copy of the Mortgage, together with a certificate of either the closing attorney or an officer of the title insurer that issued the related title insurance policy, certifying that such copy represents a true and correct copy of the original and that such original has been or is currently submitted to be recorded in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located);      (iii) with respect to each Mortgage Loan (other than a Cooperative Loan), the Assignment of Mortgage in form and substance acceptable for recording in the relevant jurisdiction, such assignment being either (A) in blank, without recourse, or (B) or endorsed to “HSBC Bank USA, National Association, as Trustee of the Sequoia Mortgage Trust 2006-1, Mortgage Pass-Through Certificates, without recourse;” provided, that if the Mortgage Loan is a MERS Designated Mortgage Loan, no Assignment of Mortgage shall be required;      (iv) with respect to each Mortgage Loan (other than a Cooperative Loan), the originals or certified copies of all Intervening Assignments of the Mortgage, if any, with evidence of recording thereon, showing a complete chain of title to the last endorsee, including any warehousing assignment;      (v) with respect to each Mortgage Loan (other than a Cooperative Loan), any assumption, modification, written assurance, substitution, consolidation, extension or guaranty agreement, if applicable;      (vi) with respect to each Mortgage Loan (other than a Cooperative Loan), the original policy of title insurance (or a true copy thereof) with respect to any such Mortgage Loan, or, if such policy has not yet been delivered by the insurer, the title commitment or title binder to issue same; 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 37 --------------------------------------------------------------------------------        (vii) if the Mortgage Note or Mortgage or any other material document or instrument relating to the Mortgage Loan has been signed by a person on behalf of the Mortgagor, the original power of attorney or other instrument that authorized and empowered such person to sign bearing evidence that such instrument has been recorded, if so required, in the appropriate jurisdiction where the Mortgaged Property is located (or, in lieu thereof, a duplicate or conformed copy of such instrument, together with a certificate of receipt from the recording office, certifying that such copy represents a true and complete copy of the original and that such original has been or is currently submitted to be recorded in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located); and      (viii) with respect to each Mortgage Loan which constitutes a Cooperative Mortgage Loan:      (a) the original loan and security agreement;      (b) the original Cooperative Shares;      (c) a stock power executed in blank by the person in whose name the Cooperative Shares are issued;      (d) the Proprietary Lease or occupancy agreement accompanied by an assignment in blank of such proprietary lease;      (e) the recognition agreement executed by the Cooperative Corporation, which requires the Cooperative Corporation to recognize the rights of the lender and its successors in interest and assigns, under the cooperative;      (f) UCC1 financing statements with recording information thereon from the appropriate governmental recording offices if necessary to perfect the security interest of the Cooperative Mortgage Loan under the Uniform Commercial Code in the jurisdiction in which the cooperative project is located, accompanied by UCC3 financing statements executed in blank for recordation of the change in the secured party thereunder;      (g) the original policy of title insurance or with respect to any such Cooperative Mortgage Loan, if such policy has not yet been delivered by the insurer, the title commitment or title binder to issue same; and      (h) Any guarantees, if applicable.      (b) The Depositor shall cause Assignments of Mortgage with respect to each Mortgage Loan other than a Cooperative Mortgage Loan to be completed in the form specified in Section 2.01(a)(iii) above within 30 days of the Closing Date for purpose of their recording; provided, however, that such Assignments of Mortgage need not be recorded if, on or prior to the Closing Date, the Depositor delivers, at its own expense, an Opinion of Counsel (which must be Independent counsel) acceptable to the Trustee, the Securities Administrator and the Rating 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 38 --------------------------------------------------------------------------------   Agencies, to the effect that recording in such states is not required to protect the Trustee’s interest in the related Mortgage Loans. Subject to the preceding sentence, as soon as practicable after the Closing Date (but in no event more than 270 days thereafter except to the extent delays are caused by the applicable recording office), the Depositor at its own expense and with the cooperation of the applicable Servicer, shall cause to be properly recorded by each Servicer in each public recording office where the related Mortgages are recorded each Assignment of Mortgage endorsed in the form described in Section 2.01(a)(iii) above with respect to each such Mortgage Loan.      (c) In instances where a title insurance policy is required to be delivered to the Trustee or the Custodian on behalf of the Trustee under Sections 2.01(a)(vi) or 2.01(a)(viii)(g) above and is not so delivered, the Depositor will provide a copy of such title insurance policy to the Trustee, or to the Custodian on behalf of the Trustee, as promptly as practicable after the execution and delivery hereof, but in any case within 180 days of the Closing Date.      (d) For Mortgage Loans (if any) that have been prepaid in full after the Cut-off Date and prior to the Closing Date, the Depositor, in lieu of delivering the above documents, herewith delivers to the Trustee, or to the Custodian on behalf of the Trustee, an Officer’s Certificate which shall include a statement to the effect that all amounts received in connection with such prepayment that are required to be deposited in the Distribution Account pursuant to Section 4.01 have been so deposited. All original documents that are not delivered to the Trustee or the Custodian on behalf of the Trustee shall be held by the Master Servicer or the applicable Servicer in trust for the benefit of the Trustee and the Certificateholders.      Section 2.02 Acceptance of Trust Fund by Trustee; Review of Documentation for Trust Fund.      (a) The Trustee, by execution and delivery hereof, acknowledges receipt by it or by the Custodian on its behalf of the Trustee Mortgage Files pertaining to the Mortgage Loans listed on the Mortgage Loan Schedule, subject to review thereof by the Custodian on behalf of the Trustee in accordance with Section 4(a) of the Custody Agreement (a form of which is attached hereto as Exhibit D). The Custodian on behalf of the Trustee, will execute and deliver to the Trustee and the Depositor an Initial Trust Receipt and Schedule of Exceptions, on the Closing Date in the forms required by the Custody Agreement.      (b) Within 270 days after the Closing Date, the Custodian on behalf of the Trustee, will, for the benefit of Holders of the Certificates, review each related Trustee Mortgage File to ascertain that all required documents set forth in Section 2.01 have been received and appear on their face to conform with the requirements set forth in Section 4A and 4B of the Custody Agreement.      (c) Nothing in this Agreement shall be construed to constitute an assumption by the Trust Fund, the Trustee, the Custodian or the Certificateholders of any unsatisfied duty, claim or other liability on any Mortgage Loan or to any Mortgagor. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 39 --------------------------------------------------------------------------------        (d) Each of the parties hereto acknowledges that the Custodian shall perform the applicable review of the related Mortgage Loans and respective certifications as provided in the Custody Agreement.      (e) Upon execution of this Agreement, the Depositor hereby delivers to the Trustee and the Trustee acknowledges receipt of the Acknowledgements, together with the related Purchase Agreements, Servicing Agreements and the Mortgage Loan Purchase and Sale Agreement.      Section 2.03 Representations and Warranties of the Depositor.      (a) The Depositor hereby represents and warrants to the Trustee, for the benefit of the Certificateholders, and to the Master Servicer and the Securities Administrator as of the Closing Date or such other date as is specified, that:      (i) the Depositor is a corporation duly organized, validly existing and in good standing under the laws governing its creation and existence and has full corporate power and authority to own its property, to carry on its business as presently conducted, to enter into and perform its obligations under this Agreement, and to create the trust pursuant hereto;      (ii) the execution and delivery by the Depositor of this Agreement have been duly authorized by all necessary corporate action on the part of the Depositor; neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on the Depositor or its properties or the certificate of incorporation or bylaws of the Depositor;      (iii) the execution, delivery and performance by the Depositor of this Agreement and the consummation of the transactions contemplated hereby do not require the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any state, federal or other governmental authority or agency, except such as has been obtained, given, effected or taken prior to the date hereof;      (iv) this Agreement has been duly executed and delivered by the Depositor and, assuming due authorization, execution and delivery by the Trustee, the Master Servicer and the Securities Administrator, constitutes a valid and binding obligation of the Depositor enforceable against it in accordance with its terms except as such enforceability may be subject to (A) applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally and (B) general principles of equity regardless of whether such enforcement is considered in a proceeding in equity or at law;      (v) there are no actions, suits or proceedings pending or, to the knowledge of the Depositor, threatened or likely to be asserted against or affecting the Depositor, before or by any court, administrative agency, arbitrator or governmental body (A) with 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 40 --------------------------------------------------------------------------------   respect to any of the transactions contemplated by this Agreement or (B) with respect to any other matter which in the judgment of the Depositor will be determined adversely to the Depositor and will if determined adversely to the Depositor materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect its ability to perform its obligations under this Agreement;      (vi) immediately prior to the transfer and assignment of the Mortgage Loans to the Trustee, the Depositor was the sole owner of record and holder of each Mortgage Loan, and the Depositor had good and marketable title thereto, and had full right to transfer and sell each Mortgage Loan to the Trustee free and clear, subject only to (1) liens of current real property taxes and assessments not yet due and payable and, if the related Mortgaged Property is a condominium unit, any lien for common charges permitted by statute, (2) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of such Mortgage acceptable to mortgage lending institutions in the area in which the related Mortgaged Property is located and specifically referred to in the lender’s title insurance policy or attorney’s opinion of title and abstract of title delivered to the originator of such Mortgage Loan, and (3) such other matters to which like properties are commonly subject which do not, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Mortgage, of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest, and had full right and authority, subject to no interest or participation of, or agreement with, any other party, to sell and assign each Mortgage Loan pursuant to this Agreement;      (vii) This Agreement creates a valid and continuing security interest (as defined in the applicable Uniform Commercial Code (the “UCC”), in the Mortgage Loans in favor of the Trustee, which security interest is prior to all other liens, and is enforceable as such against creditors of and purchasers from the Depositor;      (viii) The Mortgage Loans constitute “instruments” within the meaning of the applicable UCC;      (ix) Other than the security interest granted to the Trustee pursuant to this Agreement, the Depositor has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Mortgage Loans. The Depositor has not authorized the filing of and is not aware of any financing statement against the Depositor that includes a description of the collateral covering the Mortgage Loans other than a financing statement relating to the security interest granted to the Trustee hereunder or that has been terminated. The Depositor is not aware of any judgment or tax lien filings against the Depositor;      (x) None of the Mortgage Loans have any marks or notations indicating that such Mortgage Loans have been pledged, assigned or otherwise conveyed to any Person other than the Trustee; and 41 --------------------------------------------------------------------------------        (xi) The Depositor has received all consents and approvals required by the terms of the Mortgage Loans to convey the Mortgage Loans hereunder to the Trustee.      The foregoing representations made in this Section 2.03 shall survive the termination of this Agreement and shall not be waived by any party hereto.      Section 2.04 Discovery of Breach; Repurchase or Substitution of Mortgage Loans.      (a) Pursuant to Sections 2(b) and 2(d) of the Mortgage Loan Purchase and Sale Agreement, the Seller has made certain representations and warranties as to the characteristics of the Mortgage Loans as of the Closing Date, including representations and warranties that no Mortgage Loan is a “high-cost home loan” as defined under any local, state, or federal laws, and each of the Depositor and the Trustee intend that the Mortgage Loans (including any Replacement Mortgage Loans) included in the Trust Fund satisfy such representations and warranties. The Depositor, for the benefit of the Trustee and the Certificateholders hereby assigns any such rights against the Seller to the Trustee and the Seller acknowledges that it has agreed to comply with the provisions of this Section 2.04 in respect of a breach of any of such representations and warranties.      It is understood and agreed that such representations and warranties set forth in Section 2(b) and 2(d) of the Mortgage Loan Purchase and Sale Agreement shall survive delivery of the Trustee Mortgage Files and the Assignment of Mortgage of each Mortgage Loan to the Trustee and shall continue throughout the term of this Agreement. Upon (i) discovery or receipt by the Depositor of written notice of any materially defective document in a related Trustee Mortgage File or, following the date of delivery to the Trustee of the Custodian’s Final Trust Receipt as required under the Custody Agreement, that a document is missing from a related Trustee Mortgage File, or (ii) discovery by the Depositor or the Seller of the breach by the Seller of any representation or warranty under the Mortgage Loan Purchase and Sale Agreement in respect of any Mortgage Loan, which materially adversely affects the value of that Mortgage Loan or the interest therein of the Certificateholders (a “Defective Mortgage Loan”) (each of such parties hereby agreeing to give written notice thereof to the Trustee and the other of such parties), the Trustee, or its designee, shall promptly notify the Depositor in writing of such defective or missing document or breach and request that the Depositor deliver such missing document or cure or cause the cure of such defect or breach within 90 days from the date that the Depositor discovered or was notified of such missing document, defect or breach, and if the Depositor does not deliver such missing document or cure such defect or breach in all material respects during such period, the Trustee shall enforce the Seller’s obligation under the Mortgage Loan Purchase and Sale Agreement and cause the Seller to repurchase that Mortgage Loan from the Trust Fund at the Purchase Price on or prior to the Determination Date following the expiration of such 90-day period (subject to Section 2.04(b) below); provided, however, that, in connection with any such breach that could not reasonably have been cured within such 90-day period, if the Seller shall have commenced to cure such breach within such 90-day period, the Seller shall be permitted to proceed thereafter diligently and expeditiously to cure the same within an additional 90-day period. The Purchase Price for the repurchased Mortgage Loan shall be deposited in the related Distribution Account, and the Trustee, or its designee, upon receipt of written certification from the Securities Administrator of such deposit, shall release to the Seller, the 42 --------------------------------------------------------------------------------   related Trustee Mortgage File and shall execute and deliver such instruments of transfer or assignment, in each case without recourse, representation or warranties, as either party shall furnish to it and as shall be necessary to vest in such party any Mortgage Loan released pursuant hereto and the Trustee, or its designee, shall have no further responsibility with regard to such Trustee Mortgage File (it being understood that the Trustee shall have no responsibility for determining the sufficiency of such assignment for its intended purpose). In lieu of repurchasing any such Mortgage Loan as provided above, either party may cause such Mortgage Loan to be removed from the Trust Fund (in which case it shall become a Deleted Mortgage Loan) and substitute one or more Replacement Mortgage Loans in the manner and subject to the limitations set forth in Section 2.04(b) below. It is understood and agreed that the obligation of the Seller to cure or to repurchase (or to substitute for) any Mortgage Loan as to which a document is missing, a material defect in a constituent document exists or as to which such a breach has occurred and is continuing shall constitute the sole remedy against the such party respecting such omission, defect or breach available to the Trustee on behalf of the Certificateholders.      (b) Any substitution of Replacement Mortgage Loans for Deleted Mortgage Loans made pursuant to Section 2.04(a) above must be effected prior to the last Business Day that is within two years after the Closing Date. As to any Deleted Mortgage Loan for which the Seller substitutes a Replacement Mortgage Loan or Loans, such substitution shall be effected by delivering to the Custodian, on behalf of the Trustee, for such Replacement Mortgage Loan or Loans, the related Mortgage Note, the related Mortgage, the related Assignment of Mortgage to the Trustee, and such other documents and agreements, with all necessary endorsements thereon, together with an Officers’ Certificate stating that each such Replacement Mortgage Loan satisfies the definition thereof and specifying the Substitution Amount (as described below), if any, in connection with such substitution. The Custodian shall acknowledge receipt for such Replacement Mortgage Loan and, within 45 days thereafter, shall review such Mortgage Documents as specified in the Custody Agreement and deliver to the Trustee and the Depositor, with respect to such Replacement Mortgage Loans, a certification substantially in the form of a revised Trust Receipt, with any exceptions noted thereon. Within one year of the date of substitution, the Custodian shall deliver to the Trustee and the Depositor a certification substantially in the form of a revised Final Trust Receipt, with respect to such Replacement Mortgage Loans, with any exceptions noted thereon. Monthly Payments due with respect to Replacement Mortgage Loans in the month of substitution shall not be included as part of the Trust Fund and shall be retained by the Seller. For the month of substitution, distributions to the Certificateholders shall reflect the collections and recoveries in respect of such Deleted Mortgage in the Due Period preceding the month of substitution and the Seller shall thereafter be entitled to retain all amounts subsequently received in respect of such Deleted Mortgage Loan. Upon such substitution, such Replacement Mortgage Loan shall constitute part of the Trust Fund and shall be subject in all respects to the terms of this Agreement and the Mortgage Loan Purchase and Sale Agreement, including all representations and warranties thereof included in the Mortgage Loan Purchase and Sale Agreement, in each case as of the date of substitution.      For any month in which the Seller substitutes one or more Replacement Mortgage Loans for one or more Deleted Mortgage Loans, the related Servicer shall determine the excess (each, a “Substitution Amount”), if any, by which the aggregate Purchase Price of all such Deleted Mortgage Loans exceeds the aggregate Stated Principal Balance of the Replacement Mortgage 43 --------------------------------------------------------------------------------   Loans replacing such Deleted Mortgage Loans, together with one month’s interest on such excess amount at the applicable Net Mortgage Rate. On the date of such substitution, the Seller, as applicable, shall deliver or cause to be delivered to the Servicer for deposit in the Collection Account an amount equal to the related Substitution Amount, if any, and the Custodian, on behalf of the Trustee, upon receipt of the related Replacement Mortgage Loan or Loans and certification by the Servicer of such deposit, shall release to the Seller the related Trustee Mortgage File or Files and shall execute and deliver such instruments of transfer or assignment, in each case without recourse, as the Seller shall deliver to it and as shall be necessary to vest therein any Deleted Mortgage Loan released pursuant hereto.      In addition, the Seller shall obtain at its own expense and deliver to the Trustee and the Securities Administrator an Opinion of Counsel to the effect that such substitution (either specifically or as a class of transactions) shall not cause an Adverse REMIC Event. If such Opinion of Counsel can not be delivered, then such substitution may only be effected at such time as the required Opinion of Counsel can be given.      (c) Upon discovery by the Seller, the Depositor or the Trustee that any Mortgage Loan does not constitute a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code, the party discovering such fact shall within two Business Days give written notice thereof to the other parties. In connection therewith, the applicable party shall repurchase or, subject to the limitations set forth in Section 2.04(b), substitute one or more Replacement Mortgage Loans for the affected Mortgage Loan within 90 days of the earlier of discovery or receipt of such notice with respect to such affected Mortgage Loan. Any such repurchase or substitution shall be made in the same manner as set forth in Section 2.04(a) above. The Trustee shall re-convey to the Seller the Mortgage Loan to be released pursuant hereto in the same manner, and on the same terms and conditions, as it would a Mortgage Loan repurchased for breach of a representation or warranty.      (d) The Seller indemnifies and holds the Trust Fund, the Master Servicer, the Securities Administrator, the Trustee, the Depositor and each Certificateholder harmless against any and all taxes, claims, losses, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments, and any other costs, fees and expenses that the Trust Fund, the Trustee, the Master Servicer, the Securities Administrator, the Depositor and any Certificateholder may sustain in connection with any actions of such party relating to a repurchase of a Mortgage Loan other than in compliance with the terms of this Section 2.04 and the Mortgage Loan Purchase and Sale Agreement, to the extent that any such action causes an Adverse REMIC Event.      Section 2.05 [Reserved.]      Section 2.06 Grant Clause.      (a) It is intended that the conveyance of the Depositor’s right, title and interest in and to property constituting the Trust Fund pursuant to this Agreement shall constitute, and shall be construed as, a sale of such property and not a grant of a security interest to secure a loan. However, if such conveyance is deemed to be in respect of a loan, it is intended that: (1) the rights and obligations of the parties shall be established pursuant to the terms of this Agreement; 44 --------------------------------------------------------------------------------   (2) the Depositor hereby grants to the Trustee for the benefit of the Holders of the Certificates a first priority security interest in all of the Depositor’s right, title and interest in, to and under, whether now owned or hereafter acquired, the Trust Fund and all proceeds of any and all property constituting the Trust Fund to secure payment of the Certificates; and (3) this Agreement shall constitute a security agreement under applicable law. If such conveyance is deemed to be in respect of a loan and the trust created by this Agreement terminates prior to the satisfaction of the claims of any Person holding any Certificate, the security interest created hereby shall continue in full force and effect and the Trustee shall be deemed to be the collateral agent for the benefit of such Person, and all proceeds shall be distributed as herein provided.      (b) The Depositor shall, to the extent consistent with this Agreement, take such reasonable actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans and the other property described above, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of this Agreement. The Depositor will, at its own expense, make all initial filings on or about the Closing Date and shall forward a copy of such filing or filings to the Trustee. Without limiting the generality of the foregoing, the Depositor shall prepare and forward for filing, or shall cause to be forwarded for filing, at the expense of the Depositor, all filings necessary to maintain the effectiveness of any original filings necessary under the relevant UCC to perfect the Trustee’s security interest in or lien on the Mortgage Loans, including without limitation (x) continuation statements, and (y) such other statements as may be occasioned by (1) any change of name of the Seller, the Depositor or the Trustee, (2) any change of location of the place of business or the chief executive office of the Seller or the Depositor, (3) any transfer of any interest of the Seller or the Depositor in any Mortgage Loan or (4) any change under the relevant UCC or other applicable laws. Neither of the Seller nor the Depositor shall organize under the law of any jurisdiction other than the State under which each is organized as of the Closing Date (whether changing its jurisdiction of organization or organizing under an additional jurisdiction) without giving 30 days prior written notice of such action to its immediate and intermediate transferee, including the Trustee. Before effecting such change, the Seller or the Depositor proposing to change its jurisdiction of organization shall prepare and file in the appropriate filing office any financing statements or other statements necessary to continue the perfection of the interests of its immediate and mediate transferees, including the Trustee, in the Mortgage Loans. In connection with the transactions contemplated by this Agreement, each of the Seller and the Depositor authorizes its immediate or mediate transferee to file in any filing office any initial financing statements, any amendments to financing statements, any continuation statements, or any other statements or filings described in this paragraph (b).      On or before March 1 of each calendar year, beginning in 2007, the Depositor shall furnish to the Trustee and the Securities Administrator an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to any filings necessary to maintain the effectiveness of any original filings necessary under the relevant UCC to perfect the Trustee’s security interest in or lien on the Mortgage Loans, or stating that, in the opinion of such counsel, no such action is necessary to maintain such lien and security interest. Such Opinion of Counsel shall also describe the execution and filing of any financing statements and continuation 45 --------------------------------------------------------------------------------   statements that will, in the opinion of such counsel, be required to maintain such lien and security interest until March 1 in the following calendar year. ARTICLE III THE CERTIFICATES      Section 3.01 The Certificates.      (a) The Certificates shall be issuable in registered form only and shall be securities governed by Article 8 of the New York Uniform Commercial Code. The Certificates will be evidenced by one or more certificates, beneficial ownership of which will be held in the minimum denominations in Certificate Principal Amount or Notional Amount specified in the Preliminary Statement to this Agreement and in integral multiples of $1 in excess thereof, or in the Percentage Interests specified in the Preliminary Statement to this Agreement, as applicable.      (b) The Certificates shall be executed by manual or facsimile signature on behalf of the Trustee by an authorized officer. Each Certificate shall, on original issue, be authenticated by the Authenticating Agent upon the order of the Depositor upon receipt by the Trustee or its Custodian of the Trustee Mortgage Files described in Section 2.01. No Certificate shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein, executed by an authorized officer of the Authenticating Agent, by manual signature, and such certification upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication. At any time and from time to time after the execution and delivery of this Agreement, the Depositor may deliver Certificates executed by the Trustee to the Authenticating Agent for authentication and the Authenticating Agent shall authenticate and deliver such Certificates as in this Agreement provided and not otherwise.      (c) The Class B-4, Class B-5, Class B-6 and Class LT-R Certificates offered and sold in reliance on the exemption from registration under Rule 144A under the Securities Act shall be issued initially in definitive, fully registered form without interest coupons with the applicable legends set forth in Exhibit A added to the forms of such Certificates (each, a “Restricted Global Security”).      Section 3.02 Registration.      The Securities Administrator is hereby appointed, and the Securities Administrator hereby accepts its appointment as, initial Certificate Registrar in respect of the Certificates and shall maintain books for the registration and for the transfer of Certificates (the “Certificate Register”). The Trustee may appoint a bank or trust company to act as successor Certificate Registrar. A registration book shall be maintained for the Certificates collectively. The Certificate Registrar may resign or be discharged or removed and a new successor may be appointed in accordance with the procedures and requirements set forth in Sections 6.06 and 6.07 hereof with respect to the resignation, discharge or removal of the Securities Administrator and 46 --------------------------------------------------------------------------------   the appointment of a successor Securities Administrator. The Certificate Registrar may appoint, by a written instrument delivered to the Holders and the Master Servicer, any bank or trust company to act as co-registrar under such conditions as the Certificate Registrar may prescribe; provided, however, that the Certificate Registrar shall not be relieved of any of its duties or responsibilities hereunder by reason of such appointment.      Section 3.03 Transfer and Exchange of Certificates.      (a) A Certificate (other than Book-Entry Certificates which shall be subject to Section 3.09 hereof) may be transferred by the Holder thereof only upon presentation and surrender of such Certificate at the office of the Certificate Registrar duly endorsed or accompanied by an assignment duly executed by such Holder or his duly authorized attorney in such form as shall be satisfactory to the Certificate Registrar. Upon the transfer of any Certificate in accordance with the preceding sentence, the Trustee shall execute, and the Authenticating Agent shall authenticate and deliver to the transferee, one or more new Certificates of the same Class and evidencing, in the aggregate, the same aggregate Certificate Principal Amount (or Notional Amount) as the Certificate being transferred. No service charge shall be made to a Certificateholder for any registration of transfer of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any registration of transfer of Certificates.      (b) A Certificate may be exchanged by the Holder thereof for any number of new Certificates of the same Class, in authorized denominations, representing in the aggregate the same Certificate Principal Amount (or Notional Amount) as the Certificate surrendered, upon surrender of the Certificate to be exchanged at the office of the Certificate Registrar duly endorsed or accompanied by a written instrument of transfer duly executed by such Holder or his duly authorized attorney in such form as is satisfactory to the Certificate Registrar. Certificates delivered upon any such exchange will evidence the same obligations, and will be entitled to the same rights and privileges, as the Certificates surrendered. No service charge shall be made to a Certificateholder for any exchange of Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any exchange of Certificates. Whenever any Certificates are so surrendered for exchange, the Trustee shall execute, and the Authenticating Agent shall authenticate, date and deliver the Certificates which the Certificateholder making the exchange is entitled to receive.      (c) By acceptance of a Restricted Certificate, whether upon original issuance or subsequent transfer, each Holder of such a Certificate acknowledges the restrictions on the transfer of such Certificate set forth thereon and agrees that it will transfer such a Certificate only as provided herein.      The following restrictions shall apply with respect to the transfer and registration of transfer of a Restricted Certificate to a transferee that takes delivery in the form of a Definitive Certificate:      (i) The Certificate Registrar shall register the transfer of a Restricted Certificate if the requested transfer is (x) to the Depositor or an affiliate (as defined in 47 --------------------------------------------------------------------------------   Rule 405 under the Securities Act) of the Depositor or (y) being made to a “qualified institutional buyer” (a “QIB”) as defined in Rule 144A under the Securities Act by a transferor that has provided the Certificate Registrar with a certificate in the form of Exhibit H hereto; and      (ii) The Certificate Registrar shall register the transfer of a Restricted Certificate if the requested transfer is being made to an “accredited investor” under Rule 501(a)(1), (2), (3) or (7) under the Securities Act, or to any Person all of the equity owners in which are such accredited investors, by a transferor who furnishes to the Certificate Registrar a letter of the transferee substantially in the form of Exhibit I hereto.      (d) No transfer of an ERISA-Restricted Certificate in the form of a Definitive Certificate shall be made to any Person or shall be effective unless the Certificate Registrar, on behalf of the Trustee, has received (A) a certificate substantially in the form of Exhibit J hereto (or Exhibit B, in the case of a Residual Certificate) from such transferee or (B) an Opinion of Counsel satisfactory to the Certificate Registrar to the effect that the purchase and holding of such a Certificate will not constitute or result in prohibited transactions under Title I of ERISA or Section 4975 of the Code and will not subject the Certificate Registrar, the Trustee, the Master Servicer, the Depositor or the Securities Administrator to any obligation in addition to those undertaken in this Agreement; provided, however, that the Certificate Registrar will not require such certificate or opinion in the event that, as a result of a change of law or otherwise, counsel satisfactory to the Certificate Registrar has rendered an opinion to the effect that the purchase and holding of an ERISA-Restricted Certificate by a Plan or a Person that is purchasing or holding such a Certificate with the assets of a Plan will not constitute or result in a prohibited transaction under Title I of ERISA or Section 4975 of the Code. Each Transferee of an ERISA-Restricted Certificate that is a Book-Entry Certificate shall be deemed to have made the representations set forth in Exhibit J. The preparation and delivery of the certificate and opinions referred to above shall not be an expense of the Trust Fund, the Certificate Registrar, the Trustee, the Master Servicer, the Depositor or the Securities Administrator.      Notwithstanding the foregoing, no opinion or certificate shall be required for the initial issuance of the ERISA-Restricted Certificates. The Certificate Registrar shall have no obligation to monitor transfers of Book-Entry Certificates that are ERISA-Restricted Certificates and shall have no liability for transfers of such Certificates in violation of the transfer restrictions. The Certificate Registrar shall be under no liability to any Person for any registration of transfer of any ERISA-Restricted Certificate that is in fact not permitted by this Section 3.03(d) and none of the Securities Administrator, the Trustee or the Paying Agent shall have any liability for making any payments due on such Certificate to the Holder thereof or taking any other action with respect to such Holder under the provisions of this Agreement so long as the transfer was registered by the Certificate Registrar in accordance with the foregoing requirements. The Securities Administrator, on behalf of the Trustee, shall be entitled, but not obligated, to recover from any Holder of any ERISA-Restricted Certificate that was in fact a Plan or a Person acting on behalf of a Plan any payments made on such ERISA-Restricted Certificate at and after either such time. Any such payments so recovered by the Securities Administrator, on behalf of the Trustee, shall be paid and delivered by the Securities Administrator, on behalf of the Trustee, to 48 --------------------------------------------------------------------------------   the last preceding Holder of such Certificate that is not such a Plan or Person acting on behalf of a Plan.      (e) As a condition of the registration of transfer or exchange of any Certificate, the Certificate Registrar may require the certified taxpayer identification number of the owner of the Certificate and the payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith; provided, however, that the Certificate Registrar shall have no obligation to require such payment or to determine whether or not any such tax or charge may be applicable. No service charge shall be made to the Certificateholder for any registration, transfer or exchange of a Certificate.      (f) Notwithstanding anything to the contrary contained herein, no Residual Certificate may be owned, pledged or transferred, directly or indirectly, by or to (i) a Disqualified Organization or (ii) an individual, corporation or partnership or other person unless such person is (A) not a Non-U.S. Person or (B) is a Non-U.S. Person that holds a Residual Certificate in connection with the conduct of a trade or business within the United States and has furnished the transferor and the Certificate Registrar with an effective Internal Revenue Service Form W-8ECI or successor form at the time and in the manner required by the Code (any such person who is not covered by clause (A) or (B) above is referred to herein as a “Non-permitted Foreign Holder”).      Prior to and as a condition of the registration of any transfer, sale or other disposition of a Residual Certificate, the proposed transferee shall deliver to the Certificate Registrar, on behalf of the Trustee, an affidavit in substantially the form attached hereto as Exhibit B representing and warranting, among other things, that such transferee is neither a Disqualified Organization, an agent or nominee acting on behalf of a Disqualified Organization, nor a Non-permitted Foreign Holder (any such transferee, a “Permitted Transferee”), and the proposed transferor shall deliver to the Certificate Registrar an affidavit in substantially the form attached hereto as Exhibit C. In addition, the Certificate Registrar may (but shall have no obligation to) require, prior to and as a condition of any such transfer, the delivery by the proposed transferee of an Opinion of Counsel, addressed to the Certificate Registrar, that such proposed transferee or, if the proposed transferee is an agent or nominee, the proposed beneficial owner, is not a Disqualified Organization, agent or nominee thereof, or a Non-permitted Foreign Holder. Notwithstanding the registration in the Certificate Register of any transfer, sale, or other disposition of a Residual Certificate to a Disqualified Organization, an agent or nominee thereof, or Non-permitted Foreign Holder, such registration shall be deemed to be of no legal force or effect whatsoever and such Disqualified Organization, agent or nominee thereof, or Non-permitted Foreign Holder shall not be deemed to be a Certificateholder for any purpose hereunder, including, but not limited to, the receipt of distributions on such Residual Certificate. The Depositor, the Certificate Registrar and the Trustee shall be under no liability to any Person for any registration or transfer of a Residual Certificate to a Disqualified Organization, agent or nominee thereof or Non-permitted Foreign Holder or for the Paying Agent making any payments due on such Residual Certificate to the Holder thereof or for taking any other action with respect to such Holder under the provisions of this Agreement, so long as the transfer was effected in accordance with this Section 3.03(f), unless the Certificate Registrar shall have actual knowledge at the time of such transfer or the time of such payment or other action that the transferee is a 49 --------------------------------------------------------------------------------   Disqualified Organization, or an agent or nominee thereof, or Non-permitted Foreign Holder. The Certificate Registrar shall be entitled to recover from any Holder of a Residual Certificate that was a Disqualified Organization, agent or nominee thereof, or Non-permitted Foreign Holder at the time it became a Holder or any subsequent time it became a Disqualified Organization, agent or nominee thereof, or Non-permitted Foreign Holder, all payments made on such Residual Certificate at and after either such times (and all costs and expenses, including but not limited to attorneys’ fees, incurred in connection therewith). Any payment (not including any such costs and expenses) so recovered by the Certificate Registrar shall be paid and delivered to the last preceding Holder of such Residual Certificate.      If any purported transferee shall become a registered Holder of a Residual Certificate in violation of the provisions of this Section 3.03(f), then upon receipt of written notice to the Certificate Registrar that the registration of transfer of such Residual Certificate was not in fact permitted by this Section 3.03(f), the last preceding Permitted Transferee shall be restored to all rights as Holder thereof retroactive to the date of such registration of transfer of such Residual Certificate. The Depositor, the Certificate Registrar, the Securities Administrator and the Trustee shall be under no liability to any Person for any registration of transfer of a Residual Certificate that is in fact not permitted by this Section 3.03(f), or for the Paying Agent making any payment due on such Certificate to the registered Holder thereof or for taking any other action with respect to such Holder under the provisions of this Agreement so long as the transfer was registered upon receipt of the affidavit described in the preceding paragraph of this Section 3.03(f).      (g) Each Holder or Certificate Owner of a Restricted Certificate, ERISA-Restricted Certificate or Residual Certificate, or an interest therein, by such Holder’s or Owner’s acceptance thereof, shall be deemed for all purposes to have consented to the provisions of this section.      Section 3.04 Cancellation of Certificates.      Any Certificate surrendered for registration of transfer or exchange shall be cancelled and retained in accordance with normal retention policies with respect to cancelled certificates maintained by the Trustee or the Certificate Registrar.      Section 3.05 Replacement of Certificates.      If (i) any Certificate is mutilated and is surrendered to the Trustee or the Certificate Registrar or (ii) the Trustee or the Certificate Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate, and there is delivered to the Trustee and the Certificate Registrar such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Depositor, the Trustee or the Certificate Registrar that such destroyed, lost or stolen Certificate has been acquired by a protected purchaser, the Trustee shall execute and the Authenticating Agent shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and Certificate Principal Amount. Upon the issuance of any new Certificate under this Section 3.05, the Trustee, the Depositor, the Certificate Registrar or the Securities Administrator 50 --------------------------------------------------------------------------------   may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee, the Depositor, the Certificate Registrar or the Securities Administrator) connected therewith. Any replacement Certificate issued pursuant to this Section 3.05 shall constitute complete and indefeasible evidence of ownership in the applicable Trust Fund, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time.      If after the delivery of such new Certificate, a protected purchaser of the original Certificate in lieu of which such new Certificate was issued presents for payment such original Certificate, the Depositor, the Securities Administrator, the Certificate Registrar and the Trustee or any agent shall be entitled to recover such new Certificate from the Person to whom it was delivered or any Person taking therefrom, except a protected purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expenses incurred by the Depositor, the Certificate Registrar, the Securities Administrator, the Trustee or any agent in connection therewith.      Section 3.06 Persons Deemed Owners.      Subject to the provisions of Section 3.09 with respect to Book-Entry Certificates, the Depositor, the Securities Administrator, the Master Servicer, the Trustee, the Certificate Registrar, the Paying Agent and any agent of any of them shall treat the Person in whose name any Certificate is registered upon the books of the Certificate Registrar as the owner of such Certificate for the purpose of receiving distributions pursuant to Sections 5.01 and 5.02 and for all other purposes whatsoever, and none of the Depositor, the Master Servicer, the Securities Administrator, the Trustee, the Certificate Registrar, the Paying Agent nor any agent of any of them shall be affected by notice to the contrary.      Section 3.07 Temporary Certificates.      (a) Pending the preparation of definitive Certificates, upon the order of the Depositor, the Trustee shall execute and the Authenticating Agent shall authenticate and deliver temporary Certificates that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Certificates in lieu of which they are issued and with such variations as the authorized officers executing such Certificates may determine, as evidenced by their execution of such Certificates.      (b) If temporary Certificates are issued, the Depositor will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the office or agency of the Certificate Registrar without charge to the Holder. Upon surrender for cancellation of any one or more temporary Certificates, the Trustee shall execute and the Authenticating Agent shall authenticate and deliver in exchange therefor a like aggregate Certificate Principal Amount of definitive Certificates of the same Class in the authorized denominations. Until so exchanged, the temporary Certificates shall in all respects be entitled to the same benefits under this Agreement as definitive Certificates of the same Class. 51 --------------------------------------------------------------------------------        Section 3.08 Appointment of Paying Agent.      The Trustee may appoint a Paying Agent (which may be the Trustee) for the purpose of making distributions to the Certificateholders hereunder. The Trustee hereby appoints the Securities Administrator as the initial Paying Agent. The Trustee shall cause any Paying Agent, other than the Securities Administrator, to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee and the Securities Administrator that such Paying Agent will hold all sums held by it for the payment to the Certificateholders in an Eligible Account (which shall be the Distribution Account) in trust for the benefit of the Certificateholders entitled thereto until such sums shall be paid to the Certificateholders. All funds remitted by the Securities Administrator to any such Paying Agent for the purpose of making distributions shall be paid to the Certificateholders on each Distribution Date and any amounts not so paid shall be returned on such Distribution Date to the Securities Administrator. If the Paying Agent is not the Securities Administrator, the Securities Administrator shall cause to be remitted to the Paying Agent on or before the Business Day prior to each Distribution Date, by wire transfer in immediately available funds, the funds to be distributed on such Distribution Date. Any Paying Agent shall be either a bank or trust company or otherwise authorized under law to exercise corporate trust powers.      Section 3.09 Book-Entry Certificates.      (a) Each Class of Book-Entry Certificates, upon original issuance, shall be issued in the form of one or more typewritten Certificates representing the Book-Entry Certificates. The Book-Entry Certificates shall initially be registered on the Certificate Register in the name of the nominee of the Clearing Agency, and no Certificate Owner will receive a definitive certificate representing such Certificate Owner’s interest in the Book-Entry Certificates, except as provided in Section 3.09(c). Unless Definitive Certificates have been issued to Certificate Owners of Book-Entry Certificates pursuant to Section 3.09(c):      (i) the provisions of this Section 3.09 shall be in full force and effect;      (ii) the Certificate Registrar, the Securities Administrator, the Paying Agent and the Trustee shall deal with the Clearing Agency for all purposes (including the making of distributions on the Book-Entry Certificates) as the authorized representatives of the Certificate Owners and the Clearing Agency and shall be responsible for crediting the amount of such distributions to the accounts of such Persons entitled thereto, in accordance with the Clearing Agency’s normal procedures;      (iii) to the extent that the provisions of this Section 3.09 conflict with any other provisions of this Agreement, the provisions of this Section 3.09 shall control; and      (iv) the rights of Certificate Owners shall be exercised only through the Clearing Agency and the Clearing Agency Participants and shall be limited to those established by law and agreements between such Certificate Owners and the Clearing Agency and/or the Clearing Agency Participants. Unless and until Definitive Certificates are issued pursuant to Section 3.09(c), the initial Clearing Agency will make book-entry 52 --------------------------------------------------------------------------------   transfers among the Clearing Agency Participants and receive and transmit distributions of principal of and interest on the Book-Entry Certificates to such Clearing Agency Participants.      (b) Whenever notice or other communication to the Certificateholders is required under this Agreement, unless and until Definitive Certificates shall have been issued to Certificate Owners pursuant to Section 3.09(c), the Securities Administrator shall give all such notices and communications specified herein to be given to Holders of the Book-Entry Certificates to the Clearing Agency.      (c) If (i) (A) the Clearing Agency or the Depositor advises the Paying Agent in writing that the Clearing Agency is no longer willing or able to discharge properly its responsibilities with respect to the Book-Entry Certificates, and (B) the Depositor is unable to locate a qualified successor satisfactory to the Depositor and the Paying Agent or (ii) after the occurrence of an Event of Default, Certificate Owners representing beneficial interests aggregating not less than 50% of the Class Principal Amount of a Class of Book-Entry Certificates advise the Paying Agent and the Clearing Agency through the Clearing Agency Participants in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Certificate Owners of a Class of Book-Entry Certificates (each such event, a “Book-Entry Termination”), the Certificate Registrar shall notify the Clearing Agency to effect notification to all Certificate Owners, through the Clearing Agency, of the occurrence of any such event and of the availability of Definitive Certificates to Certificate Owners requesting the same. Upon surrender to the Certificate Registrar of the Book-Entry Certificates by the Clearing Agency, accompanied by registration instructions from the Clearing Agency for registration, the Certificate Registrar shall issue the Definitive Certificates. None of the Depositor, the Certificate Registrar, the Securities Administrator or the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Certificates all references herein to obligations imposed upon or to be performed by the Clearing Agency shall be deemed to be imposed upon and performed by the Certificate Registrar, to the extent applicable, with respect to such Definitive Certificates and the Certificate Registrar shall recognize the holders of the Definitive Certificates as Certificateholders hereunder. Notwithstanding the foregoing, the Certificate Registrar, upon the instruction of the Depositor, shall have the right to issue Definitive Certificates on the Closing Date in connection with credit enhancement programs. ARTICLE IV ADMINISTRATION OF THE TRUST FUND      Section 4.01 Collection Accounts; Distribution Account.      (a) On or prior to the Closing Date, the Master Servicer shall have caused the Servicers to establish and maintain one or more Collection Accounts, as provided in the related Servicing Agreements, into which all Scheduled Payments and unscheduled payments with respect to the Mortgage Loans, net of any deductions or reimbursements permitted under the related Servicing Agreement, shall be deposited. On each Distribution Account Deposit Date, the Servicers shall 53 --------------------------------------------------------------------------------   remit to the Securities Administrator for deposit into the Distribution Account, all amounts so required to be deposited into such account in accordance with the terms of the related Servicing Agreement.      (b) The Securities Administrator, as Paying Agent for the Trustee, shall establish and maintain an Eligible Account entitled “Distribution Account of HSBC Bank, USA, National Association, as Trustee for the benefit of Sequoia Mortgage Trust 2006-1 Holders of Mortgage Pass-Through Certificates.” The Securities Administrator shall, promptly upon receipt from the Servicers on each Distribution Account Deposit Date, deposit into the Distribution Account and retain on deposit until the related Distribution Date the following amounts:      (i) the aggregate of collections with respect to the Mortgage Loans remitted by the Servicers from the related Collection Accounts in accordance with the Servicing Agreements;      (ii) any amounts required to be deposited by the Master Servicer with respect to the Mortgage Loans for the related Due Period pursuant to this Agreement, including the amount of any Advances or Compensation Interest Payments with respect to the Mortgage Loans not paid by the Servicers; and      (iii) any other amounts so required to be deposited in the Distribution Account in the related Due Period pursuant to this Agreement.      (c) In the event the Master Servicer or a Servicer has remitted in error to the Distribution Account any amount not required to be remitted in accordance with the definition of Available Distribution Amount, it may at any time direct the Securities Administrator to withdraw such amount from the Distribution Account for repayment to the Master Servicer or Servicer, as applicable, by delivery of an Officer’s Certificate to the Securities Administrator and the Trustee which describes the amount deposited in error.      (d) On each Distribution Date and final Distribution Date of the Certificates in accordance with Section 7.01, the Securities Administrator, as Paying Agent, shall distribute the Available Distribution Amount to the Certificateholders and any other parties entitled thereto in the amounts and priorities set forth in Section 5.02. The Securities Administrator may from time to time withdraw from the Distribution Account and pay the Master Servicer, the Trustee, the Securities Administrator or any Servicer any amounts permitted to be paid or reimbursed to such Person from funds in the Distribution Account pursuant to the clauses (A) through (D) of the definition of Available Distribution Amount.      (e) Funds in the Distribution Account may be invested in Permitted Investments selected by and at the written direction of the Securities Administrator, which shall mature not later than one Business Day prior to the Distribution Date (except that if such Permitted Investment is an obligation of the Securities Administrator, then such Permitted Investment shall mature not later than such applicable Distribution Date) and any such Permitted Investment shall not be sold or disposed of prior to its maturity. All such Permitted Investments shall be made in the name of the Trustee (in its capacity as such) or its nominee. All income and gain realized from any 54 --------------------------------------------------------------------------------   Permitted Investment shall be for the benefit of the Securities Administrator, as additional compensation for its duties hereunder, and shall be subject to its withdrawal or order from time to time, and shall not be part of the Trust Fund. The amount of any losses incurred in respect of any such investments shall be deposited in such Distribution Account by the Securities Administrator out of its own funds, without any right of reimbursement therefor, immediately as realized.      Section 4.02 [Reserved].      Section 4.03 [Reserved].      Section 4.04 Reports to Trustee and Certificateholders.      On each Distribution Date, the Securities Administrator shall have prepared and shall make available to the Trustee and each Certificateholder a written report setting forth the following information (on the basis of Mortgage Loan level information obtained from the Master Servicer and the Servicers) (the “Distribution Date Statement”):      (a) the amount of the distributions, separately identified, with respect to each Class of Certificates;      (b) the amount of the distributions set forth in the clause (a) allocable to principal, separately identifying the aggregate amount of any Principal Prepayments or other unscheduled recoveries of principal included in that amount;      (c) the amount of the distributions set forth in the clause (a) allocable to interest and how it was calculated;      (d) the amount of any unpaid Interest Shortfall (if applicable) and the related accrued interest thereon, with respect to each Class of Certificates;      (e) the Class Principal Amount of each Class of Certificates after giving effect to the distribution of principal on that Distribution Date;      (f) the Aggregate Stated Principal Balance of the Mortgage Loans, the Mortgage Rates (in incremental ranges), the Pool 1 Net WAC, Pool 2 Net WAC, Pool 3 Net WAC and Subordinate Net WAC, the weighted average life and the weighted average remaining term of the Mortgage Loans, at the beginning and at the end of the related Prepayment Period;      (g) the Stated Principal Balance of the Mortgage Loans whose Mortgage Rates adjust on the basis of the six-month LIBOR index, the one-year LIBOR index and the one-year CMT index at the end of the related Prepayment Period;      (h) the Pro Rata Senior Percentage, the Senior Percentage and the Subordinate Percentage for the following Distribution Date; 55 --------------------------------------------------------------------------------        (i) the Senior Prepayment Percentage and the Subordinate Prepayment Percentage for each Mortgage Pool for the following Distribution Date;      (j) in the aggregate and with respect to each Mortgage Pool, the amount of the Master Servicing Fee and the Servicing Fee paid to or retained by the Master Servicer and by each Servicer, respectively, and the amount of any fees paid to the Securities Administrator and the Custodian;      (k) in the aggregate and with respect to each Mortgage Pool, the amount of Monthly Advances for the related Due Period;      (l) the number and Stated Principal Balance of the Mortgage Loans that were (A) Delinquent (exclusive of Mortgage Loans in foreclosure) (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days, (B) in foreclosure and Delinquent (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days and (C) in bankruptcy as of the close of business on the last day of the calendar month preceding that Distribution Date; (m) the amount of cash flow received for such Distribution Date, and the sources thereof;      (n) in the aggregate and with respect to each Mortgage Pool, for any Mortgage Loan as to which the related Mortgaged Property was an REO Property during the preceding calendar month, the principal balance of such Mortgage Loan as of the close of business on the last day of the related Due Period;      (o) in the aggregate and with respect to each Mortgage Pool, the aggregate number and principal balance of any REO Properties as of the close of business on the last day of the preceding Due Period;      (p) in the aggregate and with respect to each Mortgage Pool, the amount of Realized Losses incurred during the preceding calendar month;      (q) in the aggregate and with respect to each Mortgage Pool, the cumulative amount of Realized Losses incurred since the Closing Date;      (r) the Realized Losses, if any, allocated to each Class of Certificates on that Distribution Date; (s) the Certificate Interest Rate for each Class of Certificates for that Distribution Date;      (t) the amount of any Principal Transfer Amounts or Interest Transfer Amounts paid to an Undercollateralized Group or Principal Transfers between Groups;      (u) the applicable Record Date, Accrual Period and calculation date for each Class of Certificates and such Distribution Date; and      (v) the amount on deposit in the Distribution Account as of such Distribution Date (after giving effect to distributions on such date) and as of the prior Distribution Date. 56 --------------------------------------------------------------------------------        On each Distribution Date, the Securities Administrator shall provide Bloomberg Financial Markets, L.P. (“Bloomberg”) CUSIP level factors for each Class of Offered Certificates as of such Distribution Date, using a format and media mutually acceptable to the Securities Administrator and Bloomberg.      In addition to the information listed above, such Distribution Date Statement shall also include such other information as is required by Form 10-D, including, but not limited to, the information required by Item 1121 (§229.1121) of Regulation AB.      The Securities Administrator shall make such reports available each month via the Master Servicer’s website at http://www.ctslink.com. Assistance in using the website may be obtained by calling the Master Servicer’s customer service desk at (301) 815-6600. Certificateholders and other parties that are unable to use the website are entitled to have a paper copy mailed to them via first class mail by contacting the Securities Administrator and indicating such. In preparing or furnishing the foregoing information to the Trustee, the Securities Administrator shall be entitled to rely conclusively on the accuracy of the information or data regarding the Mortgage Loans and the related REO Properties that has been provided to the Securities Administrator by the Master Servicer and the Servicers, and the Securities Administrator shall not be obligated to verify, recompute, reconcile or recalculate any such information or data.      Upon request, within a reasonable period of time after the end of each calendar year, the Securities Administrator shall cause to be furnished to each Person who at any time during the calendar year was a Certificateholder, a statement containing the information listed above aggregated for such calendar year or applicable portion thereof during which such Person was a Certificateholder. Such obligation of the Securities Administrator shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Securities Administrator pursuant to any requirements of the Code as from time to time in effect.      Upon the reasonable advance written request of any Certificateholder that is a savings and loan, bank or insurance company, which request, if received by the Trustee or the Certificate Registrar, shall be promptly forwarded to the Securities Administrator, the Securities Administrator shall provide, or cause to be provided (or, to the extent that such information or documentation is not required to be provided by a Servicer under the applicable Servicing Agreement, shall use reasonable efforts to obtain such information and documentation from such Servicer, and provide) to such Certificateholders such reports and access to information and documentation regarding the Mortgage Loans as such Certificateholders may reasonably deem necessary to comply with applicable regulations of the Office of Thrift Supervision or its successor or other regulatory authorities with respect to an investment in the Certificates; provided, however, that the Securities Administrator shall be entitled to be reimbursed by such Certificateholders for the Securities Administrator’s actual expenses incurred in providing such reports and access. ARTICLE V DISTRIBUTIONS TO HOLDERS OF CERTIFICATES 57 --------------------------------------------------------------------------------        Section 5.01 Distributions Generally.      (a) Subject to Section 7.01 respecting the final distribution on the Certificates, on each Distribution Date the Paying Agent on behalf of the Trustee shall make distributions in accordance with this Article V. Such distributions shall be made by check mailed to each Certificateholder’s address as it appears on the Certificate Register of the Certificate Registrar or, upon written request made to the Securities Administrator at least five Business Days prior to the related Record Date by any Certificateholder owning an aggregate initial Certificate Principal Amount of at least $1,000,000, or in the case of any Class of Interest-Only Certificates or Residual Certificate, a Percentage Interest of not less than 100%, by wire transfer in immediately available funds to an account specified in the request and at the expense of such Certificateholder; provided, however, that the final distribution in respect of any Certificate shall be made only upon presentation and surrender of such Certificate at the Certificate Registrar’s Corporate Trust Office; provided, further, that the foregoing provisions shall not apply to any Class of Certificates as long as such Certificate remains a Book-Entry Certificate in which case all payments made shall be made through the Clearing Agency and its Clearing Agency Participants. Wire transfers will be made at the expense of the Holder requesting such wire transfer by deducting a wire transfer fee from the related distribution. Notwithstanding such final payment of principal of any of the Certificates, each Residual Certificate will remain outstanding until the termination of each REMIC and the payment in full of all other amounts due with respect to the Residual Certificates and at such time such final payment in retirement of any Residual Certificate will be made only upon presentation and surrender of such Certificate at the Certificate Registrar’s Corporate Trust Office. If any payment required to be made on the Certificates is to be made on a day that is not a Business Day, then such payment will be made on the next succeeding Business Day.      (b) All distributions or allocations made with respect to the Certificateholders within each Class on each Distribution Date shall be allocated among the outstanding Certificates in such Class equally in proportion to their respective initial Class Principal Amounts or initial Class Notional Amounts (or Percentage Interests).      Section 5.02 Distributions from the Distribution Account.      (a) Subject to Sections 5.02(b), (c), (l) and (m), on each Distribution Date, the Available Distribution Amount for the related Mortgage Pool (in the case of the Senior Certificates) and the Mortgage Pools in the aggregate (in the case of the Subordinate Certificates) shall be withdrawn by the Securities Administrator from the Distribution Account allocated among the Classes of Senior Certificates and Subordinate Certificates in the following order of priority:      (i) Concurrently, from the related Available Distribution Amount, to the payment of the Interest Distribution Amount and any accrued but unpaid Interest Shortfalls on each Class of Senior Certificates of the Related Certificate Group;      (ii) Concurrently, to the Senior Certificates of the Related Certificate Group, from the Available Distribution Amount remaining in the related Mortgage Pool after application of amounts pursuant to clause (i) above, as follows: 58 --------------------------------------------------------------------------------             (A) first, to the Class 1-AR Certificates, the Senior Principal Distribution Amount for Pool 1, until their Class Principal Amount has been reduced to zero, and second, pro rata, to the Class 1-A1A, Class 1-A1B and Class 1-A2 Certificates, the Senior Principal Distribution Amount for Pool 1, until their respective Class Principal Amounts have been reduced to zero;           (B) pro rata, to the Class 2-A1 and Class 2-A2 Certificates, the Senior Principal Distribution Amount for Pool 2, until their respective Class Principal Amounts have been reduced to zero;           (C) pro rata, to the Class 3-A1 and Class 3-A2 Certificates, the Senior Principal Distribution Amount for Pool 3, until their respective Class Principal Amounts have been reduced to zero;      (iii) From the Available Distribution Amount from the Mortgage Pools in the aggregate remaining after the application of amounts pursuant to clauses (i) and (ii) above, to the Class B-1 Certificates, the Interest Distribution Amount and any Interest Shortfalls, in each case, for such Class on such date;      (iv) From the Available Distribution Amount from the Mortgage Pools in the aggregate remaining after application of amounts pursuant to clauses (i) through (iii) above, to the Class B-1 Certificates, such Class’ Subordinate Class Percentage of the aggregate Subordinate Principal Distribution Amount for each Mortgage Pool, until its Class Principal Amount has been reduced to zero;      (v) From the Available Distribution Amount from the Mortgage Pools in the aggregate remaining after the application of amounts pursuant to clauses (i) through (iv) above, to the Class B-2 Certificates, the Interest Distribution Amount and any Interest Shortfalls, in each case, for such Class on such date;      (vi) From the Available Distribution Amount from the Mortgage Pools in the aggregate remaining after application of amounts pursuant to clauses (i) through (v) above, to the Class B-2 Certificates, such Class’ Subordinate Class Percentage of the aggregate Subordinate Principal Distribution Amount for each Mortgage Pool, until its Class Principal Amount has been reduced to zero;      (vii) From the Available Distribution Amount from the Mortgage Pools in the aggregate remaining after the application of amounts pursuant to clauses (i) through (vi) above, to the Class B-3 Certificates, the Interest Distribution Amount and any Interest Shortfalls, in each case, for such Class on such date;      (viii) From the Available Distribution Amount from the Mortgage Pools in the aggregate remaining after application of amounts pursuant to clauses (i) through (vii) above, to the Class B-3 Certificates, such Class’ Subordinate Class Percentage of the aggregate Subordinate Principal Distribution Amount for each Mortgage Pool, until its Class Principal Amount has been reduced to zero; 59 --------------------------------------------------------------------------------        (ix) From the Available Distribution Amount from the Mortgage Pools in the aggregate remaining after the application of amounts pursuant to clauses (i) through (viii) above, to the Class B-4 Certificates, the Interest Distribution Amount and any Interest Shortfalls, in each case, for such Class on such date;      (x) From the Available Distribution Amount from the Mortgage Pools in the aggregate remaining after application of amounts pursuant to clauses (i) through (ix) above, to the Class B-4 Certificates, such Class’ Subordinate Class Percentage of the aggregate Subordinate Principal Distribution Amount for each Mortgage Pool, until its Class Principal Amount has been reduced to zero;      (xi) From the Available Distribution Amount from the Mortgage Pools in the aggregate remaining after the application of amounts pursuant to clauses (i) through (x) above, to the Class B-5 Certificates, the Interest Distribution Amount and any Interest Shortfalls, in each case, for such Class on such date;      (xii) From the Available Distribution Amount from the Mortgage Pools in the aggregate remaining after application of amounts pursuant to clauses (i) through (xi) above, to the Class B-5 Certificates, such Class’ Subordinate Class Percentage of the aggregate Subordinate Principal Distribution Amount for each Mortgage Pool, until its Class Principal Amount has been reduced to zero;      (xiii) From the Available Distribution Amount from the Mortgage Pools in the aggregate remaining after the application of amounts pursuant to clauses (i) through (xii) above, to the Class B-6 Certificates, the Interest Distribution Amount and any Interest Shortfalls, in each case, for such Class on such date;      (xiv) From the Available Distribution Amount from the Mortgage Pools in the aggregate remaining after application of amounts pursuant to clauses (i) through (xiii) above, to the Class B-6 Certificates, such Class’ Subordinate Class Percentage of the aggregate Subordinate Principal Distribution Amount for each Mortgage Pool, until its Class Principal Amount has been reduced to zero;      (xv) To the Class 1-AR Certificate and the Class LT-R Certificate, any remaining amount of the Available Distribution Amount from the Mortgage Pools in the aggregate allocated as provided in Section 5.02(d).      The initial cash deposits of $2,130,000 in respect of Pool 1 and $444,200 in respect of Pool 3 deposited into the Collection Account by the Seller on the Closing Date, shall be treated as Principal Prepayments and distributed to the related Certificates on the Distribution Date in September 2006, in the order of priority set forth in this Section 5.02(a).      (b) On each Distribution Date on and after the Credit Support Depletion Date, the Available Distribution Amount for the Mortgage Pools shall be combined and distributed to the remaining Classes of Certificates, first, to pay the Interest Distribution Amount and any accrued but unpaid Interest Shortfalls; second, to pay principal on a pro rata basis; and third, to the Class 60 --------------------------------------------------------------------------------   1-AR and Class LT-R Certificates, any remaining Available Distribution Amount from such Mortgage Pool or Mortgage Pools.      (c) Notwithstanding the priority and allocation set forth in Section 5.02(a), if with respect to any Class of Subordinate Certificates on any Distribution Date the aggregate of the related Class Subordination Percentages of such Class and of all other Classes of Subordinate Certificates which have a higher numerical Class designation than such Class is less than the Original Applicable Credit Support Percentage for such Class, no distribution of Principal Prepayments shall be made to any such Classes and the amount of such Principal Prepayment otherwise distributable to such Classes shall be distributed to any Classes of Subordinate Certificates having lower numerical Class designations than such Class, pro rata, based on the Class Principal Amounts of the respective Classes immediately prior to such Distribution Date and shall be distributed in the sequential order provided in Section 5.02(a) above.      (d) Amounts distributed to the Residual Certificates pursuant to subparagraph (a)(xv) of this Section 5.02 on any Distribution Date shall be allocated among the REMIC residual interests represented thereby such that each such interest is allocated the excess of funds available to the related REMIC over required distributions to the regular interests in such REMIC on such Distribution Date.      (e) For purposes of distributions provided in paragraph (a), each Mortgage Pool shall “relate” to the Senior Class or Classes of the applicable Related Certificate Group.      (f) [Reserved].      (g) [Reserved].      (h) [Reserved].      (i) [Reserved].      (j) For purposes of distributions of interest in paragraph (a) such distributions to a Class of Certificates on any Distribution Date shall be made first, in respect of Current Interest; and second, in respect of Interest Shortfalls.      (k) [Reserved].      (l) Notwithstanding the priority of distributions set forth in paragraph (a) above, if on any Distribution Date prior to the Credit Support Depletion (1) either one of the Rapid Prepayment Conditions is satisfied on such date and (2) the aggregate Class Principal Amount of the Senior Certificates relating to one of the Mortgage Pools has been reduced to zero, then that portion of the Available Distribution Amount for each Mortgage Pool described in Section 5.02(a)(ii) that represents principal collections on the Mortgage Loans shall be applied as an additional distribution to the remaining Classes of Senior Certificates in the other Certificate Group, in reduction of, and in proportion to, the Class Principal Amounts thereof; provided, however, that any such amounts distributable to the Class 1-AR, Class 1-A1A, Class 1-A1B and 61 --------------------------------------------------------------------------------   Class 1-A2 Certificates shall be distributed first, to the Class 1-AR Certificates and, second, pro rata, to the Class 1-A1A, Class 1-A1B and Class 1-A2 Certificates.      (m) If, on any Distribution Date, any Certificate Group would constitute an Undercollateralized Group and the other Certificate Group or Certificate Groups constitute an Overcollateralized Group, then notwithstanding Section 5.02(a)(ii), the Available Distribution Amount for an Overcollateralized Group, to the extent remaining following distributions of interest and principal to the related Senior Certificates of that Certificate Group shall be distributed, up to the sum of the Interest Transfer Amount and the Principal Transfer Amount for the Undercollateralized Group or Undercollateralized Groups, to the Senior Certificates related to the Undercollateralized Group or Undercollateralized Groups, in payment of accrued but unpaid interest, if any, and then to such Senior Certificates as principal, in the same order and priority as such Certificates would receive other distributions of principal.      Section 5.03 Allocation of Losses.      (a) On or prior to each Distribution Date, the Master Servicer shall aggregate the information provided by each Servicer with respect to the total amount of Realized Losses experienced on the Mortgage Loans for the related Distribution Date.      (b) On each Distribution Date, the principal portion of Realized Losses shall be allocated as follows:      first, to the Classes of Subordinate Certificates in reverse order of their respective numerical Class designations (beginning with the Class of Subordinate Certificates with the highest numerical Class designation) until the Class Principal Amount of each such Class is reduced to zero; and      second, to each Class of Senior Certificates relating to the Mortgage Pool which sustained such loss (allocated among the related Senior Certificates on a pro rata basis), in each case, until the Class Principal Amount of such Class of Senior Certificates is reduced to zero; provided, however, that the amount of losses calculated above that would otherwise reduce the Class Principal Amount of the Class 1-A1A and Class 1-A1B Certificates will be allocated, pro rata, to the Class 1-A2 Certificates, in reduction of the Class Principal Amount thereof, until the Class Principal Amount of the Class 1-A2 Certificates has been reduced to zero, before reducing the Class Principal Amount of the Class 1-A1A and Class 1-A1B Certificates (which reduction shall be applied on a pro rata basis between the Class 1-A1A and Class 1-A1B Certificates); provided, further, that the amount of losses calculated above that would otherwise reduce the Class Principal Amount of the Class 2-A1 Certificates will first reduce the Class Principal Amount of the Class 2-A2 Certificates until the Class Principal Amount of the Class 2-A2 Certificates has been reduced to zero, before reducing the Class Principal Amount of the Class 2-A1 Certificates; and provided, further, that the amount of losses calculated above that would otherwise reduce the Class Principal Amount of the Class 3-A1 Certificates will first reduce the Class Principal Amount of the Class 3-A2 Certificates until the 62 --------------------------------------------------------------------------------   Class Principal Amount of the Class 3-A2 Certificates has been reduced to zero, before reducing the Class Principal Amount of the Class 3-A1 Certificates.      (c) On each Distribution Date, the Class Principal Amount of the Class of Subordinate Certificates then outstanding with the highest numerical Class designation shall be reduced on each Distribution Date by the amount, if any, by which the aggregate of the Class Principal Amounts of all outstanding Classes of Certificates (after giving effect to the distribution of principal on such Distribution Date) exceeds the Aggregate Stated Principal Balance for the following Distribution Date.      (d) Any allocation of a loss pursuant to this section to a Class of Certificates shall be achieved by reducing the Class Principal Amount thereof by the amount of such loss.      (e) Subsequent Recoveries in respect of the Mortgage Loans shall be distributed to the Certificates still outstanding, in accordance with Section 5.02, and the Class Principal Amount of each Class of Certificates then outstanding that has been reduced due to application of a Realized Loss will be increased, in order of seniority, by the amount of such Subsequent Recovery.      Section 5.04 Advances by Master Servicer.      If any Servicer fails to remit any Advance required to be made under the applicable Servicing Agreement, the Master Servicer shall itself make, or shall cause the successor Servicer to make, such Advance. If the Master Servicer determines that an Advance is required, it shall on the Business Day preceding the related Distribution Date immediately following such Determination Date remit to the Securities Administrator from its own funds (or funds advanced by the applicable Servicer) for deposit in the Distribution Account immediately available funds in an amount equal to such Advance. The Master Servicer and each Servicer shall be entitled to be reimbursed for all Advances made by it. Notwithstanding anything to the contrary herein, in the event the Master Servicer determines in its reasonable judgment that an Advance is non-recoverable, the Master Servicer shall be under no obligation to make such Advance. If the Master Servicer determines that an Advance is non-recoverable, it shall, on or prior to the related Distribution Date, deliver an Officer’s Certificate to the Trustee to such effect.      Section 5.05 Compensating Interest Payments.      The amount of the aggregate Master Servicing Fees payable to the Master Servicer in respect of any Distribution Date shall be reduced (but not below zero) by the amount of any Compensating Interest Payment for such Distribution Date, but only to the extent that Prepayment Interest Shortfalls relating to such Distribution Date are required to be paid but not actually paid by the Servicers. Such amount shall not be treated as an Advance and shall not be reimbursable to the Master Servicer. ARTICLE VI CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR; EVENTS OF DEFAULT 63 --------------------------------------------------------------------------------        Section 6.01 Duties of Trustee and the Securities Administrator.      (a) The Trustee, except during the continuance of an Event of Default and the Securities Administrator undertakes to perform such duties and only such duties as are specifically set forth in this Agreement. Any permissive right of the Trustee or the Securities Administrator provided for in this Agreement shall not be construed as a duty of the Trustee or the Securities Administrator. If an Event of Default has occurred and has not otherwise been cured or waived, the Trustee or the Securities Administrator shall exercise such of the rights and powers vested in it by this Agreement and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person’s own affairs, unless the Trustee is acting as Master Servicer, in which case it shall use the same degree of care and skill as the Master Servicer hereunder.      (b) Each of the Trustee and the Securities Administrator, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee or the Securities Administrator which are specifically required to be furnished pursuant to any provision of this Agreement, shall examine them to determine whether they are in the form required by this Agreement; provided, however, that neither the Trustee nor the Securities Administrator shall be responsible for the accuracy or content of any such resolution, certificate, statement, opinion, report, document, order or other instrument furnished by the Master Servicer or any Servicer to the Trustee or the Securities Administrator pursuant to this Agreement, and shall not be required to recalculate or verify any numerical information furnished to the Trustee or the Securities Administrator pursuant to this Agreement. Subject to the immediately preceding sentence, if any such resolution, certificate, statement, opinion, report, document, order or other instrument is found not to conform to the form required by this Agreement in a material manner the Trustee or the Securities Administrator, as applicable, shall take such action as it deems appropriate to cause the instrument to be corrected, and if the instrument is not corrected to the Trustee’s or the Securities Administrator’s satisfaction, the Trustee or the Securities Administrator will provide notice thereof to the Certificateholders and will, at the expense of the Trust Fund, which expense shall be reasonable given the scope and nature of the required action, take such further action as directed by the Certificateholders.      (c) Neither the Trustee nor the Securities Administrator shall have any liability arising out of or in connection with this Agreement, except for its negligence or willful misconduct. Notwithstanding anything in this Agreement to the contrary, neither the Trustee nor the Securities Administrator shall be liable for special, indirect or consequential losses or damages of any kind whatsoever (including, but not limited to, lost profits). No provision of this Agreement shall be construed to relieve the Trustee or the Securities Administrator from liability for its own negligent action, its own negligent failure to act or its own willful misconduct; provided, however, that:      (i) Neither the Trustee nor the Securities Administrator shall be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of Holders of Certificates as provided in Section 6.18 hereof; 64 --------------------------------------------------------------------------------        (ii) For all purposes under this Agreement, the Trustee shall not be deemed to have notice of any Event of Default (other than resulting from a failure by the Master Servicer to furnish information to the Trustee when required to do so) unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Holders of the Certificates and this Agreement;      (iii) For all purposes under this Agreement, the Securities Administrator shall not be deemed to have notice of any Event of Default (other than resulting from a failure by the Master Servicer to furnish information to the Securities Administrator when required to do so) unless a Responsible Officer of the Securities Administrator has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Securities Administrator at the address provided in Section 11.07, and such notice references the Holders of the Certificates and this Agreement;      (iv) No provision of this Agreement shall require the Trustee or the Securities Administrator to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it; and none of the provisions contained in this Agreement shall in any event require the Trustee or the Securities Administrator to perform, or be responsible for the manner of performance of, any of the obligations of the Master Servicer under this Agreement;      (v) Neither the Trustee nor the Securities Administrator shall be responsible for any act or omission of the Master Servicer, the Depositor, the Seller or the Custodian.      (d) The Trustee shall have no duty hereunder with respect to any complaint, claim, demand, notice or other document it may receive or which may be alleged to have been delivered to or served upon it by the parties as a consequence of the assignment of any Mortgage Loan hereunder; provided, however, that the Trustee shall promptly remit to the applicable Servicer upon receipt any such complaint, claim, demand, notice or other document (i) which is delivered to the Corporate Trust Office of the Trustee, (ii) of which a Responsible Officer has actual knowledge, and (iii) which contains information sufficient to permit the Trustee to make a determination that the real property to which such document relates is a Mortgaged Property.      (e) Neither the Trustee nor the Securities Administrator shall be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Certificateholders of any Class holding Certificates which evidence, as to such Class, Percentage Interests aggregating not less than 25% as to the time, method and place of conducting any proceeding for any remedy available to the Trustee or the Securities Administrator or exercising any trust or power conferred upon the Trustee or the Securities Administrator, as applicable, under this Agreement. 65 --------------------------------------------------------------------------------        (f) Neither the Trustee nor the Securities Administrator shall be required to perform services under this Agreement, or to expend or risk its own funds or otherwise incur financial liability for the performance of any of its duties hereunder or the exercise of any of its rights or powers if there is reasonable ground for believing that the timely payment of its fees and expenses or the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and none of the provisions contained in this Agreement shall in any event require the Trustee or the Securities Administrator, as applicable, to perform, or be responsible for the manner of performance of, any of the obligations of the Master Servicer or any Servicer under this Agreement or any Servicing Agreement except during such time, if any, as the Trustee shall be the successor to, and be vested with the rights, duties, powers and privileges of, the Master Servicer in accordance with the terms of this Agreement.      (g) The Trustee shall not be held liable by reason of any insufficiency in the Distribution Account or, if applicable, the Reserve Fund resulting from any investment loss on any Permitted Investment included therein (except to the extent that the Trustee is the obligor and has defaulted thereon).      (h) Except as otherwise provided herein, neither the Trustee nor the Securities Administrator shall have any duty (A) to see to any recording, filing, or depositing of this Agreement or any agreement referred to herein or any financing statement or continuation statement evidencing a security interest, or to see to the maintenance of any such recording or filing or depositing or to any rerecording, refiling or redepositing of any thereof, (B) to see to any insurance, (C) to see to the payment or discharge of any tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the Trust Fund other than from funds available in the Distribution Account, or (D) to confirm or verify the contents of any reports or certificates of the Master Servicer or any Servicer delivered to the Trustee or the Securities Administrator pursuant to this Agreement believed by the Trustee or the Securities Administrator, as applicable, to be genuine and to have been signed or presented by the proper party or parties.      (i) Neither the Securities Administrator nor the Trustee shall be liable in its individual capacity for an error of judgment made in good faith by a Responsible Officer or other officers of the Trustee or the Securities Administrator, as applicable, unless it shall be proved that the Trustee or the Securities Administrator, as applicable, was negligent in ascertaining the pertinent facts.      (j) Notwithstanding anything in this Agreement to the contrary, neither the Securities Administrator nor the Trustee shall be liable for special, indirect or consequential losses or damages of any kind whatsoever (including, but not limited to, lost profits), even if the Trustee or the Securities Administrator, as applicable, has been advised of the likelihood of such loss or damage and regardless of the form of action.      (k) Neither the Securities Administrator nor the Trustee shall be responsible for the acts or omissions of the other, it being understood that this Agreement shall not be construed to render them agents of one another. 66 --------------------------------------------------------------------------------        Section 6.02 Certain Matters Affecting the Trustee and the Securities Administrator.      Except as otherwise provided in Section 6.01:      (i) Each of the Trustee and the Securities Administrator may request, and may rely and shall be protected in acting or refraining from acting upon any resolution, Officer’s Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;      (ii) Each of the Trustee and the Securities Administrator may consult with counsel and any advice of its counsel or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;      (iii) Neither the Trustee nor the Securities Administrator shall be personally liable for any action taken, suffered or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement;      (iv) Unless an Event of Default shall have occurred and be continuing, neither the Trustee nor the Securities Administrator shall be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document (provided the same appears regular on its face), unless requested in writing to do so by the Holders of at least a majority in Class Principal Amount (or Percentage Interest) of each Class of Certificates; provided, however, that, if the payment within a reasonable time to the Trustee or the Securities Administrator, as applicable, of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee or the Securities Administrator, as applicable, not reasonably assured to the Trustee or the Securities Administrator by the security afforded to it by the terms of this Agreement, the Trustee or the Securities Administrator, as applicable, may require reasonable indemnity against such expense or liability or payment of such estimated expenses from the Certificateholders as a condition to proceeding. The reasonable expense thereof shall be paid by the party requesting such investigation and if not reimbursed by the requesting party shall be reimbursed by the Trust Fund to the Trustee or the Securities Administrator, as applicable;      (v) Each of the Trustee and the Securities Administrator may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians or attorneys, which agents, custodians or attorneys shall have any and all of the rights, powers, duties and obligations of the Trustee and the Securities Administrator conferred on them by such appointment, provided that each of the Trustee and the Securities Administrator shall continue to be responsible for its duties and obligations hereunder to the extent provided herein, and provided further that neither the 67 --------------------------------------------------------------------------------   Trustee nor the Securities Administrator shall be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by the Trustee or the Securities Administrator, as applicable;      (vi) Neither the Trustee nor the Securities Administrator shall be under any obligation to exercise any of the trusts or powers vested in it by this Agreement or to institute, conduct or defend any litigation hereunder or in relation hereto, in each case at the request, order or direction of any of the Certificateholders pursuant to the provisions of this Agreement, unless such Certificateholders shall have offered to the Trustee or the Securities Administrator, as applicable, reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;      (vii) The right of the Trustee and the Securities Administrator to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and neither the Trustee nor the Securities Administrator shall be answerable for other than its negligence or willful misconduct in the performance of such act; and      (viii) Neither the Trustee nor the Securities Administrator shall be required to give any bond or surety in respect of the execution of the Trust Fund created hereby or the powers granted hereunder.      In the event either of the Trustee or the Securities Administrator deem the nature of any action required on its part to be unclear, the Trustee or the Securities Administrator, as applicable, may require prior to such action that it be provided by the Depositor with reasonable further instructions.      Section 6.03 Trustee and Securities Administrator Not Liable for Certificates.      The Trustee and the Securities Administrator make no representations as to the validity or sufficiency of this Agreement or of the Certificates (other than the certificate of authentication on the Certificates) or of any Mortgage Loan, or related document save that the Trustee and the Securities Administrator represent that, assuming due execution and delivery by the other parties hereto, this Agreement has been duly authorized, executed and delivered by it and constitutes its valid and binding obligation, enforceable against it in accordance with its terms except that such enforceability may be subject to (A) applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally, and (B) general principles of equity regardless of whether such enforcement is considered in a proceeding in equity or at law. The Trustee and the Securities Administrator shall not be accountable for the use or application by the Depositor of funds paid to the Depositor in consideration of the assignment of the Mortgage Loans to the Trust Fund by the Depositor or for the use or application of any funds deposited into the Distribution Account or any other fund or account maintained with respect to the Certificates. The Trustee and the Securities Administrator shall not be responsible for the legality or validity of this Agreement or the validity, priority, perfection or sufficiency of the security for the Certificates issued or intended to be issued hereunder. Except as otherwise provided herein, the Trustee and the Securities Administrator shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise 68 --------------------------------------------------------------------------------   perfect or maintain the perfection of any security interest or lien granted to it hereunder or to record this Agreement.      Section 6.04 Trustee and the Securities Administrator May Own Certificates.      The Trustee and the Securities Administrator and any Affiliate or agent of either of them in its individual or any other capacity may become the owner or pledgee of Certificates and may transact banking and trust business with the other parties hereto and their Affiliates with the same rights it would have if it were not Trustee, Securities Administrator or such agent.      Section 6.05 Eligibility Requirements for Trustee and Securities Administrator.      The Trustee hereunder shall at all times (i) be an institution insured by the FDIC, (ii) be a corporation or national banking association, organized and doing business under the laws of any State or the United States of America, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or state authority and (iii) not be an Affiliate of the Master Servicer or any Servicer. If such corporation or national banking association publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then, for the purposes of this Section, the combined capital and surplus of such corporation or national banking association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.06.      The Securities Administrator hereunder shall at all times (i) be an institution authorized to exercise corporate trust powers under the laws of its jurisdiction of organization, (ii) be rated at least “A/F1” by Fitch, or if not rated by Fitch, the equivalent rating by S&P or Moody’s and (iii) not be an originator of Mortgage Loans, the Master Servicer, a Servicer, the Depositor, or an Affiliate of the Depositor unless the Securities Administrator is in an institutional trust department of the Securities Administrator.      Section 6.06 Resignation and Removal of Trustee and the Securities Administrator.      (a) Each of the Trustee and the Securities Administrator may at any time resign and be discharged from the trust hereby created by giving 60 days’ written notice thereof to the Trustee or the Securities Administrator, as applicable, the Depositor and the Master Servicer. Upon receiving such notice of resignation, the Depositor will promptly appoint a successor trustee or a successor securities administrator, as applicable, by written instrument, one copy of which instrument shall be delivered to the resigning Trustee or resigning Securities Administrator, as applicable, one copy to the successor trustee or successor securities administrator, as applicable, and one copy to the Master Servicer. If no successor trustee or successor securities administrator shall have been so appointed and shall have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee or resigning Securities Administrator, as applicable, may petition any court of competent jurisdiction for the appointment of a successor trustee or successor securities administrator, as applicable. In the case of any such resignation by 69 --------------------------------------------------------------------------------   the Securities Administrator, if no successor Securities Administrator shall have been appointed and shall have accepted appointment within 60 days after the Securities Administrator ceases to be the Securities Administrator pursuant to this Section 6.06, then the Trustee shall perform the duties of the Securities Administrator pursuant to this Agreement; provided, however, that the Trustee may engage a qualified entity to perform the duties of the Securities Administrator under Sections 6.21, 6.22, 6.23, 6.24 and 11.16 of this Agreement. The Trustee shall notify the Rating Agencies of any change of Securities Administrator.      (b) If at any time any of the following events shall occur: (i) the Trustee or the Securities Administrator ceases to be eligible in accordance with the provisions of Section 6.05 and fails to resign after written request therefor by the Depositor, (ii) the Securities Administrator fails to perform its obligations pursuant to Section 5.02 to make distributions to Certificateholders, which failure continues unremedied for a period of one Business Day after the date upon which written notice of such failure shall have been given to the Securities Administrator by the Trustee or the Depositor, (iii) the Securities Administrator fails to provide an Item 1123 Certificate, Assessment of Compliance or an Accountant’s Attestation required under Sections 6.22, 6.23 and 6.24, respectively, by March 15 of each year in which Exchange Act reports are required, (iv) the Trustee or the Securities Administrator becomes incapable of acting, or is adjudged a bankrupt or insolvent, or a receiver of the Trustee or the Securities Administrator of its property is appointed, or any public officer takes charge or control of the Trustee or the Securities Administrator or of either of their property or affairs for the purpose of rehabilitation, conservation or liquidation, (v) a tax is imposed or threatened with respect to the Trust Fund by any state in which the Trustee or the Trust Fund held by the Trustee is located, or (vi) the continued use of the Trustee or Securities Administrator would result in a downgrading of the rating by any Rating Agency of any Class of Certificates with a rating; then, in each such case, the Depositor shall remove the Trustee or the Securities Administrator, as applicable, and the Depositor shall appoint a successor trustee or successor securities administrator, as applicable, acceptable to the Depositor or the Trustee by written instrument, one copy of which instrument shall be delivered to the Trustee or Securities Administrator so removed, one copy each to the successor trustee or successor securities administrator, as applicable, and one copy to the Master Servicer.      (c) The Holders of more than 50% of the Class Principal Amount (or Percentage Interest) of each Class of Certificates may at any time upon 30 days’ written notice to the Trustee or the Securities Administrator, as applicable, and to the Depositor remove the Trustee or the Securities Administrator, as applicable, by such written instrument, signed by such Holders or their attorney-in-fact duly authorized, one copy of which instrument shall be delivered to the Depositor, one copy to the Trustee or Securities Administrator, as applicable and one copy to the Master Servicer; the Depositor shall thereupon appoint a successor trustee or successor securities administrator, as applicable, in accordance with this Section.      (d) Any resignation or removal of the Trustee or the Securities Administrator, as applicable, and appointment of a successor trustee or successor securities administrator pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor trustee or the successor securities administrator, as applicable, as provided in Section 6.07. 70 --------------------------------------------------------------------------------        Section 6.07 Successor Trustee and Successor Securities Administrator.      (a) Any successor trustee or successor securities administrator appointed as provided in Section 6.06 shall execute, acknowledge and deliver to the Depositor and to its predecessor trustee or predecessor securities administrator, as applicable, (i) an instrument accepting such appointment hereunder and (ii) the certification required pursuant to the first sentence of Section 6.20(e), and thereupon the resignation or removal of the predecessor trustee or predecessor securities administrator, as applicable, shall become effective and such successor trustee or successor securities administrator, as applicable, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee or securities administrator, as applicable, herein. The predecessor trustee or predecessor securities administrator, as applicable, shall deliver to the successor trustee (or assign to the Trustee its interest under the Custody Agreement, to the extent permitted thereunder) or successor securities administrator, as applicable, all Trustee Mortgage Files and documents and statements related to each Trustee Mortgage File held by it hereunder, and shall duly assign, transfer, deliver and pay over to the successor trustee the entire Trust Fund, together with all necessary instruments of transfer and assignment or other documents properly executed necessary to effect such transfer and such of the records or copies thereof maintained by the predecessor trustee in the administration hereof as may be requested by the successor trustee and shall thereupon be discharged from all duties and responsibilities under this Agreement. In addition, the Depositor and the predecessor trustee or predecessor securities administrator, as applicable, shall execute and deliver such other instruments and do such other things as may reasonably be required to more fully and certainly vest and confirm in the successor trustee or successor securities administrator, as applicable, all such rights, powers, duties and obligations.      (b) No successor trustee shall accept appointment as provided in this Section unless at the time of such appointment such successor trustee shall be eligible under the provisions of Section 6.05.      (c) Upon acceptance of appointment by a successor trustee or successor securities administrator, as applicable, as provided in this Section, the predecessor trustee or predecessor securities administrator, as applicable, shall mail notice of the succession of such trustee or securities administrator, as applicable, hereunder to all Holders of Certificates at their addresses as shown in the Certificate Register and to any Rating Agency. The expenses of such mailing shall be borne by the Master Servicer.      Section 6.08 Merger or Consolidation of Trustee or the Securities Administrator.      Any Person into which the Trustee or Securities Administrator may be merged or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee or Securities Administrator shall be a party, or any Persons succeeding to the business of the Trustee or Securities Administrator, shall be the successor to the Trustee or Securities Administrator hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary 71 --------------------------------------------------------------------------------   notwithstanding, provided that, in the case of the Trustee, such Person shall be eligible under the provisions of Section 6.05.      Section 6.09 Appointment of Co-Trustee, Separate Trustee or Custodian.      (a) Notwithstanding any other provisions hereof, at any time, the Trustee, the Depositor or the Certificateholders evidencing more than 50% of the Class Principal Amount (or Percentage Interest) of every Class of Certificates shall have the power from time to time to appoint one or more Persons, approved by the Trustee, to act either as co-trustees jointly with the Trustee, or as separate trustees, or as custodians, for the purpose of holding title to, foreclosing or otherwise taking action with respect to any Mortgage Loan outside the state where the Trustee has its principal place of business where such separate trustee or co-trustee is necessary or advisable (or the Trustee has been advised by the Master Servicer that such separate trustee or co-trustee is necessary or advisable) under the laws of any state in which a property securing a Mortgage Loan is located or for the purpose of otherwise conforming to any legal requirement, restriction or condition in any state in which a property securing a Mortgage Loan is located or in any state in which any portion of the Trust Fund is located. The separate Trustees, co-trustees, or custodians so appointed shall be trustees or custodians for the benefit of all the Certificateholders and shall have such powers, rights and remedies as shall be specified in the instrument of appointment; provided, however, that no such appointment shall, or shall be deemed to, constitute the appointee an agent of the Trustee. The obligation of the Master Servicer to make Advances pursuant to Section 5.04 hereof shall not be affected or assigned by the appointment of a co-trustee.      (b) Every separate trustee, co-trustee, and custodian shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:      (i) all powers, duties, obligations and rights conferred upon the Trustee in respect of the receipt, custody and payment of moneys shall be exercised solely by the Trustee;      (ii) all other rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee, co-trustee, or custodian jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations, including the holding of title to the Trust Fund or any portion thereof in any such jurisdiction, shall be exercised and performed by such separate trustee, co-trustee, or custodian;      (iii) no trustee or custodian hereunder shall be personally liable by reason of any act or omission of any other trustee or custodian hereunder; and      (iv) the Trustee may at any time, by an instrument in writing executed by it, with the concurrence of the Depositor, accept the resignation of or remove any separate 72 --------------------------------------------------------------------------------   trustee, co-trustee or custodian, so appointed by it or them, if such resignation or removal does not violate the other terms of this Agreement.      (c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee, co-trustee or custodian shall refer to this Agreement and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy given to the Master Servicer.      (d) Any separate trustee, co-trustee or custodian may, at any time, constitute the Trustee its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee, co-trustee or custodian shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.      (e) No separate trustee, co-trustee or custodian hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.05 hereunder and no notice to the Certificateholders of the appointment shall be required under Section 6.07 hereof.      (f) The Trustee agrees to instruct the co-trustees, if any, to the extent necessary to fulfill the Trustee’s obligations hereunder.      (g) The Trust shall pay the reasonable compensation of the co-trustees (which compensation shall not reduce any compensation payable to the Trustee under such Section).      Section 6.10 Authenticating Agents.      (a) The Trustee may appoint one or more Authenticating Agents which shall be authorized to act on behalf of the Trustee in authenticating Certificates. The Trustee hereby appoints the Securities Administrator as initial Authenticating Agent, and the Securities Administrator accepts such appointment. Wherever reference is made in this Agreement to the authentication of Certificates by the Trustee or the Trustee’s certificate of authentication, such reference shall be deemed to include authentication on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent must be a national banking association or a corporation organized and doing business under the laws of the United States of America or of any state, having a combined capital and surplus of at least $15,000,000, authorized under such laws to do a trust business and subject to supervision or examination by federal or state authorities. 73 --------------------------------------------------------------------------------        (b) Any Person into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which any Authenticating Agent shall be a party, or any Person succeeding to the corporate agency business of any Authenticating Agent, shall continue to be the Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.      (c) Any Authenticating Agent may at any time resign by giving at least 30 days’ advance written notice of resignation to the Trustee and the Depositor. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Depositor. Upon receiving a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.10, the Trustee may appoint a successor authenticating agent, shall give written notice of such appointment to the Depositor and shall mail notice of such appointment to all Holders of Certificates. Any successor authenticating agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent. No successor authenticating agent shall be appointed unless eligible under the provisions of this Section 6.10. No Authenticating Agent shall have responsibility or liability for any action taken by it as such at the direction of the Trustee or in accordance with the provisions of this Agreement.      Section 6.11 Indemnification of the Trustee and the Securities Administrator.      The Trustee and the Securities Administrator and their respective directors, officers, employees and agents shall be entitled to indemnification from the Depositor and the Trust Fund (provided that the Trust Fund’s indemnification under this Section 6.11 is limited by Section 4.01(d)) for any loss, liability or expense (including, without limitation, reasonable attorneys’ fees and disbursements (and, in the case of the Trustee, in connection with the Custody Agreement, including the reasonable compensation and the expenses and disbursements of its agents or counsel), incurred without negligence or willful misconduct on their part, arising out of, or in connection with, the acceptance or administration of the trusts created hereunder or in connection with the performance of their duties hereunder including the costs and expenses of defending themselves against any claim in connection with the exercise or performance of any of their powers or duties hereunder, provided that:      (i) with respect to any such claim, the Trustee or the Securities Administrator, as applicable, shall have given the Depositor written notice thereof promptly after the Trustee, the Securities Administrator, as applicable, shall have knowledge thereof;      (ii) while maintaining control over its own defense, the Trustee or the Securities Administrator, as applicable, shall cooperate and consult fully with the Depositor in preparing such defense; and      (iii) notwithstanding anything to the contrary in this Section 6.11, the Trust Fund shall not be liable for settlement of any such claim by the Trustee or the Securities 74 --------------------------------------------------------------------------------   Administrator, as applicable, entered into without the prior consent of the Depositor, which consent shall not be unreasonably withheld.      The provisions of this Section 6.11 shall survive any termination of this Agreement and the resignation or removal of the Trustee or the Securities Administrator, as applicable, and shall be construed to include, but not be limited to any loss, liability or expense under any environmental law.      Section 6.12 Fees and Expenses of Securities Administrator and the Trustee.      (a) Compensation for the services of the Securities Administrator hereunder shall be paid from the Master Servicing Fee. The Securities Administrator shall be entitled to all disbursements and advancements incurred or made by the Securities Administrator in accordance with this Agreement (including fees and expenses of its counsel and all persons not regularly in its employment), except any such expenses arising from its negligence, bad faith or willful misconduct. Wells Fargo Bank, N.A. shall act as Securities Administrator for so long as it is Master Servicer under this Agreement.      (b) As compensation for its services hereunder, the Trustee shall be entitled to receive a Trustee fee equal to $3,500 per annum, which shall be paid by the Master Servicer pursuant to a separate agreement between the Trustee and the Master Servicer. Any expenses incurred by the Trustee shall be reimbursed in accordance with Section 6.11.      Section 6.13 Collection of Monies.      Except as otherwise expressly provided in this Agreement, the Trustee and the Securities Administrator may demand payment or delivery of, and shall receive and collect, all money and other property payable to or receivable by the it pursuant to this Agreement. The Trustee or the Securities Administrator, as applicable, shall hold all such money and property received by it as part of the Trust Fund and shall distribute it as provided in this Agreement.      Section 6.14 Events of Default; Trustee To Act; Appointment of Successor.      (a) The occurrence of any one or more of the following events shall constitute an “Event of Default”:      (i) Any failure by the Master Servicer to furnish the Securities Administrator the Mortgage Loan data sufficient to prepare the reports described in Section 4.04 which continues unremedied for a period of one Business Day after the date upon which written notice of such failure shall have been given to such Master Servicer by the Trustee or the Securities Administrator or to such Master Servicer, the Securities Administrator and the Trustee by the Holders of not less than 25% of the Class Principal Amount (or Class Notional Amount) of each Class of Certificates affected thereby; or      (ii) Any failure by the Master Servicer to deliver to the Depositor and the Seller the information or reports required pursuant to Section 9.01(e) through (g) hereto; 75 --------------------------------------------------------------------------------        (iii) Any failure on the part of the Master Servicer duly to observe or perform in any material respect any other of the covenants or agreements (other than those referred to in (viii) and (ix) below) on the part of the Master Servicer contained in this Agreement which continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Master Servicer by the Trustee or the Securities Administrator, or to the Master Servicer, the Securities Administrator and the Trustee by the Holders of more than 50% of the Aggregate Voting Interests of the Certificates (or in the case of a breach of its obligation to provide an Item 1123 Certificate, an Assessment of Compliance or an Accountant’s Attestation pursuant to Sections 6.22, 6.23 and 6.24, immediately without a cure period); or      (iv) A decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Master Servicer, and such decree or order shall have remained in force undischarged or unstayed for a period of 60 days or any Rating Agency reduces or withdraws or threatens to reduce or withdraw the rating of the Certificates because of the financial condition or loan servicing capability of such Master Servicer; or      (v) The Master Servicer shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities, voluntary liquidation or similar proceedings of or relating to the Master Servicer or of or relating to all or substantially all of its property; or      (vi) The Master Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; or      (vii) The Master Servicer shall be dissolved, or shall dispose of all or substantially all of its assets, or consolidate with or merge into another entity or shall permit another entity to consolidate or merge into it, such that the resulting entity does not meet the criteria for a successor servicer as specified in Section 9.05 hereof; or      (viii) If a representation or warranty set forth in Section 9.03 hereof shall prove to be incorrect as of the time made in any respect that materially and adversely affects the interests of the Certificateholders, and the circumstance or condition in respect of which such representation or warranty was incorrect shall not have been eliminated or cured within 30 days after the date on which written notice of such incorrect representation or warranty shall have been given to the Master Servicer by the Trustee or the Securities Administrator, or to the Master Servicer, the Securities Administrator and the Trustee by the Holders of more than 50% of the Aggregate Voting Interests of the Certificates; or 76 --------------------------------------------------------------------------------        (ix) A sale or pledge of any of the rights of the Master Servicer hereunder or an assignment of this Agreement by the Master Servicer or a delegation of the rights or duties of the Master Servicer hereunder shall have occurred in any manner not otherwise permitted hereunder and without the prior written consent of the Trustee and Certificateholders holding more than 50% of the Aggregate Voting Interests of the Certificates; or      (x) After receipt of notice from the Trustee, any failure of the Master Servicer to make any Advances when such Advances are due, which failure continues unremedied for a period of one Business Day.      If an Event of Default described in clauses (i) through (ix) of this Section shall occur, then, in each and every case, subject to applicable law, so long as any such Event of Default shall not have been remedied within any period of time prescribed by this Section, the Trustee, by notice in writing to the Master Servicer may, and, if so directed by Certificateholders evidencing more than 50% of the Class Principal Amount (or Class Notional Amount) of each Class of Certificates, or upon the occurrence of an Event of Default described in clause (x) of this Section, shall, terminate all of the rights and obligations of the Master Servicer hereunder and in and to the Mortgage Loans and the proceeds thereof. On or after the receipt by the Master Servicer of such written notice, all authority and power of the Master Servicer, and only in its capacity as Master Servicer under this Agreement, whether with respect to the Mortgage Loans or otherwise, shall pass to and be vested in the Trustee; and the Trustee is hereby authorized and empowered to execute and deliver, on behalf of the defaulting Master Servicer as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement or assignment of the Mortgage Loans and related documents or otherwise. The defaulting Master Servicer agrees to cooperate with the Trustee and the Securities Administrator in effecting the termination of the defaulting Master Servicer’s responsibilities and rights hereunder as Master Servicer including, without limitation, notifying Servicers of the assignment of the master servicing function and providing the Trustee or its designee all documents and records in electronic or other form reasonably requested by it to enable the Trustee or its designee to assume the defaulting Master Servicer’s functions hereunder and the transfer to the Trustee for administration by it of all amounts which shall at the time be or should have been deposited by the defaulting Master Servicer in the Distribution Account and any other account or fund maintained with respect to the Certificates or thereafter received with respect to the Mortgage Loans. The Master Servicer being terminated shall bear all costs of a master servicing transfer, including but not limited to those of the Trustee or Securities Administrator reasonably allocable to specific employees and overhead, legal fees and expenses, accounting and financial consulting fees and expenses, and costs of amending this Agreement, if necessary.      Notwithstanding the termination of its activities as Master Servicer, each terminated Master Servicer shall continue to be entitled to reimbursement under this Agreement to the extent such reimbursement relates to the period prior to such Master Servicer’s termination. 77 --------------------------------------------------------------------------------        If any Event of Default shall occur, the Trustee, upon becoming aware of the occurrence thereof, shall promptly notify the Securities Administrator and each Rating Agency of the nature and extent of such Event of Default. The Trustee or the Securities Administrator shall immediately give written notice to the Master Servicer upon the Master Servicer’s failure to make Advances as required under this Agreement.      (b) On and after the time the Master Servicer receives a notice of termination from the Trustee pursuant to Section 6.14(a) or the Trustee receives the resignation of the Master Servicer evidenced by an Opinion of Counsel pursuant to Section 9.06, the Trustee, unless another master servicer shall have been appointed, shall be the successor in all respects to the Master Servicer in its capacity as such under this Agreement and the transactions set forth or provided for herein and shall have all the rights and powers and be subject to all the responsibilities, duties and liabilities relating thereto and arising thereafter placed on the Master Servicer hereunder, including the obligation to make Advances in accordance with Section 5.04; provided, however, that any failure to perform such duties or responsibilities caused by the Master Servicer’s failure to provide information required by this Agreement shall not be considered a default by the Trustee hereunder. In addition, the Trustee shall have no responsibility for any act or omission of the Master Servicer prior to the issuance of any notice of termination. The Trustee shall have no liability relating to the representations and warranties of the Master Servicer set forth in Section 9.03. In the Trustee’s capacity as such successor, the Trustee shall have the same limitations on liability herein granted to the Master Servicer. As compensation therefor, the Trustee shall be entitled to receive all compensation payable to the Master Servicer under this Agreement, including the Master Servicing Fee.      (c) Notwithstanding the above, the Trustee may, if it shall be unwilling to continue to so act, or shall, if it is unable to so act, petition a court of competent jurisdiction to appoint, or appoint on its own behalf any established housing and home finance institution servicer, master servicer, servicing or mortgage servicing institution having a net worth of not less than $15,000,000 and meeting such other standards for a successor master servicer as are set forth in this Agreement, as the successor to such Master Servicer in the assumption of all of the responsibilities, duties or liabilities of a master servicer, like the Master Servicer. Any entity designated by the Trustee as a successor master servicer may be an Affiliate of the Trustee; provided, however, that, unless such Affiliate meets the net worth requirements and other standards set forth herein for a successor master servicer, the Trustee, in its individual capacity shall agree, at the time of such designation, to be and remain liable to the Trust Fund for such Affiliate’s actions and omissions in performing its duties hereunder. In connection with such appointment and assumption, the Trustee may make such arrangements for the compensation of such successor out of payments on Mortgage Loans as it and such successor shall agree; provided, however, that no such compensation shall be in excess of that permitted to the Master Servicer hereunder. The Trustee and such successor shall take such actions, consistent with this Agreement, as shall be necessary to effectuate any such succession and may make other arrangements with respect to the servicing to be conducted hereunder which are not inconsistent herewith. The Master Servicer shall cooperate with the Trustee and any successor master servicer in effecting the termination of the Master Servicer’s responsibilities and rights hereunder including, without limitation, notifying Mortgagors of the assignment of the master servicing functions and providing the Trustee and successor master servicer, as applicable, all documents 78 --------------------------------------------------------------------------------   and records in electronic or other form reasonably requested by it to enable it to assume the Master Servicer’s functions hereunder and the transfer to the Trustee or such successor master servicer, as applicable, all amounts which shall at the time be or should have been deposited by the Master Servicer in the Distribution Account and any other account or fund maintained with respect to the Certificates or thereafter be received with respect to the Mortgage Loans. Neither the Trustee nor any other successor master servicer shall be deemed to be in default hereunder by reason of any failure to make, or any delay in making, any distribution hereunder or any portion thereof caused by (i) the failure of the Master Servicer to deliver, or any delay in delivering, cash, documents or records to it, (ii) the failure of the Master Servicer to cooperate as required by this Agreement, (iii) the failure of the Master Servicer to deliver the Mortgage Loan data to the Trustee as required by this Agreement or (iv) restrictions imposed by any regulatory authority having jurisdiction over the Master Servicer. No successor master servicer shall be deemed to be in default hereunder by reason of any failure to make, or any delay in making, any distribution hereunder or any portion thereof caused by (i) the failure of the Trustee to deliver, or any delay in delivering cash, documents or records to it related to such distribution, or (ii) the failure of Trustee to cooperate as required by this Agreement.      Any successor Master Servicer shall execute and deliver to the Depositor, the Seller and the predecessor Master Servicer the certification required pursuant to the first sentence of Section 6.20(e).      Section 6.15 Additional Remedies of Trustee Upon Event of Default.      During the continuance of any Event of Default, so long as such Event of Default shall not have been remedied, the Trustee, in addition to the rights specified in Section 6.14, shall have the right, in its own name and as trustee of the Trust Fund, to take all actions now or hereafter existing at law, in equity or by statute to enforce its rights and remedies and to protect the interests, and enforce the rights and remedies, of the Certificateholders (including the institution and prosecution of all judicial, administrative and other proceedings and the filings of proofs of claim and debt in connection therewith). Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy, and each and every remedy shall be cumulative and in addition to any other remedy, and no delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Event of Default.      Section 6.16 Waiver of Defaults.      More than 50% of the Aggregate Voting Interests of the Certificateholders may waive any default or Event of Default by the Master Servicer in the performance of its obligations hereunder, except that a default in the making of any required deposit to the Distribution Account that would result in a failure of the Paying Agent to make any required payment of principal of or interest on the Certificates may only be waived with the consent of 100% of the affected Certificateholders. Upon any such waiver of a past default, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived. 79 --------------------------------------------------------------------------------        Section 6.17 Notification to Holders.      Upon termination of the Master Servicer or appointment of a successor to the Master Servicer, in each case as provided herein, the Trustee shall promptly mail notice thereof by first class mail to the Securities Administrator, and the Certificateholders at their respective addresses appearing on the Certificate Register. The Trustee shall also, within 45 days after the occurrence of any Event of Default known to the Trustee, give written notice thereof to the Securities Administrator and the Certificateholders, unless such Event of Default shall have been cured or waived prior to the issuance of such notice and within such 45-day period.      Section 6.18 Directions by Certificateholders and Duties of Trustee During Event of Default.      Subject to the provisions of Section 8.01 hereof, during the continuance of any Event of Default, Holders of Certificates evidencing not less than 25% of the Class Principal Amount (or Percentage Interest) of each Class of Certificates affected thereby may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement; provided, however, that the Trustee shall be under no obligation to pursue any such remedy, or to exercise any of the trusts or powers vested in it by this Agreement (including, without limitation, (i) the conducting or defending of any administrative action or litigation hereunder or in relation hereto and (ii) the terminating of the Master Servicer or any successor master servicer from its rights and duties as master servicer hereunder) at the request, order or direction of any of the Certificateholders, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the cost, expenses and liabilities which may be incurred therein or thereby; and, provided further, that, subject to the provisions of Section 8.01, the Trustee shall have the right to decline to follow any such direction if the Trustee, in accordance with an Opinion of Counsel, determines that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith determines that the action or proceeding so directed would involve it in personal liability for which it is not indemnified to its satisfaction or be unjustly prejudicial to the non-assenting Certificateholders.      Section 6.19 Action Upon Certain Failures of the Master Servicer and Upon Event of Default.      In the event that the Trustee shall have actual knowledge of any action or inaction of the Master Servicer that would become an Event of Default upon the Master Servicer’s failure to remedy the same after notice, the Trustee shall give notice thereof to the Master Servicer.      Section 6.20 Preparation of Tax Returns and Other Reports.      (a) The Securities Administrator shall prepare or cause to be prepared on behalf of the Trust Fund, based upon information calculated in accordance with this Agreement pursuant to instructions given by the Depositor, and the Securities Administrator shall file federal tax returns, all in accordance with Article X hereof. If the Trustee notifies the Securities Administrator in writing that a state tax return or other return is required, then, at the sole 80 --------------------------------------------------------------------------------   expense of the Trust Fund, the Securities Administrator shall prepare and file such state income tax returns and such other returns as may be required by applicable law relating to the Trust Fund, and, if required by state law, and shall file any other documents to the extent required by applicable state tax law (to the extent such documents are in the Securities Administrator’s possession). The Securities Administrator shall forward copies to the Depositor of all such returns and Form 1099 supplemental tax information and such other information within the control of the Securities Administrator as the Depositor may reasonably request in writing, and shall distribute to each Certificateholder such forms and furnish such information within the control of the Securities Administrator as are required by the Code and the REMIC Provisions to be furnished to them, and will prepare and distribute to Certificateholders Form 1099 (supplemental tax information) (or otherwise furnish information within the control of the Securities Administrator and the Trustee) to the extent required by applicable law. The Master Servicer will indemnify the Securities Administrator and the Trustee for any liability of or assessment against the Securities Administrator and the Trustee, as applicable, resulting from any error in any of such tax or information returns directly resulting from errors in the information provided by such Master Servicer.      (b) The Securities Administrator shall prepare and file with the Internal Revenue Service (“IRS”), on behalf of the Trust Fund and each REMIC created hereunder, an application for an employer identification number on IRS Form SS-4 or by any other acceptable method. The Securities Administrator shall also file a Form 8811 as required. The Securities Administrator, upon receipt from the IRS of the Notice of Taxpayer Identification Number Assigned, shall upon request promptly forward a copy of such notice to the Trustee and the Depositor. The Securities Administrator shall furnish any other information that is required by the Code and regulations thereunder to be made available to the Certificateholders. The Master Servicer shall cause each Servicer to provide the Securities Administrator with such information as is necessary for the Securities Administrator to prepare such reports.      Section 6.21 Reporting to the Commission.      Each of Form 10-D and Form 10-K requires the registrant to indicate (by checking “yes” or “no”) that it “(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.” The Depositor hereby represents to the Securities Administrator that the Depositor has filed all such required reports during the preceding 12 months and that it has been subject to such filing requirement for the past 90 days. The Depositor shall notify the Securities Administrator in writing, no later than the fifth calendar day after the related Distribution Date with respect to the filing of a report on Form 10-D and no later than March 15th with respect to the filing of a report on Form 10-K, if the answer to the questions should be “no.” The Securities Administrator shall be entitled to rely on such representations in preparing, executing and/or filing any such report.           (a) Reports Filed on Form 10-D. 81 --------------------------------------------------------------------------------        (i) Within 15 days after each Distribution Date (subject to permitted extensions under the Exchange Act), the Securities Administrator shall prepare and file on behalf of the Trust Fund any Form 10-D required by the Exchange Act, in form and substance as required by the Exchange Act. The Securities Administrator shall file each Form 10-D with a copy of the related Distribution Date Statement attached thereto. Any disclosure in addition to the Distribution Date Statement that is required to be included on Form 10-D (“Additional Form 10-D Disclosure”) shall be reported by the parties set forth on Exhibit O hereto to the Depositor and the Securities Administrator and reviewed and approved or disapproved by the Depositor pursuant to the following paragraph and the Securities Administrator will have no duty or liability for any failure hereunder to determine or prepare any Additional Form 10-D Disclosure, except as set forth in the next paragraph.      (ii) As set forth on Exhibit O hereto, within 5 calendar days after the related Distribution Date, (i) the parties set forth thereon shall be required to provide to the Securities Administrator and the Depositor, to the extent known by a responsible party thereof, in EDGAR-compatible form, or in such other form as otherwise agreed upon by the Securities Administrator and such party, the form and substance of any Additional Form 10-D Disclosure, if applicable together with an additional disclosure notification in the form of Exhibit L hereto (an “Additional Disclosure Notification”) and (ii) the Depositor will approve, as to form and substance, or disapprove, as the case may be, the inclusion of the Additional Form 10-D Disclosure on Form 10-D. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Securities Administrator in connection with including any Additional Form 10-D Disclosure on Form 10-D pursuant to this paragraph.      (iii) After preparing the Form 10-D, the Securities Administrator shall forward electronically a copy of the Form 10-D to the Depositor for review. The Securities Administrator will provide a copy of the Form 10-D to the Depositor by the 11th calendar day after the related Distribution Date. On the 12th calendar day after the related Distribution Date, the Depositor will provide any changes or approval to the Securities Administrator (which may be furnished electronically). In the absence of receipt of any written changes or approval, the Securities Administrator shall be entitled to assume that such Form 10-D is in final form and the Securities Administrator may proceed with the execution and filing of the Form 10-D. No later than the 13th calendar day after the related Distribution Date, a duly authorized representative of the Master Servicer in charge of the master servicing function shall sign the Form 10-D and return an electronic or fax copy of such signed Form 10-D (with an original executed hard copy to follow by overnight mail) to the Securities Administrator. If a Form 10-D cannot be filed on time or if a previously filed Form 10-D needs to be amended, the Securities Administrator will follow the procedures set forth in subsection (d)(ii) of this Section 6.21. Promptly (but no later than 1 Business Day) after filing with the Commission, the Securities Administrator will make available on its internet website a final executed copy of each Form 10-D prepared and filed by the Securities Administrator. Each party to this Agreement acknowledges that the performance by the Securities Administrator of its duties under this Section 6.21(a) related to the timely preparation, execution and filing of Form 10-D is contingent upon 82 --------------------------------------------------------------------------------   such parties strictly observing all applicable deadlines in the performance of their duties under this Section 6.21(a). The Securities Administrator shall not have any liability for any loss, expense, damage or claim arising out of or with respect to any failure to properly prepare, execute and/or timely file such Form 10-D, where such failure results from the Securities Administrator’s inability or failure to obtain or receive, on a timely basis, any information from any other party hereto needed to prepare, arrange for execution or file such Form 10-D, not resulting from its own negligence, bad faith or willful misconduct.           (b) Reports Filed on Form 10-K.      (i) On or prior to the 90th day after the end of each fiscal year of the Trust Fund or such earlier date as may be required by the Exchange Act (the “10-K Filing Deadline”) (it being understood that the fiscal year for the Trust Fund ends on December 31st of each year), commencing in March 2007, the Securities Administrator shall prepare and file on behalf of the Trust Fund any Form 10-K required by the Exchange Act, in form and substance as required by the Exchange Act. Each such Form 10-K shall include the following items, in each case to the extent they have been delivered to the Securities Administrator within the applicable time frames set forth in this Agreement, the Custody Agreement and the related Servicing Agreement, (i) the Item 1123 Certificate for each Servicer, each Additional Servicer, the Master Servicer and Securities Administrator as described under Section 6.22, (ii)(A) the Assessment of Compliance with servicing criteria for each Servicer, each Servicing Function Participant, the Master Servicer, Securities Administrator and any Servicing Function Participant engaged by such parties (each, a “Reporting Servicer”), as described under Section 6.23, and (B) if any Reporting Servicer’s Assessment of Compliance identifies any material instance of noncompliance, disclosure identifying such instance of noncompliance, or if any Reporting Servicer’s Assessment of Compliance is not included as an exhibit to such Form 10-K, disclosure that such report is not included and an explanation why such report is not included, (iii)(A) the Accountant’s Attestation for each Reporting Servicer, as described under Section 6.24, and (B) if any Accountant’s Attestation identifies any material instance of noncompliance, disclosure identifying such instance of noncompliance, or if any such Accountant’s Attestation is not included as an exhibit to such Form 10-K, disclosure that such report is not included and an explanation why such report is not included, and (iv) a Sarbanes-Oxley Certification as described in Section 6.21(e) (provided, however, that the Securities Administrator, at its discretion may omit from the Form 10-K any annual compliance statement, Assessment of Compliance or Accountant’s Attestation that is not required to be filed with such Form 10-K pursuant to Regulation AB). Any disclosure or information in addition to (i) through (iv) above that is required to be included on Form 10-K (“Additional Form 10-K Disclosure”) shall be reported by the parties set forth on Exhibit P hereto to the Depositor and the Securities Administrator and reviewed and approved or disapproved by the Depositor pursuant to the following paragraph and the Securities Administrator will have no duty or liability for any failure hereunder to determine or prepare any Additional Form 10-K Disclosure, except as set forth in the next paragraph.. 83 --------------------------------------------------------------------------------        (ii) As set forth on Exhibit P hereto, no later than March 15 following each fiscal year that the Trust Fund is subject to the Exchange Act reporting requirements, commencing in March 2007, (i) the parties set forth on Exhibit W shall be required to provide to the Securities Administrator and the Depositor, to the extent known by a responsible officer, a notice in the form of Exhibit L hereto, along with, in EDGAR-compatible form, or in such other form as otherwise agreed upon by the Securities Administrator and such party, the form and substance of any Additional Form 10-K Disclosure, if applicable, together with an Additional Disclosure Notification and (ii) the Depositor will approve, as to form and substance, or disapprove, as the case may be, the inclusion of the Additional Form 10-K Disclosure on Form 10-K. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Securities Administrator in connection with including any Additional Form 10-K Disclosure on Form 10-K pursuant to this paragraph.      (iii) After preparing the Form 10-K, the Securities Administrator shall forward electronically a copy of the Form 10-K to the Depositor for review. Within three (3) business days of receipt, but in no event later than March 25, the Depositor shall notify the Securities Administrator in writing (which may be furnished electronically) of any changes to or approval of such Form 10-K. In the absence of any written changes or approval, the Securities Administrator shall be entitled to assume that such Form 10-K is in final form. No later than the close of business on the 4th Business Day prior to the 10-K Filing Deadline, the Depositor shall sign the Form 10-K and return an electronic or fax copy of such signed Form 10-K (with an original executed hard copy to follow by overnight mail) to the Securities Administrator. If a Form 10-K cannot be filed on time or if a previously filed Form 10-K needs to be amended, the Securities Administrator will follow the procedures set forth in Section 6.21(d). Promptly (but no later than 1 Business Day) after filing with the Commission, the Securities Administrator will make available on its internet website a final executed copy of each Form 10-K prepared and filed by the Securities Administrator. The parties to this Agreement acknowledge that the performance by the Securities Administrator of its duties under this Section 6.21(b) related to the timely preparation and filing of Form 10-K is contingent upon such parties (and the Custodian, Servicers and any Additional Servicer or Servicing Function Participant) strictly observing all applicable deadlines in the performance of their duties under Sections 6.21, 6.22, 6.23, 6.24 and 11.16. The Securities Administrator shall not have any liability for any loss, expense, damage or claim arising out of or with respect to any failure to properly prepare and/or timely file such Form 10-K, where such failure results from the Securities Administrator’s inability or failure to obtain or receive, on a timely basis, any information from any other party hereto needed to prepare, arrange for execution or file such Form 10-K, not resulting from its own negligence, bad faith or willful misconduct.           (c) Reports Filed on Form 8-K.      (i) Within four (4) Business Days after the occurrence of an event requiring disclosure on Form 8-K (each such event, a “Reportable Event”), and if requested by the Depositor, the Securities Administrator shall prepare and file on behalf of the Trust Fund 84 --------------------------------------------------------------------------------   any Form 8-K, as required by the Exchange Act, provided that the Depositor shall file the initial Form 8-K in connection with the issuance of the Certificates. Any disclosure or information related to a Reportable Event or that is otherwise required to be included on Form 8-K (“Form 8-K Disclosure Information”) shall be reported by the parties set forth on Exhibit Q hereto to the Depositor and the Securities Administrator and reviewed and approved or disapproved by the Depositor pursuant to the following paragraph and the Securities Administrator will have no duty or liability for any failure hereunder to determine or prepare any Form 8-K Disclosure Information or any Form 8-K, except as set forth in the next paragraph.      (ii) As set forth on Exhibit Q hereto, for so long as the Trust Fund is subject to the Exchange Act reporting requirements, no later than the end of business (New York City time) on the 2nd Business Day after the occurrence of a Reportable Event (i) the parties to this transaction shall be required to provide to the Securities Administrator and the Depositor, to the extent known by a responsible officer thereof, a notice in the form of Exhibit L attached hereto, along with, in EDGAR-compatible form, or in such other form as otherwise agreed upon by the Securities Administrator and such party, the form and substance of any Form 8-K Disclosure Information, if applicable, together with an Additional Disclosure Notification and (ii) the Depositor will approve, as to form and substance, or disapprove, as the case may be, the inclusion of the Form 8-K Disclosure Information. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Securities Administrator in connection with including any Form 8-K Disclosure Information on Form 8-K pursuant to this paragraph.      (iii) After preparing the Form 8-K, the Securities Administrator shall forward electronically a copy of the Form 8-K to the Depositor for review. Promptly, but no later than the close of business on the 3rd Business Day after the Reportable Event, the Depositor shall notify the Securities Administrator in writing (which may be furnished electronically) of any changes to or approval of such Form 8-K. In the absence of receipt of any written changes or approval, the Securities Administrator shall be entitled to assume that such Form 8-K is in final form and the Securities Administrator may proceed with the execution and filing of the Form 8-K. No later than noon New York City time on the 4th Business Day after the Reportable Event, the Depositor shall sign the Form 8-K and return an electronic or fax copy of such signed Form 8-K (with an original executed hard copy to follow by overnight mail) to the Securities Administrator. If a Form 8-K cannot be filed on time or if a previously filed Form 8-K needs to be amended, the Securities Administrator will follow the procedures set forth in Section 6.21(d). Promptly (but no later than 1 Business Day) after filing with the Commission, the Securities Administrator will make available on its internet website a final executed copy of each Form 8-K prepared and filed by the Securities Administrator. The parties to this Agreement acknowledge that the performance by the Securities Administrator of its duties under this Section 6.21(c) related to the timely preparation and filing of Form 8-K is contingent upon such parties strictly observing all applicable deadlines in the performance of their duties under this Section 6.21(c)(ii). The Securities Administrator shall not have any liability for any loss, expense, damage or claim arising out of or with respect to any failure to properly prepare and/or timely file such Form 8-K, where such 85 --------------------------------------------------------------------------------   failure results from the Securities Administrator’s inability or failure to obtain or receive, on a timely basis, any information from any other party hereto needed to prepare, arrange for execution or file such Form 8-K, not resulting from its own negligence, bad faith or willful misconduct.           (d) Delisting; Amendments; Late Filings.      (i) On or before January 30 of the first year in which the Securities Administrator is able to do so under applicable law, the Securities Administrator shall prepare and file a Form 15 Suspension Notification relating to the automatic suspension of reporting in respect of the Trust Fund under the Exchange Act.      (ii) In the event that the Securities Administrator is unable to timely file with the Commission all or any required portion of any Form 8-K, 10-D or 10-K required to be filed by this Agreement because required disclosure information was either not delivered to it or delivered to it after the delivery deadlines set forth in this Agreement or for any other reason, the Securities Administrator will promptly, but no later than within one Business Day, notify electronically the Depositor. In the case of Form 10-D and 10-K, the parties to this Agreement will cooperate to prepare and file a Form 12b-25 and a 10-D/A or 10-K/A, as applicable, pursuant to Rule 12b-25 of the Exchange Act. In the case of Form 8-K, the Securities Administrator will, upon receipt of all required Form 8-K Disclosure Information and upon the approval and direction of the Depositor, include such disclosure information on the next Form 10-D. In the event that any previously filed Form 8-K, 10-D or 10-K needs to be amended to include additional disclosure in connection with any additional Form 10-D disclosure (other than for the purpose of restating any Distribution Date Statement), additional Form 10-K or Form 8-K disclosure information, the Securities Administrator will electronically notify the Depositor and the affected parties and the Securities Administrator shall prepare and file, and such parties will cooperate in the preparation and filing of any necessary Form 8-K/A, 10-D/A or 10-K/A. Any Form 15, Form 12b-25 or any amendment to Form 8-K, 10-D or 10-K shall be signed by the Depositor. The parties to this Agreement acknowledge that the performance by the Securities Administrator of its duties under this Section 6.21(d) related to the timely preparation and filing of Form 15, a Form 12b-25 or any amendment to Form 8-K, 10-D or 10-K is contingent upon each such party performing its duties under this Section. Neither the Securities Administrator nor the Master Servicer shall have any liability for any loss, expense, damage or claim arising out of or with respect to any failure to properly prepare and/or timely file any such Form 15, Form 12b-25 or any amendments to Forms 8-K, 10-D or 10-K, where such failure results from the Securities Administrator’s inability or failure to obtain or receive, on a timely basis, any information from any other party hereto needed to prepare, arrange for execution or file such Form 15, Form 12b-25 or any amendments to Forms 8-K, 10-D or 10-K, not resulting from its own negligence, bad faith or willful misconduct.      Notwithstanding anything to the contrary herein, the Securities Administrator shall not file any Form 8-K, Form 10-D or Form 10K as to which it has received from the 86 --------------------------------------------------------------------------------   Depositor a notice to the effect that, upon review of the proposed filing, the Depositor does not approve of such filing.           (e) Sarbanes-Oxley Certification.      Each Form 10-K shall include a certification (the “Sarbanes-Oxley Certification”), required to be included therewith pursuant to the Sarbanes-Oxley Act. Each Servicer, the Master Servicer and the Securities Administrator shall provide, and each Servicer, the Master Servicer and the Securities Administrator shall cause any Servicing Function Participant engaged by it to provide, to the Person who signs the Sarbanes-Oxley Certification (the “Certifying Person”), by March 15 following each year in which the Trust Fund is subject to the reporting requirements of the Exchange Act and otherwise within a reasonable period of time upon request, a certification (each, a “Back-Up Certification”), in the form attached hereto as Exhibit M (or in such other form attached to the applicable Servicing Agreement), upon which the Certifying Person, the entity for which the Certifying Person acts as an officer, and such entity’s officers, directors and Affiliates (collectively with the Certifying Person, “Certification Parties”) can reasonably rely. The Depositor shall serve as the Certifying Person on behalf of the Trust Fund. In the event any such party or any Servicing Function Participant engaged by such party is terminated or resigns pursuant to the terms of this Agreement, or any applicable sub-servicing agreement, as the case may be, such party shall provide a Back-Up Certification to the Certifying Person pursuant to this Section 6.21(e) with respect to the period of time it was subject to this Agreement or any applicable sub-servicing agreement, as the case may be.      The Master Servicer shall enforce any obligation of the Servicers, to the extent set forth in the related Servicing Agreement, to deliver to the Master Servicer a certification similar to the Back-Up Certification as may be required pursuant to the related Servicing Agreement.      Section 6.22 Annual Statements of Compliance.      (a) The Master Servicer, the Securities Administrator and each Servicer shall deliver or otherwise make available (and the Master Servicer, the Securities Administrator and each Servicer shall cause any Additional Servicer engaged by it to deliver or otherwise make available) to the Depositor, the Trustee and the Securities Administrator on or before March 15 of each year, commencing in March 2007, an Officer’s Certificate (an “Item 1123 Certificate”) stating, as to the signer thereof, that (A) a review of such party’s activities during the preceding calendar year or portion thereof and of such party’s performance under this Agreement, or such other applicable agreement in the case of an Additional Servicer, has been made under such officer’s supervision and (B) to the best of such officer’s knowledge, based on such review, such party has fulfilled all its obligations under this Agreement, or such other applicable agreement in the case of an Additional Servicer, in all material respects throughout such year or portion thereof, or, if there has been a failure to fulfill any such obligation in any material respect, specifying each such failure known to such officer and the nature and status thereof. Promptly after receipt of each such Item 1123 Certificate, the Depositor shall review such Item 1123 Certificate and, if applicable, consult with each such party, as applicable, as to the nature of any failures by such party, in the fulfillment of any of such party’s obligations hereunder or, in the case of an Additional Servicer, under such other applicable agreement. 87 --------------------------------------------------------------------------------        (b) The Master Servicer shall include all Item 1123 Certificates received by it from each Servicer with its Item 1123 Certificate to be submitted to the Securities Administrator pursuant to this Section.      (c) In the event the Master Servicer, the Securities Administrator or any Additional Servicer engaged by any such party is terminated or resigns pursuant to the terms of this Agreement, or any applicable agreement in the case of an Additional Servicer, as the case may be, such party shall provide an Item 1123 Certificate pursuant to this Section 6.22 or to such applicable agreement, as the case may be, notwithstanding any such termination, assignment or resignation.      (d) The Master Servicer shall enforce any obligation of any Servicer, to the extent set forth in the related Servicing Agreement, to deliver to the Master Servicer an Item 1123 Certificate as may be required pursuant to the related Servicing Agreement. The Master Servicer shall include such Item 1123 Certificate with its own Item 1123 Certificate to be submitted to the Securities Administrator, the Depositor and the Trustee pursuant to this Section.      Section 6.23 Annual Assessments of Compliance.           (a) By March 15 of each year, commencing in March 2007, the Master Servicer and the Securities Administrator and each Servicer, each at its own expense, shall furnish or otherwise make available, and each such party shall cause any Servicing Function Participant engaged by it to furnish or otherwise make available, each at its own expense, to the Securities Administrator, the Trustee and the Depositor, a report on an assessment of compliance with the Relevant Servicing Criteria (an “Assessment of Compliance”) that contains (A) a statement by such party of its responsibility for assessing compliance with the Relevant Servicing Criteria, (B) a statement that such party used the Relevant Servicing Criteria to assess compliance with the Relevant Servicing Criteria, (C) such party’s Assessment of Compliance with the Relevant Servicing Criteria as of and for the fiscal year covered by the Form 10-K required to be filed pursuant to Section 6.21(b), including, if there has been any material instance of noncompliance with the Relevant Servicing Criteria, a discussion of each such failure and the nature and status thereof, and (D) a statement that a registered public accounting firm has issued an Accountant’s Attestation on such party’s Assessment of Compliance with the Relevant Servicing Criteria as of and for such period.           (b) No later than the end of each fiscal year for the Trust Fund for which a 10-K is required to be filed, each Servicer and the Master Servicer shall each forward to the Securities Administrator the name of each Servicing Function Participant engaged by it and what Relevant Servicing Criteria will be addressed in the Assessment of Compliance prepared by such Servicing Function Participant (provided, however, that the Master Servicer need not provide such information to the Securities Administrator so long as the Master Servicer and the Securities Administrator are the same person). When the Master Servicer and each Servicer (or any Servicing Function Participant engaged by them) submit their Assessments of Compliance to the Securities Administrator, such parties will also at such time include the Assessments of Compliance (and Accountant’s Attestation), pursuant to Sections 6.23 and 6.24, of each Servicing Function Participant engaged by it. 88 --------------------------------------------------------------------------------             (c) Promptly after receipt of each Assessment of Compliance, (i) the Depositor shall review each such report and, if applicable, consult with the Master Servicer, the Securities Administrator, a Servicer, the Custodian and any Servicing Function Participant engaged by such parties as to the nature of any material instance of noncompliance with the Relevant Servicing Criteria by each such party, and (ii) the Securities Administrator shall confirm that the Assessments of Compliance, taken individually, address the Relevant Servicing Criteria for each party as set forth on Exhibit N and on any similar exhibit set forth in each Servicing Agreement in respect of each Servicer and notify the Depositor of any exceptions. None of such parties will be required to deliver any such assessments until March 30 in any given year so long as it has received written confirmation from the Depositor that a Form 10-K is not required to be filed in respect of the Trust Fund for the preceding calendar year.           (d) The Master Servicer shall include all Assessments of Compliance received by it from the Servicers with its own Assessment of Compliance to be submitted to the Securities Administrator pursuant to this Section.           (e) In the event the Master Servicer, the Securities Administrator or any Servicing Function Participant engaged by any such party is terminated, assigns its rights and obligations under or resigns pursuant to, the terms of this Agreement, or any other applicable agreement, as the case may be, such party shall provide an Assessment of Compliance pursuant to this Section 6.23, or to such other applicable agreement, notwithstanding any termination, assignment or resignation.           (f) The Master Servicer shall enforce any obligation of the Servicers and the Custodian, to the extent set forth in the related Servicing Agreement or the Custody Agreement, as applicable, to deliver to the Master Servicer an Assessment of Compliance within the time frame set forth in, and in such form and substance as may be required pursuant to, the related Servicing Agreement or the Custody Agreement, as applicable. The Master Servicer shall include such Assessment of Compliance with its own Assessment of Compliance to be submitted to the Securities Administrator and the Trustee pursuant to this Section.      Section 6.24 Accountant’s Attestation.           (a) By March 15 of each year, commencing in 2007, the Master Servicer, the Securities Administrator and each Servicer, each at its own expense, shall cause, and each such party shall cause any Servicing Function Participant engaged by it to cause, each at its own expense, a registered public accounting firm (which may also render other services to the Master Servicer, the Securities Administrator or a Servicer or such other Servicing Function Participants, as the case may be) and that is a member of the American Institute of Certified Public Accountants to furnish a report (the “Accountant’s Attestation”) to the Securities Administrator and the Depositor, to the effect that (i) it has obtained a representation regarding certain matters from the management of such party, which includes an assertion that such party has complied with the Relevant Servicing Criteria, and (ii) on the basis of an examination conducted by such firm in accordance with standards for attestation engagements issued or adopted by the PCAOB, it is expressing an opinion as to whether such party’s compliance with the Relevant Servicing Criteria was fairly stated in all material respects, or it cannot express an 89 --------------------------------------------------------------------------------   overall opinion regarding such party’s Assessment of Compliance with the Relevant Servicing Criteria. In the event that an overall opinion cannot be expressed, such registered public accounting firm shall state in such report why it was unable to express such an opinion. Such report must be available for general use and not contain restricted use language.           (b) Promptly after receipt of such Accountant’s Attestations from the Master Servicer, each Servicer, each Custodian, the Securities Administrator or any Servicing Function Participant engaged by such parties, (i) the Depositor shall review the report and, if applicable, consult with such parties as to the nature of any defaults by such parties, in the fulfillment of any of each such party’s obligations hereunder or under any other applicable agreement, and (ii) the Securities Administrator shall confirm that each Assessment of Compliance is coupled with an Accountant’s Attestation meeting the requirements of this Section and notify the Depositor of any exceptions. None of such parties shall be required to deliver any such assessments until March 30 in any given year so long as it has received written confirmation from the Depositor that a Form 10-K is not required to be filed in respect of the Trust Fund for the preceding calendar year.           (c) The Master Servicer shall include each Accountant’s Attestation furnished to it by the Servicers with its own Accountant’s Attestation to be submitted to the Securities Administrator pursuant to this Section.           (d) In the event the Master Servicer, the Securities Administrator, the Custodian, any Servicer or Servicing Function Participant engaged by any such party, is terminated, assigns its rights and duties under, or resigns pursuant to the terms of, this Agreement, or the Custody Agreement, Servicing Agreement or sub-servicing agreement, as the case may be, such party shall at its own expense cause a registered public accounting firm to provide an Accountant’s Attestation pursuant to this Section 6.24, or other applicable agreement, notwithstanding any such termination, assignment or resignation.           (e) The Master Servicer shall enforce any obligation of the Servicers and the Custodian, to the extent set forth in the related Servicing Agreement and the Custody Agreement, as applicable, to deliver to the Master Servicer an attestation as may be required pursuant to, the related Servicing Agreement or the Custody Agreement, as applicable. The Master Servicer shall include each such attestation with its own Accountant’s Attestation to be submitted to the Securities Administrator pursuant to this Section. ARTICLE VII PURCHASE OF MORTGAGE LOANS AND TERMINATION OF THE TRUST FUND      Section 7.01 Purchase of Mortgage Loans; Termination of Trust Fund Upon Purchase or Liquidation of All Mortgage Loans.      (a) The respective obligations and responsibilities of the Trustee, the Securities Administrator and the Master Servicer created hereby (other than the obligation of the Securities 90 --------------------------------------------------------------------------------   Administrator to make payments to the Certificateholders as set forth in Section 7.02), shall terminate on the earliest of (i) the final payment or other liquidation of the last Mortgage Loan remaining in the Trust Fund and the disposition of all REO Property, (ii) the sale of the property held by the Trust Fund in accordance with Section 7.01(b) (if the Holder of the Class LT-R Certificate chooses to sell the assets of the Trust Fund in connection with the redemption of the Certificates) and (iii) the Distribution Date immediately following the Latest Possible Maturity Date; provided, however, that in no event shall the Trust Fund created hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James’s, living on the date hereof. Any termination of the Trust Fund shall be carried out in such a manner so that the termination of each REMIC included therein shall qualify as a “qualified liquidation” under the REMIC Provisions.      (b) The Certificates shall be subject to optional redemption by the Holder of the Class LT-R Certificate, in whole but not in part, on any Distribution Date on or after the date on which the Aggregate Stated Principal Balance is equal to or less than 10% of the Cut-off Date Balance. If the Holder of the Class LT-R Certificate elects to redeem the Certificates, it shall, no later than 30 days prior to the Distribution Date selected for redemption (the “Redemption Date”), deliver written notice to the Trustee and the Securities Administrator and either (a) deposit in the Distribution Account the Redemption Price therefor or (b) state in such notice that the Redemption Price shall be deposited in the Distribution Account not later than 10:00 a.m., New York City time on the applicable Redemption Date. In connection with such redemption, if the Holder of the Class LT-R Certificate elects to liquidate the assets of the Trust Fund, such Holder shall cause the Trustee to cause each REMIC to adopt a plan of complete liquidation by complying with the provisions of Section 7.03.      (c) [Reserved].      (d) The Depositor, the Master Servicer, each Servicer, the Securities Administrator and the Custodian shall be reimbursed from the Redemption Price, for any Advances, Servicer Advances, accrued and unpaid Servicing Fees and Master Servicing Fees or other amounts with respect to the related Mortgage Loans that are reimbursable to such parties under this Agreement, the related Servicing Agreement or the Custody Agreement.      Section 7.02 Procedure Upon Redemption and Termination of Trust Fund.      (a) If on any Determination Date the Master Servicer determines that there are no outstanding Mortgage Loans, and no other funds or assets in the Trust Fund other than the funds in the Distribution Account, the Master Servicer shall direct the Securities Administrator promptly to send a final distribution notice to each Certificateholder. Such notice shall specify (A) the Distribution Date upon which final distribution on the Certificates of all amounts required to be distributed to Certificateholders pursuant to Section 5.02 will be made upon presentation and surrender of the Certificates at the Certificate Registrar’s Corporate Trust Office, and (B) that the Record Date otherwise applicable to such Distribution Date is not applicable, distribution being made only upon presentation and surrender of the Certificates at the office or agency of the Certificate Registrar therein specified. The Securities Administrator 91 --------------------------------------------------------------------------------   shall give such notice to the Trustee, the Master Servicer and the Certificate Registrar at the time such notice is given to Holders of the Certificates. Upon any such termination, the duties of the Certificate Registrar with respect to the Certificates shall terminate.      Upon termination of the Trust Fund, the Securities Administrator shall terminate, or request the Master Servicer to terminate, the Distribution Account and any other account or fund maintained with respect to the Certificates, subject to the Securities Administrator’s obligation hereunder to hold all amounts payable to Certificateholders in trust without interest pending such payment.      (b) In the event that all of the Holders do not surrender their Certificates for cancellation within three months after the time specified in the termination notice, the Securities Administrator shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice any Certificates shall not have been surrendered for cancellation, the Securities Administrator may take appropriate steps to contact the remaining Certificateholders concerning surrender of such Certificates, and the cost thereof shall be paid out of the amounts distributable to such Holders. If within two years after the second notice any Certificates shall not have been surrendered for cancellation, the Securities Administrator shall, subject to applicable state law relating to escheatment, hold all amounts distributable to such Holders for the benefit of such Holders. No interest shall accrue on any amount held by the Securities Administrator and not distributed to a Certificateholder due to such Certificateholder’s failure to surrender its Certificate(s) for payment of the final distribution thereon in accordance with this Section.      (c) Any reasonable expenses incurred by the Securities Administrator or the Trustee in connection with any redemption or termination or liquidation of the Trust Fund shall be reimbursed from proceeds received from the liquidation of the Trust Fund.      Section 7.03 Additional Trust Fund Termination Requirements.      (a) Any termination of the Trust Fund shall be effected in accordance with the following additional requirements, unless the Securities Administrator and the Trustee receive an Opinion of Counsel (at the expense of the Depositor), addressed to the Securities Administrator and the Trustee to the effect that the failure of the Trust Fund to comply with the requirements of this Section 7.03 will not result in an Adverse REMIC Event:      (i) Within 89 days prior to the time of the making of the final payment on the Certificates, upon notification by the Holder of the Class LT-R Certificate that it intends to exercise its option to cause the termination of the Trust Fund, the Trustee shall adopt a plan of complete liquidation of the Trust Fund on behalf of each REMIC, meeting the requirements of a qualified liquidation under the REMIC Provisions;      (ii) Any sale of the assets of the Trust Fund pursuant to Section 7.01 shall be a sale for cash and shall occur at or after the time of adoption of such a plan of complete liquidation and prior to the time of making of the final payment on or credit to the 92 --------------------------------------------------------------------------------   Certificates, and upon the closing of such a sale, the Trustee shall deliver or cause the Custodian to deliver the assets to the purchaser thereof as instructed by the Holder of the Class LT-R Certificate;      (iii) On the date specified for final payment of the Certificates, the Securities Administrator shall make final distributions of principal and interest on the Certificates in accordance with Section 5.02 and, after payment of, or provision for any outstanding expenses, distribute or credit, or cause to be distributed or credited, to the Holders of the Residual Certificates all cash on hand after such final payment (other than cash retained to meet claims), and the Trust Fund (and each REMIC) shall terminate at that time; and      (iv) In no event may the final payment on or credit to the Certificates or the final distribution or credit to the Holders of the Residual Certificates be made after the 89th day from the date on which the plan of complete liquidation is adopted.      (b) By its acceptance of a Residual Certificate, each Holder thereof hereby agrees to accept the plan of complete liquidation adopted by the Trustee under this Section and to take such other action in connection therewith as may be reasonably requested by the Securities Administrator or any Servicer. ARTICLE VIII RIGHTS OF CERTIFICATEHOLDERS      Section 8.01 Limitation on Rights of Holders.      (a) The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or this Trust Fund, nor entitle such Certificateholder’s legal representatives or heirs to claim an accounting or take any action or proceeding in any court for a partition or winding up of this Trust Fund, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. Except as otherwise expressly provided herein, no Certificateholder, solely by virtue of its status as a Certificateholder, shall have any right to vote or in any manner otherwise control the Master Servicer or the operation and management of the Trust Fund, or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Certificates, be construed so as to constitute the Certificateholders from time to time as partners or members of an association, nor shall any Certificateholder be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision hereof.      (b) No Certificateholder, solely by virtue of its status as Certificateholder, shall have any right by virtue or by availing of any provision of this Agreement to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless such Holder previously shall have given to the Trustee a written notice of an Event of Default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of Certificates evidencing not less than 25% of the Class Principal Amount or Class Notional Amount (or Percentage Interest) of Certificates of each Class affected thereby shall have made written 93 --------------------------------------------------------------------------------   request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the cost, expenses and liabilities to be incurred therein or thereby, and the Trustee, for sixty days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding and no direction inconsistent with such written request has been given such Trustee during such sixty-day period by such Certificateholders; it being understood and intended, and being expressly covenanted by each Certificateholder with every other Certificateholder, the Securities Administrator and the Trustee, that no one or more Holders of Certificates shall have any right in any manner whatever by virtue or by availing of any provision of this Agreement to affect, disturb or prejudice the rights of the Holders of any other of such Certificates, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Agreement, except in the manner herein provided and for the benefit of all Certificateholders. For the protection and enforcement of the provisions of this Section, each and every Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.      Section 8.02 Access to List of Holders.      (a) If the Trustee is not acting as Certificate Registrar, the Certificate Registrar will furnish or cause to be furnished to the Trustee, within fifteen days after receipt by the Certificate Registrar of a request by the Trustee in writing, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Certificateholders of each Class as of the most recent Record Date.      (b) If three or more Holders or Certificate Owners (hereinafter referred to as “Applicants”) apply in writing to the Certificate Registrar, and such application states that the Applicants desire to communicate with other Holders with respect to their rights under this Agreement or under the Certificates and is accompanied by a copy of the communication which such Applicants propose to transmit, then the Certificate Registrar shall, within five Business Days after the receipt of such application, afford such Applicants reasonable access during the normal business hours of the Certificate Registrar to the most recent list of Certificateholders held by the Certificate Registrar or shall, as an alternative, send, at the Applicants’ expense, the written communication proffered by the Applicants to all Certificateholders at their addresses as they appear in the Certificate Register.      (c) Every Holder or Certificate Owner, if the Holder is a Clearing Agency, by receiving and holding a Certificate, agrees with the Depositor, the Master Servicer, the Securities Administrator, the Certificate Registrar and the Trustee that neither the Depositor, the Master Servicer, the Securities Administrator, the Certificate Registrar nor the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Certificateholders hereunder, regardless of the source from which such information was derived. 94 --------------------------------------------------------------------------------        Section 8.03 Acts of Holders of Certificates.      (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement to be given or taken by Holders or Certificate Owners, if the Holder is a Clearing Agency, may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and the Securities Administrator and, where expressly required herein, to the Master Servicer. Such instrument or instruments (as the action embodies therein and evidenced thereby) are herein sometimes referred to as an “Act” of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agents shall be sufficient for any purpose of this Agreement and conclusive in favor of the Trustee, the Securities Administrator and the Master Servicer, if made in the manner provided in this Section. Each of the Trustee, the Securities Administrator and the Master Servicer shall promptly notify the others of receipt of any such instrument by it, and shall promptly forward a copy of such instrument to the others.      (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments or deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Whenever such execution is by an officer of a corporation or a member of a partnership on behalf of such corporation or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the individual executing the same, may also be proved in any other manner which the Trustee or the Securities Administrator deems sufficient.      (c) The ownership of Certificates (whether or not such Certificates shall be overdue and notwithstanding any notation of ownership or other writing thereon made by anyone other than the Trustee) shall be proved by the Certificate Register, and neither the Trustee, the Securities Administrator, the Master Servicer, nor the Depositor shall be affected by any notice to the contrary.      (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Certificate shall bind every future Holder of the same Certificate and the Holder of every Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee, the Securities Administrator or the Master Servicer in reliance thereon, whether or not notation of such action is made upon such Certificate. 95 --------------------------------------------------------------------------------   ARTICLE IX ADMINISTRATION AND SERVICING OF MORTGAGE LOANS BY THE MASTER SERVICER      Section 9.01 Duties of the Master Servicer; Enforcement of Servicer’s and Master Servicer’s Obligations.      (a) The Master Servicer, on behalf of the Trustee, the Depositor and the Certificateholders shall, from and after the Closing Date, monitor the performance of the Servicers under the Servicing Agreements, and shall use its reasonable good faith efforts to cause the Servicers duly and punctually to perform all of their duties and obligations thereunder. Upon the occurrence of a default of which an Authorized Officer of the Master Servicer has actual knowledge under a Servicing Agreement, the Master Servicer shall promptly notify the Trustee thereof, and shall specify in such notice the action, if any, the Master Servicer is taking in respect of such default. So long as any such default shall be continuing, the Master Servicer may, and shall if it determines such action to be in the best interests of Certificateholders, (i) terminate all of the rights and powers of such Servicer pursuant to the applicable provisions of the Servicing Agreement; (ii) exercise any rights it may have to enforce the Servicing Agreement against such Servicer; and/or (iii) waive any such default under the Servicing Agreement or take any other action with respect to such default as is permitted thereunder. Notwithstanding any provision of this Agreement or any Servicing Agreement to the contrary, the Master Servicer shall have no duty or obligation to supervise, monitor or oversee the activities of, or to enforce the obligations of, (i) any Servicer under its Servicing Agreement with respect to any Additional Collateral or any Limited Purpose Surety Bond relating thereto, including, without limitation, the collection of any amounts owing to the Trust Fund in respect thereof (unless and until the Master Servicer shall have assumed the obligations of such Servicer as successor servicer under the related Servicing Agreement pursuant to this Section 9.01, in which case, as successor servicer, it shall be bound to serve and administer the Additional Collateral and any related Limited Purpose Surety Bond in accordance with the provisions of such Servicing Agreement) or (ii) any Servicer under its Servicing Agreement with respect to the servicing or administration of defaulted or Delinquent Mortgage Loans and the management and disposition of any REO Properties or for any actions of the Trustee or the Seller in connection therewith.      (b) Upon any termination by the Master Servicer of a Servicer’s rights and powers pursuant to its Servicing Agreement, the rights and powers of the Servicer with respect to the Mortgage Loans shall vest in the Master Servicer and the Master Servicer shall be the successor in all respects to such Servicer in its capacity as Servicer with respect to such Mortgage Loans under the related Servicing Agreement, unless or until the Master Servicer shall have appointed, with the consent of the Trustee and the Rating Agencies, such consent not to be unreasonably withheld, and in accordance with the applicable provisions of the Servicing Agreement, a new Fannie Mae- or FHLMC-approved Person that is a member in good standing of MERS to serve as successor to the Servicer; provided, however, that no Trustee consent or Rating Agency approval shall be required if the successor servicer is a person that was a Servicer on the Closing Date; provided, further, that it is understood and agreed by the parties hereto that there will be a period of transition (not to exceed 90 days) before the actual servicing functions can be fully 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 96 --------------------------------------------------------------------------------   transferred to a successor servicer (including the Master Servicer). With such consent, the Master Servicer may elect to continue to serve as successor servicer under the Servicing Agreement. Upon appointment of a successor servicer, as authorized under this Section 9.01(b), unless the successor servicer shall have assumed the obligation of the terminated Servicer under such Servicing Agreement, the Master Servicer, the Trustee and such successor servicer shall enter into a servicing agreement in a form substantially similar to the affected Servicing Agreement. In connection with any such appointment, the Master Servicer may make such arrangements for the compensation of such successor as it and such successor shall agree, but in no event shall such compensation of any successor servicer (including the Master Servicer) be in excess of that payable to the Servicer under the affected Servicing Agreement.      The Master Servicer shall pay the costs of such enforcement (including the termination of any Servicer, the appointment of a successor servicer or the transfer and assumption of the servicing by the Master Servicer) at its own expense and shall be reimbursed therefor initially (i) by the terminated Servicer, (ii) from a general recovery resulting from such enforcement only to the extent, if any, that such recovery exceeds all amounts due in respect of the related Mortgage Loans, (iii) from a specific recovery of costs, expenses or attorney’s fees against the party against whom such enforcement is directed, or (iv) to the extent that such amounts described in (i)-(iii) above are insufficient to reimburse the Master Servicer for such costs of enforcement, from the Trust Fund, as provided in Section 9.04.      If the Master Servicer assumes the servicing with respect to any of the Mortgage Loans, it will not assume liability for the representations and warranties of any Servicer it replaces or for the errors or omissions of such Servicer.      (c) Upon any termination of a Servicer’s rights and powers pursuant to its Servicing Agreement, the Master Servicer shall promptly notify the Trustee and the Rating Agencies, specifying in such notice that the Master Servicer or any successor servicer, as the case may be, has succeeded the Servicer under the Servicing Agreement, which notice shall also specify the name and address of any such successor servicer.      (d) Unless otherwise specified herein, the provisions of Section 9.01(b) (relating to the Fannie Mae- and Freddie Mac- approval and MERS membership of any successor servicer, the form of any servicing agreement to be entered into by such successor servicer and the amount of compensation payable thereunder) and the provisions of Section 9.01(c) (relating to notices to the Trustee, the Securities Administrator and the Rating Agencies) shall apply to any proposed transfer or assignment by the Seller of its rights under any Servicing Agreement or of the servicing thereunder or delegation of its rights or duties thereunder or any portion thereof to any other Person other than the initial Servicer under such Servicing Agreement; provided that the Seller shall not be required to provide prior notice to anyone other than the Master Servicer of any transfer of servicing that occurs within four months following the Closing Date to an entity that is a Servicer on the Closing Date. In addition, neither the Depositor nor the Trustee shall consent to the assignment by any Servicer of such Servicer’s rights and obligations under the Servicing Agreement to a successor servicer other than a Person that was a Servicer on the Closing Date without the prior written consent of the Master Servicer, which consent shall not be unreasonably withheld. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 97 --------------------------------------------------------------------------------        In connection with any transfer of servicing (whether to another initial Servicer, or otherwise), the Seller shall, at its cost and expense, take such steps, or cause the terminated Servicer to take such steps, as may be necessary or appropriate to effectuate and evidence the transfer of the servicing of the Mortgage Loans to such successor servicer, including, but not limited to, the following: (A) to the extent required by the terms of the Mortgage Loans and by applicable federal and state laws and regulations, the Seller shall cause the prior Servicer to timely mail to each obligor under a Mortgage Loan any required notices or disclosures describing the transfer of servicing of the Mortgage Loans to the successor servicer; (B) prior to the effective date of such transfer of servicing, the Seller shall cause the prior Servicer to transmit to any related insurer notification of such transfer of servicing; (C) on or prior to the effective date of such transfer of servicing, the Seller shall cause the prior Servicer to deliver to the successor servicer all Mortgage Documents and any related records or materials; (D) on or prior to the effective date of such transfer of servicing, the Seller shall cause the prior Servicer to transfer to the successor servicer all funds held by the prior Servicer in respect of the Mortgage Loans; (E) on or prior to the effective date of such transfer of servicing, the Seller shall cause the prior Servicer to, after the effective date of the transfer of servicing to the successor servicer, continue to forward to such successor servicer, within one Business Day of receipt, the amount of any payments or other recoveries received by the prior Servicer, and to notify the successor servicer of the source and proper application of each such payment or recovery; and (F) the Seller shall cause the prior Servicer to, after the effective date of transfer of servicing to the successor servicer, continue to cooperate with the successor servicer to facilitate such transfer in such manner and to such extent as the successor servicer may reasonably request. Notwithstanding the foregoing, the prior Servicer shall be obligated to perform the items listed above to the extent provided in the Servicing Agreement.      Section 9.02 Assumption of Master Servicing by Trustee.      (a) In the event the Master Servicer shall for any reason no longer be the Master Servicer (including by reason of any Event of Default under this Agreement), the Trustee shall thereupon, in accordance with the terms of Section 6.14 hereof, assume all of the rights and obligations of such Master Servicer hereunder and under each Servicing Agreement entered into with respect to the Mortgage Loans or shall appoint as successor master servicer a Fannie-Mae or FHLMC-approved servicer that is acceptable to the Depositor and the Rating Agencies. The Trustee, its designee or any successor master servicer appointed by the Trustee shall be deemed to have assumed all of the Master Servicer’s interest herein and therein to the same extent as if such Servicing Agreement had been assigned to the assuming party, except that the Master Servicer shall not thereby be relieved of any liability or obligations of the Master Servicer under such Servicing Agreement accruing prior to its replacement as Master Servicer, and shall be liable to the Trustee, and hereby agrees to indemnify and hold harmless the Trustee from and against all costs, damages, expenses and liabilities (including reasonable attorneys’ fees) incurred by the Trustee as a result of such liability or obligations of the Master Servicer and in connection with the Trustee’s assumption (but not its performance, except to the extent that costs or liability of the Trustee are created or increased as a result of negligent or wrongful acts or omissions of the Master Servicer prior to its replacement as Master Servicer) of the Master Servicer’s obligations, duties or responsibilities thereunder. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 98 --------------------------------------------------------------------------------        (b) The Master Servicer that has been terminated shall, upon request of the Trustee but at the expense of such Master Servicer, deliver to the assuming party all documents and records relating to each Servicing Agreement and the related Mortgage Loans and an accounting of amounts collected and held by it and otherwise use its best efforts to effect the orderly and efficient transfer of each Servicing Agreement to the assuming party.      Section 9.03 Representations and Warranties of the Master Servicer.      (a) The Master Servicer hereby represents and warrants to the Depositor, the Securities Administrator and the Trustee, for the benefit of the Certificateholders, as of the Closing Date that:      (i) it is validly existing and in good standing under the laws of the United States of America as a national banking association, and as Master Servicer has full power and authority to transact any and all business contemplated by this Agreement and to execute, deliver and comply with its obligations under the terms of this Agreement, the execution, delivery and performance of which have been duly authorized by all necessary corporate action on the part of the Master Servicer;      (ii) the execution and delivery of this Agreement by the Master Servicer and its performance and compliance with the terms of this Agreement will not (A) violate the Master Servicer’s charter or bylaws, (B) violate any law or regulation or any administrative decree or order to which it is subject or (C) constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material contract, agreement or other instrument to which the Master Servicer is a party or by which it is bound or to which any of its assets are subject, which violation, default or breach would materially and adversely affect the Master Servicer’s ability to perform its obligations under this Agreement;      (iii) this Agreement constitutes, assuming due authorization, execution and delivery hereof by the other respective parties hereto, a legal, valid and binding obligation of the Master Servicer, enforceable against it in accordance with the terms hereof, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights in general, and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law);      (iv) the Master Servicer is not in default with respect to any order or decree of any court or any order or regulation of any federal, state, municipal or governmental agency to the extent that any such default would materially and adversely affect its performance hereunder;      (v) the Master Servicer is not a party to or bound by any agreement or instrument or subject to any charter provision, bylaw or any other corporate restriction or any judgment, order, writ, injunction, decree, law or regulation that may materially and adversely affect its ability as Master Servicer to perform its obligations under this 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 99 --------------------------------------------------------------------------------   Agreement or that requires the consent of any third person to the execution of this Agreement or the performance by the Master Servicer of its obligations under this Agreement;      (vi) no litigation is pending or, to the best of the Master Servicer’s knowledge, threatened against the Master Servicer which would prohibit its entering into this Agreement or performing its obligations under this Agreement;      (vii) the Master Servicer, or an affiliate thereof the primary business of which is the servicing of conventional residential mortgage loans, is a Fannie Mae- or FHLMC-approved seller/servicer;      (viii) no consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Master Servicer of or compliance by the Master Servicer with this Agreement or the consummation of the transactions contemplated by this Agreement, except for such consents, approvals, authorizations and orders (if any) as have been obtained; and      (ix) the consummation of the transactions contemplated by this Agreement are in the ordinary course of business of the Master Servicer;      (b) It is understood and agreed that the representations and warranties set forth in this Section shall survive the execution and delivery of this Agreement. In addition to any indemnity required pursuant to Section 11.16 hereof, the Master Servicer shall indemnify the Depositor, the Securities Administrator and the Trustee and hold them harmless against any loss, damages, penalties, fines, forfeitures, legal fees and related costs, judgments, and other costs and expenses resulting from any claim, demand, defense or assertion based on or grounded upon, or resulting from, a material breach of the Master Servicer’s representations and warranties contained in Section 9.03(a) or any failure by the Master Servicer to deliver any information, report, certification, accountants’ letter or other material when and as required under this Agreement. It is understood and agreed that the enforcement of the obligation of the Master Servicer set forth in this Section to indemnify the Depositor, the Securities Administrator and the Trustee as provided in this Section constitutes the sole remedy (other than as set forth in Section 6.14) of the Depositor, the Securities Administrator and the Trustee, respecting a breach of the foregoing representations and warranties. Such indemnification shall survive any termination of the Master Servicer as Master Servicer hereunder, and any termination of this Agreement.      Any cause of action against the Master Servicer relating to or arising out of the breach of any representations and warranties made in this Section shall accrue upon discovery of such breach by either the Depositor, the Master Servicer or the Trustee or notice thereof by any one of such parties to the other parties.      Section 9.04 Compensation to the Master Servicer.      The Master Servicer shall be entitled to be paid by the Trust Fund, and either retain or withdraw from the Distribution Account, (i) its Master Servicing Fee with respect to each Distribution Date, (ii) amounts necessary to reimburse itself for any previously unreimbursed 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 100 --------------------------------------------------------------------------------   Advances, Servicer Advances and Nonrecoverable Advances in accordance with the definition of “Available Distribution Amount” and (iii) amounts representing assumption fees, late payment charges or other ancillary income not included in the definition of “Available Distribution Amount” and which are not required to be remitted by the Servicers to the Securities Administrator or deposited by the Securities Administrator into the Distribution Account. The Master Servicer shall be required to pay all expenses incurred by it in connection with its activities hereunder and shall not be entitled to reimbursement therefor except as provided in this Agreement.      In addition, Depositor agrees, except as otherwise expressly provided herein, to reimburse the Master Servicer, upon its request, for all reasonable expenses, disbursements and advances incurred or made by the Master Servicer in connection with the performance of its duties hereunder (including the reasonable compensation and the expenses and disbursements of its agents and counsel), to the extent not otherwise reimbursed pursuant to this Agreement, except any such expense, disbursement or advance as may be attributable to its willful misfeasance, bad faith or negligence.      Section 9.05 Merger or Consolidation.      Any Person into which the Master Servicer may be merged or consolidated, or any Person resulting from any merger, conversion, other change in form or consolidation to which the Master Servicer shall be a party, or any Person succeeding to the business of the Master Servicer, shall be the successor to the Master Servicer hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided, however, that the successor or resulting Person to the Master Servicer or its Affiliate whose primary business is the servicing of conventional residential mortgage loans shall be a Person that shall be qualified and approved to service mortgage loans for Fannie Mae or FHLMC and shall have a net worth of not less than $15,000,000.      Section 9.06 Resignation of Master Servicer.      Except as otherwise provided in Sections 9.05 and 9.07 hereof, the Master Servicer shall not resign from the obligations and duties hereby imposed on it unless the Master Servicer’s duties hereunder are no longer permissible under applicable law or are in material conflict by reason of applicable law with any other activities carried on by it and cannot be cured. Any such determination permitting the resignation of the Master Servicer shall be evidenced by an Opinion of Counsel that shall be Independent to such effect delivered to the Trustee. No such resignation shall become effective until the Trustee shall have assumed, or a successor master servicer shall have been appointed by the Trustee and until such successor shall have assumed, the Master Servicer’s responsibilities and obligations under this Agreement. Notice of such resignation shall be given promptly by the Master Servicer and the Depositor to the Trustee.      If, at any time, the Master Servicer resigns under this Section 9.06, or transfers or assigns its rights and obligations under Section 9.07, or is removed as Master Servicer pursuant to Section 6.14, then at such time as Wells Fargo Bank, N.A. also shall resign (and shall be entitled to resign) as Securities Administrator, Paying Agent, Authenticating Agent and Certificate 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 101 --------------------------------------------------------------------------------   Registrar under this Agreement. In such event, the obligations of each such party shall be assumed by the Trustee or such successor master servicer appointed by the Trustee (subject to the provisions of Section 9.02(a)).      Section 9.07 Assignment or Delegation of Duties by the Master Servicer.      Except as expressly provided herein, the Master Servicer shall not assign or transfer any of its rights, benefits or privileges hereunder to any other Person, or delegate to or subcontract with, or authorize or appoint any other Person to perform any of the duties, covenants or obligations to be performed by the Master Servicer hereunder; provided, however, that the Master Servicer shall have the right with the prior written consent of the Trustee and the Depositor (which consent shall not be unreasonably withheld), and upon delivery to the Trustee and the Depositor of a letter from each Rating Agency to the effect that such action shall not result in a downgrading of the Certificates, to delegate or assign to or subcontract with or authorize or appoint any qualified Person to perform and carry out any duties, covenants or obligations to be performed and carried out by the Master Servicer hereunder. Notice of such permitted assignment shall be given promptly by the Master Servicer to the Depositor and the Trustee. If, pursuant to any provision hereof, the duties of the Master Servicer are transferred to a successor master servicer, the entire amount of the Master Servicing Fees and other compensation payable to the Master Servicer pursuant hereto shall thereafter be payable to such successor master servicer. Such successor master servicer shall also pay the fees of the Trustee and the Securities Administrator, as provided herein.      Section 9.08 Limitation on Liability of the Master Servicer and Others.      Neither the Master Servicer nor any of the directors, officers, employees or agents of the Master Servicer shall be under any liability to the Trustee or the Certificateholders for any action taken or for refraining from the taking of any action in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Master Servicer or any such person against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or negligence in its performance of its duties or by reason of reckless disregard for its obligations and duties under this Agreement. The Master Servicer and any director, officer, employee or agent of the Master Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Master Servicer shall be under no obligation to appear in, prosecute or defend any legal action that is not incidental to its duties to master service the Mortgage Loans in accordance with this Agreement and that in its opinion may involve it in any expenses or liability; provided, however, that the Master Servicer may in its sole discretion undertake any such action that it may deem necessary or desirable in respect to this Agreement and the rights and duties of the parties hereto and the interests of the Certificateholders hereunder. In such event, the legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Trust Fund and the Master Servicer shall be entitled to be reimbursed therefor out of the Distribution Account.      The Master Servicer shall not be liable for any acts or omissions of any Servicer except to the extent that damages or expenses are incurred as a result of such act or omissions and such 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 102 --------------------------------------------------------------------------------   damages and expenses would not have been incurred but for the negligence, willful misfeasance, bad faith or recklessness of the Master Servicer in supervising, monitoring and overseeing the obligations of the Servicers in this Agreement.      Section 9.09 Indemnification; Third-Party Claims.      In addition to any indemnity required pursuant to Section 11.16 hereof, the Master Servicer agrees to indemnify the Depositor, the Securities Administrator and the Trustee, and hold them harmless against any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments, and any other costs, liability, fees and expenses that the Depositor, the Securities Administrator or the Trustee may sustain as a result of the Master Servicer’s willful misfeasance, bad faith or negligence in the performance of its duties hereunder or by reason of its reckless disregard for its obligations and duties under this Agreement. The Depositor, the Securities Administrator and the Trustee shall immediately notify the Master Servicer if a claim is made by a third party with respect to this Agreement or the Mortgage Loans entitling the Depositor, the Securities Administrator or the Trustee to indemnification under this Section 9.09, whereupon the Master Servicer shall assume the defense of any such claim and pay all expenses in connection therewith, including counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against it or them in respect of such claim.      Section 9.10 Master Servicer Fidelity Bond and Master Servicer Errors and Omissions Insurance Policy.      The Master Servicer, at its expense, shall maintain in effect a blanket fidelity bond and an errors and omissions insurance policy, affording coverage with respect to all directors, officers, employees and other Persons acting on such Master Servicer’s behalf, and covering errors and omissions in the performance of the Master Servicer’s obligations hereunder. The errors and omissions insurance policy and the fidelity bond shall be in such form and amount generally acceptable for entities serving as master servicers or trustees. ARTICLE X REMIC ADMINISTRATION      Section 10.01 REMIC Administration.      (a) REMIC elections as set forth in the Preliminary Statement to this Agreement shall be made on Forms 1066 or other appropriate federal tax or information return for the taxable year ending on the last day of the calendar year in which the Certificates are issued. The regular interests and residual interest in each REMIC shall be as designated in the Preliminary Statement to this Agreement.      (b) The Closing Date is hereby designated as the “Startup Day” of each REMIC within the meaning of section 86OG(a)(9) of the Code. The “latest possible maturity date” for purposes of Treasury Regulation 1.86OG-1(a)(4) will be the Latest Possible Maturity Date. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 103 --------------------------------------------------------------------------------        (c) The Securities Administrator shall represent the Trust Fund in any administrative or judicial proceeding relating to an examination or audit by any governmental taxing authority with respect thereto. The Securities Administrator shall pay any and all tax related expenses (not including taxes) of each REMIC, including but not limited to any professional fees or expenses related to audits or any administrative or judicial proceedings with respect to such REMIC that involve the Internal Revenue Service or state tax authorities, but only to the extent that (i) such expenses are ordinary or routine expenses, including expenses of a routine audit but not expenses of litigation (except as described in (ii)); or (ii) such expenses or liabilities (including taxes and penalties) are attributable to the negligence or willful misconduct of the Securities Administrator in fulfilling its duties hereunder (including its duties as tax return preparer). The Securities Administrator shall be entitled to reimbursement of expenses to the extent provided in clause (i) above from the Distribution Account, provided, however, the Securities Administrator shall not be entitled to reimbursement for expenses incurred in connection with the preparation of tax returns and other reports as required by Section 6.20 and this Section.      (d) The Securities Administrator shall prepare, and the Trustee shall sign and file, as instructed by the Securities Administrator, all of each REMIC’s federal and appropriate state tax and information returns as such REMIC’s direct representative. The expenses of preparing and filing such returns shall be borne by the Securities Administrator. In preparing such returns, the Securities Administrator shall, with respect to each REMIC created hereunder other than the Upper-Tier REMIC (each such REMIC, a “Non-Upper-Tier REMIC”): (i) treat the accrual period for interests in such Non-Upper-Tier REMIC as the calendar month; (ii) account for distributions made from such Non-Upper-Tier REMIC as made on the first day of each succeeding calendar month; (iii) account for income under the all-OID method at the Net WAC; (iv) use the aggregation method provided in Treasury Regulation section 1.1275-2(c); and (v) account for income and expenses related to such Non-Upper-Tier REMIC in the manner resulting in the lowest amount of excess inclusion income possible accruing to the Holder of the residual interest in such Non-Upper-Tier REMIC.      (e) The Securities Administrator or its designee shall perform on behalf of each REMIC all reporting and other tax compliance duties that are the responsibility of such REMIC under the Code, the REMIC Provisions, or other compliance guidance issued by the Internal Revenue Service or any state or local taxing authority. Among its other duties, if required by the Code, the REMIC Provisions, or other such guidance, the Securities Administrator shall provide, upon receipt of additional reasonable compensation, (i) to the Treasury or other governmental authority such information as is necessary for the application of any tax relating to the transfer of a Residual Certificate to any disqualified person or organization pursuant to Treasury Regulation 1.860E-2(a)(5) and any person designated in Section 860E(e)(3) of the Code and (ii) to the Trustee such information as is necessary for the Trustee to provide to the Certificateholders such information or reports as are required by the Code or REMIC Provisions.      (f) The Trustee, the Securities Administrator, the Master Servicer and the Holders of Certificates shall take any action or cause any REMIC to take any action necessary to create or maintain the status of any REMIC as a REMIC under the REMIC Provisions and shall assist each other as necessary to create or maintain such status. Neither the Trustee, the Securities Administrator, the Master Servicer nor the Holder of any Residual Certificate shall knowingly 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 104 --------------------------------------------------------------------------------   take any action, cause any REMIC to take any action or fail to take (or fail to cause to be taken) any action that, under the REMIC Provisions, if taken or not taken, as the case may be, could result in an Adverse REMIC Event unless the Trustee, the Securities Administrator and the Master Servicer have received an Opinion of Counsel (at the expense of the party seeking to take such action or failing to take such action) to the effect that the contemplated action (or inaction, as the case may be) will not endanger such status or result in the imposition of such a tax. In addition, prior to taking any action with respect to any REMIC or the assets therein, or causing any REMIC to take any action, which is not expressly permitted under the terms of this Agreement, any Holder of a Residual Certificate will consult with the Trustee, the Securities Administrator, the Master Servicer or their respective designees, in writing, with respect to whether such action could cause an Adverse REMIC Event to occur with respect to any REMIC, and no such Person shall take any such action or cause any REMIC to take any such action as to which the Trustee, the Securities Administrator or the Master Servicer has advised it in writing that an Adverse REMIC Event could occur; provided, however, that if no Adverse REMIC Event would occur but such action could result in the imposition of additional taxes on the Residual Certificateholders, no such Person shall take any such action, or cause any REMIC to take any such action without the written consent of the Residual Certificateholders.      (g) Each Holder of a Residual Certificate shall pay when due any and all taxes imposed on the related REMIC by federal or state governmental authorities. To the extent that such taxes are not paid by a Residual Certificateholder, the Trustee or the Paying Agent shall pay any remaining REMIC taxes out of current or future amounts otherwise distributable to the Holder of the Residual Certificate in any such REMIC or, if no such amounts are available, out of other amounts held in the Distribution Account, and shall reduce amounts otherwise payable to holders of regular interests in any such REMIC, as the case may be.      (h) The Securities Administrator shall, for federal income tax purposes, maintain books and records with respect to each REMIC on a calendar year and on an accrual basis.      (i) No additional contributions of assets shall be made to any REMIC, except as expressly provided in this Agreement.      (j) Neither the Securities Administrator nor the Master Servicer shall enter into any arrangement by which any REMIC will receive a fee or other compensation for services.      (k) [Reserved].      (l) The Holder of the Class LT-R Certificate shall act as “tax matters person” with respect to the Lower-Tier REMIC and shall act as agent for the Holder of the Class 1-AR Certificate as “tax matters person” with respect to the Upper-Tier REMIC and the Securities Administrator shall act as agent for the Holder of the Class LT-R Certificate in such roles, unless and until another party is so designated by the Holder of the Class LT-R Certificate.      Section 10.02 Prohibited Transactions and Activities.      Neither the Depositor, the Master Servicer nor the Trustee shall sell, dispose of, or substitute for any of the Mortgage Loans, except in a disposition pursuant to (i) the foreclosure 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 105 --------------------------------------------------------------------------------   of a Mortgage Loan, (ii) the bankruptcy of the Trust Fund, (iii) the termination of each REMIC pursuant to Article VII of this Agreement, (iv) a substitution pursuant to Article II of this Agreement or (v) a repurchase of Mortgage Loans pursuant to Article II of this Agreement, nor acquire any assets for any REMIC, nor sell or dispose of any investments in the Distribution Account for gain, nor accept any contributions to any REMIC after the Closing Date, unless it has received an Opinion of Counsel (at the expense of the party causing such sale, disposition, or substitution) that such disposition, acquisition, substitution, or acceptance will not result in an Adverse REMIC Event, (b) affect the distribution of interest or principal on the Certificates or (c) result in the encumbrance of the assets transferred or assigned to the Trust Fund (except pursuant to the provisions of this Agreement).     Section 10.03 Indemnification with Respect to Prohibited Transactions or Loss of REMIC Status.      Upon the occurrence of an Adverse REMIC Event due to the negligent performance by the Securities Administrator of its duties and obligations set forth herein, the Securities Administrator shall indemnify the Certificateholders of the related Residual Certificate against any and all losses, claims, damages, liabilities or expenses (“Losses”) resulting from such negligence; provided, however, that the Securities Administrator shall not be liable for any such Losses attributable to the action or inaction of the Depositor, the Trustee or the Holder of the Residual Certificate, nor for any such Losses resulting from misinformation provided by any of the foregoing parties on which the Securities Administrator has relied. Notwithstanding the foregoing, however, in no event shall the Securities Administrator have any liability (1) for any action or omission that is taken in accordance with and in compliance with the express terms of, or which is expressly permitted by the terms of, this Agreement or under any Servicing Agreement or under any Acknowledgement, (2) for any Losses other than arising out of malfeasance, willful misconduct or negligent performance by the Securities Administrator of its duties and obligations set forth herein, and (3) for any special or consequential damages to Certificateholders of the related Residual Certificate (in addition to payment of principal and interest on the Certificates).      Section 10.04 REO Property.      (a) Notwithstanding any other provision of this Agreement, the Master Servicer, acting on behalf of the Trustee hereunder, shall not, except to the extent provided in the applicable Servicing Agreement, knowingly permit any Servicer to, rent, lease, or otherwise earn income on behalf of any REMIC with respect to any REO Property which might cause an Adverse REMIC Event unless the applicable Servicer has provided to the Trustee and the Securities Administrator an Opinion of Counsel concluding that, under the REMIC Provisions, such action would not adversely affect the status of any REMIC as a REMIC and any income generated for any REMIC by the REO Property would not result in an Adverse REMIC Event.      (b) The Depositor shall cause the applicable Servicer (to the extent provided in its Servicing Agreement) to make reasonable efforts to sell any REO Property for its fair market value. In any event, however, the Depositor shall, or shall cause the applicable Servicer (to the extent provided in its Servicing Agreement) to, dispose of any REO Property within three years 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 106 --------------------------------------------------------------------------------   of its acquisition by the Trust Fund unless the Depositor or the applicable Servicer (on behalf of the Trust Fund) has received a grant of extension from the Internal Revenue Service to the effect that, under the REMIC Provisions and any relevant proposed legislation and under applicable state law, the REMIC may hold REO Property for a longer period without causing an Adverse REMIC Event. If such an extension has been received, then the Depositor, acting on behalf of the Trustee hereunder, shall, or shall cause the applicable Servicer to, continue to attempt to sell the REO Property for its fair market value for such period longer than three years as such extension permits (the “Extended Period”). If such an extension has not been received and the Depositor or the applicable Servicer, acting on behalf of the Trust Fund hereunder, is unable to sell the REO Property within 33 months after its acquisition by the Trust Fund or if such an extension, has been received and the Depositor or the applicable Servicer is unable to sell the REO Property within the period ending three months before the close of the Extended Period, the Depositor shall cause the applicable Servicer, before the end of the three year period or the Extended Period, as applicable, to (i) purchase such REO Property at a price equal to the REO Property’s fair market value or (ii) auction the REO Property to the highest bidder (which may be the applicable Servicer) in an auction reasonably designed to produce a fair price prior to the expiration of the three-year period or the Extended Period, as the case may be. ARTICLE XI MISCELLANEOUS PROVISIONS      Section 11.01 Binding Nature of Agreement; Assignment.      This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.      Section 11.02 Entire Agreement.      This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof.      Section 11.03 Amendment.      (a) This Agreement may be amended from time to time by the Depositor, the Master Servicer, the Securities Administrator, and the Trustee, without notice to or the consent of any of the Holders, (i) to cure any ambiguity or mistake, (ii) to cause the provisions herein to conform to or be consistent with or in furtherance of the statements made with respect to the Certificates, the Trust Fund or this Agreement in the Prospectus, or to correct or supplement any provision herein which may be inconsistent with any other provisions herein or with the provisions of any Servicing Agreement, (iii) to make any other provisions with respect to matters or questions arising under this Agreement or (iv) to add, delete, or amend any provisions to the extent 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 107 --------------------------------------------------------------------------------   necessary or desirable to comply with any requirements imposed by the Code and the REMIC Provisions. No such amendment effected pursuant to the preceding sentence shall, as evidenced by an Opinion of Counsel, result in an Adverse REMIC Event, nor shall such amendment effected pursuant to clause (iii) of such sentence adversely affect in any material respect the interests of any Holder. Prior to entering into any amendment without the consent of Holders pursuant to this paragraph, the Trustee shall be provided with an Opinion of Counsel (at the expense of the party requesting such amendment) to the effect that such amendment is permitted under this Section. Any such amendment shall be deemed not to adversely affect in any material respect any Holder, if the Trustee and the Securities Administrator receive written confirmation from each Rating Agency that such amendment will not cause such Rating Agency to reduce the then current rating assigned to the Certificates.      (b) This Agreement may also be amended from time to time by the Depositor, the Master Servicer, the Securities Administrator and the Trustee, with the consent of the Holders of not less than 66-2/3% of the Class Principal Amount (or Percentage Interest) of each Class of Certificates affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Holders; provided, however, that no such amendment shall be made unless the Trustee and the Securities Administrator receive an Opinion of Counsel, at the expense of the party requesting the change, that such change will not cause an Adverse REMIC Event; and provided further, that no such amendment may (i) reduce in any manner the amount of, or delay the timing of, payments received on Mortgage Loans which are required to be distributed on any Certificate, without the consent of the Holder of such Certificate or (ii) reduce the aforesaid percentages of Class Principal Amount or Class Notional Amount (or Percentage Interest) of Certificates of each Class, the Holders of which are required to consent to any such amendment without the consent of the Holders of 100% of the Class Principal Amount or Class Notional Amount (or Percentage Interest) of each Class of Certificates affected thereby. For purposes of this paragraph, references to “Holder” or “Holders” shall be deemed to include, in the case of any Class of Book-Entry Certificates, the related Certificate Owners.      (c) Promptly after the execution of any such amendment, the Trustee shall furnish written notification of the substance of such amendment to each Holder, the Depositor and the Rating Agencies.      (d) It shall not be necessary for the consent of Holders under this Section 11.03 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Holders shall be subject to such reasonable regulations as the Trustee may prescribe.      (e) Notwithstanding anything to the contrary in any Servicing Agreement, the Trustee shall not consent to any amendment of any Servicing Agreement except pursuant to the standards provided in this Section with respect to amendment of this Agreement.      (f) Prior to the execution of any amendment to this Agreement, each of the Trustee and the Securities Administrator shall be entitled to receive and conclusively rely on an Opinion of 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 108 --------------------------------------------------------------------------------   Counsel (at the expense of the Person seeking such amendment) stating that the execution of such amendment is authorized and permitted by this Agreement. The Trustee and the Securities Administrator may, but shall not be obligated to, enter into any such amendment which affects the Trustee’s or the Securities Administrator’s own rights, duties or immunities under this Agreement.      Section 11.04 Voting Rights.      Except to the extent that the consent of all affected Certificateholders is required pursuant to this Agreement, with respect to any provision of this Agreement requiring the consent of Certificateholders representing specified percentages of aggregate outstanding Certificate Principal Amount or Class Notional Amount (or Percentage Interest), Certificates owned by the Depositor, the Master Servicer, the Securities Administrator, the Trustee, any Servicer or any Affiliates thereof are not to be counted so long as such Certificates are owned by the Depositor, the Master Servicer, the Securities Administrator, the Trustee, any Servicer or any Affiliate thereof.      Section 11.05 Provision of Information.      (a) For so long as any of the Certificates of any Series or Class are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, each of the Depositor, the Master Servicer, the Securities Administrator and the Trustee agree to cooperate with each other to provide to any Certificateholders and to any prospective purchaser of Certificates designated by such holder, upon the request of such holder or prospective purchaser, any information required to be provided to such holder or prospective purchaser to satisfy the condition set forth in Rule 144A(d)(4) under the Securities Act. Any reasonable, out-of-pocket expenses incurred by the Trustee, the Master Servicer or the Securities Administrator in providing such information shall be reimbursed by the Depositor.      (b) The Securities Administrator shall provide to any person to whom a Prospectus was delivered, upon the request of such person specifying the document or documents requested, (i) a copy (excluding exhibits) of any report on Form 8-K, Form 10-D or Form 10-K (or other prescribed form) filed with the Securities and Exchange Commission pursuant to Section 6.21 and (ii) a copy of any other document incorporated by reference in the Prospectus. Any reasonable out-of-pocket expenses incurred by the Securities Administrator in providing copies of such documents shall be reimbursed by the Depositor.      (c) On each Distribution Date, the Securities Administrator shall deliver or cause to be delivered by first class mail or make available on its website to the Depositor, Attention: Contract Finance, a copy of the report delivered to Certificateholders pursuant to Section 4.02.      Section 11.06 Governing Law.      THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 109 --------------------------------------------------------------------------------   LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.      Section 11.07 Notices.      All requests, demands, notices, authorizations, directions, consents, waivers and communications hereunder shall be in writing and shall be deemed to have been duly given when received by (a) in the case of the Depositor, Sequoia Residential Funding, Inc., One Belvedere Place, Suite 330, Mill Valley, CA 94941, telecopy number (415) 381-1773, Attention: Sequoia Mortgage Trust 2006-1, or in the case of notification required to be delivered by the Securities Administrator to the Depositor pursuant to Section 6.21, to Sequoia Residential Funding, Inc. via facsimile or via email at such facsimile number or email address furnished separately by the Depositor to the Securities Administrator from time to time, (b) in the case of the Seller, RWT Holdings, Inc., One Belvedere Place, Suite 330, Mill Valley, CA 94941 telecopy number (415) 381-1773, Attention: Sequoia Mortgage Trust 2006-1, (c) in the case of the Master Servicer or the Securities Administrator, Wells Fargo Bank, N.A., P.O. Box 98, Columbia, Maryland 21046 (or, for overnight deliveries, 9062 Old Annapolis Road, Columbia, Maryland 21045), telecopy number (410) 715-2380, Attention: Sequoia Mortgage Trust 2006-1, and (d) with respect to the Trustee or the Certificate Registrar, its respective Corporate Trust Office, or as to each party such other address as may hereafter be furnished by such party to the other parties in writing. All demands, notices and communications to a party hereunder shall be in writing and shall be deemed to have been duly given when delivered to such party at the relevant address, facsimile number or electronic mail address set forth above or at such other address, facsimile number or electronic mail address as such party may designate from time to time by written notice in accordance with this Section 11.07.      Section 11.08 Severability of Provisions.      If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or the rights of the Holders thereof.      Section 11.09 Indulgences; No Waivers.      Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 110 --------------------------------------------------------------------------------        Section 11.10 Headings Not To Affect Interpretation.      The headings contained in this Agreement are for convenience of reference only, and they shall not be used in the interpretation hereof.      Section 11.11 Benefits of Agreement.      Nothing in this Agreement or in the Certificates, express or implied, shall give to any Person, other than the parties to this Agreement and their successors hereunder and the Holders of the Certificates, any benefit or any legal or equitable right, power, remedy or claim under this Agreement, except to the extent specified in Section 11.15.      Section 11.12 Special Notices to the Rating Agencies.      (a) The Depositor shall give prompt notice to the Rating Agencies of the occurrence of any of the following events of which it has notice:      (i) any amendment to this Agreement pursuant to Section 11.03;      (ii) any assignment by the Master Servicer of its rights hereunder or delegation of its duties hereunder;      (iii) the occurrence of any Event of Default described in Section 6.14;      (iv) any notice of termination given to the Master Servicer pursuant to Section 6.14 and any resignation of the Master Servicer hereunder;      (v) the appointment of any successor to any Master Servicer pursuant to Section 6.14;      (vi) the making of a final payment pursuant to Section 7.02; and      (vii) any termination of the rights and obligations of any Servicer under the applicable Servicing Agreement.      (b) All notices to the Rating Agencies provided for this Section shall be in writing and sent by first class mail, telecopy or overnight courier, as follows: If to Fitch Ratings, to: Fitch Ratings One State Street Plaza, 30th Floor New York, New York 10004 Attn: SEMT 2006-1 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 111 --------------------------------------------------------------------------------   If to S&P, to: Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. 55 Water Street New York, New York 10041 Attention: Residential Mortgages      (c) The Securities Administrator shall provide or make available to the Rating Agencies reports prepared pursuant to Section 4.02. In addition, the Securities Administrator shall, at the expense of the Trust Fund, make available to each Rating Agency such information as such Rating Agency may reasonably request regarding the Certificates or the Trust Fund, to the extent that such information is reasonably available to the Securities Administrator.      (d) The Depositor hereby represents to S&P that, to the Depositor’s knowledge, the information provided to such Rating Agency, including the loan level detail, is true and correct according to such Rating Agency’s requirements.      Section 11.13 Conflicts.      To the extent that the terms of this Agreement conflict with the terms of any Servicing Agreement, the related Servicing Agreement shall govern.      Section 11.14 Counterparts.      This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same instrument.      Section 11.15 No Petitions.      The Trustee and the Master Servicer, by entering into this Agreement, hereby covenant and agree that they shall not at any time institute against the Depositor, or join in any institution against the Depositor of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to this Agreement or any of the documents entered into by the Depositor in connection with the transactions contemplated by this Agreement.      Section 11.16 Intention of the Parties and Interpretation; Indemnification.      Each of the parties acknowledges and agrees that the purpose of Sections 6.21, 6.22, 6.23 and 6.24 of this Agreement is to facilitate compliance by the Securities Administrator and the Depositor with the provisions of Regulation AB promulgated by the Commission under the Exchange Act (17 C.F.R. §§ 229.1100 — 229.1123), as such may be amended from time to time and subject to such clarification and interpretive advice as may be issued by the staff of the Commission from time to time. Therefore, each of the parties agrees that (a) the obligations of 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 112 --------------------------------------------------------------------------------   the parties hereunder shall be interpreted in such a manner as to accomplish that purpose, (b) the parties’ obligations hereunder will be supplemented and modified as necessary to be consistent with any such amendments, interpretive advice or guidance, convention or consensus among active participants in the asset-backed securities markets, advice of counsel, or otherwise in respect of the requirements of Regulation AB, (c) the parties shall comply with the reasonable requests made by the Securities Administrator or the Depositor for delivery of such additional or different information as the Securities Administrator or the Depositor may determine in good faith is necessary to comply with the provisions of Regulation AB, which information is available to such party without unreasonable effort or expense and within such timeframe as may be reasonably requested, and (d) no amendment of this Agreement shall be required to effect any such changes in the parties’ obligations as are necessary to accommodate evolving interpretations of the provisions of Regulation AB.      Each of the Depositor, the Master Servicer, each Servicer, the Securities Administrator and any Servicing Function Participant engaged by such party shall indemnify and hold harmless the Securities Administrator, the Master Servicer, the Depositor and the Seller and each of their directors, officers, employees, agents, and affiliates from and against any and all claims, losses, damages, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments and other costs and expenses arising out of or based upon (a) any breach by such party of any of its obligations hereunder, including particularly its obligations to provide any Item 1123 Certificate, Assessment of Compliance or Accountant’s Attestation required under Sections 6.22, 6.23 and 6.24, respectively, or any information, data or materials required to be included in any Exchange Act report, (b) any misstatement or omission in any information, data or materials provided by such party, (or in the case of the Securities Administrator or the Master Servicer, any material misstatement or material omission in (i) any Item 1123 Certificate, Assessment of Compliance, Accountant’s Attestation delivered by it or by any Servicing Function Participation engaged by it pursuant to this Agreement or (any Additional Form 10-D Disclosure, Additional Form 10-K Disclosure or Form 8-K Disclosure concerning the Master Servicer or the Securities Administrator), or (c) the negligence, bad faith or willful misconduct of such party in connection with its performance hereunder. If the indemnification provided for herein is unavailable or insufficient to hold harmless the Master Servicer, the Securities Administrator, the Depositor or the Seller, as the case may be, then each such party agrees that it shall contribute to the amount paid or payable by the Securities Administrator, the Master Servicer, the Depositor and the Seller, as applicable, as a result of any claims, losses, damages or liabilities incurred by such party, in such proportion as is appropriate to reflect the relative fault of the indemnified party on the one hand and the indemnifying party on the other. This indemnification shall survive the termination of this Agreement or the termination of any party to this Agreement. 193158 Sequoia 2006-1 Pooling and Servicing Agmt. 113 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have caused their names to be signed hereto by their respective officers hereunto duly authorized as of the day and year first above written.                                 SEQUOIA RESIDENTIAL FUNDING, INC.,         as Depositor                       By:   /s/ John Isbrandtsen                           Name: John H. Isbrandtsen Title: Vice President                       HSBC BANK USA, NATIONAL ASSOCIATION,         as Trustee                       By:   /s/ Elena Zheng                           Name: Elena Zheng Title: Assistant Vice President                       WELLS FARGO BANK,         NATIONAL ASSOCIATION,         as Master Servicer                       By:   /s/ Graham Oglesby                           Name: Graham Oglesby Title: Assistant Vice President                       WELLS FARGO BANK,         NATIONAL ASSOCIATION,         as Securities Administrator                       By:   /s/ Graham Oglesby                           Name: Graham Oglesby Title: Assistant Vice President     193158 Sequoia 2006-1 Pooling and Servicing Agmt.   --------------------------------------------------------------------------------   Solely for purposes of Section 2.04 and 9.01(d) accepted and agreed to by: RWT HOLDINGS, INC.                     By:   /s/ John Isbrandtsen                   John H. Isbrandtsen         Authorized Signatory     193158 Sequoia 2006-1 Pooling and Servicing Agmt.   --------------------------------------------------------------------------------   EXHIBIT A FORMS OF CERTIFICATES [See Tab #       ] 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  A-1   --------------------------------------------------------------------------------   EXHIBIT B FORM OF RESIDUAL CERTIFICATE TRANSFER AFFIDAVIT (TRANSFEREE)               STATE OF     )             )     ss.: COUNTY OF     )            [NAME OF OFFICER],                      being first duly sworn, deposes and says:   1.   That he [she] is [title of officer]                                          of [name of Purchaser]                                          (the “Purchaser”), a                                                              [description of type of entity] duly organized and existing under the laws of the [State of                     ] [United States], on behalf of which he [she] makes this affidavit.     2.   That the Purchaser’s Taxpayer Identification Number is [                      ].     3.   That the Purchaser is not a “disqualified organization” within the meaning of Section 860E(e)(5) of the Internal Revenue Code of 1986, as amended (the “Code”) and will not be a “disqualified organization” as of [date of transfer], and that the Purchaser is not acquiring a Residual Certificate (as defined in the Agreement) for the account of, or as agent (including a broker, nominee, or other middleman) for, any person or entity from which it has not received an affidavit substantially in the form of this affidavit. For these purposes, a “disqualified organization” means the United States, any state or political subdivision thereof, any foreign government, any international organization, any agency or instrumentality of any of the foregoing (other than an instrumentality if all of its activities are subject to tax and a majority of its board of directors is not selected by such governmental entity), any cooperative organization furnishing electric energy or providing telephone service to persons in rural areas as described in Code Section 1381(a)(2)(C), any “electing large partnership” within the meaning of Section 775 of the Code, or any organization (other than a farmers’ cooperative described in Code Section 521) that is exempt from federal income tax unless such organization is subject to the tax on unrelated business income imposed by Code Section 511.     4.   That the Purchaser either (x) is not, and on                                          [date of transfer] will not be, an employee benefit plan or other retirement arrangement subject to Section 406 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or Section 4975 of the Code (“Code”), (collectively, a “Plan”) or a person acting on behalf of any such Plan or investing the assets of any such Plan to acquire a Residual Certificate; (y) if the Residual Certificate has been subject to an ERISA-Qualifying Underwriting, is an insurance company that is purchasing the Certificate with funds contained in an “insurance company 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  B-1   --------------------------------------------------------------------------------         general account” as defined in Section V(e) of Prohibited Transaction Class Exemption (“PTCE”) 95-60 and the purchase and holding of the Certificate are covered under Sections I and III of PTCE 95-60; or (z) herewith delivers to the Certificate Registrar an opinion of counsel (a “Benefit Plan Opinion”) satisfactory to the Certificate Registrar, and upon which the Certificate Registrar, the Trustee, the Master Servicer, the Depositor and Securities Administrator shall be entitled to rely, to the effect that the purchase or holding of such Residual Certificate by the Investor will not result in any non-exempt prohibited transactions under Title I of ERISA or Section 4975 of the Code and will not subject the Certificate Registrar, the Trustee, the Depositor, the Master Servicer or the Securities Administrator to any obligation in addition to those undertaken by such entities in the Agreement, which opinion of counsel shall not be an expense of the Trust Fund or any of the above parties.     5.   That the Purchaser hereby acknowledges that under the terms of the Pooling and Servicing Agreement, dated as of August 1, 2006 (the “Agreement”), by and among Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank, N.A., as Master Servicer and as Securities Administrator, and HSBC Bank USA, National Association, as Trustee with respect to Sequoia Mortgage Trust 2006-1 Mortgage Pass-Through Certificates, no transfer of the Residual Certificates shall be permitted to be made to any person unless the Certificate Registrar and Trustee have received a certificate from such transferee containing the representations in paragraphs 3 and 4 hereof.     6.   That the Purchaser does not hold REMIC residual securities as nominee to facilitate the clearance and settlement of such securities through electronic book-entry changes in accounts of participating organizations (such entity, a “Book-Entry Nominee”).     7.   That the Purchaser does not have the intention to impede the assessment or collection of any federal, state or local taxes legally required to be paid with respect to such Residual Certificate.     8.   That the Purchaser will not transfer a Residual Certificate to any person or entity (i) as to which the Purchaser has actual knowledge that the requirements set forth in paragraph 3, paragraph 6 or paragraph 10 hereof are not satisfied or that the Purchaser has reason to believe does not satisfy the requirements set forth in paragraph 7 hereof, and (ii) without obtaining from the prospective Purchaser an affidavit substantially in this form and providing to the Trustee and the Certificate Registrar a written statement substantially in the form of Exhibit C to the Agreement.     9.   That the Purchaser understands that, as the holder of a Residual Certificate, the Purchaser may incur tax liabilities in excess of any cash flows generated by the interest and that the Purchaser has and expects to have sufficient net worth and/or liquidity to pay in full any tax liabilities attributable to ownership of a Residual 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  B-2   --------------------------------------------------------------------------------         Certificate and intends to pay taxes associated with holding such Residual Certificate as they become due.     10.   That the Purchaser (i) is not a Non-U.S. Person or (ii) is a Non-U.S. Person that holds a Residual Certificate in connection with the conduct of a trade or business within the United States and has furnished the transferor, the Trustee and the Certificate Registrar with an effective Internal Revenue Service Form W-8ECI (Certificate of Foreign Person’s Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States) or successor form at the time and in the manner required by the Code or (iii) is a Non-U.S. Person that has delivered to the transferor, the Trustee and the Certificate Registrar an opinion of a nationally recognized tax counsel to the effect that the transfer of such Residual Certificate to it is in accordance with the requirements of the Code and the regulations promulgated thereunder and that such transfer of a Residual Certificate will not be disregarded for federal income tax purposes. “Non-U.S. Person” means an individual, corporation, partnership or other person other than (i) a citizen or resident of the United States; (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any state thereof, including for this purpose, the District of Columbia; (iii) an estate that is subject to U.S. federal income tax regardless of the source of its income; (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States trustees have authority to control all substantial decisions of the trust; and, (v) to the extent provided in Treasury regulations, certain trusts in existence on August 20, 1996 that are treated as United States persons prior to such date and elect to continue to be treated as United States persons.     11.   The Purchaser will not cause income from the Residual Certificate to be attributable to a foreign permanent establishment or fixed base of the Purchaser or another U.S. taxpayer.     12.   That the Purchaser agrees to such amendments of the Agreement as may be required to further effectuate the restrictions on transfer of any Residual Certificate to such a “disqualified organization,” an agent thereof, a Book-Entry Nominee, or a person that does not satisfy the requirements of paragraph 7 and paragraph 10 hereof.     13.   That the Purchaser consents to the designation of the Securities Administrator to act as agent for the “tax matters person” of each REMIC created by the Trust Fund pursuant to the Agreement. 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  B-3   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Purchaser has caused this instrument to be executed on its behalf, pursuant to authority of its Board of Directors, by its [title of officer] this                      day of                      20                    .                                           [name of Purchaser]                       By:                               Name:             Title:          Personally appeared before me the above-named [name of officer]                     , known or proved to me to be the same person who executed the foregoing instrument and to be the [title of officer]                                          of the Purchaser, and acknowledged to me that he [she] executed the same as his [her] free act and deed and the free act and deed of the Purchaser.      Subscribed and sworn before me this                      day of                      20                    . NOTARY PUBLIC                                                              COUNTY OF                                          STATE OF                                         My commission expires the                      day of                      20                     . 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  B-4   --------------------------------------------------------------------------------   EXHIBIT C RESIDUAL CERTIFICATE TRANSFER AFFIDAVIT (TRANSFEROR)                                   Date           Re:   Sequoia Mortgage Trust 2006-1     Mortgage Pass-Through Certificates                                               (the “Transferor”) has reviewed the attached affidavit of                                          (the “Transferee”), and has no actual knowledge that such affidavit is not true and has no reason to believe that the information contained in paragraph 7 thereof is not true, and has no reason to believe that the Transferee has the intention to impede the assessment or collection of any federal, state or local taxes legally required to be paid with respect to a Residual Certificate. In addition, the Transferor has conducted a reasonable investigation at the time of the transfer and found that the Transferee had historically paid its debts as they came due and found no significant evidence to indicate that the Transferee will not continue to pay its debts as they become due.                         Very truly yours,                         Name:         Title:     193158 Sequoia 2006-1 Pooling and Servicing Agmt.  C-1   --------------------------------------------------------------------------------   EXHIBIT D FORM OF CUSTODY AGREEMENT 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  D-1   --------------------------------------------------------------------------------   EXHIBIT E LIST OF SERVICING AGREEMENTS 1.   Master Mortgage Loan Sale & Servicing Agreement, dated as of July 1, 2006 between RWT Holdings, Inc. (“RWT Holdings”) and ABN AMRO Mortgage Group, Inc., as modified by the related Acknowledgements. 2.   Mortgage Loan Flow Purchase , Sale and Servicing Agreement dated as of January 1, 2006 between RWT Holdings and GreenPoint Mortgage Funding, Inc., as modified by the related Acknowledgements. 3.   Mortgage Loan Purchase and Servicing Agreement dated as of April 1, 1998, between Countrywide Home Loans, Inc. (“Countrywide”) and RWT, as amended by the Amendment Number One to such agreement dated February 27, 2004, between Countrywide and RWT (as amended the “Mortgage Loan Purchase and Servicing Agreement”), an Amendment Reg AB to the Mortgage Loan Purchase and Servicing Agreement dated as of August 1, 2006, and an Assignment Agreement dated January 1, 2001 between Countrywide and Countrywide Home Loans Servicing L.P. transferring the servicing, as modified by the related Acknowledgements. 4.   Flow Mortgage Loan Sale and Servicing Agreement, dated July 1, 2006, by and between by and between Bank of America, National Association, and RWT Holdings, as modified by the related Acknowledgements. 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  E-1   --------------------------------------------------------------------------------   EXHIBIT F LIST OF PURCHASE AGREEMENTS 1.   Master Mortgage Loan Sale & Servicing Agreement, dated as of July 1, 2006 between RWT Holdings, Inc. (“RWT Holdings”) and ABN AMRO Mortgage Group, Inc., as modified by the related Acknowledgements. 2.   Mortgage Loan Flow Purchase , Sale and Servicing Agreement dated as of January 1, 2006 between RWT Holdings and GreenPoint Mortgage Funding, Inc., as modified by the related Acknowledgements. 3.   Mortgage Loan Purchase and Servicing Agreement dated as of April 1, 1998, between Countrywide Home Loans, Inc. (“Countrywide”) and RWT, as amended by the Amendment Number One to such agreement dated February 27, 2004, between Countrywide and RWT (as amended the “Mortgage Loan Purchase and Servicing Agreement”), an Amendment Reg AB to the Mortgage Loan Purchase and Servicing Agreement dated as of August 1, 2006, and an Assignment Agreement dated January 1, 2001 between Countrywide and Countrywide Home Loans Servicing L.P. transferring the servicing, as modified by the related Acknowledgements. 4.   Seller’s Purchase, Warranties and Interim Servicing Agreement, dated as of May 1, 2006 by and between Redwood Mortgage Funding, Inc. (“RMF”) and New Century Mortgage Corporation (“New Century”), and an Assignment dated July 25, 2006, among RMF, New Century and RWT Holdings, as modified by the related Acknowledgements. 5.   Seller’s Purchase, Warranties and Interim Servicing Agreement, dated as of June 1, 2006 by and between RMF and Provident Funding Associates, LLP (“Provident”), and an Assignment dated July 25, 2006, among RMF, Provident and RWT Holdings, as modified by the related Acknowledgements. 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  F-1   --------------------------------------------------------------------------------   EXHIBIT G LIST OF LIMITED PURPOSE SURETY BONDS None 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  G-1   --------------------------------------------------------------------------------   EXHIBIT H FORM OF RULE 144A TRANSFER CERTIFICATE       Re:   Sequoia Mortgage Trust 2006-1     Mortgage Pass-Through Certificates      Reference is hereby made to the Pooling and Servicing Agreement, dated as of August 1, 2006 (the “Pooling and Servicing Agreement”), by and among Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank, N.A., as Master Servicer and as Securities Administrator, and HSBC Bank USA, National Association, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Pooling and Servicing Agreement.      This letter relates to $                     initial Certificate Principal Amount of Class                      Certificates which are held in the form of Definitive Certificates registered in the name of                      (the “Transferor”). The Transferor has requested a transfer of such Definitive Certificates for Definitive Certificates of such Class registered in the name of [insert name of transferee].      In connection with such request, and in respect of such Certificates, the Transferor hereby certifies that such Certificates are being transferred in accordance with (i) the transfer restrictions set forth in the Pooling and Servicing Agreement and the Certificates and (ii) Rule 144A under the Securities Act to a purchaser that the Transferor reasonably believes is a “qualified institutional buyer” within the meaning of Rule 144A purchasing for its own account or for the account of a “qualified institutional buyer,” which purchaser is aware that the sale to it is being made in reliance upon Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction.      This certificate and the statements contained herein are made for your benefit and the benefit of the Underwriters and the Depositor.                                 [Name of Transferor]                       By:                               Name:             Title:     Dated:                     ,                      193158 Sequoia 2006-1 Pooling and Servicing Agmt.  H-1   --------------------------------------------------------------------------------   EXHIBIT I FORM OF PURCHASER’S LETTER FOR INSTITUTIONAL ACCREDITED INVESTOR Date Dear Sirs:      In connection with our proposed purchase of $                     principal amount of Sequoia Mortgage Trust 2006-1 Mortgage Pass-Through Certificates (the “Privately Offered Certificates”) of Sequoia Residential Funding, Inc. (the “Depositor”), we confirm that: (1)   We understand that the Privately Offered Certificates have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), and may not be sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Privately Offered Certificates within two years of the later of the date of original issuance of the Privately Offered Certificates or the last day on which such Privately Offered Certificates are owned by the Depositor or any affiliate of the Depositor we will do so only (A) to the Depositor, (B) to “qualified institutional buyers” (within the meaning of Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act (“QIBs”), (C) pursuant to the exemption from registration provided by Rule 144 under the Securities Act, or (D) to an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act that is not a QIB (an “Institutional Accredited Investor”) which, prior to such transfer, delivers to the Certificate Registrar under the Pooling and Servicing Agreement, dated as of August 1, 2006 (the “Agreement”), by and among Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank, N.A., as Master Servicer and as Securities Administrator, and HSBC Bank USA, National Association, as Trustee, a signed letter in the form of this letter; and we further agree, in the capacities stated above, to provide to any person purchasing any of the Privately Offered Certificates from us a notice advising such purchaser that resales of the Privately Offered Certificates are restricted as stated herein.   (2)   We understand that, in connection with any proposed resale of any Privately Offered Certificates to an Institutional Accredited Investor, we will be required to furnish to the Certificate Registrar a certification from such transferee in the form hereof to confirm that the proposed sale is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. We further understand that the Privately Offered Certificates purchased by us will bear a legend to the foregoing effect. 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  I-1   --------------------------------------------------------------------------------   (3)   We are acquiring the Privately Offered Certificates for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Privately Offered Certificates, and we and any account for which we are acting are each able to bear the economic risk of such investment. (4)   We are an Institutional Accredited Investor and we are acquiring the Privately Offered Certificates purchased by us for our own account or for one or more accounts (each of which is an Institutional Accredited Investor) as to each of which we exercise sole investment discretion. (5)   We have received such information as we deem necessary in order to make our investment decision. (6)   If we are acquiring ERISA-Restricted Certificates, we understand that in accordance with ERISA, the Code and the Exemption, no Plan and no person acting on behalf of such a Plan may acquire such Certificate except in accordance with Section 3.03(d) of the Agreement.      Terms used in this letter which are not otherwise defined herein have the respective meanings assigned thereto in the Agreement. 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  I-2   --------------------------------------------------------------------------------        You are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.                                 Very truly yours,                                 [Purchaser]                       By:                               Name:             Title:     193158 Sequoia 2006-1 Pooling and Servicing Agmt.  I-3   --------------------------------------------------------------------------------   EXHIBIT J FORM OF ERISA TRANSFER AFFIDAVIT               STATE OF NEW YORK     )             )     ss.: COUNTY OF NEW YORK     )            The undersigned, being first duly sworn, deposes and says as follows:      1. The undersigned is the                                            of                      (the “Investor”), a [corporation duly organized] and existing under the laws of                      , on behalf of which he makes this affidavit.      2. The Investor either (x) is not, and on                      [date of transfer] will not be, an employee benefit plan or other retirement arrangement subject to Section 406 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), (collectively, a “Plan”) or a person acting on behalf of any such Plan or investing the assets of any such Plan; (y) if the Certificate has been the subject of an ERISA-Qualifying Underwriting, is an insurance company that is purchasing the Certificate with funds contained in an “insurance company general account” as defined in Section V(e) of Prohibited Transaction Class Exemption (“PTCE”) 95-60 and the purchase and holding of the Certificate are covered under Sections I and III of PTCE 95-60; or (z) herewith delivers to the Certificate Registrar an opinion of counsel (a “Benefit Plan Opinion”) satisfactory to the Certificate Registrar, and upon which the Certificate Registrar, the Trustee, the Master Servicer, the Depositor and the Securities Administrator shall be entitled to rely, to the effect that the purchase or holding of such Certificate by the Investor will not constitute or result in any non-exempt prohibited transactions under Title I of ERISA or Section 4975 of the Code and will not subject the Certificate Registrar, the Trustee, the Master Servicer, the Depositor or the Securities Administrator to any obligation in addition to those undertaken by such entities in the Pooling and Servicing Agreement, dated as of August 1, 2006 (the “Agreement”), by and among Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank, N.A., as Master Servicer and as Securities Administrator, and HSBC Bank USA, National Association, as Trustee, by which opinion of counsel shall not be an expense of the Trust Fund or the above parties.      3. The Investor hereby acknowledges that under the terms of the Agreement, no transfer of the ERISA-Restricted Certificates shall be permitted to be made to any person unless the Certificate Registrar has received a certificate from such transferee in the form hereof. 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  J-1   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Investor has caused this instrument to be executed on its behalf, pursuant to proper authority, by its duly authorized officer, duly attested, this                      day of                      20                    .                                           [Investor]                       By:                               Name:             Title:     ATTEST:                                                                            STATE OF     )             )     ss.: COUNTY OF     )            Personally appeared before me the above-named                     , known or proved to me to be the same person who executed the foregoing instrument and to be the                      of the Investor, and acknowledged that he executed the same as his free act and deed and the free act and deed of the Investor.      Subscribed and sworn before me this                      day of                      20                    .                                   NOTARY PUBLIC                   My commission expires the                      day of                      20                    .     193158 Sequoia 2006-1 Pooling and Servicing Agmt. J-2   --------------------------------------------------------------------------------   EXHIBIT K FORM OF LETTER OF REPRESENTATIONS WITH THE DEPOSITORY TRUST COMPANY 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  K-1   --------------------------------------------------------------------------------   EXHIBIT L ADDITIONAL DISCLOSURE NOTIFICATION Additional Disclosure Notification Wells Fargo Bank, N.A. Old Annapolis Road Columbia, Maryland 21045 Fax: (410) 715-2380 Email: [email protected] Attn: Corporate Trust Services- Sequoia Mortgage Trust 2006-1, Mortgage Pass-Through           Certificates, Series 2006-1—SEC REPORT PROCESSING RE: **Additional Form [10-D][10-K][8-K] Disclosure** Required Ladies and Gentlemen:      In accordance with Section 6.21[(a)][(b)][(c)] of the Pooling and Servicing Agreement, Pooling and Servicing Agreement, dated as of August 1, 2006 (the “Agreement”), by and among Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank, N.A., as Master Servicer and as Securities Administrator, and HSBC Bank USA, National Association, as Trustee with respect to Sequoia Mortgage Trust 2006-1 Mortgage Pass-Through Certificate, the undersigned, as [ ], hereby notifies you that certain events have come to our attention that [will] [may] need to be disclosed on Form [10-D][10-K][8-K].      Description of Additional Form [10-D][10-K][8-K] Disclosure: 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  L-1   --------------------------------------------------------------------------------        List of any Attachments hereto to be included in the Additional Form [10-D][10-K][8-K] Disclosure:      Any inquiries related to this notification should be directed to [                 ], phone number: [       ]; email address: [            ].                                 [NAME OF PARTY],         as [role]                       By:                               Name:             Title:     193158 Sequoia 2006-1 Pooling and Servicing Agmt.  L-2   --------------------------------------------------------------------------------   EXHIBIT M FORM OF ANNUAL CERTIFICATION Sequoia Mortgage Trust 2006-1 (the “Trust”) Mortgage Pass-Through Certificates Re: The Pooling and Servicing Agreement, dated as of August 1, 2006 (the “Agreement”), by and among Sequoia Residential Funding, Inc., as Depositor, Wells Fargo Bank, N.A., as Master Servicer and as Securities Administrator, and HSBC Bank USA, National Association, as Trustee with respect to Sequoia Mortgage Trust 2006-1 Mortgage Pass-Through Certificate. I,                                         , the                                          of [NAME OF COMPANY] (the “Company”), certify to the Depositor and its officers, directors and affiliates, with the knowledge and intent that they will rely upon this certification, that: (1) I have reviewed (i) the servicer compliance statement of the Company provided in accordance with Section 6.22 of the Pooling and Servicing Agreement (the “Item 1123 Certificate”), (ii) the report on assessment of the Company’s compliance with the servicing criteria provided in accordance with Section 6.23 of the Pooling and Servicing Agreement (the “Assessment of Compliance”), (iii) the registered public accounting firm’s attestation report provided in accordance with Section 6.24 of the Pooling and Servicing Agreement (the “Accountant’s Attestation”), and all servicing reports, officer’s certificates and other information relating to the servicing of the Mortgage Loans by the Company during 20[ ] that were delivered by the Company to the Securities Administrator pursuant to the Agreement (collectively, the “Company Servicing Information”); (2) Based on my knowledge, the Company Servicing Information, taken as a whole, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in the light of the circumstances under which such statements were made, not misleading with respect to the period of time covered by the Company Servicing Information; (3) Based on my knowledge, all of the Company Servicing Information required to be provided by the Company under the Agreement has been provided to the Securities Administrator; (4) I am responsible for reviewing the activities performed by the Company as servicer under the Agreement, and based on my knowledge and the compliance review conducted in preparing the Item 1123 Certificate and except as disclosed in the 1123 Certificate, the Assessment of Compliance or the Accountant’s Attestation, the Company has fulfilled its obligations under the Agreement in all material respects; and 193158 Sequoia 2006-1 Pooling and Servicing Agmt. M-1 --------------------------------------------------------------------------------   (5) The Item 1123 Certificate required to be delivered by the Company pursuant to the Agreement, and the Assessment of Compliance and the Accountant’s Attestation required to be provided by the Company and by any Subservicer or Subcontractor pursuant to the Agreement, have been provided to Securities Administrator. Any material instances of noncompliance described in such reports have been disclosed to Securities Administrator. Any material instance of noncompliance with the Servicing Criteria has been disclosed in such reports. By:                                          Name: Title Date: 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  M-2   --------------------------------------------------------------------------------   EXHIBIT N SERVICING CRITERIA TO BE ADDRESSED IN ASSESSMENT OF COMPLIANCE      The Assessment of Compliance to be delivered by the parties listed in the table below shall address, at a minimum, the criteria identified below as “Applicable Servicing Criteria” for each such party:                                       Securities             Regulation AB       Master   Admini-             Reference   Servicing Criteria   Servicer   strator   Servicers   Custodian         General Servicing Considerations                                               1122(d)(1)(i)   Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements.   X   X   X                                   1122(d)(1)(ii)   If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing activities.   X       X                                   1122(d)(1)(iii)   Any requirements in the transaction agreements to maintain a back-up servicer for the pool assets are maintained.   N/A   N/A   N/A                                   1122(d)(1)(iv)   A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements.   X       X                                       Cash Collection and Administration                                               1122(d)(2)(i)   Payments on pool assets are deposited into the appropriate bank collection accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements.   X   X   X                                   1122(d)(2)(ii)   Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel.   X   X   X                                   1122(d)(2)(iii)   Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements.   X       X                                   1122(d)(2)(iv)   The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of over collateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements.   X   X   X                                   1122(d)(2)(v)   Each collection account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange Act.   X   X   X                                   1122(d)(2)(vi)   Unissued checks are safeguarded so as to prevent unauthorized access.           X                                   1122(d)(2)(vii)   Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including collection   X   X   X         193158 Sequoia 2006-1 Pooling and Servicing Agmt. N-1 --------------------------------------------------------------------------------                                         Securities             Regulation AB       Master   Admini-             Reference   Servicing Criteria   Servicer   strator   Servicers   Custodian         accounts and related bank clearing accounts. These reconciliations are (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements.                                                   Investor Remittances and Reporting                                               1122(d)(3)(i)   Reports to investors, including those to be filed with the Commission, are maintained in accordance with the transaction agreements and applicable Commission requirements. Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the Commission as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of pool assets serviced by the Servicer.   X   X   X                                   1122(d)(3)(ii)   Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements.   X   X   X                                   1122(d)(3)(iii)   Disbursements made to an investor are posted within two business days to the Servicer’s investor records, or such other number of days specified in the transaction agreements.   X   X   X         1122(d)(3)(iv)   Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements.   X   X   X                                       Pool Asset Administration                                               1122(d)(4)(i)   Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents.           X   X                               1122(d)(4)(ii)   Pool assets and related documents are safeguarded as required by the transaction agreements           X   X                               1122(d)(4)(iii)   Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements.           X                                   1122(d)(4)(iv)   Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the Servicer’s obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset documents.           X                                   1122(d)(4)(v)   The Servicer’s records regarding the pool assets agree with the Servicer’s records with respect to an obligor’s unpaid principal balance.           X                                   1122(d)(4)(vi)   Changes with respect to the terms or status of an obligor’s pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents.           X                                   1122(d)(4)(vii)   Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements.           X         193158 Sequoia 2006-1 Pooling and Servicing Agmt. N-2 --------------------------------------------------------------------------------                                         Securities             Regulation AB       Master   Admini-             Reference   Servicing Criteria   Servicer   strator   Servicers   Custodian     1122(d)(4)(viii)   Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment).           X                                   1122(d)(4)(ix)   Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents.           X                                       Regarding any funds held in trust for an obligor (such as escrow accounts):                     1122(d)(4)(x)   (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements.           X                                   1122(d)(4)(xi)   Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements.           X                                   1122(d)(4)(xii)   Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the Servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission.           X                                   1122(d)(4)(xiii)   Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the servicer, or such other number of days specified in the transaction agreements.           X                                   1122(d)(4)(xiv)   Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements.   X       X                                   1122(d)(4)(xv)   Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements.   N/A   N/A   N/A   N/A     [NAME OF PARTY] Date:                                          193158 Sequoia 2006-1 Pooling and Servicing Agmt.  N-3   --------------------------------------------------------------------------------                       By:                   Name:                             Title:                   193158 Sequoia 2006-1 Pooling and Servicing Agmt.  N-4   --------------------------------------------------------------------------------   EXHIBIT O ADDITIONAL FORM 10-D DISCLOSURE ADDITIONAL FORM 10-D DISCLOSURE       Item on Form 10-D   Party Responsible Item 1: Distribution and Pool     Performance Information       Information included in the [Distribution Date   Master Servicer Statement]   Securities Administrator       Any information required by 1121 which is NOT included on the [Distribution Date Statement]   Depositor       Item 2: Legal Proceedings           Any legal proceeding pending against the following entities or their respective property, that is material to Certificateholders, including any proceedings known to be contemplated by governmental authorities:           § Issuing Entity (Trust Fund)   Trustee, Master Servicer, Securities Administrator and Depositor       § Sponsor (Seller)   Seller (if a party to the Pooling and Servicing Agreement) or Depositor       § Depositor   Depositor       § Trustee   Trustee       § Securities Administrator   Securities Administrator       § Master Servicer   Master Servicer       § Custodian   Custodian       § 1110(b) Originator   Depositor       § Any 1108(a)(2) Servicer (other than the Master Servicer or Securities Administrator)   Servicer (as to itself)       § Any other party contemplated by 1100(d)(1)   Depositor       Item 3: Sale of Securities and Use of Proceeds   Depositor Information from Item 2(a) of Part II of Form 10-Q:           With respect to any sale of securities by the sponsor, depositor or issuing entity, that are backed by the same asset pool or are otherwise issued by the issuing entity, whether or not registered, provide the sales and use of proceeds     O-1 --------------------------------------------------------------------------------   ADDITIONAL FORM 10-D DISCLOSURE       Item on Form 10-D   Party Responsible information in Item 701 of Regulation S-K. Pricing information can be omitted if securities were not registered.           Item 4: Defaults Upon Senior Securities   Securities Administrator     Trustee       Information from Item 3 of Part II of Form 10-Q:           Report the occurrence of any Event of Default (after expiration of any grace period and provision of any required notice)           Item 5: Submission of Matters to a Vote   Securities Administrator of Security Holders   Trustee       Information from Item 4 of Part II of Form 10-Q           Item 6: Significant Obligors of Pool Assets   Depositor       Item 1112(b) – Significant Obligor Financial Information*           *This information need only be reported on the Form 10-D for the distribution period in which updated information is required pursuant to the Item.           Item 7: Significant Enhancement     Provider Information           Item 1114(b)(2) – Credit Enhancement Provider Financial Information*           § Determining applicable disclosure threshold   Depositor       § Requesting required financial information (including any required accountants’ consent to the use thereof) or effecting incorporation by reference   Depositor       Item 1115(b) – Derivative Counterparty Financial Information*           § Determining current maximum probable exposure   Depositor       § Determining current significance percentage   Depositor       § Requesting required financial information (including any required accountants’ consent to the use thereof) or effecting incorporation by reference   Depositor       *This information need only be reported on the Form 10-D for the distribution period in which     O-2 --------------------------------------------------------------------------------   ADDITIONAL FORM 10-D DISCLOSURE       Item on Form 10-D   Party Responsible updated information is required pursuant to the Items.           Item 8: Other Information   Any party responsible for the applicable Form 8-K Disclosure item Disclose any information required to be reported on Form 8-K during the period covered by the Form 10-D but not reported           Item 9: Exhibits           Distribution Date Statement to Certificateholders   Securities Administrator       Exhibits required by Item 601 of Regulation S-K, such as material agreements   Depositor O-3 --------------------------------------------------------------------------------   EXHIBIT P ADDITIONAL FORM 10-K DISCLOSURE ADDITIONAL FORM 10-K DISCLOSURE       Item on Form 10-K   Party Responsible Item 1B: Unresolved Staff Comments   Depositor       Item 9B: Other Information     Disclose any information required to be reported on Form 8-K during the fourth quarter covered by the Form 10-K but not reported   Any party responsible for disclosure items on Form 8-K       Item 15: Exhibits, Financial Statement   Securities Administrator Schedules   Depositor       Reg AB Item 1112(b): Significant Obligors of Pool Assets           Significant Obligor Financial Information*   Depositor       *This information need only be reported on the Form 10-D for the distribution period in which updated information is required pursuant to the Item.           Reg AB Item 1114(b)(2): Credit Enhancement Provider Financial Information           § Determining applicable disclosure threshold   Depositor       § Requesting required financial information (including any required accountants’ consent to the use thereof) or effecting incorporation by reference   Depositor       *This information need only be reported on the Form 10-D for the distribution period in which updated information is required pursuant to the Items.           Reg AB Item 1115(b): Derivative     Counterparty Financial Information           § Determining current maximum probable exposure   Depositor       § Determining current significance percentage   Depositor       § Requesting required financial information (including any required accountants’ consent to the use thereof) or effecting incorporation by reference   Depositor       *This information need only be reported on the Form 10-D for the distribution period in which updated information is required pursuant to the Items.           Reg AB Item 1117: Legal Proceedings     193158 Sequoia 2006-1 Pooling and Servicing Agmt. P-1 --------------------------------------------------------------------------------   ADDITIONAL FORM 10-K DISCLOSURE       Item on Form 10-K   Party Responsible Any legal proceeding pending against the following entities or their respective property, that is material to Certificateholders, including any proceedings known to be contemplated by governmental authorities:           § Issuing Entity (Trust Fund)   Trustee, Master Servicer, Securities Administrator and Depositor       § Sponsor (Seller)   Seller (if a party to the Pooling and Servicing Agreement) or Depositor       § Depositor   Depositor       § Trustee   Trustee       § Securities Administrator   Securities Administrator       § Master Servicer   Master Servicer       § Custodian   Custodian       § 1110(b) Originator   Depositor       § Any 1108(a)(2) Servicer (other than the Master Servicer or Securities Administrator)   Servicer (as to itself)       § Any other party contemplated by 1100(d)(1)   Depositor       Reg AB Item 1119: Affiliations and Relationships           Whether (a) the Sponsor (Seller), Depositor or Issuing Entity is an affiliate of the following parties, and (b) to the extent known and material, any of the following parties are affiliated with one another:   Depositor as to (a) Sponsor/Seller as to (b)       § Master Servicer   Master Servicer       § Securities Administrator   Securities Administrator       § Trustee   Depositor/Sponsor as to (a) Trustee as to (b)       § Any other 1108(a)(3) servicer   Servicer (as to itself)       § Any 1110 Originator   Depositor/Sponsor       § Any 1112(b) Significant Obligor   Depositor/Sponsor       § Any 1114 Credit Enhancement Provider   Depositor/Sponsor       § Any 1115 Derivative Counterparty Provider   Depositor/Sponsor       § Any other 1101(d)(1) material party   Depositor/Sponsor       Whether there are any “outside the ordinary course business arrangements” other than would be obtained in an arm’s length transaction between (a) the Sponsor (Seller), Depositor or Issuing Entity on the one hand, and (b) any of the following parties (or their affiliates) on the other hand, that exist currently or within the past two years and that are material to a Certificateholder’s understanding of the Certificates:   Depositor as to (a) Sponsor/Seller as to (b)       193158 Sequoia 2006-1 Pooling and Servicing Agmt. P-2 --------------------------------------------------------------------------------   ADDITIONAL FORM 10-K DISCLOSURE       Item on Form 10-K   Party Responsible § Master Servicer   Master Servicer       § Securities Administrator   Securities Administrator       § Trustee   Depositor/Sponsor       § Any other 1108(a)(3) servicer   Servicer (as to itself)       § Any 1110 Originator   Depositor/Sponsor       § Any 1112(b) Significant Obligor   Depositor/Sponsor       § Any 1114 Credit Enhancement Provider   Depositor/Sponsor       § Any 1115 Derivative Counterparty Provider   Depositor/Sponsor       § Any other 1101(d)(1) material party   Depositor/Sponsor       Whether there are any specific relationships involving the transaction or the pool assets between (a) the Sponsor (Seller), Depositor or Issuing Entity on the one hand, and (b) any of the following parties (or their affiliates) on the other hand, that exist currently or within the past two years and that are material:   Depositor as to (a) Sponsor/Seller as to (a)       § Master Servicer   Master Servicer       § Securities Administrator   Securities Administrator       § Trustee   Depositor/Sponsor       § Any other 1108(a)(3) servicer   Servicer (as to itself) § Any 1110 Originator   Depositor/Sponsor       § Any 1112(b) Significant Obligor   Depositor/Sponsor       § Any 1114 Credit Enhancement Provider   Depositor/Sponsor       § Any 1115 Derivative Counterparty Provider   Depositor/Sponsor       § Any other 1101(d)(1) material party   Depositor/Sponsor 193158 Sequoia 2006-1 Pooling and Servicing Agmt. P-3 --------------------------------------------------------------------------------   EXHIBIT Q ADDITIONAL FORM 8-K DISCLOSURE FORM 8-K DISCLOSURE INFORMATION       Item on Form 8-K   Party Responsible Item 1.01- Entry into a Material Definitive Agreement   All parties (as to themselves)       Disclosure is required regarding entry into or amendment of any definitive agreement that is material to the securitization, even if depositor is not a party.           Examples: servicing agreement, custody agreement.           Note: disclosure not required as to definitive agreements that are fully disclosed in the prospectus           Item 1.02- Termination of a Material Definitive Agreement   All parties (as to themselves)       Disclosure is required regarding termination of any definitive agreement that is material to the securitization (other than expiration in accordance with its terms), even if depositor is not a party.           Examples: servicing agreement, custody agreement.           Item 1.03- Bankruptcy or Receivership   Depositor       Disclosure is required regarding the bankruptcy or receivership, with respect to any of the following:           § Sponsor (Seller)   Depositor/Sponsor (Seller)       § Depositor   Depositor       § Master Servicer   Master Servicer       § Affiliated Servicer   Servicer (as to itself)       § Other Servicer servicing 20% or more of the pool assets at the time of the report   Servicer (as to itself)       § Other material servicers   Servicer (as to itself)       § Trustee   Trustee       § Securities Administrator   Securities Administrator       § Significant Obligor   Depositor       § Credit Enhancer (10% or more)   Depositor       193158 Sequoia 2006-1 Pooling and Servicing Agmt. Q-1 --------------------------------------------------------------------------------   ADDITIONAL FORM 10-K DISCLOSURE       Item on Form 10-K   Party Responsible § Derivative Counterparty   Depositor       § Custodian   Custodian       Item 2.04- Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement   Depositor Master Servicer Securities Administrator       Includes an early amortization, performance trigger or other event, including event of default, that would materially alter the payment priority/distribution of cash flows/amortization schedule. Disclosure will be made of events other than waterfall triggers which are disclosed in the Distribution Date Statements to the certificateholders.           Item 3.03- Material Modification to Rights of Security Holders   Securities Administrator Depositor       Disclosure is required of any material modification to documents defining the rights of Certificateholders, including the Pooling and Servicing Agreement.           Item 5.03- Amendments of Articles of Incorporation or Bylaws; Change of Fiscal Year   Depositor       Disclosure is required of any amendment “to the governing documents of the issuing entity”.           Item 6.01- ABS Informational and Computational Material   Depositor       Item 6.02- Change of Servicer or Securities Administrator   Master Servicer/Securities Administrator/Depositor/ Servicer (as to itself)/Trustee       Requires disclosure of any removal, replacement, substitution or addition of any master servicer, affiliated servicer, other servicer servicing 10% or more of pool assets at time of report, other material servicers or trustee.           Reg AB disclosure about any new servicer or master servicer is also required.   Servicer (as to itself)/Master Servicer/Depositor       Reg AB disclosure about any new Trustee is also required.   Depositor/Securities Administrator       Item 6.03- Change in Credit Enhancement or External Support   Depositor/Securities Administrator 193158 Sequoia 2006-1 Pooling and Servicing Agmt. Q-2 --------------------------------------------------------------------------------   ADDITIONAL FORM 10-K DISCLOSURE       Item on Form 10-K   Party Responsible Covers termination of any enhancement in manner other than by its terms, the addition of an enhancement, or a material change in the enhancement provided. Applies to external credit enhancements as well as derivatives.           Reg AB disclosure about any new enhancement provider is also required.   Depositor       Item 6.04- Failure to Make a Required Distribution   Trustee/Securities Administrator       Item 6.05- Securities Act Updating Disclosure   Depositor       If any material pool characteristic differs by 5% or more at the time of issuance of the securities from the description in the final prospectus, provide updated Reg AB disclosure about the actual asset pool.           If there are any new servicers or originators required to be disclosed under Regulation AB as a result of the foregoing, provide the information called for in Items 1108 and 1110 respectively.   Depositor       Item 7.01- Reg FD Disclosure   All parties (as to themselves)       Item 8.01- Other Events   Depositor       Any event, with respect to which information is not otherwise called for in Form 8-K, that the registrant deems of importance to certificateholders.           Item 9.01- Financial Statements and   Responsible party for reporting/disclosing the Exhibits   financial statement or exhibit 193158 Sequoia 2006-1 Pooling and Servicing Agmt. Q-3 --------------------------------------------------------------------------------                 WELLS FARGO BANK, N.A.,          as [Securities Administrator] [Master Servicer]               By:                       Name:         Title: 193158 Sequoia 2006-1 Pooling and Servicing Agmt.   --------------------------------------------------------------------------------   SCHEDULE A MORTGAGE LOAN SCHEDULE 193158 Sequoia 2006-1 Pooling and Servicing Agmt.  

-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Exhibit 10.4.2 ASSET PLEDGE STATEMENT THIS ASSET PLEDGE STATEMENT (the “Statement”) is made as of November 29, 2006, by GENE PHARMACEUTICALS, LLC., a Nevada Limited-Liability Company (“Gene”). NOW, THEREFORE, in consideration of the foregoing premises, terms, covenants, and conditions hereinafter set forth, Gene states as follows: Gene hereby grants Cobalis the right to assign the intellectual property as described in Attachment “A” to Cornell Capital Partners, LP of San Diego, CA:   A.     Gene is a pharmaceutical company engaged in the business of researching, developing, manufacturing and marketing a dietary supplement product for the treatment of the symptoms of allergic diseases such as allergic rhinitis (aka hay fever) and atopic asthma (the “Business”). B.     Gene has owned certain intellectual property, including issued US and pending US and Patent Cooperation Treaty (PCT) patents, acquired or used in connection with the Business, as listed in Attachment “A”. C.     Gene has transferred to Cobalis Corp. (formerly known as BioGentec Incorporated), substantially all of the intellectual property and/or assets, including those patents described in Attachment “A”. The transference of which was documented and memorialized, in an Asset Purchase Agreement dated Nov. 22, 2000 between Gene Pharmaceuticals, LLC (formerly known as Allergy Limited, LLC); in a Memorandum of Agreement dated Dec. 19, 2002 between Gene and BioGentec Incorporated; and in a Memorandum of Understanding dated Feb. 20, 2004 said three documents are hereby incorporated herein by reference. C. 1.    The Asset Purchase Agreement dated Nov. 22, 2000 between Gene Pharmaceuticals, LLC included the following: Purchased Assets: Cobalis (“Buyer”) hereby agrees to purchase from Gene (“Seller”), and Seller hereby agrees to sell, transfer and assign to Buyer, free and clear of any and all liens, security interests, encumbrances, pledges, leases, equities, claims, charges, restrictions, conditions, conditional sale contracts, mortgages, and any other adverse interests of any kind whatsoever (other than those securing any Assumed Obligations), certain assets of the Seller, in which Seller has right, title and interest, used in connection with the Business (collectively referred to herein as the “Purchased Assets”). The Purchased Assets shall include, but shall not be limited to, the following: (a)     Tangible personal property including but not limited to all directories, publications, lists, products, marketing and promotional materials, files, books, compilations of names, equipment, tools, machines, machine and electric parts, and supplies that are used and have been acquired or developed in connection with the Business, wherever located, owned or used by Seller, including Seller’s rights therein, all of which are identified on Schedule 1.1(a) attached hereto and shall be delivered by or on behalf of Seller to Buyer at or prior to the Closing (collectively, the “Tangible Assets”);   (b)     All rights in and to any requirements, processes, formulations, methods, technology, know-how, formulae, trade secrets, trade dress, designs, inventions and other proprietary rights and all documentation embodying, representing or otherwise describing any of the foregoing, owned or held by Seller in connection with the Business all of which are set forth in Schedule 1.1(b)) and referred to herein as "Intangible Property Rights"; All patents, copyrights, trade names, trademarks, including the ability to trademark, and service marks of Seller including, but not limited to, the ability to trademark the name of the dietary product, “Immun-Eeze,” the Business name, Allergy Limited, and the Business Website, www.allergylimited.com used in the Business, all of which are set forth in Schedule 1.1(b), and all applications therefore, and all documentation embodying, representing, or otherwise describing any of the forgoing.     1 --------------------------------------------------------------------------------   C. 2.   The Memorandum of Agreement dated Dec. 19, 2002 between Gene and BioGentec Incorporated included the following sections:   III C. No party may assign this Agreement or their rights thereunder, nor delegate their respective duties hereunder, without the written consent of the other party. II A. The Purchase price shall be the sum of all amounts previously paid by Buyer to Seller, under the previously executed Asset Purchase Agreement, plus the sum of Four Million Dollars represented by the issuance from Buyer to Seller of Two Million fully paid and non-assessable shares of common stock in BioGentec, Incorporated as of the date of this Agreement at $2.00 per share plus a royalty calculated as one and one half percent (1.5%) of the Gross Sales of the Product (as defined in the previously executed Asset Purchase Agreement). C. 3.    The Memorandum of Understanding dated Feb. 20, 2004 included the following: The royalty of 1.5% as described in the Memorandum of Agreement dated Dec. 19, 2002 shall be amended to include a survivability clause in the case of BioGentec (i.e. Cobalis) being acquired. The same amendment will include a Royalty Buy-Out formula that can be exercised by a potential suitor. In light of the abovementioned Agreements and Understanding, all parties understand and agree that each of the aspects of the abovementioned Agreements and Understanding between Gene and Cobalis, for example, the Option Purchase Agreements for Armstrong and the Employment Agreement for Armstrong will survive or otherwise remain intact and this Statement in no way confers any right to assign the intellectual property as described in Attachment “A” to a third party, which includes but is not limited to, a large pharmaceutical company which is in a position to market the allergy treatment, PreHistin. Additionally, it is noted that fees are periodically due to the US Patent and Trademark Office (USPTO) and to foreign patent offices to keep issued patents current so as not to have the patents described in Attachment “A” deemed abandoned or otherwise invalid due to non-payment and that the ongoing prosecution of pending patents will require additional expenses and patent attorney work. In the event some or all of the patents described in Attachment “A” are released back to Cobalis from Cornell, Cobalis understands and agrees that the right for Cobalis to assign those patents to some other party will revert back to being governed by the current abovementioned Agreements and Understanding. By vertue of executing a Convertible Debenture agreement with Cornell in which the patents described in Attachment “A” are involved, Cobalis agrees to the the terms of this Statement.     The above is signed and agreed to on November 30, 2006 in Irvine, CA by:   Ernest T. Armstrong as Managing Member, Gene Pharmaceuticals, LLC 2 --------------------------------------------------------------------------------   ATTACHMENT “A”   US Patent #6,255,294 "Cyanocobalamin Treatment in Allergic Disease"   US Patent #5,135,918 "Method for Decreasing Reaginic Antibody Levels"   European Union Patent # EP1128835   Australian Patent #771728   Japanese Patent Pending P2002-533399A   Canadian Patent Pending 2,358,054   Mexican Patent Pending 2001-006297     3  

EXHIBIT 10.2 LICENSE AGREEMENT BETWEEN BIOVEST INTERNATIONAL, INC. AND AUTOVAXID, INC. This License Agreement (this “Agreement”) effective as of December 8, 2006, by and between Biovest International, Inc., a Delaware corporation (“Biovest”), and AutovaxID, Inc., a Florida corporation (“AutovaxID”) (collectively the “Parties”). WITNESSETH: WHEREAS, Biovest has developed the automated cell production instrument known as Autovax (the “Autovax Automated Instrument”); WHEREAS, AutovaxID wishes to enter into an agreement to obtain the exclusive license for the Autovax Automated Instrument in the Territory (hereinafter defined) from Biovest in order to manufacture, market and commercialize the Autovax Automated Instrument in the Territory in accordance therewith; and WHEREAS, Biovest is willing to grant such license to AutovaxID under the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the various promises and undertakings set forth herein, the Parties agree as follows: ARTICLE 1 - DEFINITIONS As used herein, capitalized terms shall have the following meanings: 1.1 “Affiliate,” with respect to any Party, shall mean any person or entity controlling, controlled by, or under common control with such Party. For these purposes, “control” shall refer to (i) the possession, directly or indirectly, of the power to direct the management or policies of a person or entity, whether through the ownership of voting securities, by contract or otherwise or (ii) the ownership, directly or indirectly, of at least 50% of the voting securities or other ownership interest of a person or entity. 1.2 “Autovax Automated Instrument” shall mean the automated instrument developed by Biovest to produce vaccines and other cell related products in a closed cell system as more fully described in Exhibit B and as covered by the Licensed Patent rights owned by Biovest under the patent numbers described in Exhibit A, together with any successor innovation thereto developed by Biovest or its Affiliates. 1.3 “Biovest Licensed Technology” shall mean any and all information, and all patentable and non-patentable inventions (including, without limitation, all Joint Inventions), improvements, discoveries, claims, formulae, processes, methods, trade secrets, technologies, data and know-how owned, licensed or controlled by Biovest or to which Biovest has the right to grant licenses or sublicenses before or during the term of this Agreement related to the automated instrument designed and developed by Biovest to produce vaccines and other cell related products in a closed cell system described in Exhibit B. -------------------------------------------------------------------------------- 1.4 “Effective Date” shall mean the date first written above. 1.5 “Joint Invention” shall mean any invention for which it is determined, in accordance with applicable law, that both: (i) employees or agents of AutovaxID or any other persons obligated to assign such Invention to AutovaxID, and (ii) employees or agents of Biovest or any other persons obligated to assign such invention to Biovest, are joint inventors of such invention. 1.6 “Know-How” shall mean any and all know-how shared by the Parties under this Agreement. 1.7 “Licensed Patents” shall mean any current and future Patent, owned or controlled by Biovest, or any of the same jointly owned or controlled by Biovest and that relate to the Biovest Licensed Technology, including Patents set forth on Exhibit A. 1.8 “Licensed Product” shall mean the Autovax Automated Instrument as defined herein and all disposables and equipment related thereto. 1.9 “Net Sales” shall mean the gross amount invoiced for Licensed Products sold by AutovaxID and/or its Affiliates in arm’s length sales or commercial transactions to a Third Party (excluding sales to Accentia Biopharmaceuticals, Inc. for its use inside or outside the Territory or for resale outside the Territory), less deductions for: (a) commissions, trade, quantity and cash discounts or rebates actually allowed or given; (b) credits, allowances or refunds given or made for rejected, outdated or returned Licensed Products, if applicable; (c) any tax or government charge (other than an income tax) levied on the sale, transportation or delivery of a Licensed Product and borne by the seller thereof; and (d) any prepaid or invoiced charges for freight, postage, shipping, import or export taxes, insurance or charges for returnable containers. 1.11 “Party” shall mean AutovaxID or Biovest and, when used in the plural, shall mean AutovaxID and Biovest. 1.12 “Patent” means (i) unexpired letters patent (including inventor’s certificates) which have not been held invalid or unenforceable by a court of competent jurisdiction from which no appeal can be taken or has been taken within the required time period, including without limitation any substitution, extension, registration, confirmation, reissue, re-examination, renewal or any like filing thereof and (ii) pending applications for letters patent, including without limitation any continuation, division or continuation-in-part thereof and any provisional applications. 1.13 “Sublicensee” shall mean any Third Party granted a sublicense by AutovaxID pursuant to Section 3.2 hereof.   - 2 - -------------------------------------------------------------------------------- 1.14 “Sublicensee Net Sales” shall mean the gross amount invoiced for all Licensed Products sold by a Sublicensee to a Third Party, less deductions for: (a) commissions, trade, quantity and cash discounts or rebates actually allowed or given; (b) credits, allowances or refunds given or made for rejected, outdated or returned Licensed Products, if applicable; (c) any tax or government charge (other than an income tax) levied on the sale, transportation or delivery of a Licensed Product and borne by the seller thereof; and (d) any prepaid or invoiced charges for freight, postage, shipping, import or export taxes, insurance or charges for returnable containers. 1.15 “Sublicensee Revenue” shall mean any and all revenue or other consideration received by AutovaxID from a Sublicensee for Licensed Product under this Agreement, including but not limited to, revenue from sales of Licensed Products, upfront revenue, milestone revenue, royalty income, and the market value at the time of transfer of all non-monetary consideration such as barter or counter-trade in the country of disposition. 1.16 “Territory” shall mean the United States, Canada and Mexico. 1.17 “Third Party” means any person or entity other than AutovaxID, Biovest or any Affiliate of either AutovaxID or Biovest. 1.18 “Valid Claim” shall mean a claim of any issued or granted Licensed Patent which has not been held invalid or unenforceable by final decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which is not admitted to be invalid or unenforceable through reissue, disclaimer or otherwise. ARTICLE 2 - REPRESENTATIONS AND WARRANTIES 2.1 Representations and Warranties of Both Parties. Each Party represents and warrants to the other Party that: (i) it is free to enter into this Agreement; (ii) in so doing, it will not violate any other agreement to which it is a party; and (iii) it has taken all corporate action necessary to authorize the execution and delivery of this Agreement and the performance of its obligations under this Agreement. 2.2 Representations and Warranties of Biovest. Biovest hereby represents and warrants to AutovaxID that: (a) Biovest has the right to grant licenses and sublicenses therefor without the consent or approval of any Third Party; (b) To the best of Biovest’s knowledge, all the Licensed Patents listed on Exhibit A are in full force and effect and have been maintained to date;   - 3 - --------------------------------------------------------------------------------   (c) Biovest is not aware of any asserted or unasserted claim or demand against the Biovest Licensed Products; (d) To the best of Biovest’s knowledge, the Biovest Licensed Product does not infringe upon any patent or other proprietary rights of any other Third Party; and (e) Biovest has not entered into any agreement with any Third Party which is in conflict with the rights granted to AutovaxID pursuant to this Agreement. 2.3 Disclaimer. (a) Government Rights; Research and Development. Biovest’s rights in the Licensed Product may be subject to the royalty-free rights of the US Government, if any, in the Patents and Licensed Product to manufacture, have manufactured, and use any Products, including Licensed Product, for research and development purposes. (b) Disclaimer of Other Warranties. EXCEPT AS PROVIDED HEREIN, THE BIOVEST LICENSED PRODUCT IS PROVIDED AND LICENSED WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. EXCEPT AS EXPRESSLY PROVIDED, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY THAT THE BIOVEST LICENSED PRODUCT WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT OF A THIRD PARTY. 2.4 Employee Agreements. Each Party warrants that it has, and covenants that it will have, entered into a proprietary information and inventions agreement with each of its employees prior to the time that any such employee shall receive confidential information from a disclosing party or begin work related to this Agreement. Such agreement shall minimally set forth employee obligations to assign inventions to the inventing Party and to maintain confidentiality of confidential information consistent with the terms of this Agreement. ARTICLE 3 - LICENSE GRANT 3.1 Grant of License. (a) Subject to the terms and conditions of this Agreement, Biovest hereby grants to AutovaxID an exclusive license throughout the Territory, with the right to grant sublicenses (subject to Section 3.2), to make, use, sell and commercialize the Licensed Product. (b) Subject to the terms and conditions of this Agreement, Biovest hereby grants to AutovaxID a nonexclusive, perpetual license to use its Know-How to develop, manufacture, use, sell and commercialize the Licensed Product. (c ) Subject to the terms and conditions of this Agreement, Biovest hereby grants to AutovaxID a nonexclusive license throughout the Territory, with the right to grant sublicenses (subject to Section 3.2) to use the trade names “Autovax” and “AutovaxID”.   - 4 - -------------------------------------------------------------------------------- For the avoidance of doubt, the rights and license granted hereby are limited to the Autovax Automated Instrument as defined herein and specifically no rights or license is granted to AutovaxID under this Agreement to: (i) develop, market, produce or commercialize any cell related product or vaccine including, but not limited to, the anti-cancer vaccine now or in the future developed or owned by Biovest, including the vaccine known as BiovaxID; (ii) manufacture, sell, market or commercialize any cell production instrument or equipment now or in the future developed, owned or licensed by Biovest except only the automated cell production equipment described in Exhibit A or (iii) manufacture, sell, market or commercialize the automated instrument developed by Biovest as described in Exhibit B or any disposable related thereto outside or for use outside the Territory. (d) Notwithstanding anything to the contrary herein, the license granted hereunder shall not include use of the Licensed Product for purposes of producing stem cells or therapeutics. 3.2 Right to Grant Sublicenses. Subject to Section 9.2 hereof, AutovaxID shall not have the right to sublicense the Biovest Licensed Product in the Territory without the consent of Biovest, which consent may be withheld in Biovest’s discretion. 3.3 [Reserved] 3.4 Intellectual Property. Any and all intellectual property developed by the Parties related to the Biovest Licensed Product, including Joint Inventions and inventions developed solely by either Biovest or AutovaxID, shall be the sole and exclusive property of Biovest. Such intellectual property shall be considered a Biovest Licensed Product and therefore subject to the license rights granted to AutovaxID in this Article 3. All intellectual property developed by AutovaxID (Joint Inventions and inventions developed solely by AutovaxID), not directly or indirectly related to the Biovest Licensed Product shall be the sole and exclusive property of AutovaxID. All intellectual property developed solely by Biovest not related to the Biovest Licensed Product shall be the sole and exclusive property of Biovest, subject to no license to such intellectual property to AutovaxID. AutovaxID shall have no rights in any intellectual property related to Licensed Product developed jointly by Biovest with any third parties. ARTICLE 4 - ROYALTY PAYMENTS AND REPORTS 4.1 License Fee. As consideration for entering into this Agreement, AutovaxID shall pay to Biovest ten (10) dollars within thirty (30) days of the Effective Date. 4.2 Royalty Free. The License shall be royalty free. For clarification, Biovest shall not be required hereunder to pay any royalty based on Net Sales or Sublicensee Revenue or otherwise. ARTICLE 5 - PATENT PROSECUTION; ENFORCEMENT; INFRINGEMENT 5.1 Patent Prosecution and Maintenance. (a) Responsibility. Biovest shall continue to have full responsibility for and shall control the preparation and prosecution and maintenance of all Licensed Patents. (b) Cooperation. Each Party agrees to cooperate with the other Party to execute any documents necessary or desirable to secure and perfect the other Party’s legal rights and worldwide   - 5 - -------------------------------------------------------------------------------- ownership in the other Party’s intellectual property, including, but not limited to documents relating to patent, trademark and copyright applications. Each Party agrees to take actions reasonably necessary to diligently prosecute and maintain its intellectual property in major commercial markets where viable protection is available. Each party or its representatives shall be entitled to meet and confer with the other Party and their patent counsel at reasonable times and places. 5.2 Limitations on Publications. The Parties agree that no one Party shall publish the results of any studies, whether conducted by its own employees or in conjunction with a Third Party, carried out pursuant to this Agreement or confidential information received from the other Party that is relating to a Licensed Product, without the prior written approval of the other Party. Each Party agrees to provide the other Party with a copy of any proposed abstracts, presentations, manuscripts, or any other disclosure which discloses clinical study results pursuant to this Agreement or confidential information received from the other Party at least one hundred twenty (120) days prior to their intended submission for publication and agrees not to submit or present such disclosure until the Party not seeking to disclose such information provides its prior written approval. Such written approval will not be unreasonably withheld unless such proposed disclosure could reasonably harm or impair a Party’s intellectual property assets or may reasonably cause commercial harm to a Party. 5.3 Notification of Infringement. If either Party learns of an infringement or threatened infringement by a Third Party of any Licensed Patent granted hereunder within the Territory, such Party shall promptly notify the other Party and shall provide such other Party with available evidence of such infringement, and Section 5.4 shall be applicable. 5.4 Patent Enforcement. Biovest shall have the first right, but not the duty, to institute patent infringement actions against third parties based on any Licensed Patent under this Agreement. If Biovest does not institute an infringement proceeding against an offending Third Party within ninety (90) days after receipt of notice from AutovaxID, AutovaxID shall have the right, but not the duty, to institute such an action. The costs and expenses of any such action (including fees of attorneys and other professionals) shall be borne by the Party instituting the action, or, if the Parties elect to cooperate in instituting and maintaining such action, such costs and expenses shall be borne by the Parties in such proportions as they may agree in writing. Each Party shall execute all necessary and proper documents and take such actions as shall be appropriate to allow the other Party to institute and prosecute such infringement actions. Any award paid by third parties as a result of such an infringement action (whether by way of settlement or otherwise) shall be paid to the Party who instituted and maintained such action, or, if both Parties instituted and maintained such action, such award shall be allocated among the Parties in proportion to their respective contributions to the costs and expenses incurred in such action. 5.5 Infringement Action by Third Parties. (a) Claim or Suit Against AutovaxID. In the event of the institution of any claim or suit by a Third Party against AutovaxID for patent infringement involving the manufacture, use, lease or sale of any Licensed Product in the Territory, and related to Biovest Licensed Technology, AutovaxID shall promptly notify Biovest in writing of such claim or suit. AutovaxID shall have the right to defend such claim or suit at its own expense and Biovest hereby agrees to assist and cooperate with AutovaxID, at Biovest’s own expense, to the extent necessary in the defense of such claim or suit. During the pendency of such claim or suit.   - 6 - -------------------------------------------------------------------------------- (b) Claim or Suit Against Biovest. In the event of the institution of any claim or suit by a Third Party against Biovest for patent infringement involving the manufacture, use, lease or sale of any Licensed Product in the Territory, Biovest shall promptly notify AutovaxID in writing of such claim or suit. Biovest shall have the right to defend such claim or suit at its own expense and AutovaxID hereby agrees to assist and cooperate with Biovest, at AutovaxID’s own expense, to the extent necessary in the defense of such claim or suit. (c) Indemnity. AutovaxID shall be responsible to pay any damage, cost or royalty required to be paid by AutovaxID or Biovest to such Third Party provided such damage, cost or royalty is related to sales or activities by AutovaxID. ARTICLE 6 - CONFIDENTIALITY 6.1 Use of Name. Biovest agrees not to use directly or indirectly AutovaxID’s name without AutovaxID’s prior written consent except as part of its required filings or in connection with a discussion of the business of Biovest. AutovaxID agrees not to use directly or indirectly Biovest’s name or information without Biovest’s prior written consent. Notwithstanding the foregoing, AutovaxID and Biovest may include an accurate description of the terms of this Agreement to the extent required under federal or state securities or other disclosure; and AutovaxID may use Biovest’s names in various documents used by AutovaxID for capital raising and financing purposes. 6.2 Confidentiality; Exceptions. Except to the extent expressly authorized by this Agreement, as required by law (upon which prior notice of disclosure shall be given to the other Party), or otherwise agreed in writing, the Parties agree that, for the term of this Agreement and for three (3) years thereafter, the receiving Party shall keep completely confidential and shall not publish or otherwise disclose and shall not use for any purpose other than proper performance hereunder any information furnished to it by the other Party pursuant to this Agreement, except to the extent that it can be established by the receiving Party by competent proof that such information: (a) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party; (b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party; (c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement; (d) was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others; or (e) was independently developed by or for the receiving Party by persons not having access to such information, as determined by the written records of such party. 6.3. Obligations of Employees and Consultants. The Parties each represent that all of its employees and the employees of its Affiliates, and any collaborators or consultants to such Party or its Affiliates, who shall   - 7 - -------------------------------------------------------------------------------- have access to confidential information of the Parties are bound by written obligations to maintain such information in confidence and not to use such information except as expressly permitted herein. Each Party agrees to enforce confidentiality obligations to which its employees and consultants (and those of its Affiliates) are obligated. ARTICLE 7 - INDEMNIFICATION 7.1 Indemnification by AutovaxID. AutovaxID shall defend, indemnify and hold Biovest, its officers, directors, employees and consultants harmless from and against any and all Third Party claims, suits or demands, threatened or filed, for liability, damages, losses, costs and expenses (including the costs and expenses of attorneys and other professionals), at both trial and appellate levels, relating to the distribution, testing, manufacture, use, lease, sale, consumption on or application of Licensed Product by AutovaxID, its Affiliates or its Sublicensees pursuant to this Agreement, including, without limitation, claims for any loss, damage, or injury to persons or property, or loss of life, relating to the promotion and advertising of Licensed Products and/or interactions and communications with governmental authorities, physicians or other Third Parties relating to the Licensed Products (“Claims”). The foregoing indemnification shall not apply to any Third Party Claims to the extent are caused by the gross negligence or willful misconduct of Biovest. 7.2 Indemnification by Biovest. Biovest shall defend, indemnify and hold AutovaxID, its officers, directors, employees and consultants harmless from and against any and all Third Party Claims for liability, damages, losses, costs and expenses (including the costs and expenses of attorneys and other professionals), at both trial and appellate levels, relating to Biovest’s activities contemplated under this Agreement, including, but not limited to, (a) breach of the representations, warranties and obligations of Biovest hereunder, or (b) any tax, duty, levy or government imposition on any sums payable by AutovaxID to Biovest hereunder. The foregoing indemnification shall not apply to any Claims to the extent caused by the gross negligence or willful misconduct of AutovaxID. 7.3 Notice. In the event that either Party seeks indemnification under Sections 7.1 or 7.2, the Party seeking indemnification agrees to (i) promptly inform the other Party of the Third Party Claim, (ii) permit the other Party to assume direction and control of the defense or claims resulting therefrom (including the right to settle it at the sole discretion of that Party), and (iii) cooperate as reasonably requested (at the expense of that Party) in the defense of the Claim. 7.4 Insurance. (a) Prior to the first sale of any Licensed Product by AutovaxID under this Agreement, AutovaxID shall obtain and maintain broad form comprehensive general liability insurance and Licensed Product liability insurance with a reputable and financially secure insurance carrier, subject to approval by Biovest’s primary insurance broker, to cover such activities of AutovaxID and AutovaxID’s contractual indemnity under this Agreement. Such insurance shall provide minimum annual limits of liability of $5,000,000 per occurrence and $5,000,000 in the aggregate with respect to all occurrences being indemnified under this Agreement. Such insurance policy shall name Biovest as an additional insured and shall be purchased and kept in force for the period of five (5) years after the cessation of sales of all Licensed Products under this Agreement.   - 8 - -------------------------------------------------------------------------------- (b) In the event that AutovaxID chooses to rely on any strategic partners of AutovaxID to satisfy any of the requirements for insurance under this Section 7.4, then AutovaxID shall provide details of such coverage to Biovest for its information. Any such coverage must substantially comply with the form, scope and amounts set forth in this Section 7.4(a) which are applicable to such insurance. In the event that any such insurance is a self-insured plan, AutovaxID shall determine that such strategic partner’s self-insured plan is adequate given the financial condition of such strategic partner. At Biovest’s request, which shall not be more frequently than annually, AutovaxID shall provide Biovest with a certificate of such insurance or written verification by such strategic partner of such self-insurance. (c) At Biovest’s request, which shall not be more frequently than annually, AutovaxID shall provide Biovest evidence of any insurance obtained pursuant to Section 7.4(a). AutovaxID shall not, and shall not permit any strategic partner to, cancel or materially reduce the coverage of any policy of insurance required under this Section 7.4(a) without giving Biovest thirty (30) days prior written notice thereof. ARTICLE 8 – TERM; TERMINATION 8.1 Term. This Agreement shall commence as of the Effective Date and, unless sooner terminated as provided hereunder, shall terminate as to each Licensed Product and as to each country in the Territory, upon the expiration of the last to expire Valid Claim of a Licensed Patent necessary for the manufacture, use or sale of such Licensed Product in such country. 8.2 Breach. Failure by either Party to comply with any of the material obligations contained in this Agreement shall entitle the other Party to give to the Party in default notice specifying the nature of the default and requiring it to cure such default. If such default is not cured within sixty (60) days after the receipt of such notice (or, if such default cannot be cured within such sixty (60) day period, if the Party in default does not commence and diligently continue actions to cure such default), the notifying Party shall be entitled, without prejudice to any of its other rights conferred on it by this Agreement, in addition to any other remedies available to it by law or in equity, to terminate this Agreement by giving written notice to take effect within thirty (30) days after such notice unless the defaulting Party shall cure such default within said thirty (30) days. The right of either Party to terminate this Agreement, as hereinabove provided, shall not be affected in any way by its waiver or failure to take action with respect to any previous default. 8.3 Termination by AutovaxID. AutovaxID shall have the right to terminate the licenses granted herein, in whole or as to any Licensed Product in the Territory, at any time, and from time to time, by giving notice in writing to Biovest. Such termination shall be effective thirty (30) days from the date such notice is given, and all AutovaxID’s rights associated therewith shall cease as of that date, subject to Section 8.5. 8.4 Rights to Sell Stock on Hand. Upon the termination of any license granted herein, in part or in whole or as to any Licensed Product, for any reason other than a failure to cure a material breach of the Agreement by AutovaxID, AutovaxID shall have the right for one (1) year or such longer period as the Parties may reasonably agree to dispose of all Licensed Products or substantially completed Licensed Products then on hand to which such termination applies, and royalties shall be paid to Biovest with respect to such Licensed Products as though this Agreement had not terminated.   - 9 - -------------------------------------------------------------------------------- 8.5 Termination of Sublicenses. Upon any termination of this Agreement, all sublicenses granted by AutovaxID under this Agreement shall terminate simultaneously, subject, nevertheless, to Section 8.4. 8.6 Effect of Termination. Upon the termination of any license granted herein as to any Licensed Product in the Territory other than pursuant to Section 8, AutovaxID and its Affiliates and Sublicensees shall promptly: (i) return to Biovest all relevant records, materials or confidential information of Biovest concerning the Biovest Licensed Product in such country in the possession or control of AutovaxID or any of its Affiliates or Sublicensees; and (ii) assign to Biovest, or Biovest’s designee, its registrations with governmental health authorities, licensees, and approvals of such Licensed Product in such country. 8.7 Surviving Rights. Termination of this Agreement shall not terminate AutovaxID’s obligation to pay all royalties which shall have accrued hereunder. The Parties’ obligations under Articles 6, 7 and 8, and Sections 9.6, 9.7 and 9.10 also shall survive termination. 8.8 Accrued Rights, Surviving Obligations. Termination, relinquishment or expiration of this Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit of either Party under this Agreement prior to such termination, relinquishment or expiration. Such termination, relinquishment or expiration shall not relieve either Party from obligations which are expressly indicated to survive termination or expiration of this Agreement. ARTICLE 9 – MISCELLANEOUS PROVISIONS 9.1 Relationship of Parties. Nothing in this Agreement is or shall be deemed to constitute a partnership, agency, employee or joint venture relationship between the Parties. No Party shall incur any debts or make any commitments for the other, except to the extent, if at all, specifically provided herein. 9.2 Assignment. Except as otherwise provided herein, neither this Agreement nor any interest hereunder shall be assignable by any Party without the prior written consent of the other, which approval is not to be unreasonably withheld; provided, however, that either Party may assign this Agreement to any wholly-owned subsidiary or to any successor by merger or sale of substantially all of its assets to which this Agreement relates in a manner such that the assignor shall remain liable and responsible for the performance and observance of all its duties and obligations hereunder; provided further, however, that AutovaxID may assign its rights, powers and obligations hereunder pursuant to the foreclosure of any lien on AutovaxID’s property, and any person exercising such power of foreclosure (and the successors and assigns thereof) shall be deemed to be substituted for AutovaxID for purposes of this Agreement upon duly executing a counterpart to this Agreement. This Agreement shall be binding upon the successors and permitted assigns of the parties and the name of a Party appearing herein shall be deemed to include the names of such Party’s successors and permitted assigns to the extent necessary to carry out the intent of this Agreement. Any assignment not in accordance with this Section 9.2 shall be void. 9.3 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instructions, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement. 9.4 Force Majeure. Neither Party shall be liable to the other for loss or damages nor shall have any   - 10 - -------------------------------------------------------------------------------- right to terminate this Agreement for any default or delay attributable to any act of God, flood, fire, explosion, strike, lockout, labor dispute, shortage of raw materials, casualty, accident, war, revolution, civil commotion, act of public enemies, blockage or embargo, injunction, law, order, proclamation, regulation, ordinance, demand or requirement of any government or subdivision, authority or representative of any such government, or any other cause beyond the reasonable control of such Party, if the Party affected shall give prompt notice of any such cause to the other Party. The Party giving such notice shall thereupon be excused from such of its obligations hereunder as it is thereby disabled from performing for so long as it is so disabled and for thirty (30) days thereafter. Notwithstanding the foregoing, nothing in this Section 9.4 shall excuse or suspend the obligation to make any payment due hereunder in the manner and at the time provided. 9.5 No Trademark Rights. Except as otherwise provided herein, no right, express or implied, is granted by this Agreement to use in any manner the name “Autovax” “AutovaxID” or “Biovest” or any other trade name or trademark of the other party in connection with the performance of this Agreement. 9.6 Public Announcements. Except as required by law, neither Party shall make any public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other. In the event of a required public announcement, the Party making such announcement shall provide the other with a copy of the proposed text prior to such announcement. 9.7 Notices. Any notice required or permitted to be given or delivered hereunder or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been properly served if: (a) delivered personally, (b) delivered by a recognized overnight courier service instructed to provide next-day delivery, (c) sent by certified or registered mail, return receipt requested and first class postage prepaid, or (d) sent by facsimile transmission followed by confirmation copy delivered by a recognized overnight courier service the next day. Such notices, demands and other communications shall be sent to the addresses set forth below, or to such other addresses or to the attention of such other person as the recipient Party has specified by prior written notice to the sending Party. Date of service of such notice shall be: (i) the date such notice is personally delivered or sent by facsimile transmission (with issuance by the transmitting machine of confirmation of successful transmission), (ii) three days after the date of mailing if sent by certified or registered mail, or (iii) one day after date of delivery to the overnight courier if sent by overnight courier. Unless otherwise specified in writing, the mailing addresses of the Parties shall be as described below:   (a) If to Biovest, addressed to: Steve Arikian, M.D. CEO and President Biovest International, Inc. Suite 350 324 South Hyde Park Ave. Tampa, Florida 33606 Facsimile: 813-258-6912   (b) If to AutovaxID, addressed to: James Carroll AutovaxID, Inc. 1701 Macklind Avenue St. Louis, MO 63110 Facsimile: 813-258-6912   - 11 - -------------------------------------------------------------------------------- 9.8 Amendment. No amendment, modification or supplement of any provision of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each Party. This Agreement may be executed in a series of counterparts, all of which, when taken together, shall constitute one and the same instrument. 9.9 Waiver. No provision of this Agreement shall be waived by any act, omission or knowledge of a Party or its agents or employees except by an instrument in writing expressly waiving such provision and signed by the waiving Party. 9.10 Dispute Resolution. (a) Senior Officials. The Parties recognize that a bona fide dispute as to certain matters may from time to time arise during the term of this Agreement which relates to either Party’s rights and/or obligations hereunder. In the event of the occurrence of such a dispute, either Party may, by notice to the other Party, have such dispute referred to their respective senior officials designated below or their successors, for attempted resolution by good faith negotiations within thirty (30) days after such notice is received. Said designated senior officials are as follows:   For AutovaxID:    James Carroll For Biovest:    Steve Arikian M.D. In the event the designated senior officials are not able to resolve such dispute within the thirty (30) day period, either Party may invoke the provisions of Section 9.10(b). (b) Arbitration. In the event of any dispute, difference or question arising between the Parties in connection with this Agreement, the construction thereof, or the rights, duties or liabilities of either Party, and which dispute cannot be amicably resolved by the good faith efforts of both Parties, then such dispute shall be resolved by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration panel shall be composed of three arbitrators, one of whom shall be chosen by Biovest, one by AutovaxID, and the third by the two so chosen. If both or either of AutovaxID or Biovest fails to choose an arbitrator or arbitrators within fourteen (14) days after receiving notice of commencement of arbitration or if the two arbitrators fail to choose a third arbitrator within fourteen (14) days after their appointment, the then President of the American Arbitration Association shall, upon the request of both or either of the Parties to the arbitration, appoint the arbitrator or arbitrators required to complete the board or, if he shall decline or fail to do so, such arbitrator or arbitrators shall be appointed by the New York office of the American Arbitration Association. The decision of the arbitrators shall be by majority vote, and, at the request of either Party, the arbitrators shall issue a written opinion of findings of fact and conclusions of law. Costs shall be borne as determined by the arbitrators. Unless the Parties to the arbitration shall otherwise agree to a place of arbitration, the place of arbitration shall be at New York, New York, U.S.A. The arbitration award shall be final and binding upon the Parties to such arbitration and may be entered in any court having jurisdiction.   - 12 - -------------------------------------------------------------------------------- 9.11 Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware. 9.12 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 9.13 Entire Agreement of the Parties. This Agreement constitutes and contains the entire understanding and agreement of the Parties and cancels and supersedes any and all prior negotiations, correspondence, understandings and agreements, whether oral or written, between the Parties respecting the subject matter hereof. [Remainder of Page Intentionally Left Blank]   - 13 - -------------------------------------------------------------------------------- IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized officer as of the day and year first above written.   BIOVEST INTERNATIONAL, INC. By:   /s/ Steven Arikian Name:   Steven Arikian, M.D. Title:   Chairman & CEO AUTOVAXID, INC. By:   /s/ Steven Arikian Name:   Steven Arikian, M.D. Title:   Chairman & CEO   License Agreement Signature Page -------------------------------------------------------------------------------- EXHIBIT A LICENSED PATENTS   Patent #/Title    Date of Grant    Expiration Date 5330915, Pressure Control System for a Bioreactor    July 19, 1994    July 19, 2011 4889812, Bioreactor Apparatus    December 26, 1989    December 26, 2006 Patent Application Provisional patent- attorney docket number 042433-057890 was filed on May 22, 2006 covering the key features of the Autovax instrument system. The patent application contains the following claims:   1. A cell culture system for the production of cells and cell-derived products comprising: a reusable instrumentation base device incorporating hardware to support cell culture growth; and a disposable cell bioreactor module attachable to said instrumentation base device, said module including a cell growth chamber.   2. The cell culture system of claim 1, wherein said instrumentation device includes a pump for circulating cell culture medium through the bioreactor module.   3. The cell culture system of claim 2, wherein said pump moves growth factor or other supplements into the cell growth chamber and removes product harvest from the cell growth chamber.   4. The cell culture system of claim 2, wherein said instrumentation device includes a plurality of rotary selection valves to control the medium flow through the bioreactor module.   5. The cell culture system of claim 1, wherein said instrumentation device includes a cool storage area for storing growth factor or other supplements and product harvest.   6. The cell culture system of claim 1, wherein said instrumentation device includes a heating mechanism for heating the cell growth chamber to promote growth and production.   7. The cell culture system of claim 6, wherein the bioreactor module includes an inlet and outlet port, said inlet and outlet ports align with air ports of the instrument device such that said heat exchange mechanism forces heated air into the module from the instrument device.   8. The cell culture system of claim 2, further comprising a pump cassette having attached tubing, the pump cassette and tubing being insertable into the multi-channel pump.   9. The cell culture system of claim 2, wherein said bioreactor module includes a gas blending mechanism in communication with the cell growth chamber.   10. The cell culture system of claim 9, further comprising a pH sensor disposed in said cultureware module to control the pH of the cell culture medium.   11. The cell culture system of claim 2, wherein said bioreactor module includes a gas exchange unit that provides oxygen and adds or removes carbon dioxide to the medium to support cell metabolism. 12. The cell culture system of claim 1, wherein said bioreactor module is pre-sterilized. -------------------------------------------------------------------------------- 13. The cell culture system of claim 1, wherein said bioreactor module includes a plurality of interface features integrated into the module that mate with instrument interface features in said device.   14. The cell culture system of claim 2, wherein the cultureware module includes sensors for sensing fluid circulation rate, temperature and pH of said medium.   15. The cell culture system of claim 1, wherein said cell growth chamber comprises a bioreactor that provides cell space and media component exchange.   16. The cell culture system of claim 1, wherein the bioreactor module includes a fluid cycling unit disposed therein reservoirs to cycle and maintain fluid volumes within said cell growth chamber.   17. The cell culture system of claim 16, wherein the fluid cycling unit includes a non-rigid reservoir and a second flexible reservoir in fluid communication with said first reservoir to cause elevated pressure in said first reservoir.   18. The cell culture system of claim 1, further comprising a plurality of disposable containers for harvest collection and flushing removably connected to said module.   19. A method for the production of cells and cell products in a highly controlled, contaminant-free environment comprising the steps of: providing a disposable bioreactor module, said module including a cell growth chamber; providing a reusable instrumentation base device incorporating hardware to support cell culture growth, said base device including a microprocessor control and a pump for circulating media through said cell growth chamber; removably attaching said bioreactor module to said instrumentation base device; introducing cells into said cell growth chamber; fluidly attaching a source of media to said cultureware module; programming operating parameters into said microprocessor control; operating said pump to circulate the media through said cell growth chamber to grow cells or cell products therein; harvesting the grown cells or cell products from the cell growth chamber; and disposing of said cultureware module.   20. The method of claim 19, further comprising the step of regulating the media feed rate control of the media.   21. The method of claim 20, wherein the step of regulating the media feed rate control includes monitoring CO2 levels in the cell growth chamber to calculate lactate concentrations.   22. The method of claim 19, further comprising the step of heating the cultureware module to promote cell growth.   23. The method of claim 19, further comprising the step of pumping high molecular weight factor into the cell growth chamber.   24. The method of claim 23, wherein said instrumentation base device includes a cool storage area and further comprising the step of storing the high molecular weight factor and product harvest in said cool storage area.   25. The method of claim 19, wherein said cultureware module has an identifying bar code and further comprising the step of scanning the identifying bar code information into said microprocessor control.   26. The method of claim 19, wherein said cultureware module includes a pH sensor disposed in said cultureware module and further comprising the step of controlling the pH of the cell culture media.   27. The method of claim 19, wherein said cultureware module includes a gas exchange unit and further comprising the step of providing oxygen and adding or removing carbon dioxide to the media to support cell metabolism.   28. The method of claim 19, further comprising the step of pre-sterilizing said cultureware module.   29. The method of claim 19, wherein said cultureware module includes a plurality of interface features integrated into the module and said step of attaching said cultureware module to said instrumentation base device includes mating the module interface features with interface features on said base device. -------------------------------------------------------------------------------- 30. The method of claim 19, wherein said cultureware module includes sensors and further comprising the step of sensing fluid circulation rate, temperature and pH of said media.   31. The method of claim 19, wherein said cultureware module includes a fluid cycling unit disposed therein and further comprising the step of cycling and mixing fluid of the cell medium within said cell growth chamber.   32. The method of claim 31, wherein cycling is achieved by utilizing a sealed flexible reservoir for the EC reservoir.   33. The method of claim 31, wherein a second flexible reservoir is used to apply indirect pressure to the EC reservoir to effect cycling.   34. An application of the system of claim 1 for the expansion or growth of human cells of germ line or somatic origin for re-infusion or re-implantation into the same or another human for therapeutic or other benefit, such cells may be genetically modified before or after expansion to confer new or desirable characteristics upon them.   35. An application of the instrument of claim 1 for the expansion or growth of animal cells of germ line or somatic origin (and such cells may be genetically modified before or after expansion to confer new or desirable characteristics upon the) for re-infusion or re-implantation into the same or another animal for therapeutic benefit or to confer upon the animal new or desirable traits or characteristics, such cells may be genetically modified before or after expansion to confer new or desirable characteristics upon them.   36. Any use of the system of claim 1 that relies upon the growth or expansion of cells in the system, whether such cells are derived from the same patient or other sources and in which the cells or cell products so produced are used for the therapeutic benefit of the recipient, such cells may be genetically modified before or after expansion to confer new or desirable characteristics upon them. -------------------------------------------------------------------------------- EXHIBIT B LOGO [g40664img_5.jpg] The AutovaxID - A breakthrough technology in the production of biologics for the Biotechnology industry The AutovaxID is a self-contained automated cell growth instrument.     •   Two component design - a base or control module (1) – (numbers refer to photos in figure below)- and a disposable culture unit (2).     •   Functionally replaces conventional cell growth chambers that would take up over ten times the space. The AutovaxID is a first-of-its kind automated modular cell growth instrument intended for research, biotechnology and pharmaceutical applications. The instrument is ideally suited for those seeking to produce any cell product including monoclonal antibodies, as well as those seeking to grow and expand a wide variety of cells. The instrument results in dramatic savings in space, manpower and consumable cost compared to conventional cell culture approaches. The AutovaxID’s base, or control module, contains the unit’s mechanics and electronics. The disposable culture unit is a single -use disposable element containing a hollow-fiber cell growth chamber and a gas exchange cartridge. The culture unit is an integrated sealed module that snaps easily (3) into the base unit housing. Once the starter cells are introduced into the unit through an access port (4), the unit is sealed and the cells expand and grow in a temperature and CO2-regulated environment optimized for their specific needs. Cells expand in number within the growth chamber and grow for as long as required - days, weeks or longer. During this time little or no operator intervention is required. LOGO [g40664img_2.jpg] In conventional cell culture systems in which cells are grown in flasks or bottles, the cells have to be diluted one or more times per week, and fed fresh growth medium. These manipulations are labor intensive and must be done by trained technicians. If the cells or their products are to be used for therapeutic purposes, these manipulations must done in costly clean-room facilities with sophisticated air handling systems. By contrast, cells in an AutovaxID require no splitting and are fed automatically with fresh medium. Because the cell growth units are sterile and sealed from the environment, the units can be housed in relatively inexpensive laboratory facilities. -------------------------------------------------------------------------------- LOGO [g40664img_3.jpg] The AutovaxID brings sophisticated hollow fiber technology within the reach of every laboratory Each AutovaxID culture unit functionally replaces approximately 100 conventional T flasks, or a smaller number of roller bottles. This is made possible by the high surface area of the hollow fiber cartridge in which cells are grown. Hollow fiber cell culture is a proven technology for growing cells at high density in a compact space with reduced costs. Hollow fiber technology dramatically reduces the need for costly growth factors and media supplements and results in secreted product concentrations up to ten times higher than can be achieved with conventional cell culture techniques. As an example, a typical 30 day growth run of hybridoma cells in an AutovaxID can yield up to 1 gram of monoclonal antibody in approximately 1-2 litres, 10-30 times more concentrated than could be achieved with conventional cell culture approaches. During the growth period in the AutovaxID the antibody- rich medium is continually collected in a sealed container stored a refrigerated compartment (4) integrated into the AutovaxID base unit. Typically, at the end of the run, the cell growth chamber is discarded and the product-rich medium is retained. For other applications, the cells also could be harvested and used for other purposes. The National Cell Culture Center has utilized Biovest’s proprietary hollow fiber cartridge technology for the production of hundreds of cell lines for NIH sponsored researchers over the past 15 years. The AutovaxID is ideal for laboratories that need to produce gram amounts of cell products such as monoclonal antibodies. A lab developing and testing many different antibodies could operate dozens of AutovaxIDs simultaneously, each growing a different cell line. All of this could be done in a modest sized room monitored by one or two (compared to 10-12) technicians, saving time and keeping costs at a minimum. For ease of record keeping the AutovaxID contains an on-board computer that stores all of the operational parameters of each production run. Each run can be uniquely associated with the disposable growth chamber used via the integrated bar code scanner and unique bar code associated with each culture module (6). Finally, because different cell lines may require different growth conditions, the AutovaxID is fully user programmable. Frequently used programs can be stored in the system memory after being entered through the touch-screen display (7). -------------------------------------------------------------------------------- The AutovaxID can also be used in applications in which the cells which are grown in the unit are collected instead of or in addition to any materials produced by the cells. Applications for the AutovaxID operated in this way include cell expansion for research or therapeutic purposes. Advantages of the AutovaxID over conventional cell culture methods   Process/Parameter    Manual Cell Culture    AutovaxID 1. Product concentration    Variable, no ability to regulate. Typically 100mg in 1-10 L    Controlled by medium flow rate through hollow fiber reactor. Typically greater than 100mg in 1L 2. Culture-ware    Multiple manual transfers using large numbers of disposable units (flasks, etc)    Single integrated disposable culture unit. No transfers needed during production period 3. Growth conditions    Change over time as nutrients are depleted and waste products accumulate    Maintained constant over time through automated feedback loop. 4. Contamination    Possible at multiple steps    Virtually eliminated by sealed sterile culture-ware 5. Culture Oxygenation    Achieved via passive diffusion or sparging. May limit O2 availability and damage cells.    Continuously regulated via gas-exchange cartridge in media recirculation loop. 6. Batch record generation and documentation    Data must be recorded manually at intervals    In-process parameters automatically recorded and stored for record generation. 7. Product harvest    Manual harvest in batch mode, contaminated by cells and debris    Continuous automated harvest of filtered material 8. Process monitoring    Requires multiple monitoring and in-process measurement steps    Automated process monitoring with alarm alerts for out-of specification conditions 9. Scalability    Increasing production requires increasing space and manpower    Because of automation and small footprint, production can typically be scaled up in existing space with minimal additional manpower LOGO [g40664img_4.jpg] -------------------------------------------------------------------------------- For additional information about the AutovaxID contact: James Carroll General Manager Biovest Advanced Instrumentation Division Biovest International 377 Plantation St. Worcester, MA 01695 508 793 0001 x 507 [email protected] The AutovaxID: Changing the world of cell culture •      Automated cell growth instrument •      Sterile, disposable cell growth chamber •      GMP-compliant •      Rapid set-up •      Touch-screen programming •      Automated batch record generation •      Small foot-print

  EXHIBIT 10.7 FIRST AMENDMENT TO FIRST AMENDED AND RESTATED UNSECURED CREDIT AGREEMENT      This FIRST AMENDMENT TO FIRST AMENDED AND RESTATED UNSECURED CREDIT AGREEMENT (this “Amendment”) is made as of November 3, 2006 (the “Effective Date”) by and among BIOMED REALTY, L.P., a Maryland limited partnership (the “Borrower”), KEYBANK NATIONAL ASSOCIATION and the several other banks and financial institutions identified on the signature pages hereof (the “Lenders”), and KEYBANK NATIONAL ASSOCIATION, not individually, but as “Agent”. RECITALS      A. The Borrower, the Agent and the Lenders are parties to a First Amended and Restated Unsecured Credit Agreement dated as of June 28, 2006 (as it may hereafter be amended from time to time, the “Credit Agreement”). All terms used herein and not otherwise defined shall have the same meanings given to them in the Credit Agreement.      B. The Borrower and the Requisite Lenders wish to amend the Credit Agreement to modify certain covenants set forth in the Credit Agreement, all as set forth herein. AGREEMENTS           1. New Definition. As of the Effective Date, the following new definition is added to Section 1.1 of the Credit Agreement in the applicable alphabetical order:      “CFLS Project” means that certain Project known as the Center for Life Sciences Building located at 3 Blackfan Street, Boston, Massachusetts, consisting of approximately 1.520 acres of land on which an eighteen (18) story office building/laboratory research center containing approximately 705,642 rentable square feet is under construction and which is being acquired in fee simple by a Wholly-Owned Subsidiary of Borrower.           2. Permitted Investments. As of the Effective Date, Section 6.13(b) of the Credit Agreement is amended and restated to read as follows:      (b) permit the sum of (i) the aggregate amount invested by the Consolidated Group in Projects owned by the Consolidated Group that are under development, excluding the CFLS Project, plus (ii) the Consolidated Group Pro Rata Share of any amounts so invested by the Investment Affiliates in Projects owned by the Investment Affiliates that are under development to exceed 20% of Gross Asset Value (with Projects under development ceasing to be treated as such when GAAP permits such Project to be classified as an operating asset);           3. Exhibit B. To reflect the changes made by this Amendment, Exhibit B, Form of Compliance Certificate, is hereby deleted and replaced by Exhibit B (Revised) Form of Compliance Certificate attached to this Amendment and made a part hereof.   --------------------------------------------------------------------------------             4. Miscellaneous.      (i) The Borrower represents and warrants to the Lenders that (i) after giving effect to this Amendment, no Default or Unmatured Default exists, (ii) the Credit Agreement is in full force and effect, and (iii) the Borrower has no defenses or offsets to, or claims or counterclaims, relating to, its obligations under the Credit Agreement.      (ii) All of the obligations of the parties to the Credit Agreement, as amended hereby, are hereby ratified and confirmed. All references in the Loan Documents to the “Credit Agreement” henceforth shall be deemed to refer to the Credit Agreement as amended by this Amendment.      (iii) Nothing contained in this Amendment shall be construed to disturb, discharge, cancel, impair or extinguish the indebtedness evidenced by the existing Notes and secured by the Loan Documents or waive, release, impair, or affect the liens arising under the Loan Documents or the validity or priority thereof.      (iv) In the event of a conflict or inconsistency between the provisions of the Loan Documents and the provisions of this Amendment, the provisions of this Amendment shall govern. The provisions of this Amendment, the Credit Agreement, and the other Loan Documents are in full force and effect except as amended herein and the Loan Documents as so amended are ratified and confirmed hereby by the Borrower.      (v) The Borrower agrees to reimburse the Agent for all reasonable out-of-pocket expenses (including legal fees and expenses) incurred in connection with the preparation, negotiation and consummation of this Amendment.      (vi) This Amendment may be executed in counterparts which, taken together, shall constitute a single document.   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, Borrower and the Requisite Lenders have caused this First Amendment to First Amended and Restated Unsecured Credit Agreement to be duly executed as of the date first above written.                   BORROWER:                   BIOMED REALTY, L.P., a Maryland limited partnership                   By:   BioMed Realty Trust, Inc., its sole general partner                       By:   /s/ KENT GRIFFIN                       Name:   Kent Griffin                       Title:   Chief Financial Officer                                 Address:               ADMINISTRATIVE AGENT:               KEYBANK NATIONAL ASSOCIATION, a national banking association, as Administrative Agent               By:   /s/ SCOTT CHILDS               Name:   Scott Childs               Title:   Vice President                         Address:               BANKS:               KEYBANK NATIONAL ASSOCIATION, a national banking association               By:   /s/ SCOTT CHILDS               Name:   Scott Childs               Title:   Vice President                         Address:               U.S. BANK NATIONAL ASSOCIATION, a national banking association               By:   /s/ NICOLE K. WRIGHT               Name:   Nicole K. Wright               Title:   Vice President                         Address:   --------------------------------------------------------------------------------                 SOCIETE GENERALE               By:   /s/ C.H. BUTTERWORTH               Name:   C.H. Butterworth               Title:   Director               Address:               LASALLE BANK NATIONAL ASSOCIATION               By:   /s/ JOHN MIX               Name:   John Mix               Title:   SVP                         Address:               WELLS FARGO NATIONAL ASSOCIATION               By:   /s/ CARA D’ANGELO               Name:   Cara D’Angelo               Title:   Vice President                         Address:               CHARTER ONE BANK, N.A.               By:   /s/ MICHELE S. JAWYN               Name:   Michele S. Jawyn               Title:   Vice President                         Address:               WACHOVIA BANK, N.A.               By:   /s/ ROBERT P. MACGREGOR               Name:   Robert P. MacGregor               Title:   Vice President                         Address:   --------------------------------------------------------------------------------                           TD BANKNORTH, N.A.               By:   /s/ CHARLES A. WALKER               Name:   Charles A. Walker               Title:   Senior Vice President                         Address:               ROYAL BANK OF CANADA               By:   /s/ DAN LEPAGE               Name:   Dan LePage               Title:   Managing Director                         Address:               SOVEREIGN BANK               By:   /s/ ERIN T. ASLAKSON               Name:   Erin T. Aslakson               Title:   Assistant Vice President                         Address:               NATIONAL CITY BANK               By:   /s/ SEAN APICELLA               Name:   Sean Apicella               Title:   Assistant Vice President                         Address:               RAYMOND JAMES BANK, FSB               By:   /s/ LAURENS F. SCHAAD JR.               Name:   Laurens F. Schaad Jr.               Title:   Vice President                         Address:   --------------------------------------------------------------------------------                           FIRST HORIZON BANK,     a division of First Tennessee Bank               By:   /s/ KENNETH W. RUB               Name:   Kenneth W. Rub               Title:   Vice President                         Address:               MEGA INTERNATIONAL COMMERCIAL BANK, NEW YORK BRANCH (f/k/a “The International Commercial Bank of China, New York Agency”)               By:   /s/ TSANG-PEI HSU               Name:   Tsang-Pei Hsu               Title:   VP & Deputy General Manager                         Address:               COMERICA BANK               By:   /s/ JAMES GRAYCHECK               Name:   James Graycheck               Title:   Vice President                         Address:               COMPASS BANK, an Alabama banking corporation               By:   /s/ JOHANNA DUKE PALEY               Name:   Johanna Duke Paley               Title:   Senior Vice President                         Address:  

  EXHIBIT 10.1 Execution Copy PLEDGE AGREEMENT      This PLEDGE AGREEMENT (this “Agreement”), dated as of October 31, 2006, from FELCOR HOLDINGS TRUST, a Massachusetts business trust (the “Assignor”) in favor of JPMORGAN CHASE BANK, N.A. (“JPMC”), in its capacity as Collateral Agent for the Secured Parties (as defined below) (the “Assignee”).      WHEREAS, the Assignor is the legal and beneficial owner of certain units of limited partner interests of FelCor Lodging Limited Partnership, a Delaware limited partnership (the “Partnership”), as more particularly described on Exhibit A attached hereto (the “LP Units”);      WHEREAS, pursuant to the terms of a Credit Agreement dated as of December 12, 2005, as amended by Amendment No. 1 to Credit Agreement, dated as of January 12, 2006, Amendment No. 2 to Credit Agreement, dated as of January 25, 2006, and Amendment No. 3 to Credit Agreement dated as of March 31, 2006 and as further amended by that certain Amendment No. 4 to Credit Agreement dated as of October 26, 2006 (“Amendment No. 4”), between the Partnership, FelCor Lodging Trust Incorporated (the “Company”, and together with the Partnership, the “Borrowers”), JPMC, as Administrative Agent (in such capacity, the “Administrative Agent”), and JPMC and certain other lenders party thereto (the “Lenders”) (such agreement as so modified and as further amended, modified, or amended and restated, and including any replacements thereof, the “Credit Agreement”), the Lenders have, upon the terms and subject to the conditions contained therein, agreed to make loans and otherwise to extend credit to the Borrowers; and      WHEREAS, the Borrowers requested that the Lenders make certain amendments to the Credit Agreement, and such amendments are now reflected in Amendment No. 4;      WHEREAS, it is a requirement under Amendment No. 4 that the Assignor execute and deliver to the Assignee a pledge agreement in substantially the form hereof;      WHEREAS, the Borrowers and certain other parties have entered into (a) the Indenture dated as of June 4, 2001 with respect to the 8-1/2% Senior Notes due 2011 and (b) the Indenture dated as of October 1, 1997 with respect to the 7-5/8% Senior Notes due 2007 (collectively, such agreements, as modified to date and as further amended, modified, or amended and restated, the “Existing Indentures”);      WHEREAS, the Borrowers and certain other parties have entered into that certain Indenture dated as of October 31, 2006 with respect to the Senior Secured Floating Rate Notes due 2011 (such agreement as amended, modified, or amended and restated, the “New Indenture”);      WHEREAS, it is a requirement under the Existing Indentures and the New Indenture that the Assignor execute and deliver to the Assignee a pledge agreement in substantially the form hereof so that the Notes issued under the Existing Indentures and the New Indenture shall   --------------------------------------------------------------------------------   be equally and ratably secured by any collateral that is granted to secure the obligations under the Credit Agreement;      WHEREAS, the Assignor and the Borrowers are part of a group of related companies, and the Assignor has received and/or expects to receive substantial direct and indirect benefits from the loans and extensions of credit to the Borrowers pursuant to the Credit Agreement, the New Indenture and the Existing Indentures (which benefits are hereby acknowledged);      WHEREAS, the Administrative Agent, U.S. Bank National Association, as successor to SunTrust Bank, as Trustee under the Existing Indentures (the “Existing Trustee”), and U.S. Bank National Association, as Trustee under the New Indenture (the “New Trustee”) have entered into that certain Collateral Agency Agreement dated as of October 31, 2006 (as amended, amended and restated, supplemented or otherwise modified and in effect from time to time, the “Collateral Agency Agreement”), pursuant to which the parties set forth their relative rights with respect to the Collateral (as defined below);      NOW, THEREFORE, in consideration of the 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. DEFINITIONS.      All terms not specifically defined herein, which terms are defined in the Uniform Commercial Code as in effect in the State of New York, shall have the meanings assigned to them therein. The following terms shall have the following meanings herein:      Administrative Agent. See preamble.      Amendment No. 4. See preamble.      Assignor. See preamble.      Assigned Interests. See §2.1 hereof.      Assignee. See preamble.      Borrowers. See preamble.      Business Day. Any day on which banks are open for business in New York, New York.      Cash Collateral. See §4.2.      Cash Collateral Account. See §4.2.      Collateral. The Assigned Interests, the Cash Collateral, the Cash Collateral Account, and all other property now or hereafter pledged or assigned to the Assignee by the Assignor hereunder, and all income therefrom, increases therein and proceeds thereof. -2- --------------------------------------------------------------------------------        Collateral Agency Agreement. See preamble.      Company. See preamble.      Credit Agreement. See preamble.      Credit Documents. As defined in the Collateral Agency Agreement.      Event of Default. See §5.      Existing Indentures. See preamble.      Existing Trustee. See preamble.      LP Units. See preamble.      JPMC. See preamble.      New Indenture. See preamble.      New Trustee. See preamble.      Partnership. See preamble.      Partnership Agreement. The Second Amended and Restated Agreement of Limited Partnership dated as of December 31, 2001, as amended by Addendum No. 1 (and the annexes thereto), Addendum No. 2, Addendum No. 3, Addendum No. 4, First Amendment dated as of April 1, 2002, Second Amendment dated as of August 31, 2002, Third Amendment dated as of October 1, 2002, Fourth Amendment dated as of July 1, 2003, Fifth Amendment dated as of April 2, 2004, Sixth Amendment dated as of August 23, 2004, Seventh Amendment dated as of April 7, 2005, and Eighth Amendment dated as of August 30, 2005, as the same may be further amended or amended and restated from time to time.      Secured Obligations. As defined in the Collateral Agency Agreement.      Secured Parties. As defined in the Collateral Agency Agreement.      Time Deposits. See §4.2. 2. PLEDGE.      2.1. Grant of Security Interest. The Assignor hereby pledges, grants a security interest in, mortgages, and collaterally assigns and transfers to the Assignee, for the benefit of the Secured Parties, as security for the payment and performance in full when due of all of the Secured Obligations, all the right, title and interest of the Assignor in and to the LP Units, wherever located and whether now owned or hereafter acquired or arising, including, without limitation, (a) all payments or distributions, whether in cash, property or otherwise, at any time owing or payable to the Assignor on account of its interest as a limited partner in the Partnership, -3- --------------------------------------------------------------------------------        (b) all of the Assignor’s rights and interests as a limited partner under the Partnership Agreement, including all voting rights and all rights to grant or withhold consents or approvals in its capacity as a limited partner, (c) all rights as a limited partner of access and inspection to and use of all books and records, including computer software and computer software programs, of the Partnership, (d) all other rights, interests, property or claims to which the Assignor may be entitled in its capacity as a limited partner of the Partnership, and (e) all proceeds and products of any of the foregoing (all of the foregoing rights, title and interest described in the foregoing clauses (a) through (e) being herein referred to collectively as the “Assigned Interests”).      2.2. Pledge of Cash Collateral Account. The Assignor also hereby pledges and assigns to the Assignee, for the benefit of the Secured Parties, and grants to the Assignee, for the benefit of the Secured Parties, a security interest in, the Cash Collateral Account and all of the Cash Collateral, subject to the terms of this Agreement.      2.3. Waiver of Certain Partnership Agreement Provisions. The Assignor irrevocably waives any and all provisions of the Partnership Agreement that (a) prohibit, restrict, condition or otherwise affect the grant hereunder of any lien, security interest or encumbrance on any of the Collateral or any enforcement action which may be taken in respect of any such lien, security interest or encumbrance, or (b) otherwise conflict with the terms of this Agreement.      2.4. Authorization to File Financing Statement. The Assignor hereby authorizes the Assignee to file in any Uniform Commercial Code filing office a financing statement naming the Assignor as the debtor and indicating the Collateral as the collateral. The financing statement may indicate some or all of the collateral on the financing statement, whether specifically or generally.      2.5. Tender of Partners’ Consents. The Assignor has tendered to the Assignee the consent of any other partner of the Partnership deemed necessary or appropriate by the Assignee for the consummation of the transactions contemplated hereby.      2.6. Delivery of Certificates. The certificates for the LP Units, accompanied by appropriate instruments of assignment thereof duly executed in blank by the Assignor, have been delivered to the Assignee.      2.7. Additional Interests. In case the Assignor shall acquire any additional common LP Units or common limited partner interests of the Partnership, or any other equity interests exchangeable for or convertible into common LP Units or common limited partner interests of the Partnership, whether by purchase, dividend, split or otherwise, then (i) such common LP Units and common limited partner interests and equity interests shall automatically be subject to the pledge, assignment and security interest granted to the Assignee, for the benefit of the Secured Parties, under this Agreement and the Assigned Interests shall include such additional LP Units and additional limited partner interests and (ii) the Assignor shall deliver to the Assignee forthwith any certificates therefor, accompanied by appropriate instruments of assignment duly executed by the Assignor in blank and the Assignee may update Exhibit A to reflect such additional LP Units or limited partner interests. In any event, on the last day of each calendar quarter, the Assignor shall update Exhibit A to reflect the LP Units then owned by the -4- --------------------------------------------------------------------------------   Assignor, and the Assignor and the Assignee shall make deliveries of the certificates for the LP Units pledged under this Agreement so that such certificates are reconciled with such updated Exhibit A. 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASSIGNOR.      3.1. Representations and Warranties. The Assignor hereby represents and warrants to Assignee as follows:      (a) The Partnership is duly organized, validly existing, and in good standing under the laws of the State of Delaware and all other jurisdictions where the Partnership does business; the Partnership Agreement is in full force and effect; the Assignor is a duly constituted partner of the Partnership pursuant to the Partnership Agreement; the persons and entities listed as partners in the Partnership Agreement and its related certificates and schedules are the only partners of the Partnership; and the Assigned Interests are validly issued, non-assessable and, except as set forth in §3.1(g) hereof, fully paid partnership interests in the Partnership.      (b) The Assignor has full right, power and authority to make this Agreement (including the provisions enabling the Assignee or its nominee, upon the occurrence of an Event of Default, to exercise the voting or other rights provided for herein), under the Partnership Agreement and under applicable law, without the consent, approval or authorization of, or notice to, any other person, including any regulatory authority or any person having any interest in the Partnership, other than any consents to this Agreement required to be given by the other partners under the Partnership Agreement, which consents, if any, have been duly received.      (c) The execution, delivery, and performance of this Agreement and the transactions contemplated hereby (i) have been duly authorized by all necessary trust proceedings on behalf of the Assignor, (ii) do not conflict with or result in any breach or contravention of any applicable law, regulation, judicial order or decree to which such Assignor is subject, (iii) do not conflict with or violate any provision of the declaration of trust or other organizational documents of the Assignor, and (iv) do not violate, conflict with, constitute a default or event of default under, or result in any rights to accelerate or modify any obligations under any agreement, instrument, lease, mortgage or indenture to which such Assignor is party or subject, or to which any of its assets are subject.      (d) This Agreement has been duly executed and delivered by the Assignor and is the legal, valid, and binding obligation of the Assignor enforceable against it in accordance with the terms hereof 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 case or proceeding therefor may be brought.      (e) The Assignor is the sole, direct, legal and beneficial owner of all Assigned Interests, which Assigned Interests constitute at least 95% of the common limited -5- --------------------------------------------------------------------------------   partnership interest in the Partnership, and has good and marketable title thereto, free and clear of any lien, security interest, mortgage or other encumbrance, other than the liens and security interest granted to the Assignee hereunder; and the liens and security interests hereunder constitute valid and perfected first priority liens and security interests.      (f) The Assignor’s type and jurisdiction of organization and the Assignor’s tax identification number and organizational identification number, if the Assignor has one, is set forth below the Assignor’s signature to this Agreement. The Assignor’s principal place of business, chief executive office, and the place where its records concerning the Collateral are kept is located at 545 E. John Carpenter Freeway, Suite 1300, Irving, Texas 75002.      (g) The Assignor has no obligation to make any contribution, capital call or other payment to the Partnership with respect to the Assigned Interests.      (h) The copy of the Partnership Agreement delivered to the Assignee is a true, correct, and complete copy thereof, and the Partnership Agreement has not been amended or modified in any respect, except for such amendments or modifications as are attached to the copy thereof delivered to the Assignee.      (i) The partnership interest of the Assignor in the Partnership is not a security governed by Article 8 of the Uniform Commercial Code of the jurisdiction in which the Partnership is organized.      3.2. Covenants. The Assignor covenants to the Assignee as follows:      (a) The Assignor will not permit or agree to any amendment or modification of the Partnership Agreement (except for ministerial or other non-substantive amendments or modifications) as in effect on the date hereof (or other governing document with respect to the Assigned Interests), or waive any rights or benefits under the Partnership Agreement (or such other governing document), without the prior written consent of the Assignee.      (b) Without the prior written consent of the Assignee, the Assignor will not sell, dispose of or assign, beneficially or of record, or grant, create, permit or suffer any lien or encumbrance on, any of the Assigned Interests, or withdraw as a limited partner of the Partnership.      (c) Without the prior written consent of the Assignee, the Assignor shall not cast any vote or give or grant any consent, waiver or ratification or take any other action which could reasonably be expected to (i) directly or indirectly authorize or permit the dissolution, liquidation or sale of the Partnership, whether by operation of law or otherwise, (ii) have the result of materially and adversely affecting any of the Assignee’s rights under this Agreement, (iii) violate the terms of this Agreement or any of the other Credit Documents, (iv) have the effect of impairing the validity, perfection or priority of the security interest of the Assignee in any manner whatsoever, or (v) cause an Event of Default. -6- --------------------------------------------------------------------------------        (d) The Assignor will comply with all laws, regulations, judicial orders or decrees applicable to the Collateral or any portion thereof, and perform and observe its duties under the Partnership Agreement or other governing documents with respect to the Assigned Interests.      (e) The Assignor will (i) keep and maintain at its own cost and expense at its principal place of business satisfactory and complete records of the Collateral including a record of all payments received and all other dealings of a material nature with the Collateral, and (ii) mark its books and records pertaining to the Collateral and its books and records kept in its jurisdiction of organization to evidence this Agreement and the liens and security interests granted hereby.      (f) The Assignor will pay promptly when due any taxes, assessments, and governmental charges or levies imposed upon the Collateral or in respect of its income or profits therefrom, as well as all claims of any kind except that no such charge need be paid if (i) the validity thereof is being diligently contested in good faith by appropriate proceedings; (ii) such proceedings do not involve any danger of the sale, forfeiture, or loss of any of the Collateral or any interest therein; and (iii) such charge is adequately reserved against in a manner acceptable to the Assignee.      (g) The Assignor will advise the Assignee promptly, in reasonable detail, of (i) any lien, charge, claim or other encumbrance made or asserted against any of the Collateral; (ii) any material change in the composition of the Collateral; (iii) the occurrence of any other event or condition which to its knowledge would have a material effect on the validity, perfection or priority of the liens and security interests granted hereunder; and (iv) any bankruptcy or litigation case or proceeding relating to any of the Collateral.      (h) The Assignor will not (i) change its type or jurisdiction of organization or, if it has one, its organizational identification number, (ii) change its principal place of business or chief executive office or the location of the records concerning the Collateral without giving prior written notice to the Assignee and taking such actions as may be necessary or appropriate in the reasonable opinion of the Assignee duly to perfect and continue the perfection of the Assignee’s first priority lien and security interest in the Collateral pursuant to the laws of any jurisdiction into which such place of business, chief executive office, or records is or are transferred, and (iii) change its name in any matter that might make any financing statement filed hereunder misleading or invalid unless the Assignor shall have notified the Assignee thereof and taken all such actions as may be necessary or appropriate in the reasonable opinion of the Assignee to make any financing statement filed in favor of the Assignee not misleading or invalid.      (i) The Assignor shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and that of the Partnership, the power and authority of each of the Assignor and the Partnership to own its property and carry on its business, the qualification of each of the Assignor and the Partnership to do business in its jurisdiction of organization, and the qualification of each of the Assignor -7- --------------------------------------------------------------------------------   and the Partnership to do business in each other jurisdiction where such qualification is necessary except where the failure so to qualify would not have a material adverse effect on the rights and interests of the Assignee hereunder.      (j) Without the prior written consent of the Assignee, the Assignor will not cause or permit the limited partner interest of the Assignor in the Partnership to constitute a security governed by Article 8 of the Uniform Commercial Code of the jurisdiction in which the Partnership is organized. If the partnership interest at any time constitutes a security governed by Article 8 of the Uniform Commercial Code of the jurisdiction in which the Partnership is organized, the Assignor will, if it has not already done so, forthwith obtain an agreement from the Partnership, in form and substance satisfactory to the Assignee, that the Partnership will comply with instructions of the Assignee as to the Assigned Interests without further consent of the Assignor. 4. RIGHTS OF ASSIGNEE.      4.1. Assignee Appointed Attorney-in-Fact. The Assignor hereby irrevocably constitutes and appoints the Assignee, its successors and assigns, its true and lawful attorney-in-fact, with full power and authority and with full power of substitution, at the expense of the Assignor, either in the Assignee’s own name or in the name of the Assignor, at any time and from time to time, in each case as the Assignee in its sole discretion may determine (i) to take any and all appropriate action and to execute any and all documents and instruments that may be necessary or desirable to accomplish the purposes of this Agreement and (ii) upon the occurrence and during the continuance of an Event of Default:      (a) to take any action and execute any instruments that such attorney-in-fact may deem necessary or advisable to accomplish the purposes hereof;      (b) to ask, demand, collect, receive, receipt for, sue for, compound, and give acquittance for any and all sums or properties that may be or become due, payable, or distributable in respect of the Collateral or that constitute a part thereof, with full power to settle, adjust, or compromise any claim thereunder or therefor as fully as the Assignor could do;      (c) to endorse or sign the name of the Assignor on all instruments given in payment or in part payment thereof and all documents of satisfaction, discharge, or receipt required or requested in connection therewith; and      (d) to file or take any action or institute any case or proceeding that the Assignee may deem necessary or appropriate to collect or otherwise realize upon any or all of the Collateral, or effect a transfer thereof, or that may be necessary or appropriate to protect and preserve the right, title, and interest of the Assignee in and to the Collateral and the security intended to be afforded hereby.      4.2. Cash Collateral Account. Unless applied by the Assignee to Secured Obligations then due and payable, all sums of money that are paid to the Assignee pursuant to this Agreement with respect to the Collateral shall be deposited into an interest bearing account -8- --------------------------------------------------------------------------------   with the Assignee or another financial institution selected by the Assignee in its sole discretion (the “Cash Collateral Account”). Some or all of the funds from time to time in the Cash Collateral Account may be invested in time deposits, including certificates of deposit issued by the Assignee or another financial institution selected by the Assignee in its sole discretion (such certificates of deposit or other time deposits being hereinafter referred to, collectively, as “Time Deposits”) that are satisfactory to the Assignee, provided, in any such case, arrangements satisfactory to the Assignee are made to perfect, and to ensure the first priority of, its lien and security interest in such Time Deposits. Interest earned on the Cash Collateral Account and on the Time Deposits, and the principal of the Time Deposits at maturity that is not invested in new Time Deposits, shall be deposited in the Cash Collateral Account. The Cash Collateral Account, all sums from time to time standing to the credit of the Cash Collateral Account, any and all Time Deposits, any and all instruments or other writings evidencing Time Deposits, and any and all proceeds of any thereof are hereinafter referred to as the “Cash Collateral.” If the Cash Collateral Account is not maintained with the Assignee, the Assignor shall, at the Assignee’s request and option, pursuant to an agreement in form and substance satisfactory to the Assignee, either (a) cause the depositary bank with which the Cash Collateral Account is maintained to agree to comply at any time with instructions from the Assignee to such depositary bank directing the funds comprising the Cash Collateral, without further consent of the Assignee, or (b) arrange for the Assignee to become the customer of such depositary bank with respect to the Cash Collateral Account.      4.3. Distributions, Conversion, Voting, etc. So long as no Event of Default shall have occurred and be continuing and to the extent permitted under the Credit Agreement, the Assignor shall be entitled to:      (a) receive all cash and other distributions paid in respect of the Assigned Interests not authorized or made in violation of the Credit Agreement;      (b) exercise any voting rights relating to the Assigned Interests; and      (c) give consents, waivers, approvals, and ratifications in respect of the Assigned Interests. All such rights of the Assignor to receive cash and other distributions shall cease if an Event of Default shall have occurred and be continuing, except to the extent permitted under the Credit Agreement, the Existing Indentures and the New Indenture, and in each such case the Assignor shall (i) at the request of the Assignee, issue appropriate instructions that any such distributions be paid directly to the Assignee or to such account as the Assignee may designate, and (ii) hold in trust for the Assignee and immediately pay over to the Assignee any such distributions received by the Assignor, except in each case to the extent permitted under the Credit Agreement, the Existing Indentures and the New Indenture. All such rights of the Assignor referred to in clauses (b) and (c) shall, at the Assignee’s sole option, as evidenced by the Assignee’s notifying the Assignor in writing of its exercise of such option, cease in case an Event of Default shall have occurred and be continuing. -9- --------------------------------------------------------------------------------        4.4. No Assignment of Duties. This Agreement constitutes an assignment of the Assigned Interests and the other Collateral only and not an assignment of any duties or obligations of the Assignor with respect thereto, and by its acceptance hereof and whether or not the Assignee shall have exercised any of its rights or remedies hereunder, the Assignee does not undertake to perform or discharge, and shall not be responsible or liable for the performance or discharge of, any such duties or responsibilities, including, without limitation, for capital calls. The Assignor agrees that, notwithstanding the exercise by the Assignee of any of its rights hereunder, the Assignor shall remain liable for the full and prompt performance of all of the Assignor’s obligations and liabilities under the Partnership Agreement. Under no circumstances shall the Assignee or any holder of any of the Secured Obligations as such be deemed to be a partner of the Partnership by virtue of the provisions of this Agreement unless expressly agreed to in writing by the Assignee. Without limiting the generality of the foregoing, the Assignee shall have no partnership fiduciary duty to the Assignor, whether by virtue of the security interests and liens hereunder, or any enforcement action in respect of such security interests and liens, unless and until the Assignee is admitted to the Partnership as a substitute partner after exercising enforcement rights under §9-610 or §9-620 of the Uniform Commercial Code in effect in the State of New York, or otherwise. 5. EVENTS OF DEFAULT.      Any one or more of the following events shall constitute an “Event of Default” hereunder:      (a) The Assignor shall fail to perform any of its obligations under the Partnership Agreement that results in a default thereunder following the expiration of any applicable notice and cure periods; or      (b) The occurrence of any Actionable Default (as defined in the Collateral Agency Agreement). 6. REMEDIES.      6.1. Remedies. During the continuance of an Event of Default, the Assignee shall have, in addition to the rights, powers and authorizations to collect the sums assigned hereunder, all rights and remedies of a secured party under the Uniform Commercial Code and under other applicable law with respect to the Assigned Interests and any other Collateral hereunder, including, without limitation, the following rights and remedies:      (a) if the Assignee so elects and gives written notice of such election to the Assignor, the Assignee may, in its sole discretion, (i) exercise any voting rights relating to the Assigned Interests (whether or not the same shall have been transferred into its name or the name of its nominee or nominees) for any lawful purpose, including for the amendment or modification of the Partnership Agreement or other governing documents or the liquidation of the assets of the Partnership, (ii) give all consents, waivers, approvals, and ratifications in respect of such Assigned Interests, and (iii) otherwise act with respect thereto as though it were the outright owner thereof (the Assignor hereby -10- --------------------------------------------------------------------------------   irrevocably constituting and appointing the Assignee the proxy and attorney-in-fact of the Assignor, with full power and authority of substitution, to do so);      (b) the Assignee may, in its sole discretion, demand, sue for, collect, compromise, or settle any rights or claims in respect of any Collateral, as attorney-in-fact pursuant to §4.1 or otherwise;      (c) (i) the Assignee may, in its sole discretion, sell, resell, assign, deliver, or otherwise dispose of any or all of the Collateral, for cash or credit or both and upon such terms, in such manner, at such place or places, at such time or times, and to such persons or entities as the Assignee thinks expedient, all without demand for performance by the Assignor or any notice or advertisement whatsoever except as expressly provided herein or as may otherwise be required by applicable law; and (ii) at the time of any such sale or other disposition, the Assignee or its nominee or any purchaser of the Collateral at a foreclosure sale may, in its sole discretion, cause the Partnership to make an election under §754 of the Internal Revenue Code as to the basis of any Assigned Interest being sold or otherwise disposed of.      (d) the Assignee may, in its sole discretion, cause all or any part of the Assigned Interests held by it to be transferred into its name or the name of its nominee or nominees; and      (e) the Assignee may, in its sole discretion, set off against the Secured Obligations or place an administrative hold or freeze on any and all sums deposited with it or held by it, including any sums standing to the credit of the Cash Collateral Account and any Time Deposits issued by the Assignee, with any withdrawal penalty relating to Time Deposits being an expense of collection.      6.2. Remedies Not Exclusive. No single or partial exercise by the Assignee of any right, power or remedy hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Each right, power and remedy herein specifically granted to the Assignee or otherwise available to it shall be cumulative, and shall be in addition to every other right, power, and remedy herein specifically given or now or hereafter existing at law, in equity, or otherwise. Each such right, power and remedy, whether specifically granted herein or otherwise existing, may be exercised at any time and from time to time and as often and in such order as may be deemed expedient by the Assignee in its sole discretion.      6.3. Public Sale. In the event of any sale or other disposition of the Collateral as provided in §6.1(c), the Assignee shall give to the Assignor at least five (5) Business Days’ prior written notice of the time and place of any public sale or other disposition of the Collateral or of the time after which any private sale or any other disposition is to be made. The Assignor hereby acknowledges that five (5) Business Days’ prior authenticated notice of such sale or other disposition or sales or other dispositions shall be reasonable notice. The Assignee may enforce its rights hereunder without any other notice and without compliance with any other condition precedent now or hereafter imposed by law, regulation, judicial order or decree or otherwise (all of which are hereby expressly waived by the Assignor, to the fullest extent permitted by law). -11- --------------------------------------------------------------------------------   The Assignee may buy any part or all of the Collateral at any public sale or other disposition and if any part or all of the Collateral is of a type customarily sold or otherwise disposed of in a recognized market or is of a type which is the subject of widely-distributed standard price quotations, the Assignee may buy at private sale or other disposition and may make payments thereof by any means. The Assignee may apply the cash proceeds actually received from any sale or other disposition to the reasonable expenses of retaking, holding, preparing for sale, selling, and the like, to reasonable attorneys’ fees, travel, and all other expenses which may be incurred by the Assignee in attempting to collect the Secured Obligations or to enforce this Agreement or in the prosecution or defense of any case or proceeding related to this Agreement, and then to the Secured Obligations in accordance with the requirements of the Collateral Agency Agreement.      6.4. Private Sale. The Assignor recognizes that the Assignee may be unable to effect a public sale or other disposition of the Collateral by reason of the lack of a ready market for the Collateral, of the limited number of potential buyers of the Collateral or of certain prohibitions contained in the Securities Act of 1933, state securities laws, and other applicable laws, and that the Assignee may be compelled to resort to one or more private sales or other dispositions thereof to a restricted group of purchasers. The Assignor agrees that any such private sales or other dispositions may be at prices and other terms less favorable to the seller than if sold at public sales or other dispositions and that such private sales or other dispositions shall not solely by reason thereof be deemed not to have been made in a commercially reasonable manner. The Assignee shall be under no obligation hereunder or otherwise (except as provided by applicable law) to delay a sale or other disposition of any of the Collateral for the period of time necessary to permit the registration of such securities for public sale or other public disposition under the Securities Act of 1933 and applicable state securities laws. Any such sale or other disposition of all or a portion of the Collateral may be for cash or on credit or for future delivery and may be conducted at a private sale or other disposition where the Assignee or any other person or entity may be the purchaser of all or part of the Assigned Interests so sold or otherwise disposed of. The Assignor agrees that to the extent notice of sale or other disposition shall be required by law, at least five (5) Business Days’ prior notice to the Assignor of the time and place after which any private sale is to be made shall constitute reasonable notification. Subject to the foregoing, the Assignee agrees that any sale or other disposition of the Assigned Interests shall be made in a commercially reasonable manner. The Assignee shall incur no liability as a result of the sale or other disposition of any of the Collateral, or any part thereof, at any private sale which complies with the requirements of this §6.4. The Assignor hereby waives, to the extent permitted by applicable law, any claims against the Assignee arising by reason of the fact that the price at which any of the Collateral, or any part thereof, may have been sold or otherwise disposed of at such private sale was less than the price that might have been obtained at a public sale or other public disposition, even if the Assignee accepts the first offer deemed by the Assignee in good faith deemed to be commercially reasonable under the circumstances and does not offer any of the Collateral to more than one offeree.      6.5. Title. Nothing contained in this Agreement shall be construed to require the Assignee to take any action with respect to the Assigned Interests, whether by way of foreclosure or otherwise and except as required by the Partnership Agreement, in order to permit the -12- --------------------------------------------------------------------------------   Assignee to become a substitute limited partner of the Partnership under the Partnership Agreement. 7. ASSIGNMENT NOT AFFECTED BY OTHER ACTS.      The Assignor acknowledges and agrees that the security interests and collateral assignments herein provided for shall remain in full force and effect and shall not be impaired by any acceptance by the Assignee of any other collateral security for or guaranty of any of the Secured Obligations, or by any failure or neglect or omission on the part of the Assignee to realize upon, collect or protect any Secured Obligations or any Collateral. The security interests and collateral assignments herein provided for shall not in any manner be affected or impaired by any renewal, extension, modification, amendment, waiver, or restatement of any of the Secured Obligations or of any collateral security therefor, or of any guaranty thereof, the Assignor hereby waiving any and all suretyship defenses to the extent otherwise applicable. In order to sell or otherwise dispose of or otherwise realize upon the security interests and assignments herein granted and provided for, and exercise the rights granted the Assignee hereunder and under applicable law, there shall be no obligation on the part of the Assignee at any time to first resort for payment to any guarantors of the Secured Obligations or any part thereof or to resort to any other collateral security, property, liens or other rights or remedies whatsoever, and the Assignee shall have the right to enforce the security interests and collateral assignments herein provided for irrespective of whether or not other proceedings are pending for realization upon or from any of the foregoing. 8. MISCELLANEOUS.      8.1. Additional Instruments and Assurances. The Assignor hereby agrees, at its own expense, to execute and deliver, from time to time, any and all further, or other, instruments, and to perform such acts, as the Assignee may reasonably request to effect the purposes of this Agreement and to secure to the Assignee the benefits of all rights and remedies conferred upon the Assignee by the terms of this Agreement.      8.2. Release. If and only if all of the indebtedness and obligations of the Borrowers under the New Indenture shall have been indefeasibly paid, performed, and discharged in full in cash, or the security interest in the Collateral otherwise shall have been released by the New Trustee in accordance with the New Indenture, the lien and security interest created hereby shall be automatically released with respect to all Secured Parties and the Assignee shall, upon demand and at the sole expense of the Assignor, deliver, file or record the proper instrument or instruments to evidence such release, and such release shall be binding upon all of the Secured Parties notwithstanding that Secured Obligations may then be outstanding.      8.3. Assignee’s Exoneration. Under no circumstances shall the Assignee be deemed to assume any responsibility for or obligation or duty with respect to any part or all of the Collateral of any nature or kind or any matter or proceeding arising out of or relating thereto, other than (a) to exercise reasonable care in the physical custody of the Collateral and (b) if an Event of Default shall have occurred and be continuing, to act in a commercially reasonable manner in exercising its rights and remedies with respect to the Collateral. Subject to the -13- --------------------------------------------------------------------------------   foregoing, the Assignee shall not be required to take any action of any kind to collect, preserve or protect its or the Assignor’s rights in the Collateral.      8.4. No Waiver, etc. Any term of this Agreement may be amended or modified with, but only with, the written consent of the Assignor and the Assignee. Any term of this Agreement may be waived by a writing executed by the party to be charged with such waiver. No act, failure, or delay by the Assignee shall constitute a waiver of its rights and remedies hereunder or otherwise. No single or partial waiver by the Assignee of any default, right, or remedy that it may have shall operate as a waiver of any other default, right, or remedy or of the same default, right, or remedy on a future occasion.      8.5. Waiver By Assignor. The Assignor hereby waives presentment, notice of dishonor, and protest of all instruments included in or evidencing any of the Secured Obligations or the Collateral, and any and all other notices and demands whatsoever (except as expressly provided herein or in the Collateral Agency Agreement or for notices required in connection with judicial proceedings).      8.6. Notice, etc. All notices, requests, and other communications hereunder shall be made and effective in the manner and at the address set forth on the signature pages hereto or at such other address as may be set forth or in a notice from the notifying party to the other parties hereto.      8.7. Overdue Amounts. Until paid, all amounts due and payable by the Assignor hereunder shall be a debt secured by the Collateral and shall bear, whether before or after judgment, interest at the rate of interest for overdue principal set forth in the Credit Agreement.      8.8. Governing Law; Consent to Jurisdiction. This Agreement is intended to take effect as a sealed instrument and shall be governed by, and construed in accordance with, the laws of the State of New York. THE ASSIGNOR AGREES THAT ANY PROCEEDING FOR THE ENFORCEMENT OF THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURT AND TO SERVICE OF PROCESS IN ANY SUCH PROCEEDING BEING MADE UPON THE ASSIGNOR BY MAIL AT THE ADDRESS SPECIFIED IN §8.6. THE ASSIGNOR HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH PROCEEDING OR ANY SUCH COURT OR THAT SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT COURT.      8.9. Waiver of Jury Trial. EACH OF THE ASSIGNOR AND THE ASSIGNEE HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS.      8.10. Limitation of Liability. Except as prohibited by applicable law, each of the Assignor and assignee waives any right which it may have to claim or recover in any proceeding referred to in the preceding sentence any special, exemplary, or punitive damages or any -14- --------------------------------------------------------------------------------   damages other than, or in addition to, actual or consequential damages. The Assignor (a) certifies that neither the Assignee nor any representative, agent, or attorney of the Assignee has represented, expressly or otherwise, that the Assignee would not, in the event of any proceeding, seek to enforce the foregoing waivers and (b) acknowledges that, in entering into this Agreement, the Assignee is relying upon, among other things, the waivers and certifications contained in this §8.10.      8.11. Severability and Enforceability. All provisions hereof are severable and the invalidity or unenforceability of any of such provisions shall in no manner affect or impair the validity and enforceability of the remaining provisions hereof.      8.12. Successors and Assigns. This Agreement shall be binding upon the Assignor and upon the legal representatives, successors and assigns of the Assignor and shall inure to the benefit of the Assignee and its successors and assigns.      8.13. Counterparts. This Agreement may be executed in any number of counterparts, each constituting an original, but all together one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.      8.14. Entire Agreement. This Agreement, the Collateral Agency Agreement and the Credit Documents and any other document executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement nor any terms hereof may be changed, waived or terminated except by a writing signed by each party hereto.      8.15. Limitation of Liability. The Assignor has been formed under the laws of the Commonwealth of Massachusetts pursuant to a Declaration of Trust dated as of July 31, 2002. In accordance with the Declaration of Trust, none of the shareholders, trustees or officers of the Assignor shall be personally liable for the obligations arising under this Agreement, and the Assignee shall look solely to the trust estate comprising the Assignor for the payment of any claim under such obligations or for the performance of such obligations. -15- --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Assignor and the Assignee have executed this Agreement as of the date first above written, as an instrument under seal.                           ASSIGNOR:   FELCOR HOLDINGS TRUST           By:   /s/ Lester C. Johnson                                   Name: Lester C. Johnson                   Title: Trustee                                     By:   /s/ Larry J. Mundy                                   Name: Larry J. Mundy                   Title: Trustee                                         Type of organization: business trust                                   Jurisdiction of organization: Massachusetts                                   Tax identification number: 68-6222007                                   Organizational identification number (or state “none” if the jurisdiction does not issue one):                                   000823956                                           Address:                               ASSIGNEE:   JPMORGAN CHASE BANK, N.A., AS COLLATERAL AGENT                               By:   /s/ Donald Shokrian                                   Name: Donald Shokrian                   Title: Managing Director                   Address:                                       277 Park Avenue, 3rd Floor             New York, NY 10172   --------------------------------------------------------------------------------   EXHIBIT A LP Units 61,926,494 units of common limited partnership interests represented by Certificate No. 97.  

Exhibit 10.1 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of March 15, 2006, between Nanogen, Inc., a Delaware corporation, with headquarters located in San Diego, California (the “Company”), and Fisher Scientific International Inc., a Delaware corporation, with headquarters located in Hampton, New Hampshire (the “Buyer”). WHEREAS: A. The Company and the Buyer desire to enter into this transaction to purchase the securities set forth herein pursuant to a currently effective shelf registration statement on Form S-3, which has approximately $36,000,000 in unallocated securities registered thereunder (Registration Number 333-125975) (the “Registration Statement”), which Registration Statement has been declared effective in accordance with the Securities Act of 1933, as amended (the “1933 Act”), by the United States Securities and Exchange Commission (the “SEC”). B. The Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”), with an aggregate purchase price of approximately $15,000,000. NOW, THEREFORE, the Company and the Buyer hereby agree as follows:   1. PURCHASE AND SALE OF PURCHASED SHARES. (a) Purchase of Purchased Shares. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 5 and 6 below, the Company shall issue and sell to the Buyer, and the Buyer agrees to purchase from the Company on the Closing Date (as defined below), 5,660,377 shares of Common Stock (the “Purchased Shares”). The closing of the transactions contemplated herein (the “Closing”) shall occur on the Closing Date at the offices of Morgan, Lewis & Bockius LLP, One Market, Spear Street Tower, San Francisco, CA 94105-1126. (b) Purchase Price. The purchase price for each Purchased Share to be purchased by the Buyer at the Closing shall be $2.65. (c) Closing Date. The date and time of the Closing (the “Closing Date”) shall be 8:30 a.m., New York City Time, on March 16, 2006 (or such later date as is mutually agreed to by the Company and the Buyer), subject to notification of satisfaction (or waiver) of the conditions to the Closing set forth in Sections 5 and 6 below. (d) Form of Payment. On the Closing Date, (i) the Buyer shall pay the Purchase Price to the Company for the Purchased Shares to be issued and sold to the Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions set forth on Exhibit A-1, and (ii) the Company shall credit the account of the Buyer set forth on Exhibit A-2 using customary book-entry procedures. -------------------------------------------------------------------------------- 2. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants that: (a) Organization; Authority. The Buyer is duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. (b) Validity; Enforcement. The execution and delivery of this Agreement by the Buyer and the consummation by the Buyer of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Buyer and no further consent or action is required by the Buyer, its board of directors or its stockholders. This Agreement has been duly executed and delivered by the Buyer and is a valid and binding obligation of the Buyer enforceable against the Buyer in accordance with its terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies. (c) Residency. The Buyer is a resident of the State of New Hampshire. (d) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Buyer 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 and the Buyer has not taken any action that would cause the Company to be liable for any such fees or commissions. (e) Acquiring Person. The Buyer, after giving effect to the transactions contemplated hereby, will not, either individually or with a group (as defined in Section 13(d)(3) of the Exchange Act), be the owner of (or have the right to acquire) any shares of the Company’s outstanding Common Stock other than the Purchased Shares. (f) No Short Sales. From and after obtaining knowledge of the transactions contemplated by this Agreement, the Buyer has not taken, and prior to the public announcement of the transactions contemplated hereby, the Buyer shall not take, any action that has caused or will cause the Buyer to have, directly or indirectly, sold or agreed to sell any Common Stock or effected any short sale.   3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby makes the following representations and warranties to the Buyer: (a) Subsidiaries. Nanogen Point-of-Care, Inc., Epoch Biosciences, Inc., Nanogen Europe B.V., Nanotronics, Inc., Nanogen Recognomics GmbH and Oy Jurilab Ltd are the only subsidiaries of the Company. Except as set forth in the Prospectus (as hereinafter defined), the Company owns, directly or indirectly, all or a majority of the capital stock, membership interests or partnership interests, as applicable, of each such subsidiary free and clear of any lien, charge, security interest, encumbrance, right of first refusal or other restriction (collectively, “Liens”), -------------------------------------------------------------------------------- and all the issued and outstanding shares of capital stock, membership interests or partnership interest of each such subsidiary are validly issued and are fully paid, nonassessable and free of preemptive and similar rights. The capitalized term “Subsidiaries” or “Subsidiaries” as used herein shall refer to the foregoing subsidiaries of the Company. The Company’s representations and warranties in Section 3 of this Agreement relating to Oy Jurilab Ltd are limited to the actual knowledge of the executive officers of the Company, without any duty to investigate or make any inquiry. (b) Organization and Qualification. Each of the Company and each Subsidiary is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as described in the Prospectus. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate: (i) materially adversely affect the legality, validity or enforceability of this Agreement, (ii) have or result in a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) adversely impair the Company’s ability to perform fully on a timely basis its obligations under this Agreement (any of (i), (ii) or (iii), a “Material Adverse Effect”). (c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company, its board of directors or its stockholders. This Agreement has been duly executed and delivered by the Company and is 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 general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies. (d) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) subject to obtaining the Required Approvals (as defined below), conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both), or require any consent or waiver under, or result in the execution or imposition of any lien, charge or encumbrance upon any properties or assets of the Company or its subsidiaries pursuant to the terms of, any agreement, indenture or instrument to -------------------------------------------------------------------------------- which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, permit, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (e) Filings, Consents and Approvals. No consent, waiver, authorization or order of, give any notice to, or filing or registration with, any court or other federal, state, local or other governmental authority or other Person is required in connection with the execution, delivery and performance by the Company of this Agreement, other than (i) the filings required under Section 4(f), (ii) the filing with the SEC of the prospectus supplement required by the Registration Statement pursuant to Rule 424(b) under the 1933 Act (the “Prospectus Supplement”) supplementing the base prospectus forming part of the Registration Statement (such base prospectus, together with the Prospectus Supplement and all information incorporated by reference to SEC Reports (as defined below) therein, the “Prospectus”), (iii) the application to the Nasdaq National Market (the “Principal Market”) for the listing of the Purchased Shares for trading thereon in the time and manner required thereby and (iv) applicable Blue Sky filings (clauses (i) – (iv) collectively, the “Required Approvals”). “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. (f) Issuance of the Purchased Shares. The Purchased Shares are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable and the issuance of the Purchased Shares is not subject to any preemptive or similar rights. The Purchased Shares are being issued pursuant to the Registration Statement and the issuance of the Purchased Shares has been registered by the Company under the 1933 Act. The Registration Statement is effective and available for the issuance of the Purchased Shares thereunder and the Company has not received any notice that the SEC has issued or intends to issue a stop-order with respect to the Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has threatened in writing to do so. The “Plan of Distribution” section under the Prospectus permits the issuance and sale of the Purchased Shares hereunder. (g) Capitalization. The issued and outstanding shares of capital stock of the Company have been validly issued, are fully paid and nonassessable and, other than as disclosed in or contemplated by the Prospectus, are not subject to any preemptive or similar rights. The Company has an authorized, issued and outstanding capitalization as set forth in the Prospectus as of the dates referred to therein (other than the grant of additional options under the Company’s existing stock option plans, or changes in the number of outstanding shares of Common Stock of the Company due to the issuance of shares upon the exercise or conversion of securities exercisable for, or convertible into, shares of Common Stock outstanding on the date hereof) and such authorized capital stock conforms to the description thereof set forth in the Prospectus. The -------------------------------------------------------------------------------- description of the securities of the Company in the Registration Statement and the Prospectus is, and at the Closing Date will be, complete and accurate in all material respects. Except as disclosed in or contemplated by the Prospectus, as of the date referred to therein, the Company did not have outstanding any options to purchase, or any rights or warrants to subscribe for, or any securities or obligations convertible into, or exchangeable for, or any contracts or commitments to issue or sell, any shares of capital stock or other securities. (h) SEC Reports; Registration Statement; Financial Statements. The Company has filed all reports required to be filed by it under the 1933 Act and the Securities Exchange Act of 1934, as amended (the “1934 Act”), including pursuant to Section 13(a) or 15(d) thereof, for the three (3) years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the 1933 Act and the 1934 Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Registration Statement, the Prospectus and the Prospectus Supplement complied on the effective date of the Registration Statement and will comply at the Closing Date in all material respects with the requirements of the 1933 Act and the 1934 Act and the rules and regulations of the SEC promulgated thereunder. Neither the Registration Statement nor the Prospectus contain or 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 the case of any prospectus in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such financial statements and related notes and schedules thereto have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations, stockholders’ equity and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. (i) Material Changes. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports: (i) there has been no event, occurrence or development that, individually or in the aggregate, has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) neither the Company nor any of its Subsidiaries have entered into any transaction or agreement, not in the ordinary course of business, that is material to the Company and its Subsidiaries taken as a whole or incurred any liability or obligation, direct or contingent, not in the ordinary course of business, that is material to the Company and its Subsidiaries taken as a whole; and (iii) neither the Company nor any of its Subsidiaries has sustained any material loss or interference with its business from any force majeure, including fire, explosion, flood or other calamity, whether or -------------------------------------------------------------------------------- not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case as otherwise disclosed in the Prospectus. (j) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which: (i) adversely affects or challenges the legality, validity or enforceability of this Agreement or the Purchased Shares or (ii) would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. To the knowledge of the Company, there has not been, and there is not pending or contemplated, any investigation by the SEC involving the Company or any current director or officer of the Company. (k) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in material violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in material 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 in any material respect. (l) Labor Relations. No strike, work stoppage, slow down or other material labor problem exists or, to the knowledge of the Company, is threatened or imminent with respect to any of the employees of the Company or any Subsidiary which would result in a Material Adverse Effect. (m) Regulatory Permits. Except as described in the Prospectus, the Company and the Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the Prospectus (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. (n) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens that would not individually or in the aggregate have a Material Adverse Effect and (ii) Liens disclosed in the Prospectus. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases. -------------------------------------------------------------------------------- (o) Patents and Trademarks. Except as described in the Prospectus, the Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as described in the Prospectus (collectively, the “Intellectual Property Rights”). Except as described in the Prospectus, neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person and to the knowledge of the Company, no such claims have been threatened. 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. (p) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost, except for cost increases being experienced by public companies in similar businesses and risk categories. (q) 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 financial records of the Company accurately reflect in all material respects the information relating to the business of the Company, the location and collection of its assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company. The Company has established disclosure controls and procedures (as defined in 1934 Act Rules 13a-14 and 15d-14) for the Company and designed such disclosures controls and procedures to ensure that material information relating to the Company is accumulated and communicated to the certifying officers as appropriate to allow timely decisions regarding required disclosures. The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as of the end of the quarter ended September 30, 2005 (such date, the “Evaluation Date”). The Company presented in the Form 10-Q for the quarter ended September 30, 2005, the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company’s internal controls over financial reporting (as such term is defined in the 1934 Act Rules 13a-13(f) and 15d-5(f)) or in other factors that could significantly affect the Company’s internal controls over financial reporting. -------------------------------------------------------------------------------- (r) Certain Fees. 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, and the Company has not taken any action that would cause the Buyer to be liable for any such fees or commissions. (s) Listing and Maintenance Requirements. The Company has not, in the 12 months preceding the date hereof, received notice from the Principal Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of the Principal Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The issuance and sale of the Purchased Shares hereunder does not contravene the rules and regulations of the Principal Market and no shareholder approval is required for the Company to fulfill its obligations under this Agreement. The Common Stock is currently listed on the Principal Market. (t) Investment Company. The Company is not, and is not an affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended ( an “Investment Company”) and after giving effect to the offering and sale of the Purchased Shares and the application of proceeds thereof, will not be an Investment Company. (u) Securities Sold. Except as described in the Prospectus, the Company has not sold or issued any shares of Common Stock during the six-month period preceding the date of hereof, including any sales pursuant to Rule 144A under, or Regulations D or S under, the 1933 Act, other than shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans or pursuant to outstanding options, rights or warrants. (v) Sarbanes-Oxley Act. The Company is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof, except where such noncompliance would not reasonably be expected to have a Material Adverse Effect.   4. COVENANTS. (a) Best Efforts. Each party shall use its best efforts timely to satisfy each of the covenants and the conditions to be satisfied by it as provided in Sections 5 and 6 of this Agreement. (b) Prospectus Supplement and Blue Sky. On or before the execution of this Agreement, the Company shall have delivered, and as soon as practicable after the Closing the Company shall file, the Prospectus Supplement with respect to the Purchased Shares as required under and in conformity with the 1933 Act, including Rule 424(b) thereunder. If required, the Company, on or before the Closing Date, shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Purchased Shares for sale to the Buyer at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), -------------------------------------------------------------------------------- and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date. The Company shall make all filings and reports relating to the offer and sale of the Purchased Shares required under and in accordance with applicable securities or “Blue Sky” laws of the states of the United States following the Closing Date. (c) Reporting Status. Until the date on which the Buyer shall have sold all the Purchased Shares (the “Reporting Period”), the Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would otherwise permit such termination. (d) Listing. The Company shall promptly secure the listing of all of the Purchased Shares upon the Principal Market (subject to official notice of issuance) following the date hereof. (e) Fees. Each party to this Agreement shall bear its own expenses in connection with the transactions contemplated by this Agreement. (f) Disclosure of Transactions and Other Material Information. The Company shall, on or before 8:30 a.m., New York City Time, on the first Business Day after the date hereof, file a Current Report on Form 8-K reasonably acceptable to the Buyer disclosing all material terms of the transactions contemplated hereby in the form required by the 1934 Act, and attaching the form of this Agreement as an exhibit to such filing (including all attachments, the “8-K Filing”). Subject to the foregoing, neither the Company nor the Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company and Buyer shall be entitled, without the prior approval of the other party, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and (ii) as is required by applicable law and regulations, including the applicable rules and regulations of the Principal Market.   5. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. The obligation of the Company hereunder to issue and sell the Purchased Shares to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing the Buyer with prior written notice thereof: (i) The Buyer shall have delivered to the Company the Purchase Price for the Purchased Shares at the Closing by wire transfer of immediately available funds pursuant to Section 1(d) of this Agreement. (ii) The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date. -------------------------------------------------------------------------------- (iii) No governmental authority or other agency or commission or federal or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction, or other order (whether temporary, preliminary or permanent) which is in effect and which materially restricts, prevents or prohibits consummation of the Closing or any transaction contemplated by this Agreement.   6. CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE. The obligation of the Buyer hereunder to purchase the Purchased Shares at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion by providing the Company with prior written notice thereof: (i) The Company shall have delivered the Purchased Shares being purchased by the Buyer at the Closing pursuant to this Agreement. (ii) The Buyer shall have received the opinion of Morgan, Lewis & Bockius LLP, the Company’s outside counsel (“Company Counsel”), dated as of the Closing Date, substantially in the form attached hereto as Exhibit B. (iii) The Company shall have delivered to the Buyer a long-form certificate of good standing from the Delaware Secretary of State with respect to the Company dated the date hereof and a facsimile bring-down of such good standing certificate on the Closing Date. (iv) The Common Stock (a) shall be listed on the Principal Market and (b) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the Closing Date, in writing by the SEC or the Principal Market. (v) The Company shall have delivered to such Buyer a certificate, executed by the Secretary of the Company and dated as of the Closing Date, as to (i) the resolutions approving the transactions contemplated by this Agreement as adopted by the Company’s Board of Directors or a committee thereof, (ii) the Certificate of Incorporation and (iii) the Bylaws of the Company, each as in effect at the Closing, in the form attached hereto as Exhibit C. (vi) The representations and warranties of the Company set forth in Section 3 of this Agreement shall be true and correct in all material respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate, executed by the Chief Executive Officer or Chief Financial Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer in the form attached hereto as Exhibit D. -------------------------------------------------------------------------------- (vii) No governmental authority or other agency or commission or federal or state court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction, or other order (whether temporary, preliminary or permanent) which is in effect and which materially restricts, prevents or prohibits consummation of the Closing or any transaction contemplated by this Agreement. (viii) The Registration Statement shall be effective and available for the issuance and sale of the Purchased Shares hereunder and the Company shall have delivered to such Buyer the Prospectus required thereunder.   7. TERMINATION. In the event that the Closing shall not have occurred on or before March 23, 2006 due to the Company’s or the Buyer’s failure to satisfy the conditions set forth in Sections 5 and 6 above (and the nonbreaching party’s failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability of any party to any other party.   8. MISCELLANEOUS. (a) Governing Law. This Agreement shall be construed in accordance with and governed for all purposes by the laws of the State of New York applicable to contracts executed and to be wholly performed within such State without giving effect to its conflicts of laws principles thereof. (b) Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature. (c) Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. (d) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. (e) Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Buyer, the Company, their affiliates and Persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Buyer. No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. -------------------------------------------------------------------------------- (f) Notices. 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 business day after deposit with an overnight courier 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: Nanogen, Inc. 10398 Pacific Center Court San Diego, California 92121 Facsimile: (858) 410-4646 Attention: Chief Financial Officer with a copy to (for information purposes only): Morgan, Lewis & Bockius LLP One Market, Spear Street Tower San Francisco, California 94105-1126 Facsimile: 415.442.1001 Attention: Scott D. Karchmer, Esq. If to Buyer: Fisher Scientific International Inc. Liberty Lane Hampton, NH 03842 Attn: General Counsel Facsimile: (603) 929-2373 With a copy (for informational purposes only) to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, NY 10036 Attn: Ralph Arditi, Esq. Facsimile: (917) 777-3860 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 (i) given by the recipient of such notice, consent, waiver or other communication, (ii) 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 (iii) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively. (g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. The Company and the Buyer shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party; provided that Buyer may assign its rights and obligations hereunder to any wholly-owned subsidiary of Buyer (although such assignment shall not relive Buyer of its obligations under this Agreement). (h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (i) Survival. Unless this Agreement is terminated under Section 8, the representations and warranties of the Company and the Buyer contained in Sections 2 and 3, the agreements and covenants set forth in Sections 4 and 8 shall survive the Closing for a period of eighteen months thereafter. (j) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any 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. [Signature Page Follows] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Buyer and the Company have caused their respective signature page to this Stock Purchase Agreement to be duly executed as of the date first written above.   COMPANY: NANOGEN, INC. By:   /s/ Robert W. Saltmarsh Name:   Robert W. Saltmarsh Title:   Chief Financial Officer -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Buyer and the Company have caused their respective signature page to this Stock Purchase Agreement to be duly executed as of the date first written above.   BUYER: FISHER SCIENTIFIC INTERNATIONAL INC. By:   /s/ Paul M. Meister Name:   Paul M. Meister Title:   Vice Chairman

EXHIBIT 10.9 EMPLOYMENT AGREEMENT OF JOHN E. HUDSON THIS EMPLOYMENT AGREEMENT is made and entered into as of the 1st day of January, 2004 by and between Eagle Financial Services, Inc., a Virginia corporation, hereinafter called the “Corporation”, and John E. Hudson hereinafter called “Employee”, and provides as follows: RECITALS WHEREAS, the Corporation is a bank holding company engaged in the operation of a bank; and WHEREAS, Employee has been involved in the management of the business and affairs of the Corporation and, therefore, possesses managerial experience, knowledge, skills and expertise in such type of business; and WHEREAS, the employment of Employee by the Corporation is in the best interests of the Corporation and Employee; and WHEREAS, the parties have mutually agreed upon the terms and conditions of Employee’s continued employment by the Corporation as hereinafter set forth; TERMS OF AGREEMENT NOW, THEREFORE, for and in consideration of the premises and of the mutual promises and undertakings of the parties as hereinafter set forth, the parties covenant and agree as follows: Section 1. Employment. (a) Employee shall be employed as an executive officer of the Corporation. He shall perform such services for the Corporation and/or one or more Affiliates as may be assigned to Employee by the Corporation from time to time and that are commensurate with his training and experience upon the terms and conditions hereinafter set forth. (b) References in this Agreement to services rendered for the Corporation and compensation and benefits payable or provided by the Corporation shall include services rendered for and compensation and benefits payable or provided by any Affiliate. References in this Agreement to the “Corporation” also shall mean and refer to each Affiliate for which Employee performs services. References in this Agreement to “Affiliate” shall mean any business entity that, directly or indirectly, through one or more intermediaries, is controlled by the Corporation. Section 2. Term and Renewal. The initial term of this Agreement shall end December 31, 2004. However, on each December 31, beginning with December 31, 2004, the term of this Agreement shall be renewed and extended by one year unless Employee or the Corporation gives 90 days prior notice to the other in writing that the term shall not be renewed and extended. This Agreement shall terminate at the end of its term. Section 3. Exclusive Service. Employee shall devote his best efforts and full time to rendering services on behalf of the Corporation in furtherance of its best interests. Employee shall comply with all policies, standards and regulations of the Corporation now or hereafter promulgated, and shall perform his duties under this Agreement to the best of his abilities and in accordance with standards of conduct applicable to officers of banks. Section 4. Salary. (a) As compensation while employed hereunder, Employee, during his faithful performance of this Agreement, in whatever capacity rendered, shall receive an annual base salary of $67,300.00 payable on such terms and in such installments as the parties may from time to time mutually agree upon. The Board of Directors, in its discretion, may increase Employee’s base salary during the term of this Agreement. (b) The Corporation shall withhold state and federal income taxes, social security taxes and such other payroll deductions as may from time to time be required by law or agreed upon in writing by Employee and the Corporation. The Corporation shall also withhold and remit to the proper party any amounts agreed to in writing by the Corporation and Employee for participation in any corporate sponsored benefit plans for which a contribution is required. (c) Except as otherwise expressly set forth hereunder, no compensation shall be paid pursuant to this Agreement in respect of any month or portion thereof subsequent to any termination of Employee’s employment by the Corporation. Section 5. Corporate Benefit Plans. Employee shall be entitled to participate in or become a participant in all cash and non-cash employee benefit plans maintained by the Corporation for its executive officers. Section 6. Bonuses. Employee shall receive only such bonuses as the Board of Directors, in its discretion, decides to pay to Employee. -------------------------------------------------------------------------------- Section 7. Expense Account. The Corporation shall reimburse Employee for reasonable and customary business expenses incurred in the conduct of the Corporation’s business. Such expenses will include business meals, out-of-town lodging and travel expenses. Employee agrees to timely submit records and receipts of reimbursable items and agrees that the Corporation can adopt reasonable rules and policies regarding such reimbursement. The Corporation agrees to make prompt payment to Employee following receipt and verification of such reports. Section 8. Personal and Sick Leave. Employee shall be entitled to the same personal and sick leave as the Board of Directors may from time to time designate for all full-time employees of the Corporation. Section 9. Vacations. Employee shall be entitled to twenty (20) week days of vacation leave each year which shall be taken at such time or times as may be approved by the Corporation and during which Employee’s compensation hereunder shall continue to be paid. Section 10. Termination. (a) Notwithstanding the termination of Employee’s employment pursuant to any provision of this Agreement, the parties shall be required to carry out any provisions of this Agreement which contemplate performance by them subsequent to such termination. In addition, no termination shall affect any liability or other obligation of either party which shall have accrued prior to such termination, including, but not limited to, any liability, loss or damage on account of breach. No termination of employment shall terminate the obligation of the Corporation to make payments of any vested benefits provided hereunder or the obligations of Employee under Sections 11, 12 and 13. (b) Employee’s employment hereunder may be terminated by Employee upon thirty (30) days written notice to the Corporation or at any time by mutual agreement in writing. (c) This Agreement shall terminate upon death of Employee; provided, however, that in such event the Corporation shall pay to the estate of Employee the compensation including salary and accrued bonus, if any, which otherwise would be payable to Employee for 60 days after his death. (d) (1) The Corporation may terminate Employee’s employment other than for “Cause”, as defined in Section 10(e), at any time upon written notice to Employee, which termination shall be effective immediately. Employee may resign thirty (30) days after notice to the Corporation for “Good Reason”, as hereafter defined. In the event the Employee’s employment terminates pursuant to this Section 10(d); (i) Employee shall receive a monthly amount equal to one-twelfth (1/12) his rate of annual base salary in effect immediately preceding such termination in each month for the remainder of the term of this Agreement at the times such payments would have been made in accordance with Section 4(a); (ii) Employee shall receive a payment in cash on the date his employment terminates equal to the greater of (a) the amount of the highest cash bonus paid or payable to him in respect of any of the three (3) fiscal years of the Corporation prior to the fiscal year in which his employment terminates, and (b) the amount of cash bonus Employee was designated to receive under the Corporation’s annual incentive plan; (iii) The Corporation shall maintain in full force and effect for the continued benefit of the Employee for the remainder of the then current term of this Agreement all employee welfare benefit plans and programs or arrangements in which the Employee was entitled to participate immediately prior to such termination, provided that continued participation is possible under the general terms and provisions of such plans and programs. In the event that Employee’s participation in any such or program is barred, the Corporation shall arrange to provide the Employee with benefits substantially similar to those which the Employee was entitled to receive under such plans and programs. (2) Notwithstanding anything in this Agreement to the contrary: (i) If Employee breaches Section 11 or 12, Employee will not thereafter be entitled to receive any further compensation or benefits pursuant to this Section 10(d); and (ii) If, while he is receiving payments under this Section 10(d), Employee engages in a Competitive Business within the area described in Section 12(i), such payments will cease and he will not thereafter be entitled to receive any compensation or benefits pursuant to this Section 10(d) even though such conduct occurs after the covenants contained in Section 12 have expired. (3) The Corporation shall not be required to make payment of the Termination Compensation or any portion thereof to the extent such payment is prohibited by the terms of the regulations presently found at 12 C.F.R. part 359 or to the extent that any other governmental approval of the payment required by law is not received. (4) Except as set forth in Sections 10(d)(2) and 10(d)(3), the Corporation’s obligation to pay the Employee the compensation provided in Section 10(d)(1) shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation may have against him or anyone else. All amounts payable by the Corporation hereunder shall be paid without notice or demand. Each and every payment made hereunder by the -------------------------------------------------------------------------------- Corporation shall be final and the Corporation will not seek to recover all or any part of such payment from the Employee or from whosoever may be entitled thereto, for any reason whatsoever. The Employee shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. (5) For purposes of this Agreement, “Good Reason” shall mean: (i) The assignment of duties to the Employee by the Corporation which result in the Employee having significantly less authority or responsibility than he has on the date hereof, without his express written consent; (ii) Requiring the Employee to maintain his principal office outside of a 25 mile radius of Clarke County, Virginia unless the Corporation moves its principal executive offices to a place to which the Employee is required to move; (iii) A reduction by the Corporation of the Employee’s base salary, as the same may have been increased from time to time; (iv) The failure of the Corporation to provide the Employee with substantially the same fringe benefits that are provided to him at the inception of this agreement; (v) The Corporation’s failure to comply with any material term of this Agreement; or (vi) The failure of the Corporation to obtain the assumption of and agreement to perform this Agreement by any successor as contemplated in Section 14 hereof. (e) The Corporation shall have the right to terminate Employee’s employment under this Agreement at any time for Cause, within 30 days of the occurrence, which termination shall be effective immediately. Termination for “Cause” shall include termination for Employee’s personal dishonesty, incompetence, willful misconduct, breach of a fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, conviction of a felony or of a misdemeanor involving moral turpitude, misappropriation of the Corporation’s assets (determined on a reasonable basis) or those of its Affiliates, or material breach of any other provision of this Agreement. In the event Employee’s employment under this Agreement is terminated for Cause, Employee shall thereafter have no right to receive compensation or other benefits under this Agreement. (f) The Corporation may terminate Employee’s employment under this Agreement, after having established the Employee’s disability by giving to Employee written notice of its intention to terminate his employment for disability and his employment with the Corporation shall terminate effective on the 90th day, or at the end of accrued time off (sick, vacation, personal), after receipt of such notice if within 90 days, or the number of available accrued days (sick, vacation, personal), after such receipt Employee shall fail to return to the full-time performance of the essential functions of his position (and if Employee’s disability has been established pursuant to the definition of “disability” set forth below). For purposes of this Agreement, “disability” means either (i) disability which after the expiration of more than 13 consecutive weeks after its commencement is determined to be total and permanent by a physician selected and paid for by the Corporation or its insurers, and acceptable to Employee or his legal representative, which consent shall not be unreasonably withheld or (ii) disability as defined in the policy of disability insurance maintained by the Corporation or its Affiliates for the benefit of Employee, whichever shall be more favorable to Employee. Notwithstanding any other provision of this Agreement, the Corporation shall comply with all requirements of the Americans with Disabilities Act, 42 U.S.C. § 12101 et. seq. (g) If Employee is suspended and/or temporarily prohibited from participating in the conduct of the Corporation’s affairs by a notice served pursuant to the Federal Deposit Insurance Act, the Corporation’s obligations under this Employment Agreement shall be suspended as of the date of service unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Corporation may in its discretion (i) pay Employee all or part of the compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended. (h) If Employee is removed and/or permanently prohibited from participating in the conduct of the Corporation’s affairs by an order issued under the Federal Deposit Insurance Act or the Code of Virginia, all obligations of the Corporation under this Employment Agreement shall terminate as of the effective date of the order, but vested rights of the parties shall not be affected. (i)(1) If Employee’s employment is terminated without Cause or if he resigns for Good Reason within one year after a Change of Control shall have occurred, then on or before Employee’s last day of employment with the Corporation, the Corporation shall pay to Employee as compensation for services rendered to the Corporation and its Affiliates a cash amount (subject to any applicable payroll or other taxes required to be withheld) equal to the excess, if any, of 299% of Employee’s “annualized includable compensation for the base period”, as defined in Section 280G of the Internal Revenue Code of 1986 (the “Code”), over the total amount payable to Employee under Section 10(d) provided that, at the option of Employee, the cash amount required to be paid hereby shall be paid by the Corporation in equal monthly installments over the twenty-four (24) months succeeding the date of termination, payable on the first day of each such month. -------------------------------------------------------------------------------- (2) For purposes of this Agreement, a Change of Control occurs if, after the date of this Agreement, (i) any person, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the owner or beneficial owner of Corporation securities having 50% or more of the combined voting power of the then outstanding Corporation securities that may be cast for the election of the Corporation’s directors other than a result of an issuance of securities initiated by the Corporation, or open market purchases approved by the Board of Directors, as long as the majority of the Board of Directors approving the purchases is a majority at the time the purchases are made; or (ii) as the direct or indirect result of, or in connection with, a tender or exchange offer, a merger or other business combination, a sale of assets, a contested election of directors, or any combination of these events, the persons who were directors of the Corporation before such events cease to constitute a majority of the Corporation’s Board, or any successor’s board, within two years of the last of such transactions. For purposes of this Agreement, a Change of Control occurs on the date on which an event described in (i) or (ii) occurs. If a Change of Control occurs on account of a series of transactions or events, the Change of Control occurs on the date of the last of such transactions or events. (3) It is the intention of the parties that no payment be made or benefit provided to Employee pursuant to this Agreement that would constitute an “excess parachute payment” within the meaning of Section 280G of the Code and any regulations thereunder, thereby resulting in a loss of an income tax deduction by the Corporation or the imposition of an excise tax on Employee under Section 4999 of the Code. If the independent accountants serving as auditors for the Corporation on the date of a Change of Control (or any other accounting firm designated by the Corporation) determine that some or all of the payments or benefits scheduled under this Agreement, as well as any other payments or benefits on a Change of Control, would be nondeductible by the Company under Section 280G of the Code, then the payments scheduled under this Agreement will be reduced to one dollar less than the maximum amount which may be paid without causing any such payment or benefit to be nondeductible. The determination made as to the reduction of benefits or payments required hereunder by the independent accountants shall be binding on the parties. Employee shall have the right to designate within a reasonable period, which payments or benefits will be reduced; provided, however, that if no direction is received from Employee, the Corporation shall implement the reductions in its discretion. Section 11. Confidentiality/Nondisclosure. Employee covenants and agrees that any and all information concerning the customers, businesses and services of the Corporation of which he has knowledge or access as a result of his association with the Corporation in any capacity, shall be deemed confidential in nature and shall not, without the proper written consent of the Corporation, be directly or indirectly used, disseminated, disclosed or published by Employee to third parties other than in connection with the usual conduct of the business of the Corporation. Such information shall expressly include, but shall not be limited to, information concerning the Corporation’s trade secrets, business operations, business records, customer lists or other customer information. Upon termination of employment Employee shall deliver to the Corporation all originals and copies of documents, forms, records or other information, in whatever form it may exist, concerning the Corporation or its business, customers, products or services. In construing this provision it is agreed that it shall be interpreted broadly so as to provide the Corporation with the maximum protection. This Section 11 shall not be applicable to any information which, through no misconduct or negligence of Employee, has previously been disclosed to the public by anyone other than Employee. Section 12. Covenant Not to Compete. During the term of this Agreement and throughout any further period that he is an officer or employee of the Corporation, and for a period of twelve (12) months from and after the date that Employee is (for any reason) no longer employed by the Corporation or for a period of twelve (12) months from the date of entry by a court of competent jurisdiction of a final judgment enforcing this covenant in the event of a breach by Employee, whichever is later, Employee covenants and agrees that he will not, directly or indirectly, either as a principal, agent, employee, employer, stockholder, co-partner or in any other individual or representative capacity whatsoever: (i) engage in a Competitive Business anywhere within a fifty (50) mile radius of the location of the Corporation’s principal executive offices on the date Employee’s employment terminates; or (ii) solicit, or assist any other person or business entity in soliciting, any depositors or other customers of the Corporation to make deposits in or to become customers of any other financial institution conducting a Competitive Business; or (iii) induce any individuals to terminate their employment with the Corporation or its Affiliates. As used in this Agreement, the term “Competitive Business” means all banking and financial products and services, excluding insurance or financial firms unless owned by a competing bank, that are substantially similar to those offered by the Corporation on the date that Employee’s employment terminates. A “Competitive Business” also means any business in which the Bank is competing as of the date hereof. Employee’s obligations under this Section 12 shall terminate on the date a Change of Control occurs. Section 13. Injunctive Relief, Damages, Etc. Employee agrees that given the nature of the positions held by Employee with the Corporation, that each and every one of the covenants and restrictions set forth in Sections 11 and 12 above are reasonable in scope, length of time and geographic area and are necessary for the protection of the significant investment of the Corporation in developing, maintaining and expanding its business. Accordingly, the parties hereto agree that in the event of any breach by Employee of any of the provisions of Sections 11 or 12 that monetary damages alone will not adequately compensate the Corporation for its losses and, therefore, that it may seek any and all legal or equitable relief available to it, specifically including, but not limited to, injunctive relief and Employee shall be liable for all damages, including actual and consequential damages, costs and expenses, including legal costs and actual attorneys’ fees, incurred by the Corporation as a result of taking action to enforce, or recover for any breach of, Section 11 or Section 12. The covenants contained in Sections 11 and 12 shall be construed and interpreted in any judicial proceeding to permit their enforcement to the maximum extent permitted by law. Should a court of competent jurisdiction determine that any provision of the covenants and restrictions set forth in Section 12 above is unenforceable as being overbroad as to time, area or scope, the court may strike the offending provision or reform such provision to substitute such other terms as are reasonable to protect the Corporation’s legitimate business interests. Section 14. Binding Effect/Assignability. This Employment Agreement shall be binding upon and inure to the benefit of the Corporation and Employee and their respective heirs, legal representatives, executors, administrators, successors and assigns, but neither this -------------------------------------------------------------------------------- Agreement, nor any of the rights hereunder, shall be assignable by Employee or any beneficiary or beneficiaries designated by Employee. The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business, stock or assets of the Corporation, by agreement in form and substance reasonably satisfactory to the Employee, to expressly assume and agree to perform this Agreement in its entirety. Failure of the Corporation to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, “Corporation” shall include any successor to its business, stock or assets as aforesaid which executes and delivers the agreement provided for in this Section 14 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. Section 15. Governing Law. This Employment Agreement shall be subject to and construed in accordance with the laws of Virginia. Section 16. Invalid Provisions. The invalidity or unenforceability of any particular provision of this Employment Agreement shall not affect the validity or enforceability of any other provisions hereof, and this Employment Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. Section 17. Notices. Any and all notices, designations, consents, offers, acceptance or any other communications provided for herein shall be given in writing and shall be deemed properly delivered if delivered in person or by registered or certified mail, return receipt requested, addressed in the case of the Corporation to its registered office or in the case of Employee to his last known address. Section 18. Entire Agreement. (a) This Employment Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes any and all other agreements, either oral or in writing, among the parties hereto with respect to the subject matter hereof. (b) This Employment Agreement may be executed in one or more counterparts, each of which shall be considered an original copy of this Agreement, but all of which together shall evidence only one agreement. Section 19. Amendment and Waiver. This Employment Agreement may not be amended except by an instrument in writing signed by or on behalf of each of the parties hereto. No waiver of any provision of this Employment Agreement shall be valid unless in writing and signed by the person or party to be charged. Section 20. Case and Gender. Wherever required by the context of this Employment Agreement, the singular or plural case and the masculine, feminine and neuter genders shall be interchangeable. Section 21. Captions. The captions used in this Employment Agreement are intended for descriptive and reference purposes only and are not intended to affect the meaning of any Section hereunder. -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Corporation has caused this Employment Agreement to be signed by its duly authorized officer and Employee has hereunto set his hand and seal on the day and year first above written.       EAGLE FINANCIAL SERVICES, INC.     By:   /s/ JOHN R. MILLESON     Title:   President ATTEST:       /s/ KALEY P. CROSEN           EMPLOYEE     /s/ JOHN E. HUDSON (SEAL)     John E. Hudson ATTEST:       /s/ KALEY P. CROSEN      

  Exhibit 10.4 September 21, 2006 Robert R. Stutler c/o Sturm, Ruger & Company, Inc. One Lacey Place Southport, CT 06890 Dear Mr. Stutler:           As you are aware, it is the practice of Sturm, Ruger & Co., Inc. (the “Company”) to provide for severance benefits, subject to certain conditions, to certain officers whose employment is terminated by the Company. The purpose of this letter is to set forth the terms of the severance benefits that you would be entitled to receive under the circumstances outlined below.           1. If your employment is terminated by the Company without Cause (as defined below) prior to a Change in Control (as defined below), then you shall be eligible for such severance payments and benefits, if any, as may be provided under then-applicable Company policy for similarly situated employees whose employment is terminated under similar circumstances, subject to the conditions set forth in such policy.           Notwithstanding the foregoing or anything to the contrary contained in any Company policy providing for severance payments and benefits to which you may become eligible pursuant to this Section 1, to the extent required by Section 409A (as defined below), no payments shall be made to you pursuant to any such Company policy during the first six months following your termination of employment with the Company; you shall instead receive a lump sum payment on the first day of the seventh month following the date your employment terminates in an amount equal to the total amount of payments that you otherwise would have received during the first six months following your termination of employment. Any remaining payments shall be made to you in accordance with the terms of the applicable Company policy.           2. As used herein, 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 (as defined below), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities; or           (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving as directors of the Company: individuals who, on the date hereof, constitute the Board of Directors of the Company and any new director (other than a director whose initial assumption of office is in connection with the settlement of 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 of Directors of the Company or nomination for election by the Company’s stockholders 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) a merger or consolidation of the Company is consummated with any other corporation or entity, other than (a) 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 (as defined below) thereof), at least a majority of the combined voting power of the securities of the Company, such surviving entity or any Parent thereof outstanding immediately after such merger or consolidation or (b) a merger or consolidation effected solely 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 representing 25% or more of the combined voting power of the Company’s then outstanding securities;           (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated a sale or disposition by the Company of any assets which individually or as part of a series of related transactions constitute all or substantially all of the Company’s consolidated assets; or           (v) the execution of a binding agreement that if consummated would result in a Change in Control of the type specified in clause (i) or (iii) of this Section 2 (an “Acquisition Agreement”) or of a binding agreement for the sale or disposition of assets that, if consummated, would result in a Change in Control of the type specified in clause (iv) of this Section 2 (an “Asset Sale Agreement”) or the adoption by the Board of Directors of the Company of a plan of complete liquidation or dissolution of the Company that, if consummated, would result in a Change in Control of a type specified in clause (iv) of this Section 2 (a “Plan of Liquidation”); provided however, that a Change in Control of the type specified in this clause (v) shall not be deemed to exist or to have occurred as a result of the execution of such Acquisition Agreement or Asset Sale Agreement, or the adoption of such a Plan of Liquidation, from and after the Abandonment Date (as defined below) if your employment has not been terminated on or prior to the Abandonment Date. The term “Abandonment Date” shall mean the date on which (a) an Acquisition Agreement, Asset Sale Agreement or Plan of Liquidation is terminated (pursuant to its terms or otherwise) without having been consummated, (b) the parties to an Acquisition Agreement or Asset Sale Agreement abandon the transactions contemplated thereby, (c) the Company abandons a Plan of Liquidation or (d) a court or regulatory body having competent jurisdiction enjoins or issues a cease and desist or stop order with respect to or otherwise prevents the consummation of, or a regulatory body notifies the Company that it will not approve, an Acquisition Agreement, Asset Sale Agreement or Plan of Liquidation or the transactions contemplated thereby and such injunction, order or notice has become final and not subject to appeal; or           (vi) any person other than Stephen Sanetti becomes the President or Chief Executive Officer of the Company. 2 --------------------------------------------------------------------------------             As used in connection with the foregoing definition of Change in Control, the term “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act; the term “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act; and “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time; and the term “Parent” shall mean any entity that becomes the Beneficial Owner of at least a majority of the voting power of the outstanding voting securities of the Company or of an entity that survives any merger or consolidation of the Company or any direct or indirect subsidiary of the Company.           3. (a) Subject to the limitations set forth in Section 5: (A) if a Change in Control of the types specified in clauses (i)-(v) of Section 2 above occurs during the Term (as defined below) and on or after the effective date of such Change in Control the Company terminates your employment (other than for Cause), or (B) if a Change in Control of the type specified in clause (vi) of Section 2 above occurs and during the Term within twenty four months from the date effective of such Change in Control the Company terminates your employment (other than for Cause), then the Company shall pay to you, within 30 days after the date your employment terminates or, to the extent required by Section 409A, on the first day of the seventh month following the date your employment terminates, as a severance payment for services previously rendered to the Company, a lump sum equal to the greater of : (i) the product of (x) 1.5 multiplied by (y) your Annual Compensation (as defined below) in effect immediately prior to the date your employment terminates (without regard to any decrease in the rate of your Annual Compensation made after the Change in Control) and (ii) the product of (x) your Annual Compensation in effect immediately prior to the date your employment terminates (without regard to any decrease in the rate of your Annual Compensation made after the Change in Control) multiplied by (y) the duration of your employment with the Company measured in full years and portions thereof multiplied by (z) .04167.                (b) Subject to the limitations set forth in Section 5: (A) if a Change in Control of the types specified in clauses (i)-(v) of Section 2 above occurs during the Term and on or after the effective date of such Change in Control the Company reduces your annual salary or makes a material change in the nature and scope of your duties to a level below that in effect immediately prior to the effective date of the Change in Control and thereafter you terminate your employment during the Term, or (B) if a Change in Control of the type specified in clause (vi) of Section 2 above occurs during the Term and within twenty four months from the effective date of such Change in Control the Company reduces your annual salary or makes a material change in the nature and scope of your duties to a level below that in effect immediately prior to the effective date of the Change in Control and thereafter you terminate your employment during the Term, then the Company shall pay to you, within 30 days after the date your employment terminates or, to the extent required by Section 409A, on the first day of the seventh month following the date your employment terminates, as a severance payment for services previously rendered to the Company, a lump sum equal to the greater of: (i) the product of (x) 1.5 multiplied by (y) your Annual Compensation in effect immediately prior to the date your employment terminates (without regard to any decrease in the rate of your Annual Compensation made after the Change in Control) and (ii) the product of (x) your Annual Compensation in effect immediately prior to the date your employment terminates (without regard to any decrease in the rate of your Annual Compensation made after the Change in Control) multiplied by (y) the 3 --------------------------------------------------------------------------------   duration of your employment with the Company measured in full years and portions thereof multiplied by (z) .04167.                (c) The term “Annual Compensation” shall mean, at any time, an amount equal to your annual rate of salary at such time, plus 100% of the target cash bonus or other cash incentive that you are eligible to earn in such year pursuant to each plan or program (whether or not such plan or program has been formalized or is in written form) of the Company in effect for such year that provides for cash bonuses or other cash incentives, or if no such plan or program has been adopted with respect to such year, 100% of the target cash bonus or other cash incentive that you were eligible to earn in the most recent year in which such a plan or program was in effect. The severance benefits specified in this Section 3 and in Section 4 hereof shall be in lieu of any severance pay or other severance benefit that the Company may provide to terminated employees pursuant to policies of the Company that may at that time be in effect (unless the only severance benefits to which you are entitled are those severance benefits provided under such policies).           4. Upon the occurrence of a termination of your employment under circumstances entitling you to receive the severance payment provided in Section 3 above, the Company shall also cause to be continued, for a period equal to the greater of (i) the remaining Term in effect at the time of the Change in Control or (ii) the period for which such coverage would be maintained if you were fully eligible to receive severance benefits under then-applicable Company benefit plans, programs or policies, subject to the limitations set forth in such plans, programs or policies, such life, medical and dental insurance coverage as is otherwise maintained by the Company for full-time employees (based on your annual rate of salary in effect immediately prior to the date your employment terminates), provided (1) that you shall continue to pay all amounts in respect of such coverage that an employee receiving the same level of coverage is or would be required to pay, and (2) no insurance coverage shall be continued past the last day of the second calendar year after the year your employment with the Company terminates.           5. In the event that any amount otherwise payable hereunder would be deemed to constitute a parachute payment (a “Parachute Payment”) within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and if any such Parachute Payment, when added to any other payments which are deemed to constitute Parachute Payments, would otherwise result in the imposition of an excise tax under Section 4999 of the Code, the amounts payable hereunder shall be reduced by the smallest amount necessary to avoid the imposition of such excise tax. Any such limitation shall be applied to such compensation and benefit amounts, and in such order, as the Company shall determine in its sole discretion.           6. You shall have no right to receive any severance pay or severance benefit or any other compensation or benefit for any period after the date of the termination by the Company of your employment for Cause or, except as otherwise provided in Section 3, following the voluntary termination by you of your employment. The term “Cause” shall mean your personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform assigned duties or willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order. 4 --------------------------------------------------------------------------------             7. Nothing in this letter (a) confers upon you the right to continue in the employment of the Company or the right to hold any particular office or position with the Company, (b) requires the Company to pay you, or entitles you to receive, any specified annual salary or interferes with or restricts in any way the right of the Company to decrease your annual salary at any time or (c) interferes with or restricts in any way the right of the Company to terminate your employment at any time, with or without Cause.           8. Any payments due you hereunder shall be reduced by all applicable withholding and other taxes.           9. The provisions set forth in this letter shall continue in effect throughout its Term. The “Term” of this letter shall mean the period commencing on the date hereof and ending on the first anniversary of the date hereof, subject to automatic extension on each anniversary of the date hereof, unless (a) you give notice of your intent to terminate your employment, or otherwise terminate your employment, before such date or (b) the Company gives written notice to you of the termination of such automatic extensions at least 360 days prior to such date.           10. This letter is intended to be binding upon the Company, its successors in interest and assigns. On and after the date of this letter, the terms regarding severance benefits described herein shall supercede and replace all severance and other benefits provided under, and any other provisions set forth or described in any prior letters to, or agreements with, you relating to provisions of benefits upon a termination of your employment, and are contingent upon your acceptance by signing below.           11. This letter shall be governed by, construed and enforced in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of law thereof.           12. You and the Company intend that this letter complies with the provisions of Section 409A of the Code and the regulations and other guidance of general applicability that are issued thereunder (“Section 409A”). You and the Company agree to negotiate in good faith regarding amendments to this letter that may be necessary or desirable to comply with Section 409A. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 5 --------------------------------------------------------------------------------             13. This letter may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which will collectively constitute a single original.             Very truly yours, STURM, RUGER & CO., INC.       By:   /s/  Stephen L. Sanetti       Name:   Stephen L. Sanetti       Title:   President and General Counsel     Agreed and Accepted to: By: Robert R.Stutler                      Date:  September 24, 2006 6

EXHIBIT 10.59 FIRST AMENDMENT TO EMPLOYMENT SEPARATION AND GENERAL RELEASE AGREEMENT THIS FIRST AMENDMENT (“First Amendment”) effective as of December 14, 2005 (the “Effective Date”), to the Employment Separation and General Release Agreement dated June 30, 2005, is entered into by and between MSC.Software Corporation, a Delaware corporation (“MSC”) and Kenneth D. Blakely, an individual (“Blakely”). WHEREAS, Blakely was previously employed as the Vice President of Special Projects for MSC; WHEREAS, Blakely and MSC mutually agreed to terminate Blakely’s employment relationship with MSC pursuant to an Employment Separation and General Release Agreement dated June 30, 2005 (the “Separation Agreement”); and WHEREAS, MSC and Blakely thereafter entered into that certain Consulting Agreement dated June 30, 2005 for the purpose of Blakely rendering consulting services from time to time to MSC (the “Consulting Agreement”); and WHEREAS, MSC and Blakely have amended the Consulting Agreement in order to extend the Consulting Term as that term is defined in the Agreement, from December 31, 2005 through and including March 31, 2006; WHEREAS, as a result of extending the Consulting Term, the parties find it necessary to also amend Section XI of the Separation Agreement to remove reference to any material breach by Blakely relative to the Consulting Agreement beyond December 31, 2005; NOW, THEREFORE, in consideration of the covenants contained herein, the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. The fourth sentence of Section XI of the Separation Agreement shall be amended so as to read as follows: “XI. Stock Options. “… This confirms that the Vested Options shall remain exercisable in accordance with their terms until the first to occur of the following: (1) the close of business on September 29, 2006, (2) Blakely’s material breach of any provision of this Separation Agreement, the Consulting Agreement entered into by and between Blakely and MSC on or about the date hereof (the “Consulting Agreement”), through December 31, 2005, or the Employee Confidentiality and Inventions Agreement by and between Blakely and MSC and entered into on or about February 27, 2004 (the “Confidentiality Agreement”), (3) the end of the maximum award term of the particular Vested Option, or (4) the termination of the Vested Option in connection with a change in control or similar event as contemplated by the applicable equity incentive plan under which the option was granted.” This Amendment shall in no way affect the terms of the Consulting Agreement between the parties. Except as expressly modified by this First Amendment, the Agreement shall be and remain in full force and effect in accordance with its terms, and shall constitute the legal, valid, binding, and enforceable obligations of MSC and Blakely. This First Amendment, including the Agreement and any attachments thereto, is the complete agreement of the parties and supersedes any prior agreements or representations, whether oral or written, with respect thereto. In the event of a conflict between the terms of this First Amendment and the Agreement, the terms of the First Amendment shall govern as to the subject matter referenced herein. -------------------------------------------------------------------------------- [Signatures intentionally appear on the following page.] IN WITNESS WHEREOF, the parties have signed this First Amendment on the dates indicated below.   MSC.Software Corporation a Delaware Corporation     Kenneth D. Blakely an Individual By:   /s/    WILLIAM J. WEYAND     By:   /s/    KENNETH D. BLAKELY Name:   William J. Weyand     Name:   Kenneth D. Blakely Title:   Chief Executive Officer     Title:   Blakely Date:   December 23, 2005     Date:   December 23, 2005

Exhibit 10.1   STOCK OPTION AWARD AGREEMENT UNDER THE CITY NATIONAL CORPORATION AMENDED AND RESTATED 2002 OMNIBUS PLAN   This Stock Option Agreement is made and entered into as of, by and between City National Corporation, a Delaware corporation (the “Company”), and, an employee of the Company or a subsidiary of the Company (the “Optionee”), with reference to the following:   A.            On April 28, 2004 the shareholders of the Company adopted the City National Corporation Amended and Restated 2002 Omnibus Plan as amended from time to time thereafter, (the “Plan”), pursuant to which the Compensation, Nominating & Governance Committee of the Board of Directors (the “Committee”) may grant selected officers and other Company or Company subsidiary employees options to purchase shares of the Company’s common stock, $1.00 par value (the “Common Stock”).   B.            The Committee has determined to grant Optionee an Option to purchase shares of Common Stock pursuant to the terms and conditions of this Agreement. This Option is not an Incentive Stock Option, as that term is defined in Section 422 of the Internal Revenue Code and Treasury regulations thereunder.   NOW, THEREFORE, in consideration of the foregoing recitals and the performance of the mutual covenants contained herein, it is hereby agreed as follows:   1.             Grant of Option. The Company hereby grants to Optionee the right and option to purchase (the “Option”), upon the terms and conditions set forth in this Agreement, all or any part of the following number of Shares of Common Stock at the following price per share:     Number of Shares   Price Per Share                               The number of shares subject to the Option and the Option exercise price are subject to adjustment in certain events, as provided in the Plan.   2.             Time of Exercise. The Option will vest and may be exercised at any time and from time to time after the dates set forth in the following schedule and before the Termination Date (as defined below) as to all or any number of full Shares not exceeding in the aggregate that percentage of all of the Shares set forth opposite each such date:   Time from Date of Grant   Options Vesting   Total Percentage of Shares as to which Options May be Exercised               After 1 year   25 % 25 % After 2 years   25 % 50 % After 3 years   25 % 75 % After 4 years   25 % 100 % After 10 years (the “Termination Date”)       Any unexercised Options will expire at this time     1 --------------------------------------------------------------------------------   Notwithstanding the foregoing, all of the Options shall immediately vest on the earlier of (i) subject to the discretion of the Committee, the occurrence of a Change in Control Event (as such term is defined in the Plan), or (ii) the date Optionee’s employment with the Company is terminated by reason of death or Total Disability. In the event Colleague’s employment is terminated for any other reason, the Committee or its delegate, as appropriate, may, in the Committee’s or such delegate’s sole discretion, approve the vesting as to any or all Options still subject to vesting, such vesting to be effective on the date of such approval or Optionee’s termination date, if later.   3.             Method of Exercise. The Option or any part thereof may be exercised by giving written notice of exercise to the Company, sent directly to the Controller’s Department, which notice must state the number of full Shares to be purchased, and must be accompanied by payment in full for the number of Shares to be purchased. Subject to the Company’s Securities Trading Policy as may be in effect from time to time, such payment may be in cash, in Shares of Common Stock, or in a broker-assisted same-day sale transaction or a combination thereof. If any part of such payment consists of Common Stock, such Common Stock must have been owned for at least six months and will be valued at the last sale price of such Common Stock as reported by the New York Stock Exchange on the date of exercise. If Optionee’s notice is received by the Controller’s Office before 1:00 p.m (PT), the date of exercise of the Option, will be the date of receipt by the Controller’s Office. The exercise date for notices received after 1:00 p.m. (PT) will be the business day following the date of receipt by the Controller’s Office. Not less than 100 Shares may be purchased at any one time unless the Shares purchased are all of the Shares then purchasable under the Option.   The Company will issue and deliver to Optionee a certificate for the number of Shares purchased; provided, however, that if any federal or state law or regulation of any securities exchange listing the Company’s Shares requires the Company to take any action with respect to the exercised Share before issuance thereof, then the date for issuance and delivery of such Shares will be extended for the period of time necessary to take such action.   4.             Withholding of Tax. The exercise of Non-Qualified Stock Options may result in income to you for federal or state tax purposes. To the extent that you become subject to taxation, you shall deliver to the Company at the time of such exercise such amount of money or Shares of unrestricted Common Stock, as the Company may require to meet its withholding obligation under applicable tax laws or regulations. If you fail to do so, the Company is authorized to withhold from any cash or stock remuneration then or thereafter payable to you any tax required to be withheld by reason of such resulting compensation income. If you exercise Stock Options through a cashless transaction, taxes will be withheld from the proceeds of the sale of Shares. Your delivery of Shares to meet the tax withholding obligation is subject to the Company’s Securities Trading Policy as may be in effect from time to time. You must have owned any Common Stock you deliver for at least six months. Any Common Stock you deliver or which is withheld by the Company will be valued on the date of which the amount of tax to be withheld is determined. Any fractional Shares of Common Stock resulting from withholding of taxes will be paid to you in cash.   5.             Expiration of Options after Termination. Stock Options and all rights granted under this Agreement, to the extent such rights have not been exercised, will terminate on the earlier of the Termination Date or the earliest to occur of the following:   5.1              Immediately upon termination of Optionee’s employment for cause or any resignation which is in lieu of a termination for cause, as defined below.   2 --------------------------------------------------------------------------------   5.2              If the employment of the Optionee terminates for any reason other than for cause, death, Retirement, Total Disability or disability, three (3) months after the date of such termination.   5.3              If Optionee’s employment terminates by reason of Retirement, Total Disability or disability, three (3) years after the date of such termination.   5.4              If Optionee dies while employed by the Company or within three (3) months after Optionee’s employment is terminated under the conditions specified in subparagraph 5.2 or 5.3 above, one (1) year after death. After the Optionee’s death, the Option and all rights granted under this Agreement, to the extent such rights will not theretofore have been exercised, may be exercised by Optionee’s designated Beneficiary, or if none, by the Optionee’s personal representative or by the person or persons to whom the Option will pass by will or by the applicable laws of descent and distribution.   Termination of Optionee’s employment with the Company to accept employment with a subsidiary of the Company, or vice versa or to go on leave of absence at the request, or with the approval, of the Company will not be deemed a termination of employment for the for the purpose of this paragraph. In the event of termination of employment, Optionee may exercise the Option only to the extent vested under paragraph 2 above on the date of termination.   Termination for cause, for purposes of the Plan and this Agreement, refers to any termination resulting from:  (a) conviction of a crime that is disqualifying from employment under City National’s Criminal Convictions Policy, as set forth in the Colleague Handbook, absent an FDIC waiver; or (b) gross misconduct or willful engagement in illegal conduct; or (c) willful and continued failure to perform substantially all of the Optionee’s duties with City National (except when such failure is due to incapacity due to physical or mental illness); or (d) a conflict of interest, as set forth in the CNB Code of Conduct.   6.             Limitation on Transfer. Except as otherwise provided in subparagraph 5.4 above, or pursuant to a DRO, the Option and all rights granted under this Agreement are personal to Optionee and cannot be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to execution, attachment or similar processes.   7.             Employment Relationship. For purposes of this Agreement, Optionee shall be considered to be in the employment of the Company as long as Optionee remains an employee of either the Company, any successor corporation or a parent or subsidiary corporation (as defined in section 424 of the Internal Revenue Code) of the Company or any successor corporation. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee, or its delegate, as appropriate, and its determination shall be final.   The Plan and this Agreement shall not constitute a contract of employment between the Company, any successor corporation or a parent or subsidiary corporation of the Company or any successor corporation and Optionee. Each Optionee is an at-will employee except as provided in any other written agreement. Nothing contained in the Plan (or any Award made pursuant to this Plan) or the Agreement shall confer upon Optionee any right to continue in the employment of the Company, or guarantee of payment of future incentives, or shall interfere with, affect or restrict in any way, the rights of the Company, which are expressly reserved, to discharge Optionee, any time for any reason whatsoever, with or without cause.   3 --------------------------------------------------------------------------------   8.             Availability of Plan/Plan Incorporated. Optionee acknowledges that Company has made available to Optionee a copy of the Plan and agrees that this Award of Options shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement. In the event of any conflict between the Plan and this Agreement, the provisions of the Plan will prevail. Optionee’s rights hereunder are subject to modification or termination in certain events, as provided in the Plan, including without limitation such rules and regulations as may from time to time be adopted or promulgated in accordance with paragraph 1.3 of the Plan. Capitalized terms not defined in this Agreement shall have the meanings set forth in the Plan.   9.             Committee Powers. No provision contained in this Agreement shall in any way terminate, modify or alter, or be construed or interpreted as terminating, modifying or altering any of the powers, rights or authority vested in the Committee or, to the extent delegated, in its delegate pursuant to the terms of the Plan or resolutions adopted in furtherance of the Plan, including, without limitation, the right to make certain determinations and elections with respect to the Options. All decisions of the Committee (as established pursuant to the Plan) with respect to any questions concerning the application, administration or interpretation of the Plan will be conclusive and binding on the Company and Optionee.   10.          No Rights as Shareholder. Optionee will have no rights as shareholder with respect to Shares of Common Stock covered by this Option until the date of the issuance of a stock certificate or stock certificates. No adjustment will be made for cash dividends for which the record date is prior to the date such stock certificate or certificates are issued.   12.          Compliance with Securities Laws. No Shares may be purchased or issued upon the exercise of this Option unless and until any then applicable requirements of the Securities and Exchange Commission, the California Commissioner of Corporations, any national securities exchange upon which the Common Stock of the Company may be listed and any other regulatory agency having jurisdiction have been fully complied with.   13.          Dispute Resolution. If a dispute arises between Optionee and Company in connection with the Stock Option award or the vesting or exercise of the Stock Options, the dispute will be resolved by binding arbitration with the American Arbitration Association (AAA) in accordance with the AAA’s Commercial Arbitration Rules then in effect.   14.          Binding Effect. This Agreement will bind and inure to the benefit of the Company and its successors and assigns, and Optionee and any heir, executor or administrator of Optionee as permitted by subparagraph 5.4.   15.          Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California.   IN WITNESS WHEREOF, the parties have executed the Agreement as of the date and year written above.   4 --------------------------------------------------------------------------------     CITY NATIONAL CORPORATION,       a Delaware corporation                     By: /s/ Christopher J. Carey       Christopher J. Carey, Executive Vice       President, Chief Financial Officer                               Optionee     PLEASE RETURN ONE COPY OF THE SIGNED AGREEMENT TO THE COMPENSATION SECTION OF HUMAN RESOURCES (86-001)   5 --------------------------------------------------------------------------------

  Exhibit 10.2 APACHE CORPORATION MONEY PURCHASE RETIREMENT PLAN Effective January 1, 2006 Document Prepared December 7, 2005 --------------------------------------------------------------------------------   Table of Contents           ARTICLE I Definitions     1             1.1 Account     1   1.2 Account Owner     1   1.3 Affiliated Entity     1   1.4 Alternate Payee     1   1.5 Annual Addition     1   1.6 Code     2   1.7 Committee     2   1.8 Company     2   1.9 Company Contributions     2   1.10 Company Mandatory Contributions     2   1.11 Compensation     2   1.12 Covered Employee     3   1.13 Disability     4   1.14 Domestic Relations Order     4   1.15 Employee     4   1.16 ERISA     4   1.17 Five-Percent Owner     4   1.18 Highly Compensated Employee     5   1.19 Key Employee     5   1.20 Lapse in Apache Employment     5   1.21 Limitation Year     5   1.22 Non-Highly Compensated Employee     5   1.23 Non-Key Employee     5   1.24 Normal Retirement Age     5   1.25 Participant     5   1.26 Period of Service     5   1.27 Plan Year     6   1.28 QDRO     6   1.29 QJSA     6   1.30 QPSA     6   1.31 Required Beginning Date     6   1.32 Spouse     6   1.33 Termination from Service Date     6   1.34 Valuation Date     6             ARTICLE II Participation     7             2.1 Participation     7   2.2 Enrollment Procedure     7             ARTICLE III Contributions     7             3.1 Company Contributions     7   3.2 Participant Contributions     8   3.3 Return of Contributions     8   3.4 Limitation on Annual Additions     8             ARTICLE IV Interests in the Trust Fund     9             4.1 Participants’ Accounts     9   4.2 Valuation of Trust Fund     9   4.3 Allocation of Increase or Decrease in Net Worth     9             ARTICLE V Amount of Benefits     10             5.1 Vesting Schedule     10   5.2 Vesting After a Lapse in Apache Employment     10   5.3 Calculating Service     11   5.4 Forfeitures     12   5.5 Transfers — Portability     13             ARTICLE VI Distribution of Benefits     13             6.1 Beneficiaries     13   6.2 Distributable Amount     14   6.3 Manner of Distribution     14   6.5 Direct Rollover Election     17             ARTICLE VII Allocation of Responsibilities — Named Fiduciaries     17             7.1 No Joint Fiduciary Responsibilities     17   7.2 The Company     18   7.3 The Trustee     18   7.4 The Committee — Plan Administrator     18   7.5 Committee to Construe Plan     18   7.6 Organization of Committee     18   7.7 Agent for Process     19   7.8 Indemnification of Committee Members     19   7.9 Conclusiveness of Action     19   7.10 Payment of Expenses     19             ARTICLE VIII Trust Agreement — Investments     19             8.1 Trust Agreement     19   8.2 Plan Expenses     19   8.3 Investments     19             ARTICLE IX Termination and Amendment     20             9.1 Termination of Plan or Discontinuance of Contributions     20   9.2 Allocations upon Termination     20   9.3 Procedure Upon Termination of Plan     20   9.4 Amendment by Apache     21             ARTICLE X Plan Adoption by Affiliated Entities     21             10.1 Adoption of Plan     21   10.2 Agent of Affiliated Entity     21   10.3 Disaffiliation and Withdrawal from Plan     21   10.4 Effect of Disaffiliation or Withdrawal     22   10.5 Actions Upon Disaffiliation or Withdrawal.     22             ARTICLE XI Top-Heavy Provisions     22             11.1 Application of Top-Heavy Provisions     22    i Document Prepared December 7, 2005 --------------------------------------------------------------------------------             11.2 Determination of Top-Heavy Status     22   11.3 Special Vesting Rule     23   11.4 Special Minimum Contribution     23   11.5 Change in Top-Heavy Status     23             ARTICLE XII Miscellaneous     23             12.1 Right to Dismiss Employees — No Employment Contract     23   12.2 Claims Procedure     23   12.3 Source of Benefits     25   12.4 Exclusive Benefit of Employees     25   12.5 Forms of Notices     25   12.6 Failure of Any Other Entity to Qualify     25   12.7 Notice of Adoption of the Plan     25   12.8 Plan Merger     25   12.9 Inalienability of Benefits — Domestic Relations Orders     25   12.10 Payments Due Minors or Incapacitated Individuals     28   12.11 Uniformity of Application     28   12.12 Disposition of Unclaimed Payments     28   12.13 Applicable Law     29             ARTICLE XIII Uniformed Services Employment and Reemployment Rights Act of 1994     29             13.1 General     29   13.2 While a Serviceman     29   13.3 Expiration of USERRA Reemployment Rights     29   13.4 Return From Uniformed Service     30   Appendix A — Participating Companies Appendix B — DEKALB Energy Company / Apache Canada Ltd Appendix C — Corporate Transactions  ii Document Prepared December 7, 2005 --------------------------------------------------------------------------------   APACHE CORPORATION MONEY PURCHASE RETIREMENT PLAN PREAMBLE Apache Corporation, a Delaware corporation (“Apache”), maintains this money purchase pension plan (the “Plan”), which is intended to be qualified under Code §401(a). The Plan is hereby amended and restated as set forth below, effective January 1, 2006, except for those provisions that have their own specific effective dates. Each Appendix to this Plan is a part of the Plan document. It is intended that an Appendix will be used to (1) describe which business entities are actively participating in the Plan, (2) describe any special participation, eligibility, vesting, or other provisions that apply to the employees of a business entity, (3) describe any special provisions that apply to Participants affected by a designated corporation transaction, and (4) describe any special distribution rules that apply to directly transferred benefits from other plans. ARTICLE I Definitions The following words and phrases shall have the meaning set forth below: 1.1   Account       “Account” means the account established pursuant to section 4.1.   1.2   Account Owner       “Account Owner” means a Participant who has an Account balance, an Alternate Payee who has an Account balance, or a beneficiary who has obtained an interest in the Account of the previous Account Owner because of the previous Account Owner’s death.   1.3   Affiliated Entity       “Affiliated Entity” means:   (a)   For all purposes of the Plan except those listed in subsection (b), the term “Affiliated Entity” means any legal entity that is treated as a single employer with Apache pursuant to Code §414(b), §414(c), §414(m), or §414(o).     (b)   For purposes of determining Annual Additions under section 1.5, limiting Annual Additions to a Participant’s Account under section 3.4, and construing the defined terms as they are used in sections 1.5 and 3.4 (such as “ Compensation” and “Employee”), the term “Affiliated Entity” means any legal entity that is treated as a single employer with Apache pursuant to Code §414(m) or §414(o), and any legal entity that would be an Affiliated Entity pursuant to Code §414(b) or §414(c) if the phrase “more than 50%” were substituted for the phrase “at least 80%” each place it occurs in Code §1563(a)(1). 1.4   Alternate Payee       “Alternate Payee” means a Participant’s Spouse, former spouse, child, or other dependent who is recognized by a QDRO as having a right to receive all, or a portion of, the benefits payable under this Plan with respect to such Participant.   1.5   Annual Addition       “Annual Addition” means the allocations to a Participant’s Account for any Limitation Year, as described in detail below.   (a)   Annual Additions shall include: (i) Company Contributions (except as provided in paragraphs (b)(iii) and (b)(v)) to this Plan and Company contributions to any other defined contribution plan maintained by the Company or any Affiliated Entity, (ii) after-tax contributions to any other defined contribution plan maintained by the Company or an Affiliated Entity; (iii) elective deferrals by the Participant, pursuant to Code §401(k), to any other defined contribution plan maintained by the Company or an Page 1 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------         Affiliated Entity; (iv) forfeitures allocated to a Participant’s Account in this Plan and any other defined contribution plan maintained by the Company or any Affiliated Entity (except as provided in paragraphs (b)(iii) and (b)(v) below); (v) all amounts paid or accrued to a welfare benefit fund as defined in Code §419(e) and allocated to the separate account (under the welfare benefit fund) of a Key Employee to provide post-retirement medical benefits; and (vi) contributions allocated on the Participant’s behalf to any individual medical account as defined in Code §415(l)(2).     (b)   Annual Additions shall not include: (i) rollovers to any defined contribution plan maintained by the Company or an Affiliated Entity; (ii) repayments of loans made to a Participant from a qualified plan maintained by the Company or any Affiliated Entity; (iii) repayments of forfeitures for rehired Participants, as described in Code §411(a)(7)(B) and §411(a)(3)(D); (iv) direct transfers of funds from one qualified plan to any qualified plan maintained by the Company or any Affiliated Entity; (v) repayments of forfeitures of missing individuals pursuant to section 12.12; or (vi) salary deferrals within the meaning of Code §414(u)(2)(C) or §414(v)(6)(B). 1.6   Code       “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations and rulings in effect thereunder from time to time.   1.7   Committee       “Committee” means the administrative committee provided for in section 7.4.   1.8   Company       “Company” means Apache, any successor thereto, and any Affiliated Entity that adopts the Plan pursuant to Article X. Each Company is listed in Appendix A.   1.9   Company Contributions       “Company Contributions” means all contributions to the Plan made by the Company pursuant to section 3.1 for the Plan Year.   1.10   Company Mandatory Contributions       “Company Mandatory Contributions” means all contributions to the Plan made by the Company pursuant to subsection 3.1(a) for the Plan Year.   1.11   Compensation       “Compensation” means:   (a)   Code §415 Compensation. For purposes of determining the limitation on Annual Additions under section 3.4 and the minimum contribution under section 11.4 when the Plan is top-heavy, Compensation shall mean those amounts reported as “wages, tips, other compensation” on Form W-2 by the Company or an Affiliated Entity and elective contributions that are not includable in the Employee’s income pursuant to Code §125, §132(f)(4), §402(e)(3), §402(h), §403(b), §408(p), §414(u)(2)(C), §414(v)(6)(B), or §457. For purposes of section 3.4, Compensation shall be measured over a Limitation Year. For purposes of section 11.4, Compensation shall be measured over a Plan Year.     (b)   Code §414(q) Compensation. For purposes of identifying Highly Compensated Employees and Key Employees, Compensation shall mean those amounts reported as “wages, tips, other compensation” on Form W-2 by the Company or an Affiliated Entity, and elective contributions that are not includable in the Employee’s income pursuant to Code §125, §132(f)(4), §402(e)(3), §402(h), §403(b), §408(p), §414(u)(2)(C), §414(v)(6)(B), or §457. Compensation shall be measured over a Plan Year. Compensation shall include only amounts paid to the Employee, and shall not include any additional amounts accrued by the Employee.     (c)   Benefit Compensation. For purposes of determining and allocating Company Mandatory Contributions under paragraphs 3.1(a)(i) and 3.1(a)(ii), Compensation shall generally mean regular compensation paid by the Company. Page 2 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------     (i)   Specifically, Compensation shall include:   (A)   Regular salary or wages,     (B)   Overtime pay,     (C)   The regular annual bonus (unless all or a portion is excluded by the Committee before the regular annual bonus is paid) and any other bonus designated by the Committee,     (D)   Salary reductions pursuant to the Apache Corporation 401(k) Savings Plan,     (E)   Salary reductions that are excludable from an Employee’s gross income pursuant to Code §125 or §132(f)(4), and     (F)   Amounts contributed as salary deferrals to the Non-Qualified Retirement/Savings Plan of Apache Corporation’.   (ii)   Compensation shall exclude:   (A)   Commissions,     (B)   Severance pay,     (C)   Moving expenses,     (D)   Any gross-up of moving expenses to account for increased income or employment taxes,     (E)   Foreign service premiums paid as an inducement to work outside of the United States,     (F)   Credits or benefits under this Plan and credits or benefits under the Apache Corporation 401(k) Savings Plan (except as provided in subparagraph (i)(D)),     (G)   Other contingent compensation,     (H)   Any amount relating to the granting of a stock option by the Company or an Affiliated Entity, the exercise of such a stock option, or the sale or deemed sale of any shares thereby acquired,     (I)   Contributions to any other fringe benefit plan (including, but not limited to, overriding royalty payments or any other exploration-related payments),     (J)   Any bonus other than (1) a regular annual bonus not otherwise excluded by the Committee and (2) a bonus specifically included as Compensation by the Committee, in each case pursuant to subparagraph 1.11(c)(i)(C), and     (K)   Except as provided under subparagraph (i)(F), any benefit accrued under, or any payment from, any nonqualified plan of deferred compensation.   (iii)   Compensation shall be measured over that portion of a Plan Year while the Employee is a Covered Employee. Compensation shall include only amounts paid to the Employee during the Plan Year, and shall not include any amounts accrued by but not paid to the Employee during the Plan Year.   (d)   Limit on Compensation. For purposes of calculating the minimum contribution required in top-heavy years under subsection (a) and for all purposes of subsection (c), the Compensation taken into account for the Plan Year shall not exceed the dollar limit specified in Code §401(a)(17) in effect for the Plan Year. 1.12   Covered Employee       “Covered Employee” means any Employee of the Company, with the following exceptions.   (a)   Any individual directly employed by an entity other than the Company shall not be a Covered Employee, even if such individual is considered a common-law employee of the Company or is treated as an employee of the Company pursuant to Code §414(n). Page 3 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------     (b)   An Employee shall not be a Covered Employee unless he is either based in the U.S. or on the U.S. payroll.     (c)   An Employee included in a unit of Employees covered by a collective bargaining agreement shall not be a Covered Employee unless the collective bargaining agreement specifically provides for such Employee’s participation in the Plan.     (d)   An Employee whose job is classified as “temporary” shall be a Covered Employee only after he has worked for the Company and Affiliated Entities for six consecutive months.     (e)   An Employee shall not be a Covered Employee while he is classified as an “intern,” a “consultant,” or an “independent contractor.” An Employee may be classified as an “intern” only if he is currently enrolled (or the Company expects him to be enrolled within the next 12 months) in a high school, college, or university. An Employee may be classified as an intern even if he does not receive academic course credit from his school for this employment with the Company.     (f)   An individual who is employed pursuant to a written agreement with an agency or other third party for a specific job assignment or project shall not be a Covered Employee. 1.13   Disability       “Disability” means a physical or mental condition that qualifies the Employee for long-term disability payments under Apache’s Long-Term Disability Plan.   1.14   Domestic Relations Order       “Domestic Relations Order” means any judgment, decree, or order (including approval of a property settlement agreement) issued by a court of competent jurisdiction that relates to the provisions of child support, alimony, or maintenance payments, or marital property rights to a Participant’s Spouse, former spouse, child, or other dependent and is made pursuant to a state domestic relations law (including a community property law).   1.15   Employee       “Employee” means each individual who performs services for the Company or an Affiliated Entity and whose wages are subject to withholding by the Company or an Affiliated Entity. The term “Employee” includes only individuals currently performing services for the Company or an Affiliated Entity, and excludes former Employees who are still being paid by the Company or an Affiliated Entity (whether through the payroll system, through overriding royalty payments, through exploration-related payments, severance, or otherwise). The term “Employee” also includes any individual who provides services to the Company or an Affiliated Entity pursuant to an agreement between the Company or an Affiliated Entity and a third party that employs the individual, but only if the individual has performed such services for the Company or an Affiliated Entity on a substantially full-time basis for at least one year and only if the services are performed under the primary direction or control by the Company or an Affiliated Entity; provided, however, that if the individuals included as Employees pursuant to the first part of this sentence constitute 20% or less of the Non-Highly Compensated Employees of the Company and Affiliated Entities, then any such individuals who are covered by a qualified plan that is a money purchase pension plan that provides a nonintegrated employer contribution rate for each participant of at least 10% of compensation, that provides for full and immediate vesting, and that provides immediate participation for each employee of the third party (other than those who perform substantially all of their services for the third party and other than those whose compensation from the third party during each of the four preceding plan years was less than $1000) shall not be considered an Employee.   1.16   ERISA       “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations and rulings in effect thereunder from time to time.   1.17   Five-Percent Owner       “Five Percent Owner” means: Page 4 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------     (a)   With respect to a corporation, any individual who owns (either directly or indirectly according to the rules of Code §318) more than 5% of the value of the outstanding stock of the corporation or stock processing more than 5% of the total combined voting power of all stock of the corporation.     (b)   With respect to a non-corporate entity, any individual who owns (either directly or indirectly according to rules similar to those of Code §318) more than 5% of the capital or profits interest in the entity.     (c)   An individual shall be a Five-Percent Owner for a particular year if such individual is a Five-Percent Owner at any time during such year. 1.18   Highly Compensated Employee       “Highly Compensation Employee” means, for each Plan Year, an Employee who (a) was in the “top-paid group” during the immediately preceding Plan Year and had Compensation of $80,000 (as adjusted by the Secretary of the Treasury) or more during the immediately preceding Plan Year, or (b) is a Five-Percent Owner during the current Plan Year, or (c) was a Five-Percent Owner during the immediately preceding Plan Year. The term “top-paid group” means the top 20% of Employees when ranked on the basis of Compensation paid during the year. In determining the number of Employees in the top-paid group, the Committee may elect to exclude Employees with less than six (or some smaller number of) months of service at the end of the year, Employees who normally work less than 171/2 (or some fewer number of) hours per week, Employees who normally work less than six (or some fewer number of) months during any year, Employees younger than 21 (or some younger age) on the last day of the year, and Employees who are nonresident aliens who receive no earned income (within the meaning of Code §911(d)(2)) from Apache or an Affiliated Entity that constitutes income from sources within the United States, within the meaning of Code §861(a)(3). Furthermore, an Employee who is a nonresident alien who receives no earned income (within the meaning of Code §911(d)(2)) from Apache or an Affiliated Entity that constitutes income from sources within the United States (within the meaning of Code §861(a)(3)) during the year shall not be in the top-paid group for that year.   1.19   Key Employee       “Key Employee” means an individual described in Code §416(i)(1) and the regulations promulgated thereunder.   1.20   Lapse in Apache Employment       “Lapse in Apache Employment” has the meaning described in subsection 5.3(c).   1.21   Limitation Year       “Limitation Year” means the calendar year.   1.22   Non-Highly Compensated Employee       “Non-Highly Compensated Employee” means an Employee who is not a Highly Compensated Employee.   1.23   Non-Key Employee       “Non-Key Employee” means an Employee who is not a Key Employee.   1.24   Normal Retirement Age       “Normal Retirement Age” means age 65.   1.25   Participant       “Participant” means any individual with an account balance under the Plan except beneficiaries and Alternate Payees. The term “Participant” shall also include any individual who has accrued a benefit pursuant to subsection 3.1(a), but who does not yet have an Account balance.   1.26   Period of Service       “Period of Service” has the meaning described in subsection 5.3(a). Page 5 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------   1.27   Plan Year       “Plan Year” means the 12-month period on which the records of the Plan are kept, which shall be the calendar year.   1.28   QDRO       “QDRO,” which is an acronym for qualified domestic relations order, means a Domestic Relations Order that creates or recognizes the existence of an Alternate Payee’s right to, or assigns to an Alternate Payee the right to, receive all or a portion of the benefits payable with respect to a Participant under the Plan and with respect to which the requirements of Code §414(p) and ERISA §206(d)(3) are met.   1.29   QJSA       “QJSA,” which is an acronym for qualified joint and survivor annuity, means:   (a)   For a married Participant, a QJSA is an annuity that will provide equal monthly payments to the Participant for life, and if the Participant dies before his Spouse, the surviving Spouse shall receive monthly payments for her life, with each monthly payment equal to 50% of the monthly payment that the Participant received before his death.     (b)   For an unmarried Participant, a QJSA is an annuity that will provide equal monthly payments to the Participant for life. 1.30   QPSA       “QPSA,” which is an acronym for qualified pre-retirement survivor annuity, means an annuity that will provide equal monthly payments to the surviving Spouse of a Participant, for the life of the surviving Spouse.   1.31   Required Beginning Date       “Required Beginning Date” means:   (a)   Excepted as provided in subsections (b) and (c), Required Beginning Date means April 1 of the calendar year following the later of (i) the calendar year in which the Participant attains age 701/2, or (ii) the calendar year in which the Participant terminates employment with Apache and all Affiliated Entities.     (b)   For a Participant who is both an Employee and a Five-Percent Owner of Apache or an Affiliated Entity, the term “Required Beginning Date” means April 1 of the calendar year following the calendar year in which the Five-Percent Owner attains age 701/2. If an Employee older than 701/2 becomes a Five-Percent Owner, his Required Beginning Date shall be April 1 of the calendar year following the calendar year in which he becomes a Five-Percent Owner.     (c)   If a Participant is rehired after his Required Beginning Date, and he is not a Five-Percent Owner, he shall be treated upon rehire as if he has not yet had a Required Beginning Date, with the result that his minimum required distributions under subsection 6.4(c) will be zero until his new Required Beginning Date. His new Required Beginning Date shall be determined pursuant to subsection (a). 1.32   Spouse       “Spouse” means the individual of the opposite sex to whom a Participant is lawfully married according to the laws of the state of the Participant’s domicile.   1.33   Termination from Service Date       “Termination from Service Date” has the meaning described in subsection 5.3(b).   1.34   Valuation Date       “Valuation Date” means the last day of each Plan Year and any other dates as specified in section 4.2 as of which the assets of the Trust Fund are valued at fair market value and as of which the increase or decrease in the net worth of the Trust Fund is allocated among the Participants’ Accounts. Page 6 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------   ARTICLE II Participation 2.1   Participation.       Each Covered Employee shall be eligible to participate in the Plan on the day he becomes a Covered Employee. A Covered Employee shall cease to accrue benefits in the Plan on the day he ceases to be a Covered Employee.   2.2   Enrollment Procedure.       Notwithstanding section 2.1, a Covered Employee shall not be eligible to participate in the Plan until after completing the enrollment procedures specified by the Committee. Such enrollment procedures may, for example, require the Covered Employee to complete and sign an enrollment form or to complete an on-line enrollment. The Covered Employee shall provide all information requested by the Committee, such as the initial investment direction, the address and date of birth of the Employee, and the name, address, and date of birth of each beneficiary of the Employee. The Committee may require that the enrollment procedure be completed a certain number of days prior to the date any Company Contribution is allocated to the Covered Employee’s Account. ARTICLE III Contributions 3.1   Company Contributions.   (a)   Company Mandatory Contributions.   (i)   General. For each Plan Year, the Company shall contribute to the Trust Fund such amount of Company Mandatory Contributions as are necessary to fund the allocations described in this subsection. The Company may elect to treat any available forfeitures as Company Mandatory Contributions, pursuant to subsection 5.4(d).     (ii)   Regular Allocation. Each “eligible Participant” shall receive an allocation of Company Mandatory Contributions equal to 6% of the eligible Participant’s Compensation. For purposes of this subsection, an “eligible Participant” is a Participant who received credit for one Hour of Service as a Covered Employee during the Plan Year and who is employed by the Company or an Affiliated Entity on the last day of the Plan Year.   (b)   Miscellaneous Contributions.   (i)   Forfeiture Restoration. The Company may make additional contributions to the Plan to restore amounts forfeited from the Accounts of certain rehired Participants, pursuant to section 5.4. This additional contribution shall be required only when the available forfeitures are insufficient to restore such forfeited amounts, as described in subsection 5.4(d).     (ii)   Top-Heavy Contribution. The Company may make additional contributions to the Plan to satisfy the minimum contribution required by section 11.4. The Company may elect to use any available forfeitures for this purpose, pursuant to subsection 5.4(d).     (iii)   Missing Individuals. The Company may make additional contributions to the Plan to restore the forfeited benefit of any missing individual, pursuant to section 12.12. This additional contribution shall be required only when the available forfeitures are insufficient to restore such forfeited amounts, as described in subsection 5.4(d).     (iv)   Returning Servicemen. The Company may make additional contributions to the Plan to provide make-up contributions for returning servicemen, pursuant to section 13.4. The Company may elect to use any available forfeitures for this purpose, pursuant to subsection 5.4(d).   (c)   Contributions Contingent on Deductibility. The Company Contributions for a Plan Year (excluding forfeitures and contributions pursuant to paragraph 3.1(b)(iv)) shall not exceed the amount allowable as a deduction for Apache’s taxable year ending with or within the Plan Year pursuant to Code §404. Company Contributions (excluding contributions pursuant to paragraph 3.1(b)(iv) and any special contributions described in any paragraph of subsection 3.1(a) after paragraph (ii)) shall be paid to the Trustee no later than the due date (including any extensions) for filing the Company’s federal income Page 7 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------         tax return for such year. Company Contributions shall be made without regard to current or accumulated earnings and profits. The Company shall pay Company Contributions to the Trust Fund in the form of cash. 3.2   Participant Contributions.       Participants may not contribute to this Plan. The Plan does not accept rollovers or direct transfers.   3.3   Return of Contributions.   (a)   Mistake of Fact. Upon the request of the Company, the Trustee shall return to the Company any Company Contribution made under a mistake of fact. The Trustee may not return any such contribution later than one year after the Trustee received the contribution. The amount returned shall not exceed the excess of the amount contributed (reduced to reflect any decrease in the net worth of the appropriate Accounts attributable thereto) over the amount that would have been contributed without the mistake of fact. Appropriate reductions shall be made in the Accounts of Participants to reflect the return of any contributions previously credited to such Accounts.     (b)   Non-Deductible Contributions. Upon the request of the Company, the Trustee shall return to the Company any Company Contribution that is not deductible under Code §404. All contributions under the Plan are expressly conditioned upon their deductibility for federal income tax purposes. The amount that shall be returned shall be the excess of the amount contributed (reduced to reflect any decrease in the net worth of the appropriate Accounts attributable thereto) over the amount that would have been contributed if there had not been a mistake in determining the deduction. Appropriate reductions shall be made in the Accounts of Participants to reflect the return of any contributions previously credited to such Accounts. Any contribution conditioned on its deductibility shall be returned only if it is returned within one year after it is disallowed as a deduction.     (c)   Effect of Correction. A contribution shall be returned under subsection (a) or (b) only to the extent that its return will not reduce the Account of a Participant to an amount less than the balance that would have been credited to the Participant’s Account had the contribution not been made. 3.4   Limitation on Annual Additions.   (a)   Limit. The Annual Additions to a Participant’s Account(s) in this Plan and to his accounts in any other defined contribution plans maintained by the Company or an Affiliated Entity for any Limitation Year shall not exceed in the aggregate the lesser of (i) $40,000 (as adjusted by the Secretary of the Treasury), or (ii) 100% of the Participant’s Compensation. The limit in clause (ii) shall not apply to any contribution for medical benefits (within the meaning of Code §419A(f)(2)) after separation from service that is treated as an Annual Addition.     (b)   Corrective Mechanism.   (i)   Reduction in Annual Additions. A Participant’s Annual Additions shall be reduced, to the extent necessary to satisfy the foregoing limits, if the Annual Additions arose as a result of a reasonable error in estimating Compensation, as a result of the allocation of forfeitures, or as a result of other facts and circumstances as provided in the regulations under Code §415.     (ii)   Order of Reduction, Multiple Plans. Apache also maintains the Apache Corporation 401(k) Savings Plan, a profit sharing plan containing a cash or deferred arrangement. The Participant’s Annual Additions shall be reduced, to the extent necessary, in the following order. First, to the extent that the Annual Additions in a single plan exceed the limits of subsection (a), the Annual Additions in that plan shall be reduced, in the order specified in that plan, to the extent necessary to satisfy the limits of subsection (a). Then, if the Participant has Annual Additions in more than one plan and in the aggregate they exceed the limits of subsection (a), the Annual Additions will be reduced as follows.   (A)   If the Participant was eligible to participate in the Non-Qualified Retirement/Savings Plan of Apache Corporation on the last day of the Plan Year in which the excess Annual Addition occurred, the Annual Additions to this Plan will be reduced before the Annual Additions to the Apache Corporation 401(k) Savings Plan are reduced, in the order specified in that plan. Page 8 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------     (B)   If the Participant was not eligible to participate in the Non-Qualified Retirement/Savings Plan of Apache Corporation on the last day of the Plan Year in which the excess Annual Addition occurred, the Annual Additions to the Apache Corporation 401(k) Savings Plan shall be reduced, in the order specified in that plan before the Annual Additions to this Plan are reduced.   (iii)   Disposition of Excess Annual Additions. Any reduction of Company Contributions shall be placed in a suspense account in the Trust Fund and used to reduce future Company Contributions to the Plan. The following rules shall apply to such suspense account: (A) no further Company Contributions may be made if the allocation thereof would be precluded by Code §415; (B) any increase or decrease in the net value of the Trust Fund attributable to the suspense account shall not be allocated to the suspense account, but shall be allocated to the Accounts; and (C) all amounts held in the suspense account shall be allocated as of each succeeding allocation date on which forfeitures may be allocated pursuant to subsection 5.4(d) (and may be allocated more frequently if the Committee so directs), until the suspense account is exhausted. ARTICLE IV Interests in the Trust Fund 4.1   Participants’ Accounts.       The Committee shall establish and maintain a separate Account in the name of each Participant, but the maintenance of such Accounts shall not require any segregation of assets of the Trust Fund. Each Account shall contain the Company Contributions allocated to the Participant and the increase or decrease in the net worth of the Trust Fund attributable to such contributions.   4.2   Valuation of Trust Fund.   (a)   General. The Trustee shall value the assets of the Trust Fund at least annually as of the last day of the Plan Year, and as of any other dates determined by the Committee, at their current fair market value and determine the net worth of the Trust Fund. In addition, the Committee may direct the Trustee to have a special valuation of the assets of the Trust Fund when the Committee determines, in its sole discretion, that such valuation is necessary or appropriate or in the event of unusual market fluctuations of such assets. Such special valuation shall not include any contributions made by Participants since the preceding Valuation Date, any Company Contributions for the current Plan Year, or any unallocated forfeitures. The Trustee shall allocate the expenses of the Trust Fund occurring since the preceding Valuation Date, pursuant to section 8.2, and then determine the increase or decrease in the net worth of the Trust Fund that has occurred since the preceding Valuation Date. The Trustee shall determine the share of the increase of decrease that is attributable to the non-separately accounted for portion of the Trust Fund and to any amount separately accounted for, as described in subsections (b) and (c).     (b)   Mandatory Separate Accounting. The Trustee shall separately account for (i) any individually directed investments permitted under section 8.3, and (ii) amounts subject to a Domestic Relations Order.     (c)   Permissible Separate Accounting. The Trustee may separately account for the following amounts to provide a more equitable allocation of any increase or decrease in the net worth of the Trust Fund:   (i)   The distributable amount of a Participant, including any amount distributable to an Alternate Payee or to a beneficiary of a deceased Participant; and     (ii)   Company Contributions made since the preceding Valuation Date;     (iii)   Any other amounts for which separate accounting will provide a more equitable allocation of the increase or decrease in the net worth of the Trust Fund. 4.3   Allocation of Increase or Decrease in Net Worth.       The Committee shall, as of each Valuation Date, allocate the increase or decrease in the net worth of the Trust Fund that has occurred since the preceding Valuation Date between the non-separately accounted for portion of the Trust Fund and the amounts separately accounted for that are identified in subsections 4.2(b) Page 9 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------       and 4.2(c). The increase or decrease attributable to the non-separately accounted for portion of the Trust Fund shall be allocated among the appropriate Accounts in the ratio that the dollar value of each such Account bore to the aggregate dollar value of all such Accounts on the preceding Valuation Date after all allocations and credits made as of such date had been completed. The Committee shall then allocate any amounts separately accounted for (including the increase or decrease in the net worth of the Trust Fund attributable to such amounts) to the appropriate Account. ARTICLE V Amount of Benefits 5.1   Vesting Schedule.   (a)   General Rule. Unless subsection (b), (c), or (d) provide for faster vesting, a Participant’s interest in his Account shall become vested in accordance with the following schedule:                   Period of Service   Vesting Percentage     Less than 1 year     0 %     At least 1 year, but less than 2 years     20 %     At least 2 year, but less than 3 years     40 %     At least 3 year, but less than 4 years     60 %     At least 4 year, but less than 5 years     80 %     5 or more years     100 %   (b)   Full Vesting in Certain Circumstances. A Participant shall have a fully vested and nonforfeitable interest in his Account (i) upon his Normal Retirement Age if he is an Employee on such date, (ii) upon his death while an Employee or while on an approved leave of absence from the Company or an Affiliated Entity, or (iii) upon his termination of employment with the Company or an Affiliated Entity because of a Disability.     (c)   Change of Control. The Accounts of all Participants shall be fully vested as of the effective date of a “change in control.” For purposes of this subsection, a “change of control” shall mean the event occurring when a person, partnership, or corporation, together with all persons, partnerships, or corporations acting in concert with each person, partnership, or corporation, or any or all of them, acquires more than 20% of Apache’s outstanding voting securities; provided that a change of control shall not occur if such persons, partnerships, or corporations acquiring more than 20% of Apache’s voting securities is solicited to do so by Apache’s board of directors, upon its own initiative, and such persons, partnerships, or corporations have not previously proposed to acquire more than 20% of Apache’s voting securities in an unsolicited offer made either to Apache’s board of directors or directly to the stockholders of Apache.     (d)   Plan Termination. A Company Contributions Account shall be fully vested as described in section 9.1, which discusses the full or partial termination of the Plan. 5.2   Vesting After a Lapse in Apache Employment.   (a)   Separate Accounts. If a Participant is rehired before incurring a one-year Lapse in Apache Employment, he shall have only one Account, and its vested percentage shall be determined under section 5.1. If a Participant is rehired after incurring a one-year Lapse in Apache Employment, he shall have two Accounts, an “old” Account for the contributions from his earlier episode of employment, and a “new” Account for his later episode of employment. If both the old and new Accounts are fully vested, they shall be combined into a single Account.     (b)   Vesting of New Account. The vested percentage of the new Account shall initially be determined based solely on the Participant’s Period of Service after rehire. If the Participant satisfies one of the following sets of conditions, the vested percentage of the new Account shall be determined by aggregating his Periods of Service from both episodes of employment.   (i)   The Participant had a vested balance in the Plan during his first episode of employment, and he completes a one-year Period of Service after rehire. Page 10 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------     (ii)   The Participant did not have a vested balance in the Plan during his first episode of employment, his Lapse in Apache Employment was for less than five years, and his Period of Service after rehire is longer than the Lapse in Apache Employment.   (c)   Vesting of Old Account. If the Participant’s Lapse in Apache Employment was for five years or longer, the vested percentage of the old Account shall be based solely on the Participant’s Period of Service from his first episode of employment. If the Participant’s Lapse in Apache Employment was for less than five years, the vested percentage of the old Account shall be determined by aggregating his Periods of Service from both episodes of employment. 5.3   Calculating Service.       This section is effective as of January 1, 2005.   (a)   Period of Service.   (i)   General. A Participant’s Period of Service prior to January 1, 2005 shall be determined according to the provisions of the Plan in effect when the service was rendered. A Participant’s Period of Service begins on the date he first begins to perform duties as an Employee for which he is entitled to payment, and ends on his Termination From Service Date. In addition, a Participant’s Period of Service also includes the period between his Termination From Service Date and the day he again begins to perform duties for the Company or an Affiliated Entity for which he is entitled to payment, but only if such period is less than one year in duration.     (ii)   Additional Rules. The service-crediting provisions in this paragraph are more generous than required by the Code.   (A)   Leased Employees. For vesting purposes only, the Plan shall treat an individual as an Employee if he satisfies all the requirements specified in Code §414(n)(2) for being a leased employee of Apache’s or an Affiliated Entity’s, except for the requirement of having performed such services for at least one year.     (B)   Approved Leave. If the Employee is absent from the Company or Affiliated Entity for more than one year because of an approved leave of absence (either with or without pay) for any reason (including, but not limited to, jury duty) and the Employee returns to work at or prior to the expiration of his leave of absence, no Termination From Service Date will occur during the leave of absence.     (C)   Servicemen. See Article XIII for special provisions that apply to Servicemen.     (D)   Corporate Transactions. See Appendix C for instances in which a new Employee’s Period of Service includes his prior employment with another company.     (E)   Contractors. If an “eligible contractor” becomes an Employee, his Period of Service shall include his previous continuous service as an eligible contractor, excluding any service provided before 2003. An “eligible contractor” is an individual who (A) performed services for Apache or an Affiliated Entity on a substantially full-time basis in the capacity of an independent contractor (for federal income tax purposes); (B) became an Employee within a month of ceasing to be an independent contractor working full-time for Apache or an Affiliated Entity; and (C) notified the Plan of his prior service as an independent contractor within two months of becoming an Employee (or, if later, by February 28, 2006).   (b)   Termination From Service Date.   (i)   Usual Rule. If the Employee quits, is discharged, retires, or dies, his Termination From Service Date occurs on the last day the Employee performs services for the Company or an Affiliated Entity, except for an Employee who incurs a Disability, in which case his Termination From Service Date does not occur, even if he quits, until the earlier of the one-year anniversary of the date his Disability or the date he recovers from his Disability.     (ii)   Other Absences. If an Employee is absent from the Company and Affiliated Entities for any reason other than a quit, discharge, or retirement, his “Termination From Service Date” is the Page 11 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------         earlier of (A) the date he quits, is discharged, retires, or dies, or (B) one year from the date the Employee is absent from the Company or Affiliated Entity for any other reason (such as vacation, holiday, sickness, disability, leave of absence, or temporary lay-off), with the following exception. If the Employee is absent from the Company or Affiliated Entity because of parental leave (which includes only the pregnancy of the Employee, the birth of the Employee’s child, the placement of a child with the Employee in connection with adoption of such child by the Employee, or the caring for such child immediately following birth or placement) on the first anniversary of the day the Employee was first absent, his Termination From Service Date does not occur until the second anniversary of the day he was first absent (and the period between the first and second anniversaries of the day he was first absent shall not be counted in his Period of Service).   (c)   Lapse in Apache Employment. A Lapse in Apache Employment means the period commencing on an individual’s Termination from Service Date and ending on the date he again begins to perform services as an Employee. 5.4   Forfeitures.   (a)   Exceptions to the Vesting Rules. The following rules supersede the vesting rules of section 5.1.   (i)   Excess Annual Additions. Annual Additions to a Participant’s Accounts and any increase or decrease in the net worth of the Participant’s Accounts attributable to such Annual Additions may be reduced to satisfy the limits described in section 3.4. Any reduction shall be used as specified in section 3.4.     (ii)   Missing Individuals. A missing individual’s vested Accounts may be forfeited as of the last day of any Plan Year, as provided in section 13.12. Any such forfeiture shall be used as specified in subsection (d).   (b)   Regular Forfeitures. A Participant’s non-vested interest in his Account shall be forfeited at the end of the Plan Year in which the Participant terminates employment. Any such forfeiture shall be used as specified in subsection (d).     (c)   Restoration of Forfeitures.   (i)   Missing Individuals. The forfeiture of a missing individual’s Account(s), as described in section 13.12, shall be restored to such individual if the individual makes a claim for such amount.     (ii)   Regular Forfeitures.   (A)   Rehire Within 5 Years. If a Participant is rehired before incurring a five-year Lapse in Apache Employment, and the Participant has received a distribution of his entire vested interest in his Account (with the result that he forfeited his non-vested interest in such Account), then the exact amount of the forfeiture shall be restored to his Account. All the rights, benefits, and features available to the Participant when the forfeiture occurred shall be available with respect to the restored forfeiture. If such a Participant again terminates employment prior to becoming fully vested in his Account, the vested portion of his Account shall be determined by applying the vested percentage determined under section 5.1 to the sum of (x) and (y), then subtracting (y) from such sum, where: (x) is the value of his Account as of the Valuation Date immediately following his most recent termination of employment; and (y) is the amount previously distributed to the Participant on account of the prior termination of employment.     (B)   Rehire After 5 Years. If a Participant is rehired after incurring a five-year Lapse in Apache Employment, then no amount forfeited from his Account shall be restored to his Account.   (iii)   Method of Forfeiture Restoration. Forfeitures that are restored shall be accomplished by an allocation of the forfeitures under subsection (d) or by a special Company Contribution pursuant to paragraph 3.1(b)(i). Page 12 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------     (d)   Use of Forfeitures. The Committee shall decide how forfeitures are used. Forfeitures may be used (i) to restore Accounts as described in subsection (c), (ii) to pay those expenses of the Plan that are properly payable from the Trust Fund and that are not paid by the Company or Account Owners or charged to Accounts, or (iii) as any Company Contribution. 5.5   Transfers — Portability.       If any other employer adopts this or a similar money purchase pension plan and enters into a reciprocal agreement with the Company that provides that (a) the transfer of a Participant from such employer to the Company (or vice versa) shall not be deemed a termination of employment for purposes of the plans, and (b) service with either or both employers shall be credited for purposes of vesting under both plans, then the transferred Participant’s Account shall be unaffected by the transfer, except, if deemed advisable by the Committee, it may be transferred to the trustee of the other plan. ARTICLE VI Distribution of Benefits 6.1   Beneficiaries.   (a)   Designating Beneficiaries. Each Account Owner shall file with the Committee a designation of the beneficiaries and contingent beneficiaries to whom the distributable amount (determined pursuant to section 6.2) shall be paid in the event of the Account Owner’s death. In the absence of an effective beneficiary designation as to any portion of the distributable amount after a Participant dies, such amount shall be paid to the Participant’s surviving Spouse, or, if none, to his estate. In the absence of an effective beneficiary designation as to any portion of the distributable amount after any non-Participant Account Owner dies, such amount shall be paid to the Account Owner’s estate. The Account Owner may change a beneficiary designation at any time and without the consent of any previously designated beneficiary.     (b)   Special Rule for Married Participants. If the Account Owner is a married Participant, his Spouse shall be the sole beneficiary unless the Spouse has consented to the designation of a different beneficiary. To be effective, the Spouse’s consent must be in writing, witnessed by a notary public, and filed with the Committee. The Spouse must also consent to waive the QPSA with respect to the benefits payable to another beneficiary, as described in subsection (c). The Spouse cannot revoke her consent to waive the QPSA. Any spousal consent shall be effective only as to the Spouse who signed the consent.     (c)   Waiver of QPSA.   (i)   General. In order for the QPSA to be waived, the Participant must be provided with an explanation of the QPSA and then elect to waive the QPSA (which the Participant may do by naming a beneficiary other than his Spouse) and the Spouse must consent to the Participant’s election.     (ii)   Spouse’s Consent. The Spouse’s consent must be in writing. The Spouse’s signature must be witnessed by a Committee representative of by a notary public. The Spouse must acknowledge the effect of the consent. The Spouse may limit her consent to a specific beneficiary or may allow the Participant to thereafter designate a different beneficiary. The Spouse may limit her consent to a specific form of benefit. (The Spouse’s consent is not needed if the Spouse cannot be located or in certain other special circumstances identified in IRS guidance of general applicability.)     (iii)   Timing of Waiver. The Participant may waive the QPSA, or revoke the QPSA waiver, at any time; however, if the Participant elects to waive the QPSA, with the consent of his Spouse, before the first day of the Plan Year in which the Participant attains age 35, the waiver shall become invalid on the first day of the Plan Year in which the Participant attains age 35.     (iv)   Explanation. The Committee shall provide the Participant with a written explanation that describes the terms and conditions of the QPSA, the Participant’s right to choose another beneficiary, the rights of the Participant’s Spouse to insist upon a QPSA, the Participant’s right to revoke his election, and such other information as may be required under IRS guidance of general applicability. The written explanation must be provided within the following time Page 13 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------         limits. If the Participant terminates employment prior to age 35, the explanation must be provided within the period beginning one year before and ending one year after the termination of employment. If the Participant terminates employment on or after age 35, the explanation must be provided within the one of the following periods (whichever period ends last): (i) the period beginning on the first day of the Plan Year in which the Participant attains age 32 and ending on the last day of the Plan Year in which the Participant attains age 34; (ii) the period beginning one year before, and ending one year after, the Participant first becomes eligible to participate in the Plan; and (iii) the period beginning one year before, and ending one year after, a married Participant is fully or partially vested in his Account (which will normally occur either when the Participant gets married or when the Participant completes a one-year Period of Service).   (d)   Special Rule for Divorces. If an Account Owner has designated his spouse as a primary or contingent beneficiary, and the Account Owner and spouse later divorce (or their marriage is annulled), then the former spouse will be treated as having pre-deceased the Account Owner for purposes of interpreting a beneficiary designation form completed prior to the divorce or annulment. This subsection (d) will apply only if the Committee is informed of the divorce or annulment before payment to the former spouse is authorized.     (e)   Disclaimers. Any individual or legal entity who is a beneficiary may disclaim all or any portion of his interest in the Plan, provided that the disclaimer satisfies the requirements of Code §2518(b) and applicable state law. The legal guardian of a minor or legally incompetent person may disclaim for such person. The personal representative (or the individual or legal entity acting in the capacity of the personal representative according to applicable state law) may disclaim on behalf of a beneficiary who has died. The amount disclaimed shall be distributed as if the disclaimant had predeceased the individual whose death caused the disclaimant to become a beneficiary. 6.2   Distributable Amount.       The distributable amount of a Participant’s Account is the vested portion of the Account, reduced by any amount that is payable to an Alternate Payee pursuant to section 12.9. Furthermore, the Committee may temporarily suspend or limit distributions (by reducing the distributable amount), as explained in subsections 12.9(e), 12.9(g), or 12.9(h), (a) when the Committee is informed that a QDRO affecting the Participant’s Accounts is in process or may be in process, (b) while the Committee believes that the Plan may have a cause of action against the Participant, or (c) when the Plan has notice of a lien or other claim against the Participant’s Accounts.   6.3   Manner of Distribution.   (a)   Participants. This subsection shall apply to distributions to Participants.   (i)   Form of Distribution. The distributable amount shall be paid in the form of either a single payment or a QJSA, except that a distribution of a small account under subsection 6.4(d) shall be paid in the form of a single payment. The distribution to a Participant shall be in the form of a QJSA unless the Participant elects a single payment and, if the Participant is married, his Spouse consents to the single payment.     (ii)   Consent of Participant and Spouse.   (A)   General. Except as provided in subparagraph (B), a distribution shall not be made unless the Participant consents to the timing of the distribution. If the Participant is married and chooses a single payment, the Participant’s Spouse must consent to both the form of payment and the time of the payment, except as provided in subparagraph (B).     (B)   Exceptions to General Rule. The consent of the Participant is not required, nor is the consent of a married Participant’s Spouse required, for distributions of small amounts pursuant to subsection 6.4(d) or for the distribution of an annuity upon the Participant’s Required Beginning Date, as described in subsection 6.4(c).   (iii)   Method of Spouse’s Consent. The consent of a Participant’s Spouse must be in writing. The consent is not valid unless the Committee has provided the written explanation described in Page 14 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------         paragraph (iv). The Spouse must acknowledge the affect of his consent. The Spouse’s consent must be witnessed by a Committee member or by a notary public. The Spouse may limit his consent to a specific beneficiary or may allow the Participant to thereafter designate a different beneficiary. The Spouse may limit his consent to a specific form of benefit. (The Spouse’s consent is not needed if the Spouse cannot be located or in certain other special circumstances identified in IRS guidance.)     (iv)   Distribution Procedure.   (A)   General. The Committee shall provide the Participant with a written explanation that contains the information required by the Code and Treasury Regulations, as explained in subparagraph (B). The timing of the explanation, the consent, and the distribution are discussed in subparagraph (C). The Participant may revoke his election at any time before the distribution is processed.     (B)   Contents of Explanation. The information in the explanation shall include, at a minimum, the terms and conditions of the QJSA, the Participant’s right to elect a single payment in lieu of a QJSA, the effect of the Participant electing a single payment in lieu of a QJSA, the right of the Participant’s Spouse to insist upon a QJSA, the Participant’s right to revoke his distribution election, and such other information as may be required under IRS guidance of general applicability.     (C)   Timing. The explanation shall be provided no more than 90 days before the annuity starting date. The explanation shall be provided no fewer than 30 days before the annuity starting date, unless all the following conditions are satisfied (1) the Participant affirmatively elects a single sum distribution (and the Participant’s Spouse, if any, consents), (2) the explanation mentions that the Participant has a right to at least 30 days to consider whether to waive the QJSA and consent to a single sum, and (3) the Participant is permitted to revoke an affirmative distribution election until the annuity starting date (or, if later, the 8th day after the Participant is provided with the explanation).     (D)   Annuity Starting Date. The annuity starting date, for a single sum payment, is the date the payment is processed, which may be any business day. The annuity starting date for a QJSA is the day as of which the annuity payments begin. The annuity starting date for an annuity must be the first day of a month, must occur on or after the Participant’s termination of employment or 65th birthday, must occur after the date the explanation is provided, but may precede the date the Participant provides any affirmative distribution election. In any event, the first payment from the annuity shall not precede the 8th day after the explanation is provided.   (b)   Beneficiaries. The distributable amount that is left to a beneficiary shall be paid, at the election of the beneficiary, in the form of a single payment, installments (for non-Spouse beneficiaries), or an annuity (for Spouse beneficiaries), as described in subsection 6.4(e).     (c)   Alternate Payees. If the Alternate Payee is not the Participant’s Spouse or former spouse, the amount assigned to the Alternate Payee shall be paid in the form of a single payment. If the Alternate Payee is the Participant’s Spouse or former spouse, then unless the next sentence applies, the amount assigned to an Alternate Payee shall be paid, at the election of the Alternate Payee or as specified in the QDRO, in the form of either a single payment or an annuity for the life of the Alternate Payee. If the amount assigned to the Alternate Payee is $5,000 or less (calculated in accordance with the applicable Treasury regulations), then the Alternate Payee shall receive a single sum distribution.     (d)   Annuities. If the distribution is to be in the form of an annuity, the Plan shall purchase an annuity contract that satisfies the requirements specified in the Plan and in Code §401(a)(11) and §417, and shall distribute such contract to the distributee. The payments under an annuity shall begin as soon as administratively practicable after the annuity contract is distributed. The payments shall remain constant for the duration of the annuity, except for a QJSA where the Spouse outlives the Participant, in which case the payments are halved when the Participant dies. Page 15 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------   6.4   Time of Distribution.   (a)   Earliest Date of Distribution. Unless an earlier distribution is permitted by subsection (b) or required by subsection (c), the earliest date that a Participant may elect to receive a distribution is as follows.   (i)   Termination of Employment or Disability. A Participant may elect to receive a distribution as soon as practicable after he terminates employment or incurs a Disability.     (ii)   During Employment. A Participant may obtain a distribution while an Employee only if he has attained Normal Retirement Age. After Normal Retirement Age, and while an Employee, the Participant may withdraw all or any portion of his Account. The minimum withdrawal shall be $1,000 or, if less, the balance of the Account. Only two withdrawals are permitted each Plan Year under this paragraph. After an Employee’s Required Beginning Date, subsection (c) shall apply instead of this paragraph.   (b)   Alternate Earliest Date of Distribution. Notwithstanding subsection (a), unless a Participant elects otherwise, his distribution shall commence no later than 60 days after the close of the latest of: (i) the Plan Year in which the Participant attains Normal Retirement Age; (ii) the Plan Year in which occurs the tenth anniversary of the year in which the Participant commenced participation in the Plan; and (iii) the Plan Year in which the Participant terminates employment with the Company and Affiliated Entities. If a Participant does not affirmatively elect a distribution, he shall be deemed to have elected to defer the distribution to a date later than that specified in the preceding sentence.     (c)   Latest Date of Distribution. The entire distributable amount shall be distributed to a Participant (i) in a single payment no later than his Required Beginning Date, or (ii) in a QJSA with payments beginning no later than his Required Beginning Date. The payment will be in the form of a QJSA unless the Participant elects a single payment and, if the Participant is married, his Spouse consents to the single payment.     (d)   Small Amounts. This section is effective as of March 28, 2005.   (i)   $1000 or Less. If the value of the nonforfeitable portion of a Participant’s Account is $1,000 or less at any time after the Participant’s termination of employment, the Participant shall receive a single payment of the distributable amount as soon as administratively practicable, provided that the value is $1,000 or less when the distribution is processed.     (ii)   $1000 to $5000. If paragraph (i) does not apply and the value of the nonforfeitable portion of a Participant’s Account is $5,000 or less on any date after his termination of employment, then as soon as practicable the Plan shall pay the distributable amount to an individual retirement account or annuity within the meaning of Code §408(a) or §408(b) (collectively, an “IRA”) for the Participant, unless the Participant affirmatively elects to receive the distribution directly or to have it paid in a direct rollover under section 6.5. The Committee shall select the trustee or custodian of the IRA as well as how the IRA shall be invested initially. The Plan shall notify the Participant (A) that the distribution has been made to an IRA and can be transferred to another IRA, (B) of the identity and contact information of the trustee or custodian of the IRA into which the distribution is made, and (C) of such other information as required to comply with Code §401(a)(31)(B)(i).     (iii)   Date Account Valued. The Committee may elect to check the value of the Participant’s Account on an occasional (rather than a daily) basis, to determine whether to apply the provisions of this subsection.   (e)   Distribution Upon Participant’s Death.   (i)   Small Accounts. If the value of the nonforfeitable portion of a Participant’s Account is $5,000 or less at any time after the Participant’s death and before any beneficiary elects to receive a distribution under this subsection, then each beneficiary shall each receive a single payment of his share of the distributable amount as soon as administratively practicable, provided that the aggregate value is $5,000 or less when the distribution is processed. The Committee may elect to check the value of the Participants’ Accounts on an occasional (rather than a daily) basis to determine whether to apply the provisions of this subsection. Page 16 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------     (ii)   Larger Accounts. If paragraph (i) does not apply, then each beneficiary may elect to have his distributable amount distributed at any time after the Participant’s death, within the following guidelines. The forms of permitted distribution are a lump sum, annual installments, and, for Spouse beneficiaries only, a QPSA. No distribution shall be processed until the beneficiary’s identity as a beneficiary is established. The entire distributable amount shall be distributed by the last day of the calendar year containing the fifth anniversary of the Participant’s death; if a Spouse beneficiary elects a QPSA, the annuity contract shall be distributed by the last day of the calendar year containing the fifth anniversary of the Participant’s death. A beneficiary who elects installments may elect to accelerate any or all remaining payments. In addition, if the Participant was a Five-Percent Owner who began to receive the minimum required distributions under subsection (c), the distribution to each beneficiary must be made at least as rapidly as required by the method used to calculate the minimum required distributions that was in effect when the Five-Percent Owner died.   (f)   Alternate Payee. Distributions to Alternate Payees and their beneficiaries shall be made as specified in section 12.9. 6.5   Direct Rollover Election.   (a)   General Rule. A Participant, an Alternate Payee who is the Spouse or former Spouse of the Participant, or a surviving Spouse of a deceased Participant (collectively, the “distributee”) may direct the Trustee to pay all or any portion of his “eligible rollover distribution” to an “eligible retirement plan” in a “direct rollover.” This direct rollover option is not available to other Account Owners (non-Spouse beneficiaries and Alternate Payees who are not the Spouse or former Spouse of the Participant). Within a reasonable period of time before an eligible rollover distribution, the Committee shall inform the distributee of this direct rollover option, the appropriate withholding rules, other rollover options, the options regarding income taxation, and any other information required by Code §402(f). The distributee may waive the usual 30-day waiting period before receiving a distribution, and elect to receive his distribution as soon as administratively practicable after completing and filing his distribution election.     (b)   Definition of Eligible Rollover Distribution. An eligible rollover distribution is any distribution or in-service withdrawal other than (i) distributions required under Code §401(a)(9), (ii) distributions of amounts that have already been subject to federal income tax, other than a direct transfer to another retirement plan that meets the requirements of Code §401(a) or §403(a), or to an individual retirement account or annuity described in Code §408(a) or §408(b), (iii) installment payments in a series of substantially equal payments made at least annually and (A) made over a specified period of ten or more years, (B) made for the life or life expectancy of the distributee, or (C) made for the joint life or joint life expectancy of the distributee and his designated beneficiary, (iv) a distribution to satisfy the limits of Code §415, or (v) any other actual or deemed distribution specified in IRS guidance of general applicability issued under Code §402(c).     (c)   Definition of Eligible Retirement Plan. An eligible retirement plan is an individual retirement account or annuity described in Code §408(a) or §408(b), an annuity plan described in Code §403(a), an annuity contract described in Code §403(b), an eligible plan under Code §457(b) that is maintained by an eligible employer described in Code §457(e)(1)(A) (which generally includes state and local governments), or the qualified trust of a defined contribution plan described in Code §401(a), that accepts eligible rollover distributions.     (d)   Definition of Direct Rollover. A direct rollover is a payment by the Trustee to the eligible retirement plan specified by the distributee. ARTICLE VII Allocation of Responsibilities — Named Fiduciaries 7.1   No Joint Fiduciary Responsibilities.       Trustee(s) and the Committee shall be the named fiduciaries under the Plan and Trust agreement and shall be the only named fiduciaries thereunder. The fiduciaries shall have only the responsibilities specifically allocated to them herein or in the Trust agreement. Such allocations are intended to be mutually exclusive Page 17 of 31 Document Prepared December 7, 2005 --------------------------------------------------------------------------------       and there shall be no sharing of fiduciary responsibilities. Whenever one named fiduciary is required by the Plan or Trust agreement to follow the directions of another named fiduciary, the two named fiduciaries shall not be deemed to have been assigned a shared responsibility, but the responsibility of the named fiduciary giving the directions shall be deemed his sole responsibility, and the responsibility of the named fiduciary receiving those directions shall be to follow them insofar as the instructions are on their face proper under applicable law.   7.2   The Company.       The Company shall be responsible for: (a) making Company Contributions; (b) certifying to the Trustee the names and specimen signatures of the members of the Committee acting from time to time; (c) keeping accurate books and records with respect to its Employees and the appropriate components of each Employee’s Compensation and furnishing such data to the Committee; (d) selecting agents and fiduciaries to operate and administer the Plan and Trust; (e) appointing an investment manager if it determines that one should be appointed; and (f) reviewing periodically the performance of such agents, managers, and fiduciaries.   7.3   The Trustee.       The Trustee shall be responsible for: (a) the investment of the Trust Fund to the extent and in the manner provided in the Trust agreement; (b) the custody and preservation of Trust assets delivered to it; and (c) the payment of such amounts from the Trust Fund as the Committee shall direct.   7.4   The Committee — Plan Administrator.       The board of directors of Apache shall appoint an administrative Committee consisting of no fewer than three individuals who may be, but need not be, Participants, officers, directors, or Employees of the Company. If the board of directors does not appoint a Committee, Apache shall act as the Committee under the Plan. The members of the Committee shall hold office at the pleasure of the board of directors and shall service without compensation. The Committee shall be the Plan’s “administrator” as defined in section 3(16)(A) of ERISA. It shall be responsible for establishing and implementing a funding policy consistent with the objectives of the Plan and with the requirements of ERISA. This responsibility shall include establishing (and revising as necessary) short-term and long-term goals and requirements pertaining to the financial condition of the Plan, communicating such goals and requirements to the persons responsible for the various aspects of the Plan operations, and monitoring periodically the implementation of such goals and requirements. The Committee shall publish and file or cause to be published and filed or disclosed all reports and disclosures required by federal or state laws.   7.5   Committee to Construe Plan.   (a)   The Committee shall administer the Plan and shall have all discretion, power, and authority necessary for that purpose, including, but not by way of limitation, the full and absolute discretion and power to interpret the Plan, to determine the eligibility, status, and rights of all individuals under the Plan, and in general to decide any dispute and all questions arising in connection with the Plan. The Committee shall direct the Trustee concerning all distributions from the Trust Fund, including the purchase of annuity contracts, in accordance with the provisions of the Plan, and shall have such other powers in the administration of the Trust Fund as may be conferred upon it by the Trust agreement. The Committee shall maintain all Plan records except records of the Trust Fund.     (b)   The Committee may adjust the Account of any Participant, in order to correct errors and rectify omissions, in such manner as the Committee believes will best result in the equitable and nondiscriminatory administration of the Plan. 7.6   Organization of Committee.       The Committee shall adopt such rules as it deems desirable for the conduct of its affairs and for the administration of the Plan. It may appoint agents (who need not be members of the Committee) to whom it may delegate such powers as it deems appropriate, except that the Committee shall determine any dispute. The Committee may make its determinations with or without meetings. It may authorize one or more of its members or agents to sign instructions, notices, and determinations on its behalf. If a Committee decision or action affects a small number of Participants including a Committee member, then such Committee member Page 18 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------       shall not participate in the Committee decision or action. The action of a majority of the disinterested Committee members shall constitute the action of the Committee.   7.7   Agent for Process.       Apache’s Vice President, General Counsel, and Secretary shall be the agents of the Plan for service of all process.   7.8   Indemnification of Committee Members.       The Company shall indemnify and hold the members of the Committee, and each of them, harmless from the effects and consequences of their acts, omissions, and conduct in their official capacities, except to the extent that the effects and consequences thereof shall result from their own willful misconduct, breach of good faith, or gross negligence in the performance of their duties. The foregoing right of indemnification shall not be exclusive of the rights to which each such member may be entitled as a matter of law.   7.9   Conclusiveness of Action.       Any action taken by the Committee on matters within the discretion of the Committee shall be conclusive, final and binding upon all participants in the Plan and upon all persons claiming any rights hereunder, including Alternate Payees and beneficiaries.   7.10   Payment of Expenses.       The members of the Committee shall serve without compensation but the Company shall pay their reasonable expenses. The compensation or fees of accountants, counsel, and other specialists and any other costs of administering the Plan or Trust Fund may be paid by the Company or Account Owners or may be charged to the Trust Fund, to the extent permissible under the provisions of ERISA. ARTICLE VIII Trust Agreement — Investments 8.1   Trust Agreement.       Apache has entered into a Trust agreement to provide for the holding, investment, and administration of the funds of the Plan. The Trust agreement shall be part of the Plan, and the rights and duties of any individual under the Plan shall be subject to all terms and provisions of the Trust agreement.   8.2   Plan Expenses.   (a)   General. Except as provided in subsection (b), (i) all taxes upon or in respect of the Plan and Trust shall be paid out of Plan assets, and all expenses of administering the Plan and Trust shall be paid out of Plan assets, to the extent permitted by law and to the extent such taxes and expenses are not paid by the Company or an Account Owner, and (ii) the Committee shall have full discretion to determine how each tax or expense that is not paid by the Company shall be paid and the Committee shall have full discretion to determine how each tax or expense that is paid out of Plan assets shall be allocated. No fiduciary shall receive any compensation for services rendered to the Plan if the fiduciary is being compensated on a full time basis by the Company or an Affiliated Entity.     (b)   Individual Expenses. To the extent not paid by the Company or an Account Owner, all expenses of individually directed transactions, including without limitation the Trustee’s transaction fee, brokerage commissions, transfer taxes, interest on insurance policy loans, and any taxes and penalties that may be imposed as a result of an individual’s investment direction, shall be assessed against the Account of the Account Owner directing such transactions. 8.3   Investments.   (a)   §404(c) Plan. The Plan is intended to be a plan described in ERISA §404(c). To the extent that an Account Owner exercises control over the investment of his Accounts, no person who is a fiduciary shall be liable for any loss, or by reason of any breach, that is the direct and necessary result of the Account Owner’s exercise of control.     (b)   Directed Investments. Accounts shall be invested, upon the direction of each Account Owner made in a manner acceptable to the Committee, in any one or more of a series of investment funds designated Page 19 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------         by the Committee or to the extent permitted by the Committee in a brokerage arrangement. The funds available for investment and the principal features thereof, including a general description of the investment objectives, the risk and return characteristics, and the type and diversification of the investment portfolio of each fund, shall be communicated to the Account Owners in the Plan from time to time. Any changes in such funds shall be immediately communicated to all Account Owners.     (c)   Absence of Directions. To the extent that an Account Owner fails to affirmatively direct the investment of his Accounts, the Committee shall direct the Trustee in writing concerning the investment of such Accounts. The Committee shall act by majority vote. Any dissenting member of the Committee shall, having registered his dissent in writing, thereafter cooperate to the extent necessary to implement the decision of the Committee.     (d)   Change in Investment Directions. Account Owners may change their investment directions, with respect to the investment of new contributions and with respect to the investment of existing amounts allocated to Accounts, on any business day, subject to any restrictions and limitations imposed by the Trustee, investment funds, or brokerage arrangement. The Committee shall establish procedures for giving investment directions, which shall be in writing and communicated to Account Owners. ARTICLE IX Termination and Amendment 9.1   Termination of Plan or Discontinuance of Contributions.       Apache expects to continue the Plan indefinitely, but the continuance of the Plan and the payment of contributions are not assumed as contractual obligations. Apache may terminate the Plan or discontinue contributions at any time. Upon the termination of the Plan, each Participant’s Account shall become fully vested. Upon the partial termination of the Plan, the Accounts of all affected Participants shall become fully vested. The only Participants who are affected by a partial termination are those whose employment with the Company or Affiliated Entity is terminated as a result of the corporate event causing the partial termination; Employees terminated for cause and those who leave voluntarily are not affected by a partial termination.   9.2   Allocations upon Termination.       Upon the termination or partial termination of the Plan, the Committee shall promptly notify the Trustee of such termination. The Trustee shall promptly determine, in the manner prescribed in section 4.2, the net worth of the Trust Fund. The Trustee shall advise the Committee of any increase or decrease in such net worth that has occurred since the preceding Valuation Date. The Committee shall allocate, in the manner described in section 4.3, among the remaining Plan Accounts, in the manner described in Articles III, IV, and V, any Company Contributions or forfeitures occurring since the preceding Valuation Date.   9.3   Procedure Upon Termination of Plan.       If the Plan has been terminated or partially terminated, then, after the allocations required under section 9.2 have been completed, the Trustee shall distribute or transfer the Accounts of affected Account Owners as follows.   (a)   No Other Plan. If the Company and Affiliated Entities are not treated, pursuant to the Treasury Regulations under Code §401(k), as maintaining another “alternative defined contribution plan,” the Trustee shall distribute each Account Owner’s Account in a single payment, after complying with the requirements of section 6.5. For purposes of this section only, an “alternative defined contribution plan” means a defined contribution plan that is not an employee stock ownership plan within the meaning of Code §4975(e)(7) or §409(a)), a simplified employee pension within the meaning of Code §408(k), a SIMPLE IRA within the meaning of Code §408(p), a plan or contract that satisfies the requirements of Code §403(b), or a plan described in Code §457(b) or §457(f).     (b)   Other Plan Maintained. If the Company and Affiliated Entities are treated, pursuant to the Treasury Regulations under Code §401(k), as maintaining another “alternative defined contribution plan,” the Trustee shall (i) distribute the Accounts of each non-Participant Account Owner in a single payment, after complying with the requirements of section 6.5, and (ii) transfer the Account of each Participant to an alternative defined contribution plan. All the rights, benefits, features, and distribution Page 20 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------         restrictions with respect to the transferred amounts shall continue to apply to the transferred amounts unless a change is permitted pursuant to applicable IRS guidance of general applicability.     (c)   Form of Payment. A transfer made pursuant to this section may be in cash, in kind, or partly in cash and partly in kind. Any distribution made pursuant to this section shall be in cash. After all such distributions or transfers have been made, the Trustee shall be discharged from all obligation under the Trust; no Participant, Spouse, Alternate Payee, or beneficiary who has received any such distribution, or for whom any such transfer has been made, shall have any further right or claim under the Plan or Trust. 9.4   Amendment by Apache.   (a)   Amendment. Apache may at any time amend the Plan in any respect, without prior notice, subject to the following limitations. No amendment shall be made that would have the effect of vesting in the Company any part of the Trust Fund or of diverting any part of the Trust Fund to purposes other than for the exclusive benefit of Account Owners. The rights of any Account Owner with respect to contributions previously made shall not be adversely affected by any amendment. No amendment shall reduce or restrict, either directly or indirectly, the accrued benefit (within the meaning of Code §411(d)(6)) to any Account Owner before the amendment, except as permitted by the Code or IRS guidance of general applicability.     (b)   Amendment to Vesting Schedule. If the vesting schedule is amended, each Participant with at least three Years of Service may elect, within the period specified in the following sentence after the adoption of the amendment, to have his nonforfeitable percentage computed under the Plan without regard to such amendment. The period during which the election may be made shall commence with the date the amendment is adopted and shall end on the latest of: (i) 60 days after the amendment is adopted; (ii) 60 days after the amendment becomes effective; or (iii) 60 days after the Participant is issued written notice of the amendment by the Company or Committee. Furthermore, no amendment shall decrease the nonforfeitable percentage, measured as of the later of the date the amendment is adopted or effective, of any Account Owner’s Account.     (c)   Procedure. Each amendment shall be in writing. Each amendment shall be approved by Apache’s board of directors or by an officer of Apache who has the authority to amend the Plan. Each amendment shall be executed by an officer of Apache who has the authority to execute the amendment. ARTICLE X Plan Adoption by Affiliated Entities 10.1   Adoption of Plan.       Apache may permit any Affiliated Entity to adopt the Plan and Trust for its Employees. Thereafter, such Affiliated Entity shall deliver to the Trustee a certified copy of the resolutions or other documents evidencing its adoption of the Plan and Trust.   10.2   Agent of Affiliated Entity.       By becoming a party to the Plan, each Affiliated Entity appoints Apache as its agent with authority to act for the Affiliated Entity in all transactions in which Apache believes such agency will facilitate the administration of the Plan. Apache shall have the sole authority to amend and terminate the Plan.   10.3   Disaffiliation and Withdrawal from Plan.   (a)   Disaffiliation. Any Affiliated Entity that has adopted the Plan and thereafter ceases for any reason to be an Affiliated Entity shall forthwith cease to be a party to the Plan.     (b)   Withdrawal. Any Affiliated Entity may, by appropriate action and written notice thereof to Apache, provide for the discontinuance of its participation in the Plan. Such withdrawal from the Plan shall not be effective until the end of the Plan Year. Page 21 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------   10.4   Effect of Disaffiliation or Withdrawal.       If at the time of disaffiliation or withdrawal, the disaffiliating or withdrawing entity, by appropriate action, adopts a substantially identical plan that provides for direct transfers from this Plan, then, as to Account Owners associated with such entity, no plan termination shall have occurred; the new plan shall be deemed a continuation of this Plan for such Account Owners. In such case, the Trustee shall transfer to the trustee of the new plan all of the assets held for the benefit of Account Owners associated with the disaffiliating or withdrawing entity, and no forfeitures or acceleration of vesting shall occur solely by reason of such action. Such payment shall operate as a complete discharge of the Trustee, and of all organizations except the disaffiliating or withdrawing entity, of all obligations under this Plan to Account Owners associated with the disaffiliating or withdrawing entity. A new plan shall not be deemed substantially identical to this Plan if it provides slower vesting than this Plan. Nothing in this section shall authorize the divesting of any vested portion of a Participant’s Account.   10.5   Actions Upon Disaffiliation or Withdrawal.   (a)   Distribution or Transfer. If an entity disaffiliates from Apache or withdraws from the Plan and the provisions of section 10.4 are not followed, then the following rules apply to the Account of an Account Owner associated with the disaffiliating or withdrawing entity. The Account Owner’s Account shall remain in this Plan until a distribution is processed under the usual rules of Article VI, unless the disaffiliating or withdrawing entity maintains another qualified plan that accepts direct transfers from this Plan, in which case the Committee may transfer the Account Owner’s Account to the disaffiliating or withdrawing entity’s plan without the consent of the Account Owner.     (b)   Form of Payment. A transfer made pursuant to this section may be in cash, in kind, or partly in cash and partly in kind. Any distribution made pursuant to this section shall be in cash. After such distribution or transfer has been made, no Account Owner who has received any such distribution, or for whom any such transfer has been made, shall have any further right or claim under the Plan or Trust. ARTICLE XI Top-Heavy Provisions 11.1   Application of Top-Heavy Provisions.       The provisions of this Article XII shall be applicable only if the Plan becomes “top-heavy” as defined below for any Plan Year. If the Plan becomes “top-heavy” for a Plan Year, the provisions of this Article XII shall apply to the Plan effective as of the first day of such Plan Year and shall continue to apply to the Plan until the Plan ceases to be “top-heavy” or until the Plan is terminated or otherwise amended.   11.2   Determination of Top-Heavy Status.       The Plan shall be considered “top-heavy” for a Plan Year if, as of the last day of the prior Plan Year, the aggregate of the Account balances (as calculated according to the regulations under Code §416) of Key Employees under this Plan (and under all other plans required or permitted to be aggregated with this Plan) exceeds 60% of the aggregate of the Account balances (as calculated according to the regulations under Code §416) in this Plan (and under all other plans required or permitted to be aggregated with this Plan) of all current Employees and all former Employees who terminated employment within one year of the last day of the prior Plan Year. This ratio shall be referred to as the “top-heavy ratio.” For purposes of determining the account balance of any Participant, (a) the balance shall be determined as of the last day of the prior Plan Year, (b) the balance shall also include any distributions to the Participant during the one-year period ending on the last day of the prior Plan Year, and (c) the balance shall also include, for distributions made for a reason other than separation from service or death or disability, any distributions to the Participant during the five-year period ending on the last day of the prior Plan Year. This shall also apply to distributions under a terminated plan that, if it had not been terminated, would have been required to be included in an aggregation group. The Account balances of a Participant who had once been a Key Employee, but who is not a Key Employee during the Plan Year, shall not be taken into account. The following plans must be aggregated with this Plan for the top-heavy test: (a) a qualified plan maintained by the Company or an Affiliated Entity in which a Key Employee participated during this Plan Year or during the previous four Plan Years and (b) any other qualified plan maintained by the Company or an Affiliated Entity that enables this Plan or any plan Page 21 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------       described in clause (a) to meet the requirements of Code §401(a)(4) or §410. The following plans may be aggregated with this Plan for the top-heavy test: any qualified plan maintained by the Company or an Affiliated Entity that, in combination with the Plan or any plan required to be aggregated with this Plan when testing this Plan for top-heaviness, would satisfy the requirements of Code §401(a)(4) and §410. If one or more of the plans required or permitted to be aggregated with this Plan is a defined benefit plan, a Participant’s “account balance” shall mean the present value of the Participant’s accrued benefit. If the aggregation group includes more than one defined benefit plan, the same actuarial assumptions shall be used with respect to each such defined benefit plan. The foregoing top-heavy ratio shall be computed in accordance with the provisions of Code §416(g), together with the regulations and rulings thereunder.   11.3   Special Vesting Rule.       Unless section 5.1 provides for faster vesting, the Participant’s Account shall vest in accordance with the following schedule during any top-heavy Plan Year:       Period of Service   Vesting Percentage Less than 2 years   0% At least 2 years, but less than 3 years   20% At least 3 years, but less than 4 years   40% At least 4 years, but less than 5 years   60% At least 5 years, but less than 6 years   80% 6 or more years   100% 11.4   Special Minimum Contribution.       Notwithstanding the provisions of section 3.1, in every top-heavy Plan Year, a minimum allocation is required for each Non-Key Employee who both (a) performed one or more hours of service as a Covered Employee during the Plan Year, and (b) was an Employee on the last day of the Plan Year. The minimum allocation shall be a percentage of each Non-Key Employee’s Compensation. The percentage shall be the lesser of 3% or the largest percentage obtained for any Key Employee by dividing his Annual Additions (to this Plan and any other plan aggregated with this Plan) for the Plan Year by his Compensation for the Plan Year. If the Participant participates in both this Plan and the Apache Corporation 401(k) Savings Plan, then the Participant’s minimum allocation to this Plan shall be reduced by any allocation of company contributions (or forfeitures treated as company contributions) that he receives in that plan for the Plan Year.   11.5   Change in Top-Heavy Status.       If the Plan ceases to be a “top-heavy” plan as defined in this Article XII, and if any change in the benefit structure, vesting schedule, or other component of a Participant’s accrued benefit occurs as a result of such change in top-heavy status, the nonforfeitable portion of each Participant’s benefit attributable to Company Contributions shall not be decreased as a result of such change. In addition, each Participant with at least a three-year Period of Service on the date of such change may elect to have the nonforfeitable percentage computed under the Plan without regard to such change in status. The period during which the election may be made shall commence on the date the Plan ceases to be a top-heavy plan and shall end on the later of (a) 60 days after the change in status occurs, (b) 60 days after the change in status becomes effective, or (c) 60 days after the Participant is issued written notice of the change by the Company or the Committee. ARTICLE XII Miscellaneous 12.1   Right to Dismiss Employees — No Employment Contract.       The Company and Affiliated Entities may terminate the employment of any employee as freely and with the same effect as if this Plan were not in existence. Participation in this Plan by an employee shall not constitute an express or implied contract of employment between the Company or an Affiliated Entity and the employee.   12.2   Claims Procedure.   (a)   General. Each claim for benefits shall be processed in accordance with the procedures that are established by the Committee. The procedures shall comply with the guidelines specified in this section. The Committee may delegate its duties under this section. Page 23 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------     (b)   Representatives. A claimant may appoint a representative to act on his behalf. The Plan shall only recognize a representative if the Plan has received a written authorization signed by the claimant and on a form prescribed by the Committee, with the following exceptions. The Plan shall recognize a claimant’s legal representative, once the Plan is provided with documentation of such representation. If the claimant is a minor child, the Plan shall recognize the claimant’s parent or guardian as the claimant’s representative. Once an authorized representative is appointed, the Plan shall direct all information and notification regarding the claim to the authorized representative and the claimant shall be copied on all notifications regarding decisions, unless the claimant provides specific written direction otherwise.     (c)   Extension of Deadlines. The claimant may agree to an extension of any deadline that is mentioned in this section that applies to the Plan. The Committee or the relevant decision-maker may agree to an extension of any deadline that is mentioned in this section that applies to the claimant.     (d)   Fees. The Plan may not charge any fees to a claimant for utilizing the claims process described in this section.     (e)   Filing a Claim. A claim is made when the claimant files a claim in accordance with the procedures specified by the Committee. Any communication regarding benefits that is not made in accordance with the Plan’s procedures will not be treated as a claim.     (f)   Initial Claims Decision. The Plan shall decide a claim within a reasonable time up to 90 days after receiving the claim. The Plan shall have a 90-day extension, but only if the Plan is unable to decide within 90 days for reasons beyond its control, the Plan notifies the claimant of the special circumstances requiring the need for the extension by the 90th day after receiving the claim, and the Plan notifies the claimant of the date by which the Plan expects to make a decision.     (g)   Notification of Initial Decision. The Plan shall provide the claimant with written notification of the Plan’s full or partial denial of a claim, reduction of a previously approved benefit, or termination of a benefit. The notification shall include a statement of the reason(s) for the decision; references to the plan provision(s) on which the decision was based; a description of any additional material or information necessary to perfect the claim and why such information is needed; a description of the procedures and deadlines for appeal; a description of the right to obtain information about the appeal procedures; and a statement of the claimant’s right to sue.     (h)   Appeal. The claimant may appeal any adverse or partially adverse decision. To appeal, the claimant must follow the procedures specified by the Committee. The appeal must be filed within 60 days of the date the claimant received notice of the initial decision. If the appeal is not timely and properly filed, the initial decision shall be the final decision of the Plan. The claimant may submit documents, written comments, and other information in support of the appeal. The claimant shall be given reasonable access at no charge to, and copies of, all documents, records, and other relevant information.     (i)   Appellate Decision. The Plan shall decide the appeal of a claim within a reasonable time of no more than 60 days from the date the Plan receives the claimant’s appeal. The 60-day deadline shall be extended by an additional 60 days, but only if the Committee determines that special circumstances require an extension, the Plan notifies the claimant of the special circumstances requiring the need for the extension by the 60th day after receiving the appeal, and the Plan notifies the claimant of the date by which the Plan expects to make a decision. If an appeal is missing any information from the claimant that is needed to decide the appeal, the Plan shall notify the claimant of the missing information and grant the claimant a reasonable period to provide the missing information. If the missing information is not timely provided, the Plan shall deny the claim. If the missing information is timely provided, the 60-day deadline (or 120-day deadline with the extension) for the Plan to make its decision shall be increased by the length of time between the date the Plan requested the missing information and the date the Plan received it.     (j)   Notification of Decision. The Plan shall provide the claimant with written notification of the Plan’s appellate decision (positive or adverse). The notification of any adverse or partially adverse decision shall include a statement of the reason(s) for the decision; reference to the plan provision(s) on which the decision was based; a statement of the claimant’s right to sue; and a statement that the claimant is Page 24 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------         entitled to receive, free of charge and upon request, reasonable access to and copies of all documents, records, and other information relevant to the claim.     (k)   Discretionary Authority. The Committee shall have total discretionary authority to determine eligibility, status, and the rights of all individuals under the Plan and to construe any and all terms of the Plan. 12.3   Source of Benefits.       All benefits payable under the Plan shall be paid solely from the Trust Fund, and the Company and Affiliated Entities assume no liability or responsibility therefor.   12.4   Exclusive Benefit of Employees.       It is the intention of the Company that no part of the Trust, other than as provided in sections 3.3, 8.2, and 12.9 hereof and the Trust Agreement, ever to be used for or diverted for purposes other than for the exclusive benefit of Participants, Alternate Payees, and their beneficiaries, and that this Plan shall be construed to follow the spirit and intent of the Code and ERISA.   12.5   Forms of Notices.       Wherever provision is made in the Plan for the filing of any notice, election, or designation by a Participant, Spouse, Alternate Payee, or beneficiary, the action of such individual may be evidenced by the execution of such form as the Committee may prescribe for the purpose. The Committee may also prescribe alternate methods for filing any notice, election, or designation (such as telephone voice-response or e-mail).   12.6   Failure of Any Other Entity to Qualify.       If any entity adopts this Plan but fails to obtain or retain the qualification of the Plan under the applicable provisions of the Code, such entity shall withdraw from this Plan upon a determination by the Internal Revenue Service that it has failed to obtain or retain such qualification. Within 30 days after the date of such determination, the assets of the Trust Fund held for the benefit of the Employees of such entity shall be separately accounted for and disposed of in accordance with the Plan and Trust.   12.7   Notice of Adoption of the Plan.       The Company shall provide each of its Employees with notice of the adoption of this Plan, notice of any amendments to the Plan, and notice of the salient provisions of the Plan prior to the end of the first Plan Year. A complete copy of the Plan shall also be made available for inspection by Employees and Account Owners.   12.8   Plan Merger.       If this Plan is merged or consolidated with, or its assets or liabilities are transferred to, any other qualified plan of deferred compensation, each Participant shall be entitled to receive a benefit immediately after the merger, consolidation, or transfer that is equal to or greater than the benefit the Participant would have been entitled to receive immediately before the merger, consolidation, or transfer if this Plan had then been terminated.   12.9   Inalienability of Benefits — Domestic Relations Orders.   (a)   General. Except as provided in subsection 6.1(e), relating to disclaimers, and subsections (b), (g), and (h) below, no Account Owner shall have any right to assign, alienate, transfer, or encumber his interest in any benefits under this Plan, nor shall such benefits be subject to any legal process to levy upon or attach the same for payment of any claim against any such Account Owner.     (b)   QDRO Exception. Subsection (a) shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant pursuant to a Domestic Relations Order unless such Domestic Relations Order is a QDRO, in which case the Plan shall make payment of benefits in accordance with the applicable requirements of any such QDRO.     (c)   QDRO Requirements. In order to be a QDRO, the Domestic Relations Order must satisfy the requirements of Code §414(p) and ERISA §206(d)(3). In particular, the Domestic Relations Order: (i) must specify the name and the last known mailing address of the Participant; (ii) must specify the name and mailing address of each Alternate Payee covered by the order; (iii) must specify either the Page 25 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------         amount or percentage of the Participant’s benefits to be paid by the Plan to each such Alternate Payee, or the manner in which such amount or percentage is to be determined; (iv) must specify the number of payments or period to which such order applies; (v) must specify each plan to which such order applies; (vi) may not require the Plan to provide any type or form of benefit, or any option, not otherwise provided under the Plan, subject to the provisions of subsection (f); (vii) may not require the Plan to provide increased benefits (determined on the basis of actuarial value); and (viii) may not require the payment of benefits to an Alternate Payee if such benefits have already been designated to be paid to another Alternate Payee under another order previously determined to be a QDRO.     (d)   QDRO Payment Rules. In the case of any payment before an Employee has separated from service, a Domestic Relations Order shall not be treated as failing to meet the requirements of subsection (c) solely because such order requires that payment of benefits be made to an Alternate Payee (i) on or after the dates specified in subsection (f), (ii) as if the Employee had retired on the date on which such payment is to begin under such order (but taking into account only the Account balance on such date), and (iii) in any form in which such benefits may be paid under the Plan to the Employee. For purposes of this subsection, the Account balance as of the date specified in the QDRO shall be the vested portion of the Employee’s Account on such date.     (e)   QDRO Review Procedures and Suspension of Benefits. The Committee shall establish reasonable procedures to determine the qualified status of Domestic Relations Orders and to administer distributions under QDROs. Such procedures shall be in writing and shall permit an Alternate Payee to designate a representative to receive copies of notices. The Committee may temporarily suspend distributions and withdrawals from the Participant’s Accounts, except to the extent necessary to make the required minimum distributions under Code §401(a)(9), when the Committee receives a Domestic Relations Order or a draft of such an order that affects the Participant’s Accounts or when one or the following individuals informs the Committee, orally or in writing, that a QDRO is in process or may be in process: the Participant, a prospective Alternate Payee, or counsel for the Participant or a prospective Alternate Payee. The Committee shall promulgate reasonable and non-discriminatory rules regarding such suspensions, including but not limited to how long such suspensions remain in effect. The procedures may allow the Participant to receive such distributions and withdrawals from the Plan, subject to the rules of Article VI, as are consented to in writing by all prospective Alternate Payees identified in the Domestic Relations Order or, in the absence of a Domestic Relations Order, as are consented to in writing by the prospective Alternate Payee(s) who informed the Committee that a QDRO was in process or may be in process. When the Committee receives a Domestic Relations Order it shall promptly notify the Participant and each Alternate Payee of such receipt and provide them with copies of the Plan’s procedures for determining the qualified status of the order. Within a reasonable period after receipt of a Domestic Relations Order, the Committee shall determine whether such order is a QDRO and notify the Participant and each Alternate Payee of such determination. During any period in which the issue of whether a Domestic Relations Order is a QDRO is being determined (by the Committee, by a court of competent jurisdiction, or otherwise), the Committee shall separately account for the amounts payable to the Alternate Payee if the order is determined to be a QDRO. If the order (or modification thereof) is determined to be a QDRO within 18 months after the date the first payment would have been required by such order, the Committee shall pay the amounts separately accounted for (plus any interest thereon) to the individual(s) entitled thereto. However, if the Committee determines that the order is not a QDRO, or if the issue as to whether such order is a QDRO has not been resolved within 18 months after the date of the first payment would have been required by such order, then the Committee shall pay the amounts separately accounted for (plus any interest thereon) to the individual(s) who would have been entitled to such amounts if there had been no order. Any determination that an order is a QDRO that is made after the close of the 18-month period shall be applied prospectively only. If the Plan’s fiduciaries act in accordance with fiduciary provision of ERISA in treating a Domestic Relations Order as being (or not being) a QDRO or in taking action in accordance with this subsection, then the Plan’s obligation to the Participant and each Alternate Payee shall be discharged to the extent of any payment made pursuant to the acts of such fiduciaries. Page 26 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------     (f)   Rights of Alternate Payee. The Alternate Payee shall have the following rights under the Plan:   (i)   Small Accounts. If the value of the nonforfeitable portion of an Alternate Payee’s Account is $5,000 or less, the Alternate Payee shall receive a single payment of the distributable amount as soon as practicable, provided that the value is $5,000 or less when the distribution is processed. The Committee may elect to check the value of the Alternate Payee’s Account on an occasional (rather than a daily) basis, to determine whether this paragraph applies.     (ii)   Single Payment or Annuity. This paragraph applies only if paragraph (i) does not apply. The only form of payment available to an Alternate Payee who is not the Spouse or former Spouse of the Participant is a single payment of the distributable amount (measured at the time the payment is processed). An Alternate Payee who is the Spouse or former Spouse of the Participant may choose between a single payment of the distributable amount or an annuity. If the Alternate Payee is awarded more than the distributable amount, the Alternate Payee shall initially receive a distribution of the distributable amount, with additional distributions made as soon as administratively convenient after more of the amount awarded to the Alternate Payee becomes distributable.     (iii)   Timing of Distribution. This paragraph applies only if paragraph (i) does not apply. Subject to the limits imposed by this paragraph, the Alternate Payee may choose (or the QDRO may specify) the date of the distribution. The distribution to the Alternate Payee may occur at any time after the Committee determines that the Domestic Relations Order is a QDRO and before the Participant’s Required Beginning Date (unless the order is determined to be a QDRO after the Participant’s Required Beginning Date, in which case the distribution to the Alternate Payee shall be made as soon as administratively practicable after the order is determined to be a QDRO).     (iv)   Death of Alternate Payee. The Alternate Payee may designate one or more beneficiaries, as specified in section 6.1. When the Alternate Payee dies, the Alternate Payee’s beneficiary shall receive a complete distribution of the distributable amount in a single payment as soon as administratively convenient.     (v)   Investing. An Alternate Payee may direct the investment of his Account pursuant to section 8.3.     (vi)   Claims. The Alternate Payee may bring claims against the Plan pursuant to section 12.2.   (g)   Exception for Misconduct towards the Plan. Subsection (a) shall not apply to any offset of a Participant’s benefits against an amount that the Participant is ordered or required to pay to the Plan if the following conditions are met.   (i)   The order or requirement to pay must arise (A) under a judgment of conviction for a crime involving the Plan, (B) under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA, or (C) pursuant to a settlement agreement between the Secretary of Labor and the Participant, or a settlement agreement between the Pension Benefit Guaranty Corporation and the Participant, in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA by a fiduciary or any other person.     (ii)   The judgment, order, decree, or settlement agreement must expressly provide for the offset of all or part of the amount ordered or required to be paid to the Plan against the Participant’s benefits provided under the Plan.     (iii)   If the Participant is married at the time at which the offset is to be made, (A) either the Participant’s Spouse must have already waived his right to a QPSA and QJSA or the Participant’s Spouse must consent in writing to such offset with such consent witnessed by a notary public or representative of the Plan (or it is established to the satisfaction of a Plan representative that such consent may not be obtained by reason of circumstances described in Code §417(a)(2)(B)), or (B) the Participant’s Spouse is ordered or required in such judgment, order, decree, or settlement to pay an amount to the Plan in connection with a violation of part 4 of subtitle B of title I of ERISA, or (C) in such judgment, order, decree, or settlement, the Participant’s Spouse retains the right to receive a survivor annuity under a qualified joint and Page 27 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------   survivor annuity pursuant to Code §401(a)(11)(A)(i) and under a qualified preretirement survivor annuity provided pursuant to Code §401(a)(11)(A)(ii). The value of the Spouse’s survivor annuity in subparagraph (C) shall be determined as if the Participant terminated employment on the date of the offset, there was no offset, the Plan permitted commencement of benefits only on or after Normal Retirement Age, the Plan provided only the “minimum-required qualified joint and survivor annuity,” and the amount of the qualified preretirement survivor annuity under the Plan is equal to the amount of the survivor annuity payable under the “minimum-required qualified joint and survivor annuity.” For purposes of this paragraph only, the “minimum-required qualified joint and survivor annuity” is the qualified joint and survivor annuity which is the actuarial equivalent of the Participant’s accrued benefit (within the meaning of Code §411(a)(7)) and under which the survivor annuity is 50% of the amount of the annuity which is payable during the joint lives of the Participant and his Spouse.       The Committee may temporarily suspend distributions and withdrawals from a Participant’s Account, except to the extent necessary to make the required minimum distributions under Code §401(a)(9), when the Committee has reason to believe that the Plan may be entitled to an offset of the Participant’s benefits described in this subsection. The Committee shall promulgate reasonable and non-discriminatory rules regarding such suspensions, including but not limited to how long such suspensions remain in effect.     (h)   Exception for Federal Liens. Subsection (a) shall not apply to the enforcement of a federal tax levy made pursuant to Code §6331, the collection by the United States on a judgment resulting from an unpaid tax assessment, or any debt or obligation that is permitted to be collected from the Plan under federal law (such as the Federal Debt Collection Procedures Act of 1977). The Committee may temporarily suspend distributions and withdrawals from an Account, except to the extent necessary to make the required minimum distributions under Code §401(a)(9), when the Committee has reason to believe that such a federal tax levy or other obligation has or will be received. The Committee shall promulgate reasonable and non-discriminatory rules regarding such suspensions, including but not limited to how long such suspensions remain in effect. 12.10   Payments Due Minors or Incapacitated Individuals.       If any individual entitled to payment under the Plan is a minor, the Committee shall cause the payment to be made to the custodian or representative who, under the state law of the minor’s domicile, is authorized to receive funds on behalf of the minor. If any individual entitled to payment under this Plan has been legally adjudicated to be mentally incompetent or incapacitated, the Committee shall cause the payment to be made to the custodian or representative who, under the state law of the incapacitated individual’s domicile, is authorized to receive funds on behalf of the incapacitated individual. Payments made pursuant to such power shall operate as a complete discharge of the Trust Fund, the Trustee, and the Committee.   12.11   Uniformity of Application.       The provisions of this Plan shall be applied in a uniform and non-discriminatory manner in accordance with rules adopted by the Committee, which rules shall be systematically followed and consistently applied so that all individuals similarly situated shall be treated alike.   12.12   Disposition of Unclaimed Payments.       Each Participant, Alternate Payee, or beneficiary with an Account balance in this Plan must file with the Committee from time to time in writing his address, the address of each beneficiary (if applicable), and each change of address. Any communication, statement, or notice addressed to such individual at the last address filed with the Committee (or if no address is filed with the Committee then at the last address as shown on the Company’s records) will be binding on such individual for all purposes of the Plan. Neither the Committee nor the Trustee shall be required to search for or locate any missing individual. If the Committee notifies an individual that he is entitled to a distribution and also notifies him that a failure to respond may result in a forfeiture of benefits, and the individual fails to claim his benefits under the Plan or make his address known to the Committee within a reasonable period of time after the notification, then the benefits under the Plan of such individual shall be forfeited. Any amount forfeited pursuant to this section shall be allocated pursuant to subsection 5.4(d). If the individual should later make a claim for this forfeited amount, the Company shall, if the Plan is still in existence, make a special contribution to the Plan equal to the forfeiture, and such amount Page 28 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------       shall be distributed to the individual; if the Plan is not then in existence, the Company shall pay the amount of the forfeiture to the individual.   12.13   Applicable Law.       This Plan shall be construed and regulated by ERISA, the Code, and, unless otherwise specified herein and to the extent applicable, the laws of the State of Texas, excluding any conflicts-of-law provisions. ARTICLE XIII Uniformed Services Employment and Reemployment Rights Act of 1994 13.1   General.   (a)   Scope. The Uniformed Services Employment and Reemployment Rights Act of 1994 (the “USERRA”), which is codified at 38 USCA §§4301-4318, confers certain rights on individuals who leave civilian employment to perform certain services in the Armed Forces, the National Guard, the commissioned corps of the Public Health Service, or in any other category designated by the President of the United States in time of war or emergency (collectively, the “Uniformed Services”). An Employee who joins the Uniformed Services shall be referred to as a “Serviceman” in this Article. This Article shall be interpreted to provide such individuals with all the benefits required by the USERRA but no greater benefits than those required by the USERRA. This Article shall supersede any contrary provisions in the remainder of the Plan.     (b)   Rights of Servicemen. When a Serviceman leaves the Uniformed Services, he may have reemployment rights with the Company or Affiliated Entities, depending on many factors, including the length of his stay in the Uniformed Services and the type of discharge he received. When this Article speaks of the date a Serviceman’s potential USERRA reemployment rights expire, it means the date on which the Serviceman fails to qualify for reemployment rights (if, for example, he is dishonorably discharged, or remains in the Uniformed Services for more than 5 years) or, if the Serviceman obtains reemployment rights, the date his reemployment rights lapse because the Serviceman failed to timely exercise those rights. 13.2   While a Serviceman.       In general, a Serviceman shall be treated as an Employee while he continues to receive wages from the Company or an Affiliated Entity, and once the Serviceman’s wages from the Company or Affiliated Entity cease, the Serviceman shall be treated as if he were on an approved, unpaid leave of absence.   (a)   Company Contributions. Wages paid by the Company to a Serviceman shall be included in his Compensation as if the Serviceman were an Employee. If the Employee was a Covered Employee when he became a Serviceman and his wages continue through the last day of a Plan Year, then (i) the Serviceman shall be treated as an “eligible Participant” under subsection 3.1(a) for that Plan Year (and shall therefore receive an allocation of Company Mandatory Contributions); and (ii) he shall be treated as an Employee under subsection 11.4(a) (and, if he is a Non-Key Employee, he shall therefore receive any minimum required allocation if the Plan is top-heavy).     (b)   Investments. If the Serviceman has an account balance in the Plan, he is an Account Owner and may therefore direct the investment of his Accounts pursuant to section 8.3.     (c)   Distributions and Withdrawals. For purposes of Article VI (relating to distributions), the Serviceman shall be treated as an Employee until the day on which his potential USERRA reemployment rights expire. See section 13.3 once his potential USERRA rights expire.     (d)   QDROs. QDROs shall be processed while the Participant is a Serviceman. The Committee has the discretion to establish special procedures under subsection 12.9(e) for Servicemen, by, for example, extending the usual deadlines to accommodate any practical difficulties encountered by the Serviceman that are attributable to his service in the Uniformed Services. 13.3   Expiration of USERRA Reemployment Rights.   (a)   Consequences. If a Serviceman is not reemployed before his potential USERRA reemployment rights expire, the Committee shall determine his Termination from Service Date by treating his service in the Uniformed Services as an approved leave of absence but treating the expiration of his potential Page 29 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------         USERRA reemployment rights as the failure to timely return from his leave of absence, with the consequence that his Termination from Service Date will generally be the earlier of the date his potential USERRA rights expired or one year after the date he joined the Uniformed Services. Once his Termination from Service Date has been determined, the Committee shall determine his vested percentage. For purposes of Article VI (relating to distributions), the day the Serviceman’s potential USERRA reemployment rights expired shall be treated as the day he terminated employment with the Company and Affiliated Entities. For purposes of subsection 5.2(c) (relating to the timing of forfeitures), the Serviceman’s last day of employment shall be the day his potential USERRA reemployment rights expired.     (b)   Rehire after Expiration of Reemployment Rights. If the Company or an Affiliated Company hires a former Serviceman after his potential USERRA reemployment rights have expired, he shall be treated like any other former employee who is rehired. 13.4   Return From Uniformed Service.       This section applies solely to a Serviceman who returns to employment with the Company or an Affiliated Entity because he exercised his reemployment rights under the USERRA.   (a)   Credit for Service. A Serviceman’s length of time in the Uniformed Services shall be treated as service with the Company for purposes of vesting and determining his eligibility to participate in the Plan upon reemployment.     (b)   Participation. If the Serviceman satisfies the eligibility requirements of section 2.1 before his reemployment, and he is a Covered Employee upon his reemployment, he may participate in the Plan immediately upon his return.     (c)   Make-Up Company Mandatory Contribution. The Company shall contribute an additional contribution to a Serviceman’s Account equal to the Company Mandatory Contribution (including any forfeitures treated as Company Mandatory Contributions) that would have been allocated to such Account if the Serviceman had remained employed during his time in the Uniformed Services, and had earned his Deemed Compensation during that time. See subsection (e) for guidance on applying the various limits contained in the Code to the calculation of the additional mandatory contribution.     (d)   Make-Up Miscellaneous Contributions. The Company shall contribute to the Serviceman’s Accounts any top-heavy minimum contribution he would have received pursuant to section 11.4, (including any forfeitures treated as top-heavy minimum contributions) if he had remained employed during his time in the Uniformed Services, and had earned Deemed Compensation during that time. See subsection (e) for guidance on applying the various limits contained in the Code to the calculation of the top-heavy minimum contribution.     (e)   Application of Limitations.   (i)   The make-up contributions under subsections (c) and (d) (the “Make-Up Contributions”) shall be ignored for purposes of determining the Company’s maximum contribution under subsection 3.1(c), the limits on Annual Additions under section 3.4, the non-discrimination requirements of Code §401(a)(4), and (if the Serviceman is a Key Employee) calculating the minimum required top-heavy contribution under section 11.4.     (ii)   In order to determine the maximum Make-Up Contributions, the following limitations shall apply.   (A)   The Serviceman’s “Aggregate Compensation” for each year shall be calculated. His Aggregate Compensation shall be equal to his actual Compensation, plus his Deemed Compensation that would have been paid during that year. Each type of Aggregate Compensation (for benefit purposes, for purposes of determining whether the Serviceman is a Highly Compensated Employee, etc.) shall be determined separately.     (B)   The Serviceman’s Aggregate Compensation each Plan Year shall be limited to the dollar limit in effect for that Plan Year under Code §401(a)(17), for the purposes and in the manner specified in subsection 1.11(d). Page 30 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------     (C)   The limits of subsection 3.1(c) (relating to the maximum contribution by the Company to the Plan) for each Plan Year shall be calculated by using the Serviceman’s Aggregate Compensation for that Plan Year, and by treating the Make-Up Contributions that are attributable to that Plan Year’s Deemed Compensation as having been made during that Plan Year.     (D)   The limits of section 3.4 (relating to the maximum Annual Additions to a Participant’s Accounts) shall be calculated for each Limitation Year by using the Serviceman’s Aggregate Compensation for that Limitation Year, and by treating as Annual Additions all the Make-Up Contributions that are attributable to that Limitation Year’s Deemed Compensation.   (f)   Deemed Compensation. A Serviceman’s Deemed Compensation is the Compensation that he would have received (including raises) had he remained employed by the Company or Affiliated Entity during his time in the Uniformed Services, unless it is not reasonably certain what his Compensation would have been, in which case his Deemed Compensation shall be based on his average rate of compensation during the 12 months (or, if shorter, his period of employment with the Company and Affiliated Entities) immediately before he entered the Uniformed Services. A Serviceman’s Deemed Compensation shall be reduced by any Compensation actually paid to him during his time in the Uniformed Services (such as vacation pay). Deemed Compensation shall cease when the Serviceman’s potential USERRA reemployment rights expire. Each type of Deemed Compensation (for benefit purposes, for purposes of determining if the Serviceman is a Highly Compensated Employee, etc.) shall be determined separately.             APACHE CORPORATION     Date: 12/23/05  By:   /s/ Jeffrey M. Bender         Title: Vice President -- Human Resources              Page 31 of 31   Document Prepared December 7, 2005 --------------------------------------------------------------------------------   APPENDIX A Participating Companies      The following Affiliated Entities were actively participating in the Plan as of the following dates:               Participation   Participation Business   Began As Of   Ended As Of   Apache International, Inc.   January 1, 1997   N/A Apache Canada Ltd.   January 1, 1997   N/A — END OF APPENDIX A — A-1   Document Prepared December 7, 2005 --------------------------------------------------------------------------------   APPENDIX B DEKALB Energy Company / Apache Canada Ltd. Introduction Through a merger effective as of May 17, 1995, Apache then held 100% of the stock of DEKALB Energy Company (which has been renamed Apache Canada Ltd.). Capitalized terms in this Appendix have the same meanings as those given to them in the Plan. The regular terms of the Plan shall apply to the employees of Apache Canada Ltd., except as provided below. Eligibility to Participate Notwithstanding the definition of “Covered Employee,” an employee of Apache Canada Ltd. shall be a Covered Employee only if (1) he is either a U.S. citizen or a U.S. resident, and (2) he was employed by Apache or another Company immediately before becoming an employee of Apache Canada Ltd. Compensation If the payroll of the Apache Canada Ltd. employee is handled in the United States, then the definitions of Compensation in the main body of the Plan shall apply. To the extent that the payroll of the Apache Canada Ltd. employee is handled outside of the United States, the following definitions of Compensation shall apply in lieu of the definitions found in the main body of the Plan:   (a)   Code §415 Compensation. For purposes of determining the limitation on Annual Additions under section 3.4 and the minimum contribution under section 11.4 when the Plan is top-heavy, Compensation shall mean foreign earned income (within the meaning of Code §911(b)) paid by the Company or an Affiliated Entity, and elective contributions that are not includable in the Employee’s income pursuant to Code §125, §132(f)(4), §402(e)(3), §402(h), §403(b), §408(p), §414(u)(2)(C), §414(v)(6)(B), or §457. For purposes of section 3.4, Compensation shall be measured over a Limitation Year. For purposes of section 11.4, Compensation shall be measured over a Plan Year.     (b)   Code §414(q) Compensation. For purposes of identifying Highly Compensated Employees and Key Employees, Compensation shall have the same meaning as in paragraph (a), except that Compensation shall be measured over a Plan Year and shall not include any amounts accrued by, but not paid to, the Employee during the Plan Year. — END OF APPENDIX B — B-1   Document Prepared December 7, 2005 --------------------------------------------------------------------------------   APPENDIX C Corporate Transactions Over the years, the Company has engaged in numerous corporate transactions, both acquisitions and sales. This Appendix contains any special service-crediting provisions that apply to employees affected by the corporate transaction (both those who are hired by the Company and those whose employment is terminated). Sales The following Participants are fully vested in their Accounts in this Plan, on the following dates: [none, as of January 1, 2006] Acquisitions A Period of Service for vesting purposes for a New Employee (listed below) shall be determined by treating all periods of employment with the Former Employer Controlled Group as periods of employment with Apache. The “Former Employer Controlled Group” means the Former Employer (listed below), its predecessor company/ies, and any business while such business was treated as a single employer with the Former Employer or predecessor company pursuant to Code §414(b), §414(c), §414(m), or §414(o). The following individuals are “New Employees” and the following companies are “Former Employers”:       Former Employer   New Employees Crescendo Resources, L.P. (“Crescendo”)   All individuals hired from April 30, 2000 through June 1, 2000 from Crescendo and related companies in connection with an April 30, 2000 asset acquisition from Crescendo.       Collins & Ware (“C&W”) and Longhorn Disposal, Inc. (“Longhorn”)   All individuals hired from C&W, Longhorn, and related companies in connection with a May 23, 2000 asset acquisition from C&W and Longhorn.       Occidental Petroleum Corporation (“Oxy”)   All individuals hired from Oxy and related companies in connection with an August 2000 asset acquisition from an Oxy subsidiary.       Private company (“Private”)   All individuals hired in January 2003 from Private and related companies in connection with an asset acquisition of certain property in Louisiana effective as of December 1, 2002. —END OF APPENDIX C—  C-1   Document Prepared December 7, 2005

STOCK PLEDGE AGREEMENT     This Stock Pledge Agreement (this “Agreement”), dated as of October 18, 2006, among Laurus Master Fund, Ltd. (the “Pledgee”) and Ronco Corporation, a Delaware corporation (the “Company” or “Pledgor”).   BACKGROUND   The Company has entered into a Security and Purchase Agreement dated as of the date hereof (as amended, modified, restated or supplemented from time to time, the “Security Agreement”), pursuant to which the Pledgee provides or will provide certain financial accommodations to the Company and certain subsidiaries of the Company.   In order to induce the Pledgee to provide or continue to provide the financial accommodations described in the Security Agreement, each Pledgor has agreed to pledge and grant a security interest in the collateral described herein to the Pledgee on the terms and conditions set forth herein.   NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration the receipt of which is hereby acknowledged, the parties hereto agree as follows:   1.  Defined Terms. All capitalized terms used herein which are not defined shall have the meanings given to them in the Security Agreement.   2.  Pledge and Grant of Security Interest. To secure the full and punctual payment and performance of (the following clauses (a) and (b), collectively, the “Obligations”) (a) the obligations under the Security Agreement and the Ancillary Agreements referred to in the Security Agreement (the Security Agreement and the Ancillary Agreements, as each may be amended, restated, modified and/or supplemented from time to time, collectively, the “Documents”) and (b) all other obligations and liabilities of each Pledgor to the Pledgee whether now existing or hereafter arising, direct or indirect, liquidated or unliquidated, absolute or contingent, due or not due and whether under, pursuant to or evidenced by a note, agreement, guaranty, instrument or otherwise (in each case, irrespective of the genuineness, validity, regularity or enforceability of such Obligations, or of any instrument evidencing any of the Obligations or of any collateral therefor or of the existence or extent of such collateral, and irrespective of the allowability, allowance or disallowance of any or all of such in any case commenced by or against any Pledgor under Title 11, United States Code, including, without limitation, obligations of each Pledgor for post-petition interest, fees, costs and charges that would have accrued or been added to the Obligations but for the commencement of such case), each Pledgor hereby pledges, assigns, hypothecates, transfers and grants a security interest to Pledgee in all of the following (the “Collateral”):   (a)  the shares of stock or other equity interests set forth on Schedule A annexed hereto and expressly made a part hereof (together with any additional shares of stock or other equity interests acquired by any Pledgor, the “Pledged Stock”), the certificates representing the Pledged Stock and all dividends, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Stock;       --------------------------------------------------------------------------------   (b)  all additional shares of stock or other equity interests of any issuer (each, an “Issuer”) of the Pledged Stock from time to time acquired by any Pledgor in any manner, including, without limitation, stock dividends or a distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock split, spin-off or split-off (which shares shall be deemed to be part of the Collateral), and the certificates representing such additional shares, and all dividends, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares; and   (c)  all options and rights, whether as an addition to, in substitution of or in exchange for any shares of any Pledged Stock and all dividends, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all such options and rights.   3.  Delivery of Collateral. All certificates representing or evidencing the Pledged Stock shall be delivered to and held by or on behalf of Pledgee pursuant hereto and shall be accompanied by duly executed instruments of transfer or assignments in blank, all in form and substance satisfactory to Pledgee. Each Pledgor hereby authorizes the Issuer upon demand by the Pledgee to deliver any certificates, instruments or other non-cash distributions issued in connection with the Collateral directly to the Pledgee, in each case to be held by the Pledgee, subject to the terms hereof. Upon the occurrence and during the continuance of an Event of Default (as defined below), the Pledgee shall have the right, during such time in its discretion and without notice to the Pledgor, to transfer to or to register in the name of the Pledgee or any of its nominees any or all of the Pledged Stock. In addition, the Pledgee shall have the right at such time to exchange certificates or instruments representing or evidencing Pledged Stock for certificates or instruments of smaller or larger denominations.   4.  Representations and Warranties of each Pledgor. Each Pledgor jointly and severally represents and warrants to the Pledgee (which representations and warranties shall be deemed to continue to be made until all of the Obligations have been paid in full and each Document and each agreement and instrument entered into in connection therewith has been irrevocably terminated) that:   (a)  the execution, delivery and performance by each Pledgor of this Agreement and the pledge of the Collateral hereunder do not and will not result in any violation of any agreement, indenture, instrument, license, judgment, decree, order, law, statute, ordinance or other governmental rule or regulation applicable to any Pledgor, which violation is reasonably likely to result in a Material Adverse Effect ;   (b)  this Agreement constitutes the legal, valid, and binding obligation of each Pledgor enforceable against each Pledgor in accordance with its terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and general principles of equity that restrict the availability of equitable or legal remedies;     2 --------------------------------------------------------------------------------   (c)  (i) all Pledged Stock owned by each Pledgor is set forth on Schedule A hereto and (ii) each Pledgor is the direct and beneficial owner of each share of the Pledged Stock;   (d)  all of the shares of the Pledged Stock have been duly authorized, validly issued and are fully paid and nonassessable;   (e)  no consent or approval of any person, corporation, governmental body, regulatory authority or other entity, the absence of which is reasonably likely to result in a Material Adverse Effect, is or will be necessary for (i) the execution, delivery and performance of this Agreement, (ii) the exercise by the Pledgee of any rights with respect to the Collateral or (iii) the pledge and assignment of, and the grant of a security interest in, the Collateral hereunder ;   (f)  there are no pending or, to the best of Pledgor’s knowledge, threatened actions or proceedings before any court, judicial body, administrative agency or arbitrator which may materially adversely affect the Collateral ;   (g)  each Pledgor has the requisite power and authority to enter into this Agreement and to pledge and assign the Collateral to the Pledgee in accordance with the terms of this Agreement;   (h)  each Pledgor owns each item of the Collateral and, except for the pledge and security interest granted to Pledgee hereunder, the Collateral shall be, immediately following the closing of the transactions contemplated by the Documents, free and clear of any other security interest, mortgage, pledge, claim, lien, charge, hypothecation, assignment, offset or encumbrance whatsoever (collectively, “Liens”) ;   (i)  there are no restrictions on transfer of the Pledged Stock contained in the certificate of incorporation or by-laws (or equivalent organizational documents) of the Issuer, which have not otherwise been enforceably and legally waived by the necessary parties;   (j)  none of the Pledged Stock has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject;   (k)  the pledge and assignment of the Collateral and the grant of a security interest under this Agreement vest in the Pledgee all of those rights of the Pledgor in the Collateral that are contemplated by this Agreement; and   (l)  to the extent not otherwise set forth on Schedule A hereto, the Pledged Stock constitutes one hundred percent (100%) of the issued and outstanding shares of capital stock or other equity interests of each Issuer.     3 --------------------------------------------------------------------------------   5.  Covenants. Each Pledgor jointly and severally covenants that other than as contemplated by the Security Agreement, until the Obligations shall be indefeasibly satisfied in full and each Document and each agreement and instrument entered into in connection therewith is irrevocably terminated:   (a)  No Pledgor will sell, assign, transfer, convey, or otherwise dispose of its rights in or to the Collateral or any interest therein; nor will any Pledgor create, incur or permit to exist any Lien whatsoever with respect to any of the Collateral or the proceeds thereof other than that created hereby .   (b)  Each Pledgor will, at its expense, defend Pledgee’s right, title and security interest in and to the Collateral against the claims of any other party.   (c)  Each Pledgor shall at any time, and from time to time, upon the written request of Pledgee, execute and deliver such further documents and do such further acts and things as Pledgee may reasonably request in order to effectuate the purposes of this Agreement including, but without limitation, delivering to Pledgee, upon the occurrence of an Event of Default, irrevocable proxies in respect of the Collateral in form satisfactory to Pledgee. Until receipt thereof, upon an Event of Default that has occurred and is continuing beyond any applicable grace period, this Agreement shall constitute Pledgor’s proxy to Pledgee or its nominee to vote all shares of Collateral then registered in each Pledgor’s name.   (d)  No Pledgor will consent to or approve the issuance of (i) any additional shares of any class of capital stock or other equity interests of the Issuer; or (ii) any securities convertible either voluntarily by the holder thereof or automatically upon the occurrence or nonoccurrence of any event or condition into, or any securities exchangeable for, any such shares, unless, in either case, such shares are pledged as Collateral pursuant to this Agreement.   6.  Voting Rights and Dividends. In addition to the Pledgee’s rights and remedies set forth in Section 8 hereof, in case an Event of Default shall have occurred and be continuing, beyond any applicable cure period, the Pledgee shall (i) be entitled to vote the Collateral, (ii) be entitled to give consents, waivers and ratifications in respect of the Collateral (each Pledgor hereby irrevocably constituting and appointing the Pledgee, with full power of substitution, the proxy and attorney-in-fact of each Pledgor for such purposes) and (iii) be entitled to collect and receive for its own use cash dividends paid on the Collateral. Following the occurrence of an Event of Default, all dividends and all other distributions in respect of any of the Collateral, shall be delivered to the Pledgee to hold as Collateral and shall, if received by any Pledgor, be received in trust for the benefit of the Pledgee, be segregated from the other property or funds of any other Pledgor, and be forthwith delivered to the Pledgee as Collateral in the same form as so received (with any necessary endorsement).   7.  Event of Default. An “Event of Default” under this Agreement shall be deemed to have occurred when:   (a)  An “Event of Default” under any Document shall have occurred and be continuing beyond any applicable cure period;     4 --------------------------------------------------------------------------------   (b)  Intentionally omitted.;   (c)  Any representation or warranty of any Pledgor made herein shall be false in any material respect;   (d)  Any portion of the Collateral is subjected to a levy of execution, attachment, distraint or other judicial process and such levy shall not be cured, disputed or stayed within a period of fifteen (15) business days after the occurrence thereof; or   (e)  Any Pledgor shall (i) apply for, consent to, or suffer to exist the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or other fiduciary of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing.   8.  Remedies. In case an Event of Default shall have occurred and is continuing, the Pledgee may:   (a)  Transfer any or all of the Collateral into its name, or into the name of its nominee or nominees;   (b)  Exercise all corporate rights with respect to the Collateral including, without limitation, all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to any shares of the Collateral as if it were the absolute owner thereof, including, but without limitation, the right to exchange, at its discretion, any or all of the Collateral upon the merger, consolidation, reorganization, recapitalization or other readjustment of the Issuer thereof, or upon the exercise by the Issuer of any right, privilege or option pertaining to any of the Collateral, and, in connection therewith, to deposit and deliver any and all of the Collateral with any committee, depository, transfer agent, registrar or other designated agent upon such terms and conditions as it may determine, all without liability except to account for property actually received by it; and   (c)  Subject to any requirement of applicable law, sell, assign and deliver the whole or, from time to time, any part of the Collateral at the time held by the Pledgee, at any private sale or at public auction, with or without demand, advertisement or notice of the time or place of sale or adjournment thereof or otherwise (all of which are hereby waived, except such notice as is required by applicable law and cannot be waived), for cash or credit or for other property for immediate or future delivery, and for such price or prices and on such terms as the Pledgee in its sole discretion may determine, or as may be required by applicable law.     5 --------------------------------------------------------------------------------   Each Pledgor hereby waives and releases any and all right or equity of redemption, whether before or after sale hereunder. At any such sale, unless prohibited by applicable law, the Pledgee may bid for and purchase the whole or any part of the Collateral so sold free from any such right or equity of redemption. All moneys received by the Pledgee hereunder, whether upon sale of the Collateral or any part thereof or otherwise, shall be held by the Pledgee and applied by it as provided in Section 10 hereof. No failure or delay on the part of the Pledgee in exercising any rights hereunder shall operate as a waiver of any such rights nor shall any single or partial exercise of any such rights preclude any other or future exercise thereof or the exercise of any other rights hereunder. The Pledgee shall have no duty as to the collection or protection of the Collateral or any income thereon nor any duty as to preservation of any rights pertaining thereto, except to apply the funds in accordance with the requirements of Section 10 hereof. The Pledgee may exercise its rights with respect to property held hereunder without resort to other security for or sources of reimbursement for the Obligations. In addition to the foregoing, Pledgee shall have all of the rights, remedies and privileges of a secured party under the Uniform Commercial Code of New York (the “UCC”) regardless of the jurisdiction in which enforcement hereof is sought.   9.  Private Sale. Each Pledgor recognizes that the Pledgee may be unable to effect (or to do so only after delay which would adversely affect the value that might be realized from the Collateral) a public sale of all or part of the Collateral by reason of certain prohibitions contained in the Securities Act, and may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Each Pledgor agrees that any such private sale may be at prices and on terms less favorable to the seller than if sold at public sales and that such private sales shall be deemed to have been made in a commercially reasonable manner. Each Pledgor agrees that the Pledgee has no obligation to delay sale of any Collateral for the period of time necessary to permit the Issuer to register the Collateral for public sale under the Securities Act.   10.  Proceeds of Sale. The proceeds of any collection, recovery, receipt, appropriation, realization or sale of the Collateral shall be applied by the Pledgee as follows:   (a)  First, to the payment of all costs, reasonable expenses and charges of the Pledgee and to the reimbursement of the Pledgee for the prior payment of such costs, reasonable expenses and charges incurred in connection with the care and safekeeping of the Collateral (including, without limitation, the reasonable expenses of any sale or any other disposition of any of the Collateral), attorneys’ fees and reasonable expenses, court costs, any other fees or expenses incurred or expenditures or advances made by Pledgee in the protection, enforcement or exercise of its rights, powers or remedies hereunder;   (b)  Second, to the payment of the Obligations, in whole or in part, in such order as the Pledgee may elect, whether or not such Obligations is then due;   (c)  Third, to such persons, firms, corporations or other entities as required by applicable law including, without limitation, Section 9-615(a)(3) of the UCC; and   (d)  Fourth, to the extent of any surplus to the Pledgors or as a court of competent jurisdiction may direct.     6 --------------------------------------------------------------------------------   In the event that the proceeds of any collection, recovery, receipt, appropriation, realization or sale are insufficient to satisfy the Obligations, each Pledgor shall be jointly and severally liable for the deficiency plus the costs and fees of any attorneys employed by Pledgee to collect such deficiency.   11.  Waiver of Marshaling. Each Pledgor hereby waives any right to compel any marshaling of any of the Collateral.   12.  No Waiver. Any and all of the Pledgee’s rights with respect to the Liens granted under this Agreement shall continue unimpaired, and Pledgor shall be and remain obligated in accordance with the terms hereof, notwithstanding (a) the bankruptcy, insolvency or reorganization of any Pledgor, (b) the release or substitution of any item of the Collateral at any time, or of any rights or interests therein, or (c) any delay, extension of time, renewal, compromise or other indulgence granted by the Pledgee in reference to any of the Obligations. Each Pledgor hereby waives all notice of any such delay, extension, release, substitution, renewal, compromise or other indulgence, and hereby consents to be bound hereby as fully and effectively as if such Pledgor had expressly agreed thereto in advance. No delay or extension of time by the Pledgee in exercising any power of sale, option or other right or remedy hereunder, and no failure by the Pledgee to give notice or make demand, shall constitute a waiver thereof, or limit, impair or prejudice the Pledgee’s right to take any action against any Pledgor or to exercise any other power of sale, option or any other right or remedy.   13.  Expenses. The Collateral shall secure, and each Pledgor shall pay to Pledgee on demand, from time to time, all reasonable costs and expenses, (including but not limited to, reasonable attorneys’ fees and costs, taxes, and all transfer, recording, filing and other charges) of, or incidental to, the custody, care, transfer, administration of the Collateral or any other collateral, or in any way relating to the enforcement, protection or preservation of the rights or remedies of the Pledgee under this Agreement or with respect to any of the Obligations.   14.  The Pledgee Appointed Attorney-In-Fact and Performance by the Pledgee. Upon the occurrence of an Event of Default, each Pledgor hereby irrevocably constitutes and appoints the Pledgee as such Pledgor’s true and lawful attorney-in-fact, with full power of substitution, to execute, acknowledge and deliver any instruments and to do in such Pledgor’s name, place and stead, all such acts, things and deeds for and on behalf of and in the name of such Pledgor, which such Pledgor could or might do or which the Pledgee may deem necessary, desirable or convenient to accomplish the purposes of this Agreement, including, without limitation, to execute such instruments of assignment or transfer or orders and to register, convey or otherwise transfer title to the Collateral into the Pledgee’s name. Each Pledgor hereby ratifies and confirms all that said attorney-in-fact may so do and hereby declares this power of attorney to be coupled with an interest and irrevocable. If any Pledgor fails to perform any agreement herein contained, the Pledgee may itself perform or cause performance thereof, and any costs and expenses of the Pledgee incurred in connection therewith shall be paid by the Pledgors as provided in Section 10 hereof.     7 --------------------------------------------------------------------------------   15.  Waivers. THE PARTIES HERETO DESIRES THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEN IN CONNECTION WITH THIS AGREEMENT, ANY OTHER DOCUMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.    16.  Recapture. Notwithstanding anything to the contrary in this Agreement, if the Pledgee receives any payment or payments on account of the Obligations, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver, or any other party under the United States Bankruptcy Code, as amended, or any other federal or state bankruptcy, reorganization, moratorium or insolvency law relating to or affecting the enforcement of creditors’ rights generally, common law or equitable doctrine, then to the extent of any sum not finally retained by the Pledgee, each Pledgor’s obligations to the Pledgee shall be reinstated and this Agreement shall remain in full force and effect (or be reinstated) until payment shall have been made to Pledgee, which payment shall be due on demand.   17.  Captions. All captions in this Agreement are included herein for convenience of reference only and shall not constitute part of this Agreement for any other purpose.   18.  Miscellaneous.   (a)  This Agreement constitutes the entire and final agreement among the parties with respect to the subject matter hereof and may not be changed, terminated or otherwise varied except by a writing duly executed by the parties hereto.   (b)  No waiver of any term or condition of this Agreement, whether by delay, omission or otherwise, shall be effective unless in writing and signed by the party sought to be charged, and then such waiver shall be effective only in the specific instance and for the purpose for which given.   (c)  In the event that any provision of this Agreement or the application thereof to any Pledgor or any circumstance in any jurisdiction governing this Agreement shall, to any extent, be invalid or unenforceable under any applicable statute, regulation, or rule of law, such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute, regulation or rule of law, and the remainder of this Agreement and the application of any such invalid or unenforceable provision to parties, jurisdictions, or circumstances other than to whom or to which it is held invalid or unenforceable shall not be affected thereby, nor shall same affect the validity or enforceability of any other provision of this Agreement.   (d)  This Agreement shall be binding upon the Company and the Pledgee and their respective successors and assigns.     8 --------------------------------------------------------------------------------   (e)  Any notice or other communication required or permitted pursuant to this Agreement shall be given in accordance with the Security Agreement.   (f)  THIS AGREEMENT AND THE OTHER DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.   (g)  PLEDGEE AND EACH PLEDGOR HEREBY CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY PLEDGOR, ON THE ONE HAND, AND THE PLEDGEE, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS, PROVIDED, THAT PLEDGEE AND EACH PLEDGOR ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE PLEDGEE FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE INDEBTEDNESS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE INDEBTEDNESS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE PLEDGEE. PLEDGEE AND EACH PLEDGOR EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND PLEDGEE AND EACH PLEDGOR HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. PLEDGEE AND EACH PLEDGOR HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH IN THE SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR FIVE (5) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.   (h)  It is understood and agreed that any person or entity that desires to become a Pledgor hereunder, or is required to execute a counterpart of this Agreement after the date hereof pursuant to the requirements of any Document, shall become a Pledgor hereunder by (x) executing a Joinder Agreement in form and substance satisfactory to the Pledgee, (y) delivering supplements to such exhibits and annexes to such Documents as the Pledgee shall reasonably request and/or set forth in such joinder agreement and (z) taking all actions as specified in this Agreement as would have been taken by such Pledgor had it been an original party to this Agreement, in each case with all documents required above to be delivered to the Pledgee and with all documents and actions required above to be taken to the reasonable satisfaction of the Pledgee.     9 --------------------------------------------------------------------------------   (i)  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same agreement. Any signature delivered by a party by facsimile transmission shall be deemed an original signature hereto.   [Remainder of Page Intentionally Left Blank]         10 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first written above.   RONCO CORPORATION   By: /s/ Paul Kabashima                             Name: Paul Kabashima Title: Interim President   LAURUS MASTER FUND, LTD.   By: unintelligible                                        Name: unintelligble Title: Director     11 --------------------------------------------------------------------------------     SCHEDULE A to the Stock Pledge Agreement   Pledged Stock   Pledgor Issuer Class of Stock Stock Certificate Number Par Value Number of Shares % of outstanding Shares               Ronco Corporation Ronco Marketing Corporation Common Stock 7 $.001 1 100%                                            

  Exhibit 10.6a ZALE CORPORATION OUTSIDE DIRECTORS’ 2005 STOCK INCENTIVE PLAN (As Amended Through August 2006)      1. PREAMBLE      This Zale Corporation Outside Directors’ 2005 Stock Incentive Plan, as it may be amended from time to time (the “Plan”), is intended to promote the interests of Zale Corporation, a Delaware corporation (the “Company”), and its stockholders by providing directors of the Company who are not employees of the Company with appropriate incentives and rewards to serve on the board of directors of the Company and to acquire a proprietary interest in the long-term success of the Company.      2. DEFINITIONS      As used in the Plan, the following definitions apply to the terms indicated below:      (a) “Board of Directors” shall mean the Board of Directors of the Company.      (b) “Cause,” when used in connection with a Participant’s removal or resignation as a member of the Board of Directors, shall mean (i) the willful and continued failure by the Participant substantially to perform his or her duties and obligations to the Company (other than any such failure resulting from his or her incapacity due to physical or mental illness) or (ii) the willful engaging by the Participant in misconduct which is materially injurious to the Company. For purposes of this Section 2(b), no act, or failure to act, on a Participant’s part shall be considered “willful” unless done, or omitted to be done, by the Participant in bad faith and without reasonable belief that his or her action or omission was in the best interests of the Company. The Board of Directors shall determine whether a Participant’s removal or resignation as a member of the Board of Directors is for Cause.      (c) “Change in Control” shall mean the first to occur of the following:      (i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities;      (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii) or (iv) of this definition) whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of   --------------------------------------------------------------------------------   the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;      (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other entity, other than (i) a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as hereinabove defined) acquires more than 50% of the combined voting power of the Company’s then outstanding securities; or      (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.      (d) “Code” shall mean the Internal Revenue Code of 1986, as amended.      (e) “Company Stock” shall mean the common stock, par value $.01 per share, of the Company.      (f) “Disability” shall mean any physical or mental condition that would qualify a Participant for a disability benefit under the long-term disability plan maintained by the Company and applicable to him or her.      (g) “Effective Date” shall mean November 11, 2005.      (h) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.      (i) The “Fair Market Value” of a share of Company Stock shall be the price at which the Company Stock was last sold in the principal United States market for the Company Stock as of the date for which the Fair Market Value is determined or, in the event that the price of a share of Company Stock shall not be so reported, the Fair Market Value of a share of Company Stock shall be determined by the Committee in its absolute discretion.      (j) “Incentive Award” shall mean an Option or a share of Restricted Stock granted pursuant to the terms of the Plan.      (k) “Issue Date” shall mean the date established by the Board of Directors on which certificates representing shares of Restricted Stock shall be issued by the Company pursuant to the terms of Section 8(e). 2 --------------------------------------------------------------------------------        (l) “Option” shall mean an option to purchase shares of Company Stock granted pursuant to Section 6(a) and as described in Section 7.      (m) “Participant” shall mean a member of the Board of Directors who is not an employee of the Company or a Subsidiary.      (n) A share of “Restricted Stock” shall mean a share of Company Stock which is granted pursuant to the terms of Section 6(b) and as described in Section 8.      (o) “Rule 16b-3” shall mean the rule thus designated as promulgated under the Exchange Act.      (p) “Subsidiary” shall mean any corporation or other entity in which, at the time of reference, the Company owns, directly or indirectly, stock or similar interests comprising more than 50 percent of the combined voting power of all outstanding securities of such entity.      (q) “Vesting Date” shall mean the date established by the Board of Directors on which a share of Restricted Stock may vest.      3. STOCK SUBJECT TO THE PLAN      (a) Shares Available for Option or Restricted Stock Awards      The total number of shares of Company Stock with respect to which Incentive Awards may be granted shall not exceed 250,000 shares, with not more than 100,000 shares to be granted as Restricted Stock awards. Such shares may be authorized but unissued Company Stock or authorized and issued Company Stock held in the Company’s treasury or acquired by the Company for the purposes of the Plan. The Board of Directors may direct that any stock certificate evidencing shares of Company Stock issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares pursuant to the Plan.      (b) Adjustment for Change in Capitalization      If there is any change in the outstanding shares of Company Stock by reason of a stock dividend or distribution, stock split-up, recapitalization, combination or exchange of shares, or by reason of any merger, consolidation, spin-off or other corporate reorganization in which the Company is the surviving corporation, the number of shares available for issuance both in the aggregate and with respect to each outstanding Incentive Award, and the price per share under each outstanding Option, shall be proportionately adjusted by the Board of Directors, whose determination shall be final and binding. After any adjustment made pursuant to this Section 3(b), the number of shares subject to each outstanding Incentive Award shall be rounded to the nearest whole number.      (c) Re-use of Shares 3 --------------------------------------------------------------------------------        Any shares subject to an Incentive Award that remain unissued upon the cancellation or termination of such Incentive Award for any reason whatsoever shall again become available for Incentive Awards under the Plan.      (d) No Repricing      Absent stockholder approval, the Board of Directors shall not have any authority, with or without the consent of the affected holders of Options, to “reprice” an Option after the date of its initial grant with a lower exercise price in substitution for the original exercise price. This paragraph may not be amended, altered or repealed by the Board of Directors without approval of the stockholders of the Company.      4. ADMINISTRATION OF THE PLAN      The Plan shall be administered by the Board of Directors. The Board of Directors shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan and the terms of any Incentive Awards issued under it and to adopt such rules and regulations for administering the Plan as it may deem necessary or appropriate. Decisions of the Board of Directors shall be final and binding on all parties. Unless determined otherwise by the Board of Directors, the authority of the Board of Directors to administer the Plan is delegated to the Compensation Committee of the Board of Directors.      No member of the Board of Directors shall be liable for any action, omission or determination relating to the Plan, and the Company shall indemnify and hold harmless each member of the Board of Directors and each other director or employee of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been delegated against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Board of Directors) arising out of any action, omission or determination relating to the Plan, unless, in either case, such action, omission or determination was taken or made by such member, director or employee in bad faith and without reasonable belief that it was in the best interests of the Company.      5. ELIGIBILITY      The persons who shall be eligible to receive Options or Restricted Stock awards pursuant to the Plan shall be such members of the Board of Directors who are not employees of the Company or a Subsidiary.      6. INCENTIVE AWARDS UNDER THE PLAN      Incentive Awards granted under the Plan shall be subject to the terms and conditions set forth in the Plan, and shall be evidenced by an Incentive Award Agreement which shall not be inconsistent with the provisions of the Plan. The Board of Directors shall be entitled to increase or decrease the number of Incentive Awards Participants receive.      (a) Annual Awards. Annually, Participants shall receive the following Incentive Awards: 4 --------------------------------------------------------------------------------        (i) 3,800 Options; and      (ii) 1,500 shares of Restricted Stock.      (b) Other Awards      Upon the initial election to the Board of Directors of any person who is a Participant (other than through an initial election by the Company’s stockholders at an annual meeting of stockholders), such person shall be granted:      (i) Options to purchase such number of shares of Company Stock as shall be determined by multiplying (1) 308 by (2) the number of full calendar months remaining before the next annual meeting of stockholders of the Company at which directors will be elected (if no date has been set for the next annual meeting of stockholders such date shall be presumed to be November 1); and      (ii) Restricted Stock in such number of shares as shall be determined by multiplying (1) 104 by (2) the number of full calendar months remaining before the next annual meeting of stockholders of the Company at which directors will be elected (if no date has been set for the next annual meeting of stockholders such date shall be presumed to be November 1).      The Board of Directors shall be entitled to increase or decrease these pro rata amounts in order to reflect any adjustment on the annual awards.      7. OPTIONS      (a) Exercise Price      The exercise price per share of an Option shall be the Fair Market Value of a share of Company Stock on the date the Option is granted.      (b) Term and Exercise of Options      (i) Unless the Board, in its discretion, determines otherwise, each Option shall become cumulatively exercisable as to 25% of the shares covered thereby on each of the first, second, third and fourth anniversaries of the date of grant. The expiration date of each Option shall be ten years after the date of grant; provided, however, that if the expiration date would occur during a period in which the Participant is prohibited from trading in the Company Stock pursuant to the provisions of the Company’s insider trading policy, then the expiration date shall be extended and such Option shall expire on the 30th day after the prohibition against trading under the Company’s insider trading policy has ceased to be in effect.      (ii) An Option may be exercised for all or any portion of the shares as to which it is exercisable; provided, that no partial exercise of an Option shall be for an aggregate exercise price of less than $1,000. The partial exercise of an 5 --------------------------------------------------------------------------------   Option shall not cause the expiration, termination or cancellation of the remaining portion thereof.      (iii) An Option shall be exercised by delivering notice to the Company’s principal office, to the attention of its Secretary (or the Secretary’s designee), no less than one business day in advance of the effective date of the proposed exercise. Such notice shall specify the number of shares of Company Stock with respect to which the Option is being exercised and the effective date of the proposed exercise and shall be signed by the Participant or other person then having the right to exercise the Option. Such notice may be withdrawn at any time prior to the close of business on the business day immediately preceding the effective date of the proposed exercise. Payment for shares of Company Stock purchased upon the exercise of an Option shall be made on the effective date of such exercise by one or a combination of the following means: (i) in cash, by certified check, bank cashier’s check or wire transfer; (ii) subject to the approval of the Board of Directors, in shares of Company Stock owned by the Participant for at least six months prior to the date of exercise and valued at their Fair Market Value on the effective date of such exercise; or (iii) subject to the approval of the Board of Directors, by such other provision as the Board of Directors may from time to time authorize. Any payment in shares of Company Stock shall be effected by the delivery of such shares to the Secretary (or the Secretary’s designee) of the Company, duly endorsed in blank or accompanied by stock powers duly executed in blank, together with any other documents and evidences as the Secretary (or the Secretary’s designee) of the Company shall require.      (iv) Certificates for shares of Company Stock purchased upon the exercise of an Option shall be issued in the name of the Participant or other person entitled to receive such shares, and delivered to the Participant or such other person as soon as practicable following the effective date on which the Option is exercised.      (c) Effect of Termination of Directorship      (i) Unless the Board of Directors shall determine otherwise, in the event of a Participant’s removal or resignation as a member of the Board of Directors for any reason other than Cause, Disability or death: (i) Options granted to such Participant, to the extent that they were exercisable at the time of such removal or resignation, shall remain exercisable until the date that is three months after such removal or resignation, on which date they shall expire; and (ii) Options granted to such Participant, to the extent that they were not exercisable at the time of such removal or resignation, shall expire at the close of business on the date of such removal or resignation. The three-month period described in this Section 7(c)(i) shall be extended to one year in the event of the Participant’s death during such three-month period. Notwithstanding the foregoing, no Option shall be exercisable after the expiration of its term. 6 --------------------------------------------------------------------------------        (ii) Unless the Board of Directors shall determine otherwise, in the event of a Participant’s removal or resignation as a member of the Board of Directors on account of the Disability or death of the Participant: (i) Options granted to such Participant, to the extent that they were exercisable at the time of such removal or resignation, shall remain exercisable until the first anniversary of such removal or resignation, on which date they shall expire; and (ii) Options granted to such Participant, to the extent that they were not exercisable at the time of such removal or resignation, shall expire at the close of business on the date of such removal or resignation. Notwithstanding the foregoing, no Option shall be exercisable after the expiration of its term.      (iii) In the event of a Participant’s removal or resignation as a member of the Board of Directors for Cause, all outstanding Options granted to such Participant shall expire at the commencement of business on the date of such removal or resignation.      (d) Acceleration of Exercise Date Upon Change in Control      Upon the occurrence of a Change in Control, each Option granted under the Plan and outstanding at such time shall become fully and immediately exercisable and shall remain exercisable until its expiration, termination or cancellation pursuant to the terms of the Plan. In addition, in the event of a potential Change in Control, the Board of Directors may in its discretion, cancel any outstanding Options and pay to the holders thereof, in cash or stock, or any combination thereof, the value of such Options based upon the price per share of Company Stock to be received by shareholders of the Company in the transaction giving rise to the Change in Control less the exercise price of each Option.      8. RESTRICTED STOCK      (a) Issue Date and Vesting Date      At the time of the grant of shares of Restricted Stock, the Board of Directors shall establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates with respect to such shares. Provided that all conditions to the vesting of a share of Restricted Stock imposed pursuant to Section 8(b) are satisfied, upon the occurrence of the Vesting Date with respect to a share of Restricted Stock, such share shall vest and the restrictions of Section 8(b) shall cease to apply to such share. Unless the Board of Directors determines otherwise, shares of Restricted Stock issued under the Plan vest on the first anniversary of the Issue Date.      (b) Conditions to Vesting      At the time of the grant of shares of Restricted Stock, the Board of Directors may impose such restrictions or conditions to the vesting of such shares as it, in its absolute discretion, deems appropriate. By way of example and not by way of limitation, the Board of Directors may require, as a condition to the vesting of any class or classes of shares of Restricted Stock, that the Participant or the Company achieves such performance goals as the Board of Directors may specify. 7 --------------------------------------------------------------------------------        (c) Restrictions on Transfer Prior to Vesting      Prior to the vesting of a share of Restricted Stock, no transfer of a Participant’s rights with respect to such share, whether voluntary or involuntary, by operation of law or otherwise, shall be permitted. Immediately upon any attempt to transfer such rights, such share, and all of the rights related thereto, shall be forfeited by the Participant.      (d) Dividends on Restricted Stock      The Board of Directors in its discretion may require that any dividends paid on shares of Restricted Stock shall be held in escrow until all restrictions on such shares have lapsed.      (e) Issuance of Certificates      Reasonably promptly after the Issue Date with respect to shares of Restricted Stock, the Company shall cause to be issued a stock certificate, registered in the name of the Participant to whom such shares were granted, evidencing such shares; provided, that the Company shall not cause such a stock certificate to be issued unless it has received a stock power duly endorsed in blank with respect to such shares. Each such stock certificate shall bear the following legend: The transferability of this certificate and the shares of stock represented hereby are subject to the restrictions, terms and conditions (including forfeiture provisions and restrictions against transfer) contained in the Zale Corporation Outside Directors’ 2005 Stock Incentive Plan, and such rules, regulations and interpretations as the Zale Corporation Board of Directors may adopt. Copies of the Plan and, if any, rules, regulations and interpretations are on file in the office of the Secretary of Zale Corporation, 901 West Walnut Hill Lane, Irving, Texas 75038-1003.      Such legend shall not be removed until such shares vest pursuant to the terms hereof.      Each certificate issued pursuant to this Section 8(e), together with the stock powers relating to the shares of Restricted Stock evidenced by such certificate, shall be held by the Company unless the Board of Directors determines otherwise.      (f) Voting Rights of Restricted Stock      During the restricted period, Participants holding shares of Restricted Stock may exercise full voting rights with respect to the shares.      (g) Consequences of Vesting      Upon the vesting of a share of Restricted Stock pursuant to the terms of the Plan, the restrictions of Section 8(c) shall cease to apply to such share. Reasonably promptly after a share of Restricted Stock vests, the Company shall cause to be delivered to the Participant to whom such shares were granted, a certificate evidencing such share, free of the legend set forth in 8 --------------------------------------------------------------------------------   Section 8(e). Notwithstanding the foregoing, such share still may be subject to restrictions on transfer as a result of applicable securities laws.      (h) Effect of Termination of Directorship      (i) Unless the Board of Directors provides otherwise, during the 90 days following a Participant’s removal or resignation as a member of the Board of Directors for any reason other than Cause, the Company shall have the right to require the return of any shares to which restrictions on transferability apply, in exchange for which the Company shall repay to the Participant (or the Participant’s estate) any amount paid by the Participant for such shares. In the event that the Company requires such a return of shares, it also shall have the right to require the return of all dividends paid on such shares, whether by termination of any escrow arrangement under which such dividends are held or otherwise.      (ii) In the event of a Participant’s removal or resignation as a member of the Board of Directors for Cause, all shares of Restricted Stock granted to such Participant which have not vested as of the date of such removal or resignation shall immediately be returned to the Company, together with any dividends paid on such shares, in return for which the Company shall repay to the Participant any amount paid for such shares.      (i) Effect of Change in Control      Upon the occurrence of a Change in Control, all outstanding shares of Restricted Stock which have not theretofore vested shall immediately vest.      9. RIGHTS AS A STOCKHOLDER      No person shall have any rights as a stockholder with respect to any shares of Company Stock covered by or relating to any Option until the date of issuance of a stock certificate with respect to such shares of Company Stock. Except as otherwise expressly provided in Section 3(b), no adjustment to any Option shall be made for dividends or other rights for which the record date occurs prior to the date such stock certificate is issued.      10. NO RIGHT TO INCENTIVE AWARD      Other than as specifically provided in the Plan, no person shall have any claim or right to receive an Incentive Award hereunder. The Board of Director’s granting of an Incentive Award to a Participant at any time shall neither require the Board of Directors to grant any other Incentive Award to such Participant or other person at any time nor preclude the Board of Directors from making subsequent grants to such Participant or any other person.      11. SECURITIES MATTERS      The Company shall be under no obligation to effect the registration pursuant to the Securities Act of 1933 of any interests in the Plan or any shares of Company Stock to be issued 9 --------------------------------------------------------------------------------   hereunder or to effect similar compliance under any state laws. Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause to be issued or delivered any certificates evidencing shares of Company Stock pursuant to the Plan unless and until the Company is advised by its counsel that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authority and the requirements of the New York Stock Exchange and any other securities exchange on which shares of Company Stock are traded. Certificates evidencing shares of Company Stock issued pursuant to the terms hereof, may bear such legends, as the Board of Directors, in its sole discretion, deems necessary or desirable to insure compliance with applicable securities laws.      The transfer of any shares of Company Stock hereunder shall be effective only at such time as counsel to the Company shall have determined that the issuance and delivery of such shares is in compliance with all applicable laws, regulations of governmental authority and the requirements of the New York Stock Exchange and any other securities exchange on which shares of Company Stock are traded. The Board of Directors may, in its sole discretion, defer the effectiveness of any transfer of shares of Company stock hereunder in order to allow the issuance of such shares to be made pursuant to registration or an exemption from registration or other methods for compliance available under federal or state securities laws. The Company shall inform the Participant in writing of the Board of Director’s decision to defer the effectiveness of a transfer. During the period of such a deferral in connection with the exercise of an Option, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto.      12. NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF THE CODE      If any Participant shall, in connection with the acquisition of shares of Company Stock under the Plan, make the election permitted under Section 83(b) of the Code (i.e., an election to include in gross income in the year of transfer the amounts specified in Section 83(b)), such Participant shall notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under the authority of Code Section 83(b).      13. WITHHOLDING TAXES      Whenever cash is to be paid pursuant to an Option or share of Restricted Stock, the Company shall have the right to deduct therefrom an amount sufficient to satisfy any federal, state and local withholding tax requirements related thereto.      Whenever shares of Company Stock are to be delivered either pursuant to an Option or as Restricted Stock, the Company shall have the right to require the Participant to remit to the Company in cash an amount sufficient to satisfy any federal, state and local withholding tax requirements related thereto. With the approval of the Board of Directors, which it shall have sole discretion to grant, a Participant may satisfy the foregoing requirement by electing to have the Company withhold from delivery shares of Company Stock having a value equal to the amount of tax to be withheld. Such shares shall be valued at their Fair Market Value on the date as of which the amount of tax to be withheld is determined (the “Tax Date”). Fractional share amounts shall be settled in cash. Such a withholding election may be made with respect to all or 10 --------------------------------------------------------------------------------   any portion of the shares to be delivered pursuant to an Option or as Restricted Stock. To the extent required for such a withholding of stock to qualify for the exemption available under Rule 16b-3, such an election by a grantee whose transactions in Company Stock are subject to Section 16(b) of the Exchange Act shall be: (i) subject to the approval of the Board of Directors in its sole discretion; (ii) irrevocable; (iii) made no sooner than six months after the grant of the award with respect to which the election is made; and (iv) made at least six months prior to the Tax Date unless such withholding election is in connection with exercise of an Option and both the election and the exercise occur prior to the Tax Date in a “window period” of ten business days beginning on the third day following release of the Company’s quarterly or annual summary statement of sales and earnings.      14. AMENDMENT OR TERMINATION OF THE PLAN      Except as provided in Section 3(d), the Board of Directors may, at any time, suspend or terminate the Plan or revise or amend it in any respect whatsoever; provided, however, that stockholder approval shall be required if and to the extent required by Rule 16b-3 or the New York Stock Exchange or any other securities exchange on which shares of the Company Stock are traded. Nothing herein shall restrict the Board of Director’s ability to exercise its discretionary authority pursuant to Section 4, which discretion may be exercised without amendment to the Plan. No action hereunder may, without the consent of a Participant, reduce the Participant’s rights under any outstanding Incentive Award.      15. NO OBLIGATION TO EXERCISE      The grant to a Participant of an Option shall impose no obligation upon such Participant to exercise such Option.      16. TRANSFERS UPON DEATH; NONASSIGNABILITY      Upon the death of a Participant outstanding Options granted to such Participant may be exercised only by the executor or administrator of the Participant’s estate or by a person who shall have acquired the right to such exercise by will or by the laws of descent and distribution. No transfer of an Incentive Award by will or the laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with (a) written notice thereof and with a copy of the will and/or such evidence as the Board of Directors may deem necessary to establish the validity of the transfer and (b) an agreement by the transferee to comply with all the terms and conditions of the Incentive Award that are or would have been applicable to the Participant and to be bound by the acknowledgments made by the Participant in connection with the grant of the Incentive Award.      During a Participant’s lifetime, the Board of Directors may permit the transfer, assignment or other encumbrance of an outstanding Incentive Award unless the award is meant to qualify for the exemptions available under Rule 16b-3 and the Board of Directors and the Participant intend that it shall continue to so qualify. 11 --------------------------------------------------------------------------------        17. EXPENSES AND RECEIPTS      The expenses of the Plan shall be paid by the Company. Any proceeds received by the Company in connection with the exercise of any Option by a Participant will be used for general corporate purposes.      18. FAILURE TO COMPLY      In addition to the remedies of the Company elsewhere provided for herein, failure by a Participant (or beneficiary) to comply with any of the terms and conditions of the Plan, unless such failure is remedied by such Participant (or beneficiary) within ten days after notice of such failure by the Board of Directors, shall be grounds for the cancellation and forfeiture of such Incentive Award, in whole or in part, as the Board of Directors, in its sole discretion, may determine.      19. EFFECTIVE DATE AND TERM OF PLAN      The Plan shall be effective as of the Effective Date. Unless earlier terminated by the Board of Directors, the right to grant Options under the Plan will terminate on the tenth anniversary of the Effective Date. Options outstanding at the termination of the Plan will remain in effect according to their terms and the provisions of the Plan.      20. APPLICABLE LAW      Except to the extent preempted by any applicable federal law, the Plan will be construed and administered in accordance with the laws of the State of Delaware, without reference to the principles of conflicts of laws thereunder. 12

EXHIBIT 10.1(a)   FORM OF NON-EMPLOYEE DIRECTOR RESTRICTED STOCK AGREEMENT   RESTRICTED STOCK AGREEMENT   THIS RESTRICTED STOCK AGREEMENT (this “Agreement”) is made as of                              ,                    between Symmetry Medical Inc., a Delaware corporation (the “Company”), and                                      (“Grantee”).   WHEREAS, the Grantee is a director of the Company; and   WHEREAS, the grant of the shares of restricted stock (as governed by the Company’s Amended and Restated 2004 Equity Incentive Plan (the “Plan”)) to the Grantee described herein has been authorized by the Company’s Compensation Committee and Board of Directors (the “Board”).   NOW, THEREFORE, pursuant to the Plan, the Company, upon the terms and conditions set forth herein, hereby grants to you 1,000 restricted shares of Common Stock, par value $.0001, (“Common Stock”) of the Company (the “Restricted Shares”) effective as of the date hereof (the “Date of Grant”), and subject to the terms and conditions of the Plan and the terms and conditions of this Agreement.   1. Definitions. All capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Plan.   2. Issuance of Shares. In consideration of the Grantee’s service as a director of the Company, the Restricted Shares shall be issued to the Grantee, and, upon payment to the Company by the Grantee of the aggregate par value thereof, which payment shall be made within 10 days of the date hereof, shall be fully paid and nonassessable and shall be represented by a certificate or certificates issued in the name of the Grantee and endorsed with an appropriate legend referring to the restrictions hereinafter set forth.   3. Restrictions on Transfer of Shares. The Restricted Shares may not be sold, assigned, transferred, conveyed, pledged, exchanged or otherwise encumbered or disposed of (each, a “Transfer”) by the Grantee, except to the Company, until they have become nonforfeitable as provided in Section 4 hereof. Any purported encumbrance or disposition in violation of the provisions of this Section 3 shall be void AB INITIO, and the other party to any such purported transaction shall not obtain any rights to or interest in the Restricted Shares. As and when permitted by the Plan, the Committee may in its sole discretion waive the restrictions on transferability with respect to all or a portion of the Restricted Shares. Notwithstanding the foregoing, Grantee may not Transfer Restricted Shares which have become nonforfeitable as provided in Section 3 hereof unless such Restricted Shares are registered pursuant to the Securities Act of 1933 (the “Securities Act”) or under Rule 144 promulgated under the Securities Act or unless the Company and its counsel agree with Grantee that such Transfer is not required to be registered under the Securities Act.   4. Vesting of Shares.   (a) Subject to Section 5 hereof, the Restricted Shares shall vest and become nonforfeitable if the Grantee remains a director of the Company through the vesting dates set forth below with respect to the number of Restricted Shares set forth next to such date:   Vesting Date   Number of Restricted Shares Vesting on such Vesting Date           December 31, 2006   333.33   December 31, 2007   333.33   December 31, 2008   333.33     1 --------------------------------------------------------------------------------   (b) Notwithstanding the provisions of Section 4(a) above, in connection with a Change in Control, the provisions set forth in Section 13 of the Plan shall govern with respect to the acceleration of the vesting of the Restricted Shares.   (c) Notwithstanding the provisions of Section 4(a) above, the Board may, in its sole discretion, accelerate the vesting of shares of the Restricted Shares at any time.   5. Forfeiture of Shares. If the Grantee ceases to be a director of the Company due to death, Disability or Retirement during any period of restriction, any non-vested Restricted Shares shall immediately vest and all restrictions on the Restricted Shares shall lapse. If the Grantee ceases to be a director of the Company for any other reason, any non-vested Restricted Shares shall be forfeited by the Grantee and the certificate(s) representing the non-vested portion of the Restricted Shares so forfeited shall be canceled.   6. Dividend, Voting and Other Rights. Except as otherwise provided in this Agreement, from and after the Date of Grant, the Grantee shall have all of the rights of a stockholder with respect to the Restricted Shares, including the right to vote the Restricted Shares and receive any dividends that may be paid thereto, provided, however, that any additional Common Stock or other securities that the Grantee may become entitled to receive pursuant to a stock dividend, stock split, recapitalization, combination of shares, merger, consolidation, separation or reorganization or any other change in the capital structure of the Company shall be subject to the same risk of forfeiture and restrictions on transfer as the forfeitable Restricted Shares in respect of which they are issued or transferred and shall become Restricted Shares for the purposes of this Agreement.   7. Retention of Stock Certificate(s) by the Company. The certificate(s) representing the Restricted Shares shall be held in custody by the Company, together with a stock power in the form of Exhibit A hereto which shall be endorsed in blank by the Grantee and delivered to the Company within 10 days of the date hereof, until such shares have become nonforfeitable in accordance with Section 4.   8. Investment Representation. Grantee hereby represents and warrants to the Company that: (i) the Grantee has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of the Restricted Shares and has had full access to such other information concerning the Company as it has requested; (ii) Grantee is acquiring the Restricted Shares to be acquired by it hereunder for its own account with the present intention of holding such securities for purposes of investment; (iii) Grantee is an “accredited investor” within the meaning of Rule 501 Regulation D promulgated under the Securities Act; (iv) Grantee understands that the Restricted Shares constitute “restricted securities” within the meaning of Rule 144 promulgated under the Securities Act and the certificates representing such Restricted Shares will bear a legend stating, and Grantee hereby agrees, that such securities may not be transferred without the consent of the issuer or its legal counsel as to compliance with the Securities Act; (v) Grantee does not intend to sell such securities in a public distribution in violation of any applicable foreign, federal or state securities laws.   9.  Reserved.   10. Compliance with Law. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws, provided, however, notwithstanding any other provision of this Agreement, the Company shall not be obligated to issue or release from restrictions on transfer any Restricted Shares pursuant to this Agreement if such issuance or release would result in a violation of any such law.   11. Withholding Taxes. If the Company shall be required to withhold any federal, state, local or foreign tax in connection with any issuance or vesting of Restricted Shares or other securities pursuant to this Agreement, and the amounts available to the Company for such withholding are insufficient, the Grantee shall pay the tax or make provisions that are satisfactory to the Company for the payment thereof. The Grantee may elect to satisfy all or any part of any such withholding obligation by surrendering to the Company a portion of the Restricted Shares that become nonforfeitable hereunder, and the Restricted Shares so surrendered by the Grantee shall be credited against any such withholding obligation at the market value (determined with reference to the then current price of the Company’s Common Stock as quoted on the New York Stock Exchange) per Share of such Restricted Shares on the date of such surrender.   12. Conformity with Plan. The Agreement and the Restricted Shares granted pursuant hereto are intended to conform in all respects with, and are subject to all applicable provisions of, the Plan (which is incorporated herein by   2 --------------------------------------------------------------------------------   reference). Inconsistencies between this letter agreement and the Plan shall be resolved in accordance with the terms of the Plan. By executing this Agreement, you acknowledge and agree to be bound by all of the terms of this Agreement and the Plan.   13. Amendments. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and the Grantee.   14. Severability. In the event that one or more of the provisions of this Agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.   15. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Grantee and the successors and assigns of the Company.   16. Notices. Any notice to the Company provided for herein shall be in writing to the attention of the Secretary of the Company at Symmetry Medical Inc., 220 W. Market Street, Warsaw, Indiana 46580, and any notice to the Grantee shall be addressed to the Grantee at his address currently on file with the Company. Except as otherwise provided herein, any written notice shall be deemed to be duly given if and when hand delivered, or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service, addressed as aforesaid. Any party may change the address to which notices are to be given hereunder by written notice to the other party as herein specified, except that notices of changes of address shall be effective only upon receipt.   17. Governing Law. The laws of the State of New York, without giving effect to the principles of conflict of laws thereof, shall govern the interpretation, performance and enforcement of this Agreement.   IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above.       SYMMETRY MEDICAL INC.       By:           Name:           Title:         ACKNOWLEDGED AND AGREED:             (Signature of Grantee)     EXHIBIT “A” FORM OF ASSIGNMENT SEPARATE FROM CERTIFICATE   FOR VALUE RECEIVED,                                      hereby sells, assigns and transfers unto                                         ,              shares of the Common Stock, par value $0.001 per share, of Symmetry Medical Inc., a Delaware corporation (the “Company”) standing in its name on the books of said Company represented by Certificate Number             , and does hereby irrevocably constitute and appoint                      as attorney to transfer the said stock on the books of the Company with full power of substitution in the premises.   Date:                   Holder   3 --------------------------------------------------------------------------------

  Exhibit 10.5 AGREEMENT OF SETTLEMENT NOTE: CERTAIN MATERIAL HAS BEEN OMITTED FROM THIS AGREEMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2. THE LOCATIONS OF THESE OMISSIONS ARE INDICATED THROUGHOUT THE AGREEMENT BY THE FOLLOWING MARKINGS: [***].      This Agreement of Settlement (together with all appendices, exhibits, schedules and attachments hereto, the “Agreement”), dated as of this 23rd day of December, 2005, is made by and among; H&R Block, Inc., H&R Block Services, Inc., H&R Block Tax Services, Inc., Block Financial Corp., HRB Royalty, Inc., and H&R Block Eastern Enterprise, Inc., successor to H&R Block Eastern Tax Services, Inc., for themselves and all persons or entities acting on their behalf or at their direction (collectively, the “Settling Defendants”), on the one hand, and Deadra D. Cummins, Ivan and LaDonna Bell, Levon Mitchell, Geral Mitchell, Joyce Green, Lynn Becker, Justin Sevey, Maryanne Hoekman, and Renea Griffith (“Plaintiffs”), on behalf of themselves individually and on behalf of the respective Settlement Classes they seek to represent, as defined in Section II, Paragraph 2, on the other hand (all of the foregoing mentioned in this sentence, the “Parties”). This Agreement is intended by the Settling Parties to fully, finally and forever compromise, resolve, discharge and settle the Released Claims subject to the terms and conditions set forth below. I. CLAIMS OF THE PARTIES      1. The Settling Defendants and/or their Affiliates have been involved, together and separately, in facilitating Refund Anticipation Loans (“RALs”) at some point from at least 1992 to the present. A RAL is a patented method by which tax customers, for a fee, can take a loan that is secured by and expected to be repaid from the anticipated proceeds of their tax refunds.      2. On January 22, 2003, a class action was filed in the Circuit Court of Kanawha   --------------------------------------------------------------------------------   County (the “Court”) against some of the Settling Defendants captioned Deadra D. Cummins, et al. v. H & R Block, Inc., et al. (Civil Action No. 03-C-134) (the “Cummins Action”). A Second Amended Complaint was filed on October 22, 2004. The Second Amended Complaint alleged that the Settling Defendants, among others, violated the West Virginia credit service organization statute, W. Va. § 46A-6C-1 et seq., breached fiduciary duties to the plaintiffs, violated the West Virginia Consumer Credit and Protection Act, breached their contractual obligations to plaintiffs and were unjustly enriched. On December 30, 2004, the Court appointed Ms. Cummins, Ivan Bell and LaDonna Bell as class representatives and Brian Glasser of Bailey & Glasser, LLP, class counsel (“Coordinating Counsel”). The Court certified a class in the Cummins Action that included all West Virginia residents who obtained Refund Anticipation Loans through any “H&R Block” office in West Virginia from January 1, 1994 to December 31, 2004, as to all claims contained in the plaintiffs’ Second Amended Complaint. A copy of the class certification order is attached as Exhibit A.      3. On June 13, 1995, a class action was filed in the Circuit Court of Mobile City, Alabama against some of the Settling Defendants captioned as Mitchell v. H&R Block, Inc. et al., Case No. CV-95-2067 (Circuit Court of Mobile City, Ala.) (the “Mitchell Action”). The plaintiffs allege that certain of the Settling Defendants herein breached fiduciary duties to plaintiffs, breached their contractual obligations to plaintiffs and were unjustly enriched by offering RALs. On July 11, 2003, the Court appointed Levon Mitchell and Geral Mitchell as class representatives. The Court appointed Steve Martino, W. Lloyd Copeland of Taylor, Martino & Hedge, PC; Michael B. Hyman of Much, Shelist, Freed, Denenberg, Ament & Rubenstein; and Steven E. Angstreich of Levy, Angstreich, Finney, Baldante, Rubenstein and Coren, P.C., as class counsel in the Mitchell Action. The Court certified two classes in the 2 --------------------------------------------------------------------------------   Mitchell Action as follows (i) Breach of Fiduciary Duty/Unjust Enrichment Subclass: all individuals who obtained Refund Anticipation Loans from June 13, 1993 through December 31, 1996 through any “H&R Block” office in Alabama for which the Settling Defendants herein received a license fee payment or portion of the finance charge; (ii) Breach of Contract Subclass: all individuals who obtained Refund Anticipation Loans from June 13, 1989 through December 31, 1996 through any “H&R Block” office in Alabama for which the Settling Defendants herein received a license fee payment or portion of the finance charge. A copy of the class certification order is attached as Exhibit B. The Mitchell Action has not been set for trial. A class certification ruling is on appeal.      4. On July 14, 1997, a class action was filed in the Circuit Court of Baltimore City, Maryland against some of the Settling Defendants captioned as Green v. H&R Block, Inc. et al., Case No. 97195023/CC411 (Circuit Court of Baltimore City, Maryland) (the “Green Action”). The plaintiff alleges that certain of the Settling Defendants herein violated the Maryland Consumer Protection Act, engaged in fraudulent concealment and negligent misrepresentations, and breached fiduciary duties and duties of good faith and fair dealing allegedly owed to plaintiff by offering RALs. On May 19, 2000, the Court appointed Joyce A. Green as class representative. The Court appointed Charles J. Piven of Baltimore, Maryland; Steve Martino, W. Lloyd Copeland of Taylor, Martino & Hedge, PC; Michael B. Hyman of Much, Shelist, Freed, Denenberg, Ament & Rubenstein; Steven E. Angstreich of Levy, Angstreich, Finney, Baldante, Rubenstein and Coren, P.C.; and Roger Kirby of Kirby, McInerney & Squire as class counsel in the Green Action. Through the original order, and an order modifying the class definition on July 10, 2002, the Court certified a class of all persons whose income taxes were prepared at any “H&R Block” office or facility in Maryland who obtained a RAL at any time from January 1, 3 --------------------------------------------------------------------------------   1992 to December 31, 1996, and did not later apply for and receive a RAL through an application that contained a retroactive arbitration clause. A copy of the class certification order, and the order modifying it, are attached, collectively, as Exhibit C. The Green Action has been set for trial in May 2006.      5. On March 19, 2004, a class action was filed in the Court of Common Pleas for Summit County, Ohio against some of the Settling Defendants captioned as Becker v. H&R Block, Inc., Case No. 5:04-cv-01074-CAB (N.D. Ohio) (removed from Summit County (Ohio) Court of Common Pleas) (the “Becker Action”). Plaintiff Lynn Becker alleges that some of the Settling Defendants herein violated the Ohio credit services organization statute and the Ohio Consumer Protection Act. The plaintiff purports to represent a class of Ohio residents who, from March 19, 2000 to present, obtained a RAL through any “H&R Block” office in Ohio. Plaintiff’s Motion to Remand, and Defendants’ motion to dismiss and Defendants’ motion to compel arbitration, are pending and unresolved as of the date of this Agreement.      6. The cases identified in paragraphs 2 through 5 will be referred to in this Agreement collectively as “the Settling Cases.” The plaintiffs in the Settling Cases will be referred to collectively as “Plaintiffs.”      7. This Settlement Agreement encompasses four distinct Settlement Classes. To simplify settlement administration and obtain economies of scale the parties negotiated uniform elements of settlement which apply to all of the Settlement Classes, as well as class specific elements.      8. The parties have consolidated these uniform and class specific elements within this Settlement Agreement. Plaintiffs will similarly submit consolidated filings upon application for preliminary and final approval. 4 --------------------------------------------------------------------------------        9. Plaintiffs will jointly move for leave to file a Consolidated and Amended Complaint in the Circuit Court of Kanawha County, West Virginia, with such request for leave to file being expressly conditioned upon the concurrent entry of an order granting preliminary approval of this Agreement (the “Preliminary Approval Order” described below in Section X), which order will provide that in the event that the Circuit Court determines not to grant final approval of this Agreement or of any respective settlement class it contains, such Consolidated and Amended Complaint or affected portion thereof will be stricken (i) concurrently with any order rejecting approval of this Agreement or of any respective settlement class it contains, or (ii) in the event that the Circuit Court grants final approval of this Agreement or of any respective settlement class it contains but such final approval order is subsequently reversed or modified on appeal, concurrently with any order remanding the case to the Circuit Court, in either case without the need for any further order of the Circuit Court. This Agreement will be presented for preliminary review and approval in the Circuit Court simultaneously with the request for leave to file the proposed Consolidated and Amended Complaint. The Settling Defendants consent to the filing of the proposed Consolidated and Amended Complaint subject to all applicable conditions herein, including the striking thereof or any affected portion thereof in the event that the Settlement does not become final with respect to any settlement class for any reason.      10. With respect to Settling Cases pending in other courts, the parties to those respective cases will inform their respective courts of the existence of this Agreement and hereby consent to the respective courts either placing the cases on the inactive docket, staying discovery or otherwise taking whatever action such courts find best serves the efficient administration of justice while this proposed settlement is being reviewed for approval.      11. Over the past several years, Class Counsel have conducted an investigation of the 5 --------------------------------------------------------------------------------   facts, including reviews of over 300,000 of the Settling Defendants’ relevant documents and more than 50 depositions of the Settling Defendants’ representatives, and analyzed the relevant legal issues. While Plaintiffs and Class Counsel believe that the claims asserted in their respective complaints have merit, they have also examined the benefits to be obtained under the proposed settlement and have considered the costs, risks and delays associated with the continued prosecution of this time-consuming litigation and the likely appeals of any rulings in favor of either Plaintiffs or the Settling Defendants. Plaintiffs desire to resolve the claims asserted against the Settling Defendants.      12. Plaintiffs and their Class Counsel believe that, in consideration of all the circumstances and after prolonged and serious arms-length settlement negotiations with counsel for the Settling Defendants, the proposed settlement embodied in this Agreement is fair, reasonable, adequate and in the best interests of the Settlement Class.      13. The Settling Defendants have vigorously denied, and continue to deny, all liability with respect to any and all of the facts or claims alleged in the complaints filed in the Cummins, Mitchell, Green and Becker actions, deny that they engaged in any wrongdoing, deny that they acted improperly in any way, and deny any liability to Plaintiffs, any member of the Settlement Class, or any third party. The Settling Defendants nevertheless desire to settle Plaintiffs’ claims on the terms and conditions set forth in this Agreement solely for the purpose of avoiding the burden, expense, risk and uncertainty of continuing the proceedings in currently pending actions, and for the purpose of putting to rest all controversies among the Parties. In no event is this Agreement to be construed as, or is to be deemed evidence of, an admission or concession on the part of the Settling Defendants or Released Parties (as defined herein) with respect to: any claim by Plaintiffs and the Settlement Class; any fault, liability, wrongdoing or 6 --------------------------------------------------------------------------------   damage; the merits of any defenses that the Settling Defendants asserted; or the propriety of class certification of the Settlement Class if the Action were to be litigated rather than settled.      14. Mediation in the Cummins action was initially unsuccessful in February 2004. In the Summer of 2005, Class Counsel began to explore the possibility of further mediation. Thereafter, Class Counsel and counsel for the Settling Defendants commenced formal settlement negotiations on August 15, 2005, that took place in face-to-face mediation sessions with Thomas Meites, a mediator suggested to the Parties by United States District Judge Elaine Bucklo, the presiding judge in Carnegie v. Household International et al., 98 C 2178 (N.D. Ill.) (the “Carnegie Action”), a separate case not affected by this proposed Agreement, with mediation sessions conducted on August 15, 16, 29 and September 8, 2005. The Parties thereafter conducted extensive arms’-length negotiations in numerous negotiation sessions.      15. The Parties intend that the proposed settlement embodied in this Agreement resolve all the claims and disputes between Plaintiffs, Settlement Class Members, the Settling Defendants, and all Released Parties with respect to the Released Claims. II. DEFINITIONS      In addition to the terms defined elsewhere in this Agreement, for purposes of this Agreement and all its Appendices or Exhibits, the following terms shall have the meanings as set forth below.      1. “Administration” or “Administration Costs” means the act of, and the costs associated with, administering the settlement, including but not limited to maintaining an e-filing process for claims of class members, processing paper claims forms, responding to class member inquiries, dealing with disputes from class members, distributing checks to class members, preparing and disseminating reports to class counsel about administrative issues, and post- 7 --------------------------------------------------------------------------------   distribution settlement administration and related activities. Administration Costs do not include Notice Costs.      2. “Administrator” means the third party administrator to be hired by the Parties through competitive bidding to handle all or parts of Notice and Administration.      3. “Affiliates” means (i) all past, present or future persons or entities of any kind controlling, controlled by, or under common ownership with any of the Settling Defendants and their respective predecessors and successors, including without limitation any parent companies, subsidiaries, sister companies, or divisions, and (ii) any and all persons or entities acting on behalf of or at the direction of any of the foregoing, including but not limited to any franchisee of any Settling Defendant.      4. “Class Counsel” means and includes the following:       Steven E. Angstreich, Esq.     Michael Coren, Esq.     Carolyn C. Lindheim, Esq.   Daniel Hume, Esq. Levy Angstreich Finney Baldante   Kirby Mclnerney & Squire. LLP Rubenstein & Coren, P.C.   830 Third Avenue, 10th Floor 1616 Walnut Street, 5th Floor   New York, NY 10022 Philade lphia, PA 19103   Fax: 212-751-2540 Fax: 215-545-2642   Counsel to the State Law Class Counsel to the Green/Mitchell Class           Ronald L. Futterman, Esq.   Michael B. Hyman, Esq. Michael I. Behn, Esq.   William H. London, Esq. William W. Thomas, Esq.   Much Shelist Freed Denenberg Futterman & Howard, Chtd.   Ament & Rubenstein, P.C. 122 South Michigan Avenue-Suite 1850   191 North Wacker, Suite 1800 Chicago, IL 60603   Chicago, IL 60606 Fax: 312-427-1850   Fax: 312-521-2100 Counsel to the State Law Class   Counsel to the State Law Class       Brian A. Glasser, Esq.   Steven A. Martino, Esq. H. F. Salsbery, Esq.   Frederick T. Kuykendall, III, Esq. John Barrett, Esq.   W. Lloyd Copeland, Esq. Eric Snyder, Esq.   Taylor, Martino & Kuykendall Bailey & Glasser, LLP   51 St. Joseph Street 8 --------------------------------------------------------------------------------         227 Capitol Street   Mobile, AL 36602 Charleston, West Virginia 25301   Fax: 251-405-5080 Fax: 304-342-1110   Counsel to the Green/Mitchell Class Counsel to the West Virginia Class     and Coordinating Counsel           John Roddy, Esq.   Ronald Frederick, Esq. Gary Klein, Esq.   Ronald Frederick & Associates, LLC Elizabeth Ryan, Esq.   55 Public Square, Suite 1300 Roddy Klein & Ryan   Cleveland, Ohio 44113 727 Atlantic Avenue, 2nd Floor   Counsel to the Becker Class Boston, Massachusetts 02111   Fax: 216-781-1749 Fax: 617-357-5030     Counsel to the Becker Class           Charles J. Piven, Esq.     Law Offices of Charles J. Piven, P.A.     The World Trade Center — Baltimore     401 East Pratt Street, Suite 2525     Baltimore, Maryland 21202     Fax: 410-685-1300     Counsel to the Green/Mitchell Class          5. “Coordinating Counsel” means Brian Glasser and Bailey & Glasser, LLP.      6. The “Effective Date” for purposes of the Settlement shall be five (5) business days after the latest of the following dates: (a) the date upon which the time to commence an appeal of the Final Order has expired, if no one has commenced any appeal or writ proceeding challenging the Final Order; or (b) the date the Final Order has been affirmed on appeal or writ review (or the appeal or writ petition has been dismissed), and the time within which to seek further review has expired. Notwithstanding the foregoing, the Settling Defendants may, within their sole discretion, declare an earlier Effective Date, namely, any date after the Final Order is entered.      7. “Excluded Claims” means, collectively, (i) all claims, including claims made pursuant to authorizations to amend the operative complaints, asserted in Marshall v. H&R Block, Inc., No. 02-L-04 (Circuit Court for the Third Judicial Circuit, Madison County, Illinois) 9 --------------------------------------------------------------------------------   and Soliz v. H&R Block, Inc., Cause No. 03-032-D (District Court for Kleberg County, Texas) arising from or related to the Settling Defendants’ “Peace of Mind” product; (ii) all claims, including claims made pursuant to authorizations to amend the operative complaints, asserted in Marshall v. H&R Block, Inc., No. 03-L-576 (Circuit Court for the Third Judicial Circuit, Madison County, Illinois); McNulty et al. v. H&R Block, Inc, No. 2002 CV 4654 (Court of Common Pleas, Lackawanna County, Pennsylvania); and Soliz v. H&R Block, Inc., Cause No. 03-199-D (District Court for Kleberg County, Texas) arising from or related to electronic filing fees; (iii) all claims for RICO violations or breach of contract asserted by members of the class pending and certified for merits trial in Carnegie v. Household International et al., 98 C 2178 (N.D. Ill.) (the “Carnegie Action”) as of the Effective Date, including such RICO and breach of contract claims of persons who are also members of the classes certified in the Green Action and the Mitchell Action; (iv) all individual claims of Lynne Carnegie currently pending in Carnegie v. H&R Block, Inc., 96/606129 (Supreme Court of the State of New York, County of New York) as of the Effective Date; (v) all claims pending in Basile v. H&R Block, Inc., Case No. 93043245 (Court of Common Pleas for Philadelphia County) as of the Effective Date; (vi) claims under state law based solely on allegations that a tax preparer failed (A) to properly prepare a tax return or (B) to maintain the confidentiality of taxpayer information resulting in injury based on “stolen identity” or similar misuse of taxpayer information or theft of a RAL check; and (vii) any and all claims to enforce the terms and conditions of this Agreement.      8. “Final Order” means the Final Order of Judgment and Dismissal to be entered if the Circuit Court grants final approval to this settlement as proposed on behalf of one or more of the Settlement Classes, substantially in the form of Exhibit D.      9. “Notice” means the notice to the members of the respective Settlement Classes, 10 --------------------------------------------------------------------------------   approved by the Court in the Preliminary Approval Order.      10. “Notice Costs” means the entire cost of providing the notice to all such Settlement Class Members, including the Cummins Settlement Class, ordered by the Court for mail and publication substantially conforming to the proposed notice plan set forth in Section X, Paragraph 3. Notice Costs further includes all the costs associated with compiling the database of members of the Settlement Classes, preparing the database of members of the Settlement Classes, printing the mailed notice, printing the claims forms, mailing the notice and claims form by means of first class mail, and the cost of developing and maintaining a central website containing materials about the Settlement Agreement. This cost will be borne by the Settling Defendants. The database to be utilized for purposes of the initial mailing of notice will be the database previously updated as of August 2005 by Analytics, Inc.      11. “Preliminary Approval Order” means the order to be entered if the Circuit Court grants preliminary approval of this Agreement and certifies the Settlement Classes for settlement purposes only, substantially in the form attached as Exhibit E.      12. “RAL” is a Refund Anticipation Loan.      13. “Released Claims” includes any claims, Unknown Claims as defined herein, rights, demands, obligations, actions, causes of action, suits, cross-claims, matters, issues, liens, contracts, liabilities, agreements, costs, expenses of any nature by the Plaintiffs and Settlement Class Members against the Released Parties arising out of, or in connection with, or in any way related to any RAL transaction. This includes any activity engaged in or any services performed directly or indirectly in connection with any RAL, including but not limited to tax preparation, electronic filing, RAL document preparation or related services, RAL contractual commitments, RAL advertisements or RAL solicitations, money collected in connection with a RAL, RAL 11 --------------------------------------------------------------------------------   related fees, RAL license fees, RAL participation interest revenue, and the RAL waiver fee, or other policies or procedures relating to any RAL made within the Settlement Class Period, whether for damages, fines, punitive damages, exemplary damages, penalties, restitution, disgorgement, or any declaratory, injunctive or any other equitable relief of any kind, whether based on any federal or state statute, regulation or common law theory (specifically including but not limited to claims for fraudulent misrepresentation or omission, state consumer protection or fraud laws, TILA, RICO, credit service organization statutes, breach of fiduciary duty, agency, loan broker, unjust enrichment and/or breach of contract). Notwithstanding the foregoing, “Released Claims” specifically excludes the “Excluded Claims” described in Section II, paragraph 7.      14. “Released Parties” means, collectively, H&R Block, Inc., H&R Block Services, Inc., H&R Block Tax Services, Inc., Block Financial Corp., HRB Royalty, Inc., H&R Block Eastern Enterprise, Inc., successor to H&R Block Eastern Tax Services, Inc., all direct or indirect franchise or sub-franchise offices operating under the trade name of “H&R Block,” and (a) any and all of their respective past and present parent companies, subsidiaries, divisions, affiliates, franchises, predecessors, successors, and assigns; (b) their respective present and former general partners, limited partners, principals, members, directors and their attorneys, officers, employees, stockholders, owners, agents, insurers, reinsurers, attorneys, the representatives, heirs, executors, personal representatives, administrators, trustees, transferees and assigns of any of them; and (c) all persons or entities acting on behalf or at the direction of any of the foregoing. “Released Parties” shall be deemed to include Melanie Lester, Jason Brown, Bobby Hague, Robert Heckert, Cynthia Lantz, Clarence E. Miller, Carla R. Lewis, and Debra Riggleman, who were named defendants in the Cummins Action, regardless of whether they are named in the Consolidated 12 --------------------------------------------------------------------------------   and Amended Complaint.      15. The “Settlement Class” or “Settlement Classes” as the context may require, includes the following classes:           (a) State Law Class: All residents of the several jurisdictions identified in the chart attached as Exhibit F who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate, as defined herein, or any H&R Block offices such as in Sears stores) from January 1, 2000 through the date of this Agreement;           (b) West Virginia Class: All West Virginia residents who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate, as defined herein, or any H&R Block offices such as in Sears stores) from January 1, 1994 through the date of this Agreement .           (c) Becker Class: All Ohio residents who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate, as defined herein, or any H&R Block offices such as in Sears stores) from January 1, 2000 through the date of this Agreement.           (d) Mitchell/Green Class: All Maryland residents who applied for and obtained a RAL at any H&R Block office in Maryland from January 1, 1992 through December 31, 1996 and did not thereafter apply for and obtain a RAL subject to an arbitration provision 13 --------------------------------------------------------------------------------   and all individuals who obtained a RAL from June 13, 1989 through December 31, 1996 through any “H&R Block” office in Alabama for which the Settling Defendants herein received a license fee payment or portion of the finance charge.           (e) Excluded from the Settlement Class are current or former directors or officers of the Settling Defendants and their counsel.      16. “Settlement Class Members” or “Members of the Settlement Classes” as the context may require, means all persons who are included in the class definitions in Paragraph 14, above, and who do not validly and timely elect exclusion from the Settlement Class pursuant to W. Va. R. Civ. P. 23 and under the conditions and procedures as determined by the Court.      17. “Settlement Class Period” means the time periods associated with each Settlement Class.      18. “Unknown Claims” means all claims arising out of facts relating to any matter covered by the Released Claims, which in the future are or may be found to be other than or different from the facts now believed to be true, so that each person or entity so affected shall be deemed to have expressly waived all of the rights and benefits of any provision of the law, either state or federal, providing that a general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor, including without limitation § 1542 of the California Civil Code, which reads as follows: Section 1542. General Release: extent. A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. All persons or entities providing releases under this Agreement, including all Settlement Class 14 --------------------------------------------------------------------------------   Members, upon the Effective Date shall be deemed to have, and by operation of the Final Order shall have, waived any and all provisions, rights or benefits conferred by § 1542 of the California Civil Code or any comparable law of any state or territory of the United States, or principle of common law, which is similar, comparable or equivalent to § 1542 of the California Civil Code. All persons or entities providing releases under this Agreement may hereafter discover facts other than or different from those which he, she or it now knows or believes to be true with respect to the subject matter of the Released Claims, but such person or entity, upon the Effective Date, shall be deemed to have, and by operation of the Final Order in the Action shall have, fully, finally, and forever settled and released any and all such claims, known or unknown, suspected or unsuspected, contingent or non-contingent, whether or not concealed or hidden, which now exist, or heretofore have existed upon any theory of law or equity now existing or coming into existence in the future, including conduct which is negligent, intentional, with or without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or existence of such different or additional facts. III. CERTIFICATION OF CLASS FOR SETTLEMENT PURPOSES ONLY      For settlement purposes only, the Parties agree that, as part of the preliminary approval process, the Court may make preliminary findings and enter an order granting provisional certification of the respective Settlement Classes subject to final findings and certification in the Final Order, and appointing both Plaintiffs and Class Counsel as representatives of the proposed Settlement Classes. For settlement purposes only, the respective Settlement Classes are certified pursuant to Rule 23(b)(3) of the West Virginia Rules of Civil Procedure. The Settling Defendants do not consent to certification of the respective Settlement Classes, or to the filing of the proposed Consolidated and Amended Complaint, for any purpose other than to effectuate the 15 --------------------------------------------------------------------------------   settlement of the actions and claims identified in this Agreement. If one or more of the Settlement Classes contained in this Agreement is not approved by the Court or is terminated pursuant to its terms or for any other reason, or is disapproved in a final order by any court of competent jurisdiction, (a) the order certifying the disapproved Settlement Class and all preliminary and/or final findings or stipulations regarding certification of such disapproved Settlement Class shall be automatically vacated upon notice to the Court of that portion of this Agreement’s termination or disapproval and in such instance, the disapproved Settlement Class shall proceed as indicated: (i) the Cummins Action may proceed with the West Virginia merits class previously certified by the Court as of December 30, 2004, and as though the Settlement Class had never been certified and any related findings or stipulations pursuant to this agreement had never been made; or (ii) the Mitchell Action may proceed with the merits class previously certified by the court as of July 11, 2003, including the appeal of class certification, and as though the Settlement Class had never been certified and any related findings or stipulations had never been made; or (iii) the Green Action may proceed with the merits class previously certified by the court as of May 19, 2000, and as though the Settlement Class had never been certified and any related findings or stipulations had never been made; and (b) the Plaintiffs will withdraw their motion for leave to file the proposed Consolidated and Amended Complaint in its present form and, if already filed, portions of the Consolidated and Amended Complaint related to the disapproved Settlement Class will be stricken pursuant to the terms of the order related to its filing; and (c) the Parties reserve all procedural or substantive rights as presently exist, including all affirmative defenses, in all RAL litigation pending as of the date of execution of this Agreement, including but not limited to, the Becker Action and Basile v. H&R Block, No. 9304-3246 (Court of Common Pleas for Philadelphia County, Pennsylvania). 16 --------------------------------------------------------------------------------   IV. SETTLEMENT CONSIDERATION      1. ECONOMIC RELIEF.           (a) The Settling Defendants will contribute up to $62.5 million in cash, by wire transfer, to be used for purposes of making payments to Settlement Class Members (the “Settlement Fund”), paying for all attorneys’ fees and costs to Class Counsel, and covering service awards to representative Plaintiffs. This is substantially an “all-in” payment.           (b) The Settlement Fund will be held in one account, the interest on which account will accrue first to the benefit of the Settlement Fund. The account will be held at a major bank agreed to by the Coordinating Counsel and Counsel for the Settling Defendants and approved by the Court and shall be under the joint control of the Settling Defendants and Coordinating Counsel.           (c) The Settling Defendants will not be required to make any additional payments to or on behalf of the Settlement Class Members for any purpose whatsoever, except for the Notice Costs substantially conforming to the proposed notice plan set forth in Section X, Paragraph 3, which shall be paid separately by the Settling Defendants.           (d) Each Settlement Class Member who submits a timely, proper and undisputed Claim Form as defined in Section XII, Paragraph 1 (a “Valid Claim”) will be entitled to a payment from the Settlement Fund for each RAL that he or she obtained by or through the Settling Defendants or their Affiliates for their claim. As provided in Section IV, Paragraph 1(g), the amount paid to individual Settlement Class Members will be calculated on a pro-rata basis (based on each Settlement Class Member’s total claim for all RALs previously obtained during the respective Settlement Class Member’s Settlement Class Period) from the cash funds remaining in the Settlement Fund after deduction for all items to be paid for from the Settlement 17 --------------------------------------------------------------------------------   Fund under this Agreement, including Administration Costs, service fees, and attorneys’ fees and costs awarded to Class Counsel. Notwithstanding the foregoing, if a Settlement Class Member has previously released his or her claims for any RAL or RALs covered by any prior individual or class settlement with any of the Settling Defendants, such person cannot recover any further cash payment from the Settlement Fund with respect to such settled RAL or RALs under the terms of this Paragraph, but he or she will still be entitled to receive payments under the terms of this Paragraph solely with respect to any other non-settled RALs he or she may have obtained, on the same terms and conditions as applicable to other Settlement Class Members.           (e) In the event that a RAL was issued to joint borrowers and a Valid Claim is submitted with respect to such RAL, such couple or joint interest shall be treated as one Settlement Class Member for all purposes under this Agreement; provided, however, that if the joint borrowers are contesting the entitlement of the other to the settlement consideration, each joint borrower will be entitled to one half of the settlement consideration with respect to such RAL. Settlement Class Members who are joint RAL borrowers waive any and all claims against the Settlement Administrator and the Released Parties with regard to payments made to joint RAL borrowers.           (f) The Settling Defendants will contribute the amount required to the Settlement Fund no later than 31 days after the Court’s entry of the Final Order, or the Effective Date, whichever occurs first. No payments will be made to or on behalf of the Settlement Class Members until at least 60 days after the Effective Date. In the event that the settlement does not become final and the Effective Date does not occur for any reason, this amount, together with all accrued interest, shall promptly be returned to the Settling Defendants by either transfer of the ownership of the account or wire transfer. 18 --------------------------------------------------------------------------------             (g) The Settlement Fund shall be distributed to class members as follows: (i) $32.5 million of the Settlement Fund shall be paid as attorneys’ fees and costs to Class Counsel in the West Virginia Cummins Class, service awards to representative Plaintiffs in the West Virginia Cummins Class, pro rata Administration Costs of the Settlement Fund attributable to the West Virginia Class, and further consideration to members of the West Virginia Class not to exceed $175 per RAL (after attorneys’ fees and expenses and Administration Costs attributable to West Virginia) on a pro rata basis; and (ii) a total of up to $30 million of the Settlement Fund shall be paid to members of the other classes in this action as attorneys’ fees and costs for their Class Counsel, service awards to representative Plaintiffs in such other classes, pro rata Administration Costs of the Settlement Fund attributable to these other classes, and further consideration on a pro rata basis to such other class members in the amounts outlined on the chart attached as Exhibit F. A class member’s right to a settlement payment pursuant to this Agreement is a conditional right that terminates if a class member to whom the Administrator mailed a settlement payment fails to cash his or her check within six months of its mailing date. In such case the check shall be null and void (the checks shall be stamped or printed with a legend to that effect) and the Administrator and the Parties shall have no further obligation under the terms of this Agreement to make payment to such class member, with such amount reverting to the Settlement Fund effective immediately upon the expiration of such six-month period. The Administrator will provide to Coordinating Counsel and counsel for the Settling Defendants and Coordinating Counsel will file with the Court a final accounting of the Settlement Funds within 30 days after the latest date upon which class members’ checks expire.           (h) In the event that there are any residual amounts that remain in the Settlement Fund after the Effective Date and distribution pursuant to the terms of this 19 --------------------------------------------------------------------------------   Agreement, the remaining amounts in the Settlement Fund shall be distributed to a charity or charities or scientific or educational organizations pursuant to Section 501(c)(3) of the Internal Revenue Code jointly proposed by the Plaintiffs and Settling Defendants and approved by the Court. The Plaintiffs and Settling Defendants propose the West Virginia University College of Law. If that proposal is disapproved and the parties are unable to reach agreement on another proposed charity, then the Court shall designate a charitable organization to which the remaining amounts of the Settlement Fund shall be distributed. V. REPRESENTATIONS, WARRANTIES AND CONFIRMATORY DISCOVERY      1. Settling Defendants represent and warrant that, to the best of their knowledge and based in reliance on data obtained from Analytics Inc. and the RAL lenders, no more than 15,700,000 RALs are attributable to members of the Settlement Class (excluding only the RALs attributable to the West Virginia Class). Should confirmatory discovery or other information prove the stated number of RALs inaccurate, Settling Defendants shall increase the Settlement Fund by a proportional amount equal to the ratio between the total number of RALs and 15,700,000.      2. Settling Defendants further represent and warrant that, to the best of their knowledge and based in reliance on data obtained from Analytics Inc. and the RAL lenders, no more than 1,585,000 RALs are attributable to members of the Becker Class. Should confirmatory discovery or other information prove the stated number of RALs inaccurate, Settling Defendants shall increase the Settlement Fund attributable to the Becker Class by a proportional amount equal to the ratio between the total number of RALs in Ohio and 1,585,000.      3. Settling Defendants further represent and warrant that, to the best of their knowledge and based in reliance on data obtained from Analytics Inc. and the RAL lenders, no 20 --------------------------------------------------------------------------------   more than 560,000 RALs are attributable to members of the Mitchell/Green Class. Should confirmatory discovery or other information prove the stated number of RALs inaccurate, Settling Defendants shall increase the Settlement Fund attributable to the Mitchell/Green Class by a proportional amount equal to the ratio between the total number of RALs in the Mitchell and Green cases and 560,000.      4. Prior to the date set for the preliminary approval hearing, the Settling Defendants provided Class Counsel with a summary of the number of Settlement Class members in each jurisdiction covered by this Agreement and the number of RALs within each such jurisdiction obtained within the applicable class period. Prior to mailing any notice, Settling Defendants will provide to Class Counsel an affirmation that the database has been checked against the National Change of Address (NCOA) database.      5. Settling Defendants represent and warrant that (i) all “Peace of Mind” related cases involving a class allegation with which they have been served or of which they are aware as of the date of this Agreement, and (ii) all electronic filing related cases involving a class allegation with which they have been served or of which they are aware as of the date of this Agreement have been excluded from this Agreement, by name, in the definition of Excluded Claims.      6. Settling Defendants represent and warrant that all RAL-related cases involving a class allegation with which they have been served or of which they are aware as of the date of this Agreement are either specifically identified in the Agreement and thereby proposed for settlement or specifically excluded from this Agreement, by name, in the definition of Excluded Claims.      7. Subsequent to preliminary approval of this settlement, Coordinating Counsel may 21 --------------------------------------------------------------------------------   conduct confirmatory discovery sufficient to assure that (1) the Settling Defendants’ representations and warranties that the Settlement Class encompasses a maximum of 15,700,000 RALs are accurate; (2) the Settling Defendants’ representations and warranties that the Becker Class encompasses a maximum of 1,585,000 RALs are accurate; (3) the Settling Defendants’ representations and warranties that the Mitchell/Green Class encompasses a maximum of 560,000 RALs are accurate and (4) Class Members have been properly identified. Coordinating counsel will accept affidavits as to these subjects, and will conduct depositions only if the affidavits are insufficient and Settling Defendants are unwilling or unable to supplement such affidavits to address deficiencies identified by Coordinating Counsel. If a deposition(s) is conducted, Settling Defendants will produce a knowledgeable person with respect to the three topics described above. VI. BUSINESS PRACTICES      1. Subject to the terms of this Agreement and all applicable state or federal law, for the period from the date of this Agreement until two years following the date of entry of a Final Order, (the “Time Period”) in connection with any RAL transaction, the Settling Defendants and/or their Affiliates shall (a) substantially conform to the business practices set forth in Appendix A to this Agreement, and (b) use RAL applications, agreements and other RAL forms in substantially the form attached as Appendix B (the “RAL Forms”). So long as any of the Settling Defendants and/or their Affiliates do not knowingly and materially fail to conform to such business practices or use such RAL Forms during such Time Period, Plaintiffs and all Settlement Class Members agree to release any Released Claims or other claims or actions for money damages or equitable relief that they may have or be entitled to assert hereafter against such entities under any legal theory concerning such business practices or RAL Forms either 22 --------------------------------------------------------------------------------   directly, representatively, derivatively, or in any other capacity, in any local, state, or federal court, or in any agency or authority or forum wherever located arising out of or related to any new RAL transaction in such Time Period. However, if at the end of this Time Period the Settling Defendants or their Affiliates (as applicable) have not registered as a Credit Service Organization (a “CSO”) in a jurisdiction covered by this Agreement that requires or permits registration as a CSO (or posted a bond in a state that requires or permits a bond) for persons who assist consumers in obtaining an extension of credit under an applicable CSO statute, and have not implemented the requirements of such CSO statute, (i) the release set forth in the immediately preceding sentence by Members of the Settlement Class who reside in such jurisdiction shall be deemed null and void in such jurisdiction, (ii) all Parties will be placed in their status quo ante position with respect to any such new RAL transactions in such jurisdiction in such Time Period, (iii) Settlement Class Members in such jurisdiction shall have all the all procedural or substantive rights that they would otherwise have as of the day after the Effective Date of this Agreement (and in addition shall be entitled to tolling of any applicable limitations period for such Time Period), and (iv) the Settling Defendants will likewise have all the procedural or substantive rights and defenses that they would otherwise have as of the day after the Effective Date of this Agreement.      2. Subject to the terms of this Agreement, the Settling Defendants and/or their Affiliates will begin implementation of the business practices set forth in Appendix A immediately following the Effective Date. The Parties acknowledge that the RAL Forms are documents of the RAL lender, and believe that the RAL Forms attached as Appendix B are reasonably acceptable to the RAL lender and that the RAL lender will approve of their use, in which case the Settling Defendants and/or their Affiliates will also begin implementation of the 23 --------------------------------------------------------------------------------   use of the RAL Forms immediately following the Effective Date. However, if there are changes in the applicable state or federal laws after the Effective Date and within the Time Period that impact the business practices in Appendix A or the RAL Forms, or if the RAL lender within the Time Period gives notice of a refusal to agree to the implementation and use of RAL Forms that substantially conform to the requirements of Paragraph (a) in all material respects, Coordinating Counsel for the Settlement Class and the Settling Defendants agree to use their best efforts to negotiate together in good faith to develop new business practices or, in the case of the RAL Forms, with the RAL lender to develop revised RAL Forms, that in either case conform to the requirements of Paragraph (a) to the extent reasonably practicable. In the event that Coordinating Counsel and the Settling Defendants are not able to reach agreement with the RAL lender on revisions to the RAL Forms despite their best good faith efforts, then (i) Coordinating Counsel and the Settling Defendants will use their best efforts to determine how the revised disclosures that may be required can be conveyed to RAL customers by means other than the RAL Forms used by the RAL lender (to the extent consistent with the Settling Defendants’ contractual obligations with the RAL lender), and (ii) the Settling Defendants and their Affiliates shall be released from all requirements to use the specific RAL Forms in Appendix B.      3. Nothing in Paragraph 1 above shall bar a Settlement Class Member who is a RAL customer from asserting a claim to the extent that one or more of the Settling Defendants or their Affiliates fail to perform their contractual obligations under the RAL Forms.      4. Nothing in this Section VI forecloses a Non-Opt Out’s right to arbitrate a Released Claim arising prior to the date of this Agreement pursuant to Section VII, Paragraph 2.      5. Nothing in this Section VI shall be construed as a covenant on the part of the Settling Defendants or their Affiliates to register as a CSO in any jurisdiction, but it should be 24 --------------------------------------------------------------------------------   construed as an agreement on the part of the Settling Defendants to, in good faith, evaluate their obligations under various CSO laws and comply with them to the extent applicable. This Section VI is not an admission that any Settling Defendant or any Affiliate is or was at any time a CSO. This Section VI is instead an inducement, available at the Settling Defendants’ option, to register as a CSO. In addition, a decision by any of the Settling Defendants and/or their Affiliates not to register as a CSO in any particular jurisdiction(s) by the end of the Time Period set forth in Paragraph (a) above shall not be or be deemed to be a breach of this Agreement or the violation of any order related to this Agreement and the settlement contemplated herein in any respect.      6. This Section VI is not intended to create a right or obligation on the part of any Settlement Class Member to litigate any issue pursuant to this Section VI in the Circuit Court of Kanawha County, West Virginia, nor is this Section VI intended to have the effect or character of a Consent Decree. After the Time Period ends, the Settling Defendants have no further obligation to consult Coordinating Counsel respecting changes to their business practices or RAL Forms. After the Time Period ends, the release offered by Paragraph (b) will either be effective or not effective in any given jurisdiction, as determined in the normal fashion by any tribunal of competent jurisdiction. VII. RELEASE BY SETTLEMENT CLASS MEMBERS      1. In accordance with the provisions of the Final Order, for good and sufficient consideration, the receipt of which is hereby acknowledged, upon the Effective Date Plaintiffs and each Settlement Class Member who receives money from the Settlement Fund shall be deemed to have, and by operation of the Final Order shall have, fully, finally and forever released, relinquished and discharged all Released Claims against the Released Parties.      2. Each Settlement Class Member who does not opt out of this settlement (“Non-Opt 25 --------------------------------------------------------------------------------   Outs”), but for whatever reason does not receive money from the Settlement Fund, shall be deemed to have and by operation of the Final Order shall have fully, finally and forever released and extinguished his or her right (if any ever existed) to adjudicate a Released Claim in any forum other than by individual arbitration as permitted by and in accordance with the arbitration provision of the 2005 RAL application, a copy of which is attached as Exhibit G. In all other respects, such Non-Opt Outs do not release any Released Claims for a period of one year after the Effective Date, at which time such Non-Opt Outs shall be deemed to have, and by operation of the Final Order shall have, fully, finally and forever released, relinquished and discharged all Released Claims against the Released Parties.      3. In accordance with the provisions of the Final Order, for good and sufficient consideration, the receipt of which is hereby acknowledged, upon the Effective Date each of the Released Parties and all signatories to this Agreement shall be deemed to have, and by operation of the Final Order shall have, fully, finally and forever released, relinquished and discharged Plaintiffs, Class Counsel, and the Settling Defendants and their counsel in this Action from any claims (including Unknown Claims) for abuse of process, libel, malicious prosecution or similar claims arising out of, relating to, or in connection with the institution, prosecution, defense, assertion, or resolution of the Action, including any right under any statute or federal law to seek counsel fees and costs. VIII. EXCLUSIONS FROM AND OBJECTIONS TO SETTLEMENT      1. The “Opt-Out Date” will be a date set by the Court and identified in the Notice (defined below).      2. Each Settlement Class Member who wishes to be excluded from the Settlement Class must mail or otherwise deliver to the Administrator an appropriate written request for 26 --------------------------------------------------------------------------------   exclusion, including his or her name, address, telephone number and Social Security number, that is personally signed by the Settlement Class Member, which request must be postmarked no later than the Opt-Out Date and actually received by the Administrator. No Settlement Class Member, or any person acting on behalf of or in concert or in participation with that Settlement Class Member, may request exclusion of any other Settlement Class Member from the Settlement Class. The original requests for exclusion shall be filed with the Court by the Administrator not later than 30 days after the Opt-Out Date. The filing shall redact the social security number of the person requesting exclusion, except for the last three digits. Copies of requests for exclusion will be provided by the Administrator to Class Counsel and counsel for the Settling Defendants not later than five days after the Opt-Out Date. If this Agreement is approved, any and all persons within the Settlement Class who have not submitted a timely, valid and proper written request for exclusion from the Settlement Class will be bound by the releases and other terms and conditions set forth herein and all proceedings, orders and judgments in the Action, even if those persons have previously initiated or subsequently initiate individual litigation or other proceedings against the Settling Defendants (or any of them) relating to the claims released pursuant to or covered by the terms of this Settlement.      3. Any Settlement Class Member who has not filed a timely, valid and proper written request for exclusion and who wishes to object to the fairness, reasonableness or adequacy of this Agreement or the settlement, or to any award of attorneys’ fees and expenses, must serve upon Coordinating Counsel and counsel for the Settling Defendants (by mail, hand or by facsimile transmission) and must be received by the Court, no later than the Opt-Out Date or as the Court may otherwise direct, a statement of his/her objection, as well as the specific reason(s), if any, for each objection, including any legal support the Settlement Class Member 27 --------------------------------------------------------------------------------   wishes to bring to the Court’s attention and a description of any evidence the Settlement Class Member wishes to introduce in support of the objection. Settlement Class Members may so object either on their own or through an attorney hired at their own expense who files an appearance on their behalf. IX. THE FINAL JUDGMENT AND ORDERS OF DISMISSAL      1. If, after the Final Approval Hearing, the proposed Settlement is approved by the Court with respect to one or more Settlement Classes, Class Counsel shall promptly file and request entry of a Final Order, substantially in the form of Exhibit D, by the Court:           (a) Finding that the requirements necessary for certification of the Settlement Class for purposes of settlement, have been satisfied, approving both the final certification of the Settlement Class and the Agreement, judging its terms to be fair, reasonable, adequate and in the best interests of the Settlement Class, directing consummation of its terms, and reserving continuing jurisdiction to implement, enforce, administer, effectuate, interpret and monitor compliance with the provisions of the Agreement and the Judgment;           (b) Dismissing the Action and the Released Claims, with prejudice and without costs (except as otherwise provided herein) against Plaintiffs and all Settlement Class Members, and releasing both the Released Claims and all of the claims described in Section I, Paragraphs 2 through 5 against the Released Parties; and           (c) Permanently barring and enjoining Plaintiffs and Settlement Class Members from asserting, commencing, prosecuting or continuing any of the Released Claims or any of the claims described in Section I, Paragraphs 2 through 5 against the Released Parties, except in a manner consistent with all terms and conditions of Section VII, Paragraph 2, to the extent applicable. 28 --------------------------------------------------------------------------------        2. Within 14 days after the Effective Date, Plaintiffs shall, with appropriate court approvals, dismiss their claims pending in the Cummins Action, the Mitchell Action, the Green Action, and the Becker Action. X. NOTICE AND PRELIMINARY APPROVAL OF SETTLEMENT      1. Class Counsel will submit preliminary approval papers for the settlement, including a Motion for Preliminary Approval and the proposed Preliminary Approval Order, together with a proposed form or forms of Notice and a Summary Notice substantially in the form of Exhibit H (the “Notice” and “Summary Notice”), the proposed form of the Final Order, and the executed Agreement, within a reasonable time following of execution of this Agreement.      2. Class Counsel will submit to the Court the proposed Preliminary Approval Order which will, among other things, certify the respective Settlement Classes for settlement purposes only, approve Plaintiffs as adequate representatives of the respective Settlement Classes, and ask for a date for a “Final Approval Hearing.” The proposed Preliminary Approval Order also will approve the form of the Notice, will find that the method of notice selected constitutes the best notice to all persons within the definitions of the respective Settlement Classes that is practicable under the circumstances, and will find that the form and method of notice comply fully with all applicable law.      3. The Parties propose the following Notice regime:           (a) The appropriate form of notice, along with a claim form, will be mailed to the last known address of all Settlement Class Members, by first class mail, and any mail returned with a forwarding address will be promptly re-mailed to such address;           (b) The Administrator and each Class Counsel that maintains a website will provide a link on its website to a central site maintained by the Administrator to obtain 29 --------------------------------------------------------------------------------   downloadable and printable copies of the Settlement Agreement, the Notice and the Claim Form;           (c) Plaintiffs will also provide a short form publication notice of the Agreement (“Summary Notice”) in the form attached as Exhibit H to be published twice in USA Today.      4. The Settling Defendants will pay the cost of the proposed mailed notice and publication in Paragraph 3 above. Additional publication notice ordered by the Court, if any, shall be at the expense of the Settlement Class receiving such additional publication notice.      5. The Settling Defendants and Coordinating Counsel shall, by agreement, designate an Administrator. The Settling Defendants and Coordinating Counsel agree that they will cooperate in negotiating the Notice and Administration Costs, toward the end of reducing both costs and preventing the Administrator from incurring any significant Administration Costs before the Effective Date.      6. The Administrator will file with the Court and serve upon Class Counsel and Settling Defendants’ counsel no later than ten (10) days prior to the Final Approval Hearing an affidavit or declaration stating that notice has been completed in accordance with the terms of the Preliminary Approval Order.      7. The Final Approval Hearing will be held at a date and time to be set by the Court after mailing of the notice and the passing of the opt-out date. At the Final Approval Hearing, the Court will consider and determine whether the provisions of this Agreement should be approved, whether the Settlement should be finally approved as fair, reasonable and adequate, whether any objections to the Settlement should be overruled, and whether a Final Order approving the Settlement and dismissing any of the actions should be entered. 30 --------------------------------------------------------------------------------   XI. PAYMENT OF ATTORNEYS’ FEES AND REIMBURSEMENT OF EXPENSES TO CLASS COUNSEL      1. Plaintiffs’ Coordinating Counsel will submit a fee petition for attorneys’ fees, costs and expenses, on behalf of all Class Counsel, with all such fees and costs to be paid from the Settlement Fund. In such Petition, Coordinating Counsel will request that the Court award such attorneys’ fees, costs and expenses to Coordinating Counsel to be distributed in his discretion thereafter between and among all Class Counsel. The Settling Defendants agree not to oppose in Court or any other forum such petition by Coordinating Counsel for an award of attorneys’ fees and expenses to be paid from the Settlement Fund.      2. Entry of a Final Order is not conditioned upon an award of the attorneys’ fees and costs sought by Class Counsel.      3. Coordinating Counsel will apply to the Court for an award of service fees for representative Plaintiffs. All service fees shall be paid out of the aforesaid fees and expenses to be approved by the Court, in settlement of their individual claims in this action and in any other pending action involving allegations regarding refund anticipation loans in any state or federal court against any Settling Defendants or their Affiliates. Representative Plaintiffs will not be entitled to receive any additional payments in connection with this settlement other than their service fee and their pro rata payment under the Agreement.      4. The Settling Defendants shall not be liable for any additional fees or expenses of Plaintiffs or any other plaintiff in any of the actions settled by this Agreement or persons within the Settlement Class, or other plaintiffs’ counsel in connection with the actions settled by this Agreement. The Settling Defendants will be entitled to oppose any such fee application.      5. Class Counsel agree that they will not seek any additional fees or costs arising out of any case settled by this Agreement other than as provided in this Agreement from any of the Settling Defendants in connection with the settlement of the Settling Cases. 31 --------------------------------------------------------------------------------        6. Payment of any Class Counsel fees, expenses and/or service fees for class representatives approved by the Court shall be made ten (10) days following the Effective Date. XII. CLAIMS (CLAIMS PROCESS)      1. The Administrator will mail the appropriate claim form with respect to the relief set forth in Section IV, Paragraph 1 above substantially in the form attached as Exhibit I, to all persons within the Settlement Class together with the Notice. Pursuant to this Agreement, certain monetary benefits are available to Settlement Class Members only upon submission to the Administrator of a Valid Claim. A “Valid Claim” is a Claim Form that: (1) is signed by the Settlement Class Member, or signed by the heirs or estate of a deceased Settlement Class Member; (2) provides all the information required by the Claim Form, including: (i) the Social Security Numbers that they have used at any time; and (ii) their current mailing address; (3) is postmarked by June 30, 2006; (4) is affirmed as true by the claimant who shall also state (i) that he/she is the person who applied for and received a RAL, (ii) the name(s) under which his/her RAL was approved, and (iii) his/her current name to be stated on any settlement check; and (5) is determined by the Administrator to be complete and in accordance with the requirements of this Agreement.      2. Promptly after June 30, 2006, the Administrator will provide Coordinating Counsel and counsel for the Settling Defendants with a list identifying: (1) the number of claim forms submitted; (2) the number of RALs covered; and (3) the number of claim forms that were denied (“Denied Claims”).      3. After the Effective Date, Valid Claims will be paid by the Administrator as ordered by the Court. 32 --------------------------------------------------------------------------------        4. Promptly after receiving a claim form, the Administrator will evaluate the claim and, for Denied Claims, will mail to the Settlement Class Member, with copies to Coordinating Counsel and counsel for Settling Defendants, a notice stating that the claim was denied and the reasons for the denial, and advising the Settlement Class Member how he or she might contest denial or remedy any deficiency in the filing. For issues that are not administrative in nature, the Administrator may advise the Settlement Class Member to contact Class Counsel for the person with any questions about his or her Denied Claim.      5. A Settlement Class Member or Class Counsel may submit to the Administrator a request to reconsider the claim denial within 45 days following the date of such denial. Such request must be accompanied by documentation to support the claim and served on Coordinating Counsel and counsel for the Settling Defendants, and Coordinating Counsel shall promptly refer such claims to appropriate Class Counsel for the person making the claim.      6. Class Counsel for any claimant and counsel for the Settling Defendants will meet promptly after the Effective Date to confer regarding all Denied Claims for which requests for reconsideration have been denied by the Administrator. Class Counsel for the claimant shall have full settlement authority to resolve such Denied Claims. If counsel for the Parties cannot then agree as to the treatment of a submitted Claim Form, the matter will be submitted to the Discovery Commissioner in the Cummins Action (“Discovery Commissioner”) for final and binding determination, with costs of resolution to be part of Administration Cost. Claims that are to be submitted to the Discovery Commissioner for resolution will be submitted together in bulk no later than 30 days after attempts at informal resolution of all Denied Claims have been completed. Should in-person hearings be required, the Discovery Commissioner shall hold such hearings in the state in which the respective complaining claimants reside. 33 --------------------------------------------------------------------------------        7. This Section sets forth the exclusive procedure for determining the validity of claims, and no Settlement Class Member may challenge the denial of any such claim except through this procedure. XIII. TERMINATION OF THE AGREEMENT      If this Settlement Agreement, as a whole, or any respective Settlement Class it contains is not approved by the Court or does not receive final approval after review by any court of competent jurisdiction for any reason, or is terminated in accordance with its terms for any other reason, the affected Parties will be returned to their status immediately prior to execution of the Agreement as if this Agreement had never been made, and (i) the affected Parties will be relieved from any orders or stipulations made in connection with this Agreement, other than the order related to the filing of the Consolidated and Amended Complaint and providing that it or the affected portions related to the disapproved Settlment Class, as appropriate, shall be stricken, (ii) if and only if the West Virginia Class is disapproved, then the Cummins Action will proceed with discovery toward trial on the merits with the merits class previously certified by the Court as of December 30, 2004, as set forth in Section I.2 above; (iii) if and only if the Mitchell/Green Class is disapproved, then the Mitchell Action will proceed with discovery toward trial on the merits with the merits class previously certified by the Court as of July 11, 2003, as set forth in Section I.4 above; (iv) if and only if the Mitchell/Green Class is disapproved, then the Green Action will proceed toward trial on the merits with the merits class previously certified by the Court as of May 19, 2000, as set forth in Section III above; and (v) if and only if the Becker Class is disapproved, then the Becker action will proceed as directed by the court in Ohio in which it is pending. Accordingly, upon any such termination for any reason (i) the Parties will be deemed to have preserved all their substantive or procedural rights or defenses with respect to 34 --------------------------------------------------------------------------------   the Cummins Action, Mitchell Action, Green Action or Becker Action, as appropriate, existing as of the date of this Agreement and (ii) the Parties shall not be deemed to have waived any substantive or procedural rights or defenses of any kind that they may have with respect to any persons within the Settlement Class who were not members of the merits class that was certified in the Cummins Action as of December 30, 2004, in the Mitchell Action as of July 11, 2003, and in the Green Action as of May 19, 2000, as appropriate,; provided, that the terms of this Section XIII shall survive any termination of the settlement or this Agreement and shall remain binding on the Parties and effective in all respects regardless of the reasons for such termination. XIV. NO ADMISSION OF LIABILITY      Neither this Agreement nor any drafts hereof nor any documents relating to the Settlement set forth herein constitutes an admission of liability or of any fact by the Plaintiffs or the Settling Defendants. The Parties agree that the foregoing documents:      (a) Will not be offered or received against any of the Released Parties as evidence of or be construed as or deemed to be evidence of, any admission or concession by any of the Released Parties of (i) the truth or relevance of any fact alleged by Plaintiffs, (ii) the existence of any class alleged by Plaintiffs, (iii) the propriety of class certification on the merits if the Cummins Action, the Mitchell Action, the Green Action, or the Becker Action were to be litigated rather than settled, or (iv) the validity of any claim or the deficiency of any defense that has been or could have been asserted in the Cummins Action, the Mitchell Action, the Green Action, or the Becker Action or in any other litigation;      (b) Will not be offered as or received against any of the Released Parties as evidence of, or construed as or deemed to be evidence of any admission or concession of any liability, negligence, fault or wrongdoing, or in any way referred to for any other reason as against any of 35 --------------------------------------------------------------------------------   the parties to this Agreement, in any other civil, criminal or administrative action or proceeding, other than such proceedings as may be necessary to effectuate the provisions of this Agreement; provided, however, that if this Agreement is approved by the Court, the Released Parties may refer to it to effectuate the liability protection granted them hereunder.      (c) Will not be offered or received as an admission or concession that the consideration to be given to Settlement Class Members hereunder represents the amount which could be or would have been recovered by any such persons after trial. XIV. CONTINUING JURISDICTION      1. The Circuit Court of Kanawha County, West Virginia, will have continuing jurisdiction over the Cummins Action for the purpose of implementing the Settlement until the Cummins Action and all related matters are fully resolved, and for enforcement of the Settlement, the Agreement and the Final Order thereafter. Any dispute regarding the Parties’ obligations pursuant to this Agreement and/or interpretation of the terms of this Agreement or Final Order will first be presented to the Discovery Commissioner for a recommendation as to how the dispute should be resolved, and the Court may consider the Discovery Commissioner’s recommendation in ruling on any dispute requiring the Court’s action. Notwithstanding the foregoing, the procedure set forth in this Section XII above shall be the exclusive procedure for determining the validity of claims, and no Settlement Class Member may challenge any claim denial except through the procedure set forth in Section XII, Paragraphs 5 and 6. XV. JOINT PRESS RELEASE      1. The Parties will agree upon the form of any public statement to the press or governmental agencies concerning the settlement, the Agreement and the proceedings leading to its ultimate approval or disapproval by the Court (whether issued by mail, website posting or 36 --------------------------------------------------------------------------------   other means of communication). The Parties and their counsel shall be entitled to respond to inquiries by the press or otherwise. but, except as provided in the preceding sentence, shall not (i) initiate any public announcement, including a press release, or other communications with the press regarding the Settlement, (ii) make any public comments that would undermine the joint press release or the Settlement, or (iii) make any disparaging public statements about any other Party or counsel for a Party prior to the Effective Date. Nothing in this Paragraph shall prohibit Class Counsel from providing legal advice to individual Settlement Class Members XVI. MISCELLANEOUS PROVISIONS      1. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding between and among the Parties with respect to settlement, and supersedes any and all prior negotiations and agreements or understandings (oral or written) with respect to the subject matter hereof.      2. NEUTRAL INTERPRETATTON. This Agreement shall not be construed more strictly against one Party than another merely because it may have been prepared by counsel for one of the Parties, it being recognized that, because of the arms-length negotiations and mediation resulting in the Agreement, all parties have contributed substantially and materially to the preparation of the Agreement.      3. CHOICE OF LAW. This Agreement will be governed by federal law and the internal laws of West Virginia, without regard to its choice of law principles.      4. CHOICE OF FORUM. The forum selected by the Parties for implementation and enforcement of the Settlement shall be West Virginia, in the Circuit Court of Kanawha County.      5. MODIFICATIONS OR AMENDMENTS. This Agreement may not be modified or amended except by a writing signed by all Parties and their respective counsel and the 37 --------------------------------------------------------------------------------   subsequent approval of the Court.      6. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.      7. ADDITIONAL ACTS TO EFFECTUATE THE AGREEMENT. The Parties shall execute all documents and perform all acts necessary and proper to effectuate the terms of this Agreement and to obtain the benefits of the Agreement.      8. COMPETENCY; INDEPENDENT COUNSEL. Each Party to this Agreement represents and warrants that he, she or it is competent to enter into the Agreement and in doing so is acting upon his, her or its independent judgment and upon the advice of his, her or its own counsel and not in reliance upon any warranty or representation, express or implied, of any nature or kind by any other Party, other than the terms expressly set forth in this Agreement.      9. NO REMOVAL. Settling Defendants hereby waive any right to remove this case to federal court upon the filing of the Consolidated and Amended Complaint to effectuate the terms of this settlement, so long as the terms of the order providing for its filing and, if the Effective Date does not occur, its withdrawal, are complied with and enforced in all respects. They likewise affirmatively state that none of them will consent to the removal of this case to federal court. All Parties agree that the Circuit Court of Kanawha County, West Virginia shall be the exclusive forum for the resolution of this action.      10. NO RELEASE OF THE RAL LENDING BANKS. Nothing in this Agreement shall be construed to operate as a release of the RAL lending banks including but not limited to, Beneficial National Bank, Household Bank f.s.b., Imperial Capital Bank and HSBC. 38 --------------------------------------------------------------------------------   XVII. [FILED UNDER SEAL] [***]      IN WITNESS WHEREOF, the undersigned parties hereto have caused this Agreement to be duly executed on the date first written above:                   BAILEY & GLASSER, LLP       TAYLOR, MARTINO & KUYKENDALL                   By:           By:                           Brian A. Glasser, Esq.           Frederick T. Kuykendall III, Esq     Counsel to the West Virginia Cummins           Counsel to the Green/Mitchell Class     Class and Coordinating Counsel                               LEVY ANGSTREICH FINNEY BALDANTE,       KIRBY McINERNEY & SQUIRE, LLP RUBENSTEIN & COREN, P.C.                               By:           By:                           Steven E. Angstreich, Esq.           Daniel Hume, Esq.     Counsel to the Green/Mitchell Class           Counsel to the State Law Class                   FUTTERMAN & HOWARD, CHTD.       MUCH SHELIST FREED DENENBERG             AMENT & RUBENSTEIN, P.C.                   By:           By:                           Ronald L. Futterman, Esq.           Michael B. Hyman, Esq.     Counsel to the State Law Class           Counsel to the State Law Class                   RODDY KLEIN & RYAN       RONALD FREDERICK & ASSOCIATES LLC                   By:           By:                           John Roddy, Esq.           Ronald Frederick, Esq.     Counsel to the Becker Class           Counsel to the Becker Class                   LAW OFFICES OF CHARLES J. PIVEN, P.A.                               By:                                       Charles J. Piven, Esq.                 Counsel to the Green/Mitchell Class             39 --------------------------------------------------------------------------------   H&R BLOCK, INC., H&R BLOCK SERVICES, INC., H&R BLOCK TAX SERVICES, INC., BLOCK FINANCIAL CORP., HRB ROYALTY, INC., H&R BLOCK EASTERN ENTERPRISE, INC., successor H&R BLOCK EASTERN TAX SERVICES, INC. By:                                                                   Printed Name: Mark A. Ernst Title: President & CEO 40 --------------------------------------------------------------------------------   Exhibit 10.5  A   --------------------------------------------------------------------------------        IN THE CIRCUIT COURT OF KANAWHA COUNTY, WEST VIRGINIA DEADRA D. CUMMINS, on her own behalf and                                                                  (SEAL) on behalf of those similarly situated, and IVAN and LaDONNA BELL, on their own behalf and on behalf of those similarly situated,           /s/ Cathy S. Gatson Clerk           CATHY S. GATSON CLERK     KANAWHA CTY, CIRCUIT COURT      Plaintiffs,       v.   Civil Action No. 03-C-134 H & R BLOCK, INC., H & R BLOCK TAX SERVICES, INC., H & R BLOCK EASTERN TAX SERVICES, INC., BLOCK FINANCIAL CORPORATION, H&R BLOCK SERVICES, INC., MELANIE LESTER, JASON BROWN, BOBBY HAGUE, ROBERT HECKERT, CYNTHIA LANTZ, CLARENCE E. MILLER, CARLA R. LEWIS, DEBRA RIGGLEMAN and JOHN DOE,      Defendants. ORDER GRANTING PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION      Pending before this Court is the Plaintiffs’ Motion for Class Certification pursuant to Rule 23 of the West Virginia Rules of Civil Procedure. Based on the findings of fact and conclusions of law that follow, the Court determines that this case permits resolution of a myriad claims in a single, efficient class action that poses no unusual problems of manageability. If these claims are to be resolved at all, they will likely be resolved on a class-wide basis. Further, class-wide resolution will not require evaluation of individual factual scenarios for each class member. Instead, because Plaintiffs’ claims center on the Defendants’ conduct and legal status with respect to the putative class members generally, this case is particularly well-suited for class certification. Accordingly, the Court GRANTS the motion and certifies the class as proposed and as indicated by the following findings of fact and conclusions of law.   --------------------------------------------------------------------------------   PROCEDURAL BACKGROUND 1.   The plaintiffs filed this action as a putative class action in the Circuit Court of Kanawha County on January 23, 2003. The Defendants timely removed the action to the federal district court for the Southern District of West Virginia. On June 6, 2003, Judge Goodwin granted the Plaintiffs’ Motion to Remand.   2.   The defendants then moved to dismiss and to compel arbitration. Following the hearings on December 11, 2003, and March 18, 2004, this Court denied Defendants’ motion to dismiss and compel arbitration by Order of May 13, 2004.   3.   The Defendants then petitioned the Supreme Court of Appeals of West Virginia for a writ of prohibition to prevent this Court from enforcing its Order denying their motion to dismiss and compel arbitration. The Supreme Court ordered the plaintiffs to respond to defendants’ Petition, which was then denied on September 2, 2004.   4.   The Plaintiffs’ Motion for Class Certification was filed on October 1, 2003. The defendants responded on May 13, 2004, and plaintiffs filed their reply on October 18, 2004. The Court held a hearing on the motion for class certification on October 21, 2004.   5.   Before taking up that motion, the Court heard argument on Plaintiffs’ Motion to Amend the Complaint to add two corporate subsidiaries of defendant H & R Block, Inc. The Court granted plaintiffs’ motion to add Block Financial Corporation and H & R Block Services, Inc., and ordered that the evidence on Plaintiffs’ Motion for Class Certification be held open until a second hearing on this matter could be held on December 22, 2004, to provide these two new 2 --------------------------------------------------------------------------------       corporate subsidiaries and defendants an opportunity to present evidence or argument in opposition to Plaintiffs’ Motion for Class Certification, should they choose to do so. (Transcript from Hearing Held on Oct. 21, 2004, at p. 17).   6.   Discovery commenced and more than thirty depositions have been taken. Several sets of written discovery have been exchanged.   7.   The newly added defendants, Block Financial Corporation and H & R Block Services, Inc. appeared at the December 22, 2004 hearing on class certification through their counsel, Ancil G. Ramey of Steptoe & Johnson.   8.   Prior to the December 22, 2004 hearing, Mr. Ramey filed a “Motion to Compel Arbitration Or In The Alternative, To Dismiss”, which asked this Court to compel arbitration or to dismiss based on three grounds: (1) lack of personal jurisdiction, (2) failure to state a cause of action, and (3) federal preemption. This Court then denied both the motion to compel and the motion to dismiss and ordered the new defendants to file an answer.   9.   At the December 22, 2004 hearing, the Court asked Mr. Ramey to present any evidence or argument he had to offer in regard to the class certification issue.   10.   Mr. Ramey acknowledged that he had no evidence, but he did present argument. Mr. Ramey argued that because his clients had recently been added to this action, due process dictates that they receive additional time to conduct discovery as it would pertain to the class certification issue. (Excerpt of Hearing RE: Class Certification, December 22, 2004, p. 4-5). 3 --------------------------------------------------------------------------------   11.   Mr. Ramey admitted that he had reviewed the record and was familiar with the case due to his prior representation of the other defendants in their removal petition.   12.   When asked what new information the new defendants sought, Mr. Ramey stated that he would ask if the plaintiffs knew about the participation interest and if they did, whether or not they would have entered into the loan transactions. (Excerpt of Hearing RE: Class Certification, December 22, 2004, p. 3-4).   13.   Additionally, Mr. Ramey stated that the additional time he was seeking was to ask whether the plaintiffs would have participated in the rapid refund RAL program if they had known that the lending banks paid a fee in order to participate in the loan program. (Excerpt of Hearing RE: Class Certification, December 22, 2004, p. 5).   14   Mr. Ramey urged the Court to consider the recent Supreme Court of Appeals of West Virginia opinion in State of West Virginia ex rel. Chemtall Inc. v. Madden, 2004 WL 2750996 (W.Va.,2004).   15   The Court has reviewed all the pleadings and evidence in support of and in opposition to Plaintiffs’ Motion for Class Certification, as well as all the other pleadings in the case, and heard argument of counsel spread on the record at the hearings on class certification of October 21, 2004 and December 22, 2004.   16   Each party submitted proposed findings of facts and conclusions of law in regard to the motion for class certification. 4 --------------------------------------------------------------------------------   FINDINGS OF FACT The Underlying Claims 1.   This action is against Defendant H & R Block, Inc., its named corporate subsidiaries (hereinafter collectively referred to as “Block”) and the individual tax preparers.   2.   The plaintiffs’ claims against the defendants all relate to the Rapid Refund Program that Block offers to its clients. The Rapid Refund Program utilizes refund anticipation loans (hereinafter “RAL” or “RALs”).   3.   A RAL is a loan against a taxpayer’s expected federal income tax refund.   4.   H&R Block offers RALs in West Virginia and throughout the United States.   5.   Block negotiated contracts with certain lending banks that finance the RALs. The contracts set forth the RAL application procedure, the RAL terms, the RAL credit criteria, and the RAL prices and other matters.   6.   Block then marketed the RAL to a target demographic. Block defines its “RAL client profile” as “decent, hardworking people,” who are “unsophisticated” financially, and “live pay check to pay check.” Such clients were “very satisfied with the H&R Block experience,” but “have little understanding of what they were paying for their RAL.” Clients take RALs because they want “to get their money quickly,” they “do not have regular bank accounts,” can have tax preparation fees withheld, and “have no other choice to get money quickly.” Over one-half get the earned income tax credit. Most “do not have credit cards or other credit options.”   7.   Block tax preparers who presented these documents to the clients were trained by Block to present the RAL product using a formulaic sales script, in which the 5 --------------------------------------------------------------------------------       loan products were presented in the same order and described using the same terms to every client. Block also provided the tax preparers with computer hardware and software for use with its RAL customers.   8.   Block filled out and completed the RAL applications for the clients and directed the clients to the several places where they were to sign the documents. Block then assembled the actual RAL application and presented it to the bank.   9.   At the class certification hearing on October 21, 2004, the Court heard testimony from Deborah Mounts, Block’s franchise district manager for its franchise offices in West Virginia, Ms. Mounts testified that Block provides national advertising, merchandise, signs, copiers, toner for the copiers, pamphlets, light boxes, furniture, and yellow page ads to its franchises. (Trans. from October 21, 2004 Hearing, p. 31-34.) Block provides capital to its franchisees in the form of a loan secured by the franchise. (Id. at 35-36.) Block provides training material and consulting services to its franchises. (Id. at 37-38.) In return, Block collects royalties and receives the participation fee from the RALs sold by the franchises. (ld. at 43.)   10.   Block does not believe it should tell its clients about its participation fee and does not tell its tax-preparers about this fee. (Id. at 45.) Thus, any disclosure of that fee came, if at all, from written material distributed to clients which was the same on a year by year basis in all Block’s offices in West Virginia. Block believes that the clients who go to its franchises belong to Block, not to the franchise. (Id.)   11.   The plaintiffs aver that the defendants’ actions, in regard to the RAL process, amounts to a breach of a fiduciary duty owed to the plaintiffs. The plaintiffs also 6 --------------------------------------------------------------------------------       aver that the royalties and participation fees are “kickbacks” which violate West Virginia law governing credit services organizations and deceptive practices.   12.   The Second Amended Complaint contains seven counts, which include the following:   (1)   Breach of Fiduciary Duty Arising Out of an Agency Relationship;     (2)   Breach of Fiduciary Duty Arising Out of a Confidential Relationship;     (3)   Breach of Fiduciary Duty Arising out of H&R Block’s Status as a Loan Broker;     (4)   Breach of West Virginia’s Statute Governing Credit Services Organizations;     (5)   Breach of Contract based on implied duty of good faith and fair dealing;     (6)   Unjust Enrichment; and     (7)   Unfair or Deceptive Acts or Practices. 13.   The claim for unjust enrichment seeks recovery of the plaintiffs’ money that the defendants received in connection with the RALs, plus reasonable interest.   14.   The Plaintiffs propose a class consisting of all West Virginia residents who obtained Refund Anticipation Loans (“RALs”) from January 1, 1994 through the present.1 At the October 21 hearing, plaintiffs’ counsel proposed the class should be cut off on December 31, 2003 to provide a date certain for class determination. (Id. at p. 15),   1   Two subclasses are proposed:   Sub-class A: All West Virginia residents who obtained RALs from October 27, 1999 to July 29, 2003.   Sub-class B: All West Virginia residents who obtained RALs from January 1, 1994 to October 26, 1999. 7 --------------------------------------------------------------------------------   15.   As is evident from the definition, whether an individual is a member of the class is based on the objective facts of whether a West Virginia resident obtained a RAL and when he or she obtained the RAL.   16.   The parties have also submitted uncontradicted evidence that the proposed class contains more than 438,500 transactions.   17.   Block either prepared tax returns for all class members or checked their returns before filing.   18.   The process was basically the same for every RAL client.   19.   Block presented the same or substantially the same RAL applications, and documents to every RAL client, at least on a year-to-year basis. (Id. at 57-58.)   20   The contracts between H&R Block and the lending banks created the common framework against which all the RAL applications were considered and all the RALs were processed. Additionally, these contracts apply to all RALs the defendants offered in West Virginia.   21   Each of the named plaintiffs understands that he or she is representing a number of unnamed class members in this case, and understands that he or she owes a duty to treat those absent class members fairly.   22.   The named plaintiffs are represented by the law firm of Bailey & Glasser, LLP, whom they move to appoint as lead class counsel. John Barrett of the Barrett Law Firm is proposed as co-counsel.   23.   Plaintiffs have moved for certification under Rule 23(b)(3). 8 --------------------------------------------------------------------------------   STATEMENT OF THE LAW 1.   The claims based on the West Virginia Consumer Credit and Protection Act and the prohibitions against unfair methods of competition and unfair or deceptive acts or practices is based on the definitions of such actions, as they are defined in West Virginia Code, section 46A-6-102(f).   2.   The prohibited acts include “[t]he act use or employment by any person of any deception, fraud, false pretense, false promise or misrepresentation, or the concealment, suppression or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any goods or services, whether or not any person has in fact been misled, deceived or damaged thereby.” W.Va. Code, §46A-6-102(f)(13) (emphasis added).   3.   The Court recognizes that a determination of class status should occur as soon as practicable after the filing of the action, and believes that this issue is now ripe for determination.   4.   “In general, class actions are a flexible vehicle for correcting wrongs committed by a large-scale enterprise upon individual consumers.” In re West Virginia Rezulin Litigation, 214 W. Va. 52, 62, 585 S.E.2d 52, 62 (2003).   5.   On a motion for class certification, a court should not inquire into the merits of the parties’ contentions. See Syl. Pts, 6 & 7, Rezulin, 214 W.Va. 52. “The dispositive question is not whether the plaintiff has stated a cause of action or will prevail on the merits, but rather whether the requirements of Rule 23 have been met.” Rezulin, Syl. Pt. 7. 9 --------------------------------------------------------------------------------   6.   Under Rule 23(a) of the West Virginia Rules of Civil Procedure, a class action is appropriate when the party seeking to certify a class has proved that:   (a)   the class is so numerous that joinder of all members is impracticable;     (b)   there are questions of law or fact common to the class;     (c)   the claims or defenses of the representative parties are typical of the claims or defenses of the class; and     (d)   the representative parties will fairly and adequately protect the interests of the class. W. Va. Rules of Civil Procedure, Rule 23(a) Numerosity 7.   Rule 23(a)(1) requires that a class be so numerous that joinder of all members is impracticable. Rezulin, Syl. pt. 9. Commonality 8.   Rule 23(a)(2) requires that there be questions of law or fact common to the members of the proposed class. “[A] common nucleus of operative fact or law is usually enough to satisfy the commonality requirement.” Rezulin, Syl. Pt. 11.   9.   The threshold of “commonality” is not high, and requires only that the resolution of common questions that affect all or a substantial number of class members. Rezulin, Syl. pt. 11.   10.   The Court in Rezulin quoted from Newburg on Class Actions, 4th Ed., § 3:12 at 314-315 (2002), when it stated the following:       “Individual issues will often be present in a class action, especially in connection with individual defenses against class plaintiffs, rights of individual class members to recover in the event a violation is established, and the type or amount of relief individual class members may be entitled to receive. Nevertheless, it is settled that the common issues need not be dispositive of the litigation. The fact that class members must individually demonstrate their right to recover, or that they may suffer varying degrees of injury, will not bar a class action; nor is a class action precluded by the presence of individual defenses against class plaintiffs.” Rezulin, 214 W. Va. at 68. 10 --------------------------------------------------------------------------------   Typicality 11.   Rule 23(a)(3) requires that the claims of the representative party be “typical” of those of the class. Typicality focuses on the desired characteristics of the class representative. 12.   The Rezulin Court held that “a representative party’s claim or defense Is typical if it arises from the same event or practice or course of conduct that gives rise to the claims of the other class members, and if his or her claims are based on the same legal theory.” Rezulin, Syl. Pt. 12.   13.   The Court further explained that typicality: “only requires that the class representative’s claims be typical of the other class members’ claims not that the claims be identical,... When the claim arises out of the same legal or remedial theory, the presence of factual variations is normally not sufficient to preclude class action treatment....[D]ifferences in the situation of each plaintiff or each class member do not necessarily defeat typicality; the harm suffered by the named plaintiffs may differ in degree from that suffered by other members of the class so long as the harm suffered is of the same type. Furthermore, the fact that a defense may be asserted against the named representative, as well as some other class members, but not the class as a whole, does not destroy the representative’s status. Rezulin, 214 W.Va. at 67-68. Adequacy of Representation 14.   Rule 23(a)(4) requires that the representative parties must fairly and adequately protect the interests of the class. 15.   The first part of Rule 23(a)(4) tests the representative party’s attorneys’ ability to vigorously represent the entire class based on available resources to investigate claims and contact class members, and the attorneys’ overall competence and experience. Id. at Syl. Pt. 13. 11 --------------------------------------------------------------------------------   16.   The class representatives must “share a strong interest in establishing the liability of the defendants and seek the same types of relief and damages requested for other class members.” Rezulin, 214 W. Va. at 69. 17.   The second part of Rule 23(a)(4) inquires whether there are “conflicts of interest between named parties and the class they seek to represent.” W. Va. R, Civ. P. 23(a)(4). Rule 23(b) Requirements 18.   An action that satisfies all of the Rule 23(a) requirements may be maintained as a class action if the court finds that it also meets one of the three prerequisites of Rule 23(b). Rezulin, Syl. Pt. 8. 19.   Under Rule 23(b)(3), a class action may be certified to proceed on behalf of a class if the trial court finds “that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members” and finds that a class action “is superior to other available methods for the fair and efficient adjudication of the controversy.” W. Va. R. Civ. P. 23(b)(3). 20.   “The predominance criterion in Rule 23(b)(3) is a corollary to the ‘commonality’ requirement found in Rule 23(a)(2). While the commonality requirement simply requires a showing of common questions, the ‘predominance’ requirement requires a showing that the common questions of law or fact outweigh individual questions.” Rezulin, 214 W. Va. at 71.   21.   “A conclusion on the issue of predominance requires an evaluation of the legal issues and the proof needed to establish them.” Id. at 72. The predominance requirement is not a rigid test, but rather contemplates a review of many factors, 12 --------------------------------------------------------------------------------   the central question being whether “adjudication of the common issues in the particular suit has important and desirable advantages of judicial economy compared to all other issues, or when viewed by themselves.” Id. (citations omitted). 22.   The Chemtall case cited by Mr. Ramey in his argument for additional time to conduct discovery held that West Virginia courts should conduct a thorough analysis of motions to certify, and if a court grants the motion, it should enter a specific, detailed order, with relevant findings of fact and conclusions of law, that indicates the basis for certification and the satisfaction of Rule 23 prerequisites. State of West Virginia ex rel. Chemtall Inc. v. Madden, 2004 WL 2750996 (W.Va.,2004). CONCLUSIONS OF LAW Due Process Argument 1.   The Court finds that Mr. Ramey did not offer any convincing reason for this Court to grant the new defendants additional time for discovery relating to class certification issues. 2.   The Court has reviewed the Chemtall opinion and believes that it has conducted a thorough analysis of the issues presented and believes that such an analysis is evident from this detailed Order. 3.   Mr. Ramey’s reasons for asking for additional discovery time did not relate to class certification issues, rather they went to the merits of the claims. 4.   Supreme Court case law dictates that this Court should not inquire into the merits of the claims when reviewing a motion for class certification. 13 --------------------------------------------------------------------------------   5.   Whether or not the plaintiffs would have engaged in the RAL program if they knew of the alleged kickbacks and hidden fees does not affect the maintainability of this action as a class action. The new defendants have failed to show to this Court how such information relates to any of the Rule 23 factors. 6.   The fact that certain class members would have signed the RAL had they known of the fees, and the fact that others would not have signed the RAL with this information does not affect the class certification issue at hand. Although one might question whether this affects typicality, it does not in this instance because it is not pertinent to the underlying claim. The plaintiffs need not aver or prove that they were in fact misled, deceived, or even damaged to prove a prima facie case of unfair and deceptive practices. 7.   Therefore, the Court does hereby find that the new defendants, represented by Mr. Ramey, were given sufficient notice and opportunity to be heard on class certification and presented no reasons, related to the certification issue, for which this Court is willing to grant additional time for discovery. Class Definition 8.   The Court finds the proposed class is objectively defined as it is easily determined whether a particular individual is a member of the class. Numerosity 9.   Given that there are more than 438,500 transactions, although some of these transactions may represent repeat customers, the Court finds and concludes that he proposed class is so numerous that joinder of all of its members would be impracticable and numerosity is satisfied. 14 --------------------------------------------------------------------------------   Commonality 10.   The Court finds that there is no factual basis to distinguish the claims of proposed class members at Block-owned offices from those at franchise offices.2 11.   In fact, there are numerous questions of law and fact common to class members. Some of those common issues of law and fact include the following:   a.   Whether Block was required to comply with West Virginia’s law governing credit services organizations when it arranges refund anticipation loans;     b.   Whether the class members are buyers within the meaning of the credit services organizations statute;     c.   Whether Block negotiates contracts with lenders, funnels its RAL customers to the lenders, and then receives payment for that referral;     d.   Whether Block secretly concealed profits made on brokering RAL’s;     e.   Whether Block was the taxpayers’ agent or broker;     f.   Whether Block had a confidential relationship with the taxpayer that would create a fiduciary duty; and if so, did Block breach that duty; and     g.   Whether Block breached the contract to obtain RAL’s or was unjustly enriched at the expense of class members. 12.   Because the class members’ claims directly relate to the RAL that was offered each year, and based on the questions of law and fact for each of those years, this Court finds that resolution of common questions that affect all or a   2   Ms. Mounts also testified at the October 21,2004 hearing that Block’s Williamson, West Virginia franchise uses a different computer software platform for obtaining RALs. (Hearing Trans. at 67-68.) This testimony contradicts that given by Block’s corporate representative on franchises. (Ex. C, Pis.’ Reply to Defs.’ Mem, of Law in Supp. of Mot. for Part’l Summ. J.) Nevertheless, should the evidence ultimately show that the Williamson Block franchise RALS are materially different from those in the rest of Block’s West Virginia offices, those RALs can be excluded from the class. 15 --------------------------------------------------------------------------------       substantial number of class members can be achieved through the maintenance of a class action.   13.   For these reasons, the Court finds and concludes that commonality is satisfied. Typicality 14.   As described above, the offer and application process for the RAL constitute a common practice and course of conduct that establish typicality. Those events did not differ for the representative plaintiffs in any respect relevant to typicality. Plaintiffs’ claims focus squarely on Block’s conduct and do not depend on customer-specific representations. 15.   Additionally, the representative plaintiffs’ claims are based on the same legal theory as those of the class generally. Plaintiffs claim that as a tax prepare, loan broker, and agent, Block had a duty to its clients. They further claim that Block breached that duty by failing to disclose its self-dealing according to plaintiffs and brokering a loan while hiding the participating fee.   16.   Block complains that Deadra Cummins and Ivan and LaDonna Bell are not typical of the class because each had individual reasons to get a RAL and individual reactions and experiences when they got the RAL. Contrary to Block’s contention, however, Cummins and the Bells are “typical” of RAL borrowers in the ordinary, everyday sense of the word “typical.” These representative plaintiffs are just the type of people Block targets for its RAL-product.   17.   Ordinary typicality, however, is not tested under Rezulin. The test is legal typicality, whether Cummins’ and the Bells’ claims are “typical” of the class claims, in fact and law. This Court finds that the claims of the proposed class 16 --------------------------------------------------------------------------------       representatives are typical of those claims of the several class members as they share essentially the same facts and require the same legal analysis as it relates to the individual counts included in the Second Amended Complaint.   18.   The claim for unjust enrichment seeks recovery of monies paid by each plaintiff. The facts relevant to recovery for each member of the class are virtually identical. 19.   Because unjust enrichment is predicated in equity, the Court finds that all members of the class can be adequately protected through the maintenance of a class action. 20.   The defendants claim that individual issues of trust and reliance abound in regard to the plaintiffs’ claims based on an alleged fiduciary duty. However, whether or not the defendants were agents, loan brokers, or credit services organizations does not vary from client to client. The relationship, if any, was formed from the RAL application process. 21.   Additionally, if the defendants were agents, loan brokers, or credit services organizations, the duty each defendant owed to each class member does not vary or depend on the class member; it can be determined from the RAL documents and the alleged systematic actions of the defendants when offering and providing RALs through their Rapid Refund Program. 22.   The unfair and deceptive practices claim will depend on a determination as to whether the services offered by Block were “goods” and whether Block’s conduct constitutes a consumer transaction that occurred in the course of trade or commerce. Whether or not the plaintiffs can recover will depend on whether the 17 --------------------------------------------------------------------------------   defendants’ actions amount to “methods of’ competition and unfair or deceptive acts or practices” as defined by West Virginia Code, section § 46A-6-102. 23.   The acts and practices that will be pertinent to this determination are based on the defendants’ actions in offering and providing RALs. To the extent that the defendants used the same techniques, procedures, and RAL applications, there is no variance between class members and no individual issues that would defeat commonality. 24.   The breach of contract claim, based on an implied duty of good faith, will be reviewed according to the contract, if one is found, and whether or not the defendants acted in good faith and fair dealing in its disclosures and actions. The plaintiffs’ averments were sufficient to avoid a dismissal for failure to state a claim, but this claim, and all others, may be removed from class certification or otherwise dismissed if further evidence dictates such a decision. 25.   The Court has considered and rejected Block’s claim that Ms. Cummins cannot maintain her claims because in February 2003 she obtained another RAL from Jackson Hewitt. As Plaintiffs’ counsel pointed out at argument, Ms. Cummins obtained this RAL from a Block competitor, and not from Block. This case pertains to Block’s conduct and Block’s disclosures. It has nothing to do with some other company’s conduct and disclosures. 26.   Block also has argued that the named plaintiffs “lack standing” to challenge the RAL process in 1994 and 2003 when none of them actually obtained RALS through Block in those years. This is not a standing question. Plaintiffs have standing because they suffered injury in fact, fairly traceable to the defendants, 18 --------------------------------------------------------------------------------   and for which the Court can provide a remedy. See Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992). Instead, this argument attempts to attack typicality. As noted above, however, the named plaintiffs’ claims need only be typical, but not identical, to those of the class. See Rezulin at 67-68. 27.   Based on the foregoing, the claims of the named Plaintiffs are typical of the claims of the proposed class and, accordingly, the Court finds and concludes Plaintiffs satisfy the typicality requirement. Adequacy of Representation Class Representatives 28.   No party has demonstrated any conflicts of interest between the named plaintiffs or proposed class counsel and the proposed class. 29.   The Court finds each named plaintiff has a common sense and sufficient understanding of his or her duties as a class representative and the legal and factual basis for his or her claim. 30.   The class representatives “share a strong interest in establishing the liability of the defendants and seek the same types of relief and damages requested for other class members.” Rezulin, 214 W. Va. at 68. All plaintiffs seek disgorgement of funds wrongfully withheld, as well as statutory penalties. While amounts of individual damages may vary, the formulas and methodology for recovery are the same. Class Counsel 31.   Several individual attorneys making appearances on behalf of the plaintiffs have been counsel to certified classes in the past. The pleadings and argument on 19 --------------------------------------------------------------------------------   behalf of the plaintiffs have been thoughtful, competent and professional. From their performance thus far in this case, the Court finds that Plaintiffs attorneys are competent and experienced not only in general matters of civil litigation, but also specifically in the area of class action and multi-plaintiff litigation. 32.   While the defendants made allegations of unethical conduct against proposed class counsel, such conduct, even if committed, does not provide reason for this Court to find that a conflict exists between the class and the class representatives or between the class and proposed counsel for the class. 33.   The Court further finds that Plaintiffs’ attorneys possess the available resources to investigate the claims and prosecute this litigation. 34.   The Court finds and concludes that the named plaintiffs and proposed class counsel together and individually will fairly and adequately protect the interests of the class. 35.   Based on the Rezulin decision, the Court finds that Plaintiff has satisfied all the Rule 23(a) requirements of numerosity, commonality, typicality and adequacy. Rule 23(b)(3) Requirements 36.   Defendants have not identified any individual issues that would negate a finding that the common issues predominate. 37.   Both parties claim that common issues, fundamental to plaintiffs’ theories of the case, can be adjudicated on cross-motions for summary judgment. Both parties have, in fact, already moved for summary judgment and briefed the issues whether Block is a loan broker, a credit services organization, or acts as the agent of its RAL clients. Both parties have also moved for summary judgment on 20 --------------------------------------------------------------------------------   and briefed the issues of whether Block has a fiduciary duty to its RAL clients; and whether Block’s acts were unfair or deceptive. 38.   On both parties’ own account, therefore, the fundamental legal issues of this action predominate in the Rule 23 sense that they may be determined by the Court for all class members because both parties agree, there are no questions of material fact and they may be decided as a matter of law. 39.   The Court finds and concludes that because common issues predominate, certifying this case as a class action would provide desirable advantages of judicial economy, when compared with any court’s individual determination of these fundamental questions for even a small number of the plaintiffs represented here. 40.   Finally, and for some of the same reasons set forth above, the plaintiffs have satisfied the Rule 23(b)(3) requirement “that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.’ This requirement focuses upon a comparison of available alternatives.” Rezulin, 214 W. Va. at 75. 41.   “[F]orcing numerous plaintiffs to litigate the alleged misconduct of the defendants in hundreds or thousands of repeated individual trials, especially where a plaintiff’s individual damages may be relatively small, runs counter to the very purpose of a class action.... [T]o determine the superiority of a class action in a particular case[,] other factors must also be considered, as must the purposes of Rule 23, including: conserving time, effort and expense; providing a forum for small claimants; and deterring illegal activities.” Id., at 75-76. 21 --------------------------------------------------------------------------------   42.   Plaintiffs have pursued and Block has defended this case vigorously. Both sides have done substantial discovery and depositions have occurred in no less than four states. Plaintiffs aver that they have spent more than $535,000 in time and expense so far. By contrast, the most any individual class member could recover, even assuming all of West Virginia’s statutory penalties apply, would be about $3,700 per transaction. 43.   As Judge Posner recently observed, “[A] class action has to be unwieldy indeed before it can be pronounced an inferior alternative — no matter how massive the fraud or other wrongdoing that will go unpunished if class treatment is denied —to to no litigation at all.” Carnegie v. Household Int’I, Inc., 376 F.3d 656, 661 (7th Cir. 2004). 44.   The Court finds and concludes that a class action is the superior, if not the only realistic way to resolve this dispute. The cost of pursuing an individual claim such as this would be so far outweighed by the cost that the only real alternative to a class action would be no action at all. 45.   For the reasons set forth above and the record herein, the Court GRANTS Plaintiff’s motion for class certification as follows:   (a)   The class proposed by plaintiffs is CERTIFIED, consisting of all West Virginia residents who obtained Refund Anticipation Loans (“RALs”) from January 1,1994 through the present, as to all claims contained in the plaintiff’s Second Amended Complaint.     (b)   Deadra D. Cummins and Ivan and Ladonna Bell will be class representatives; and 22 --------------------------------------------------------------------------------     (c)   Bailey & Glasser, LLP, will be lead counsel.     (d)   This class certification is conditional. If further discovery uncovers evidence that negates the maintainability of this class action, the Court may decertify, alter, or amend this order.      Accordingly, the case may proceed as a class action pursuant to Rule 23(a) and Rule 23(b)(3).      Within ten days of the date of entry of this Order, plaintiffs shall provide the Court and all counsel a proposed notice and opt-out form for approval.      Within ten days from the date that plaintiffs provide counsel with the proposed notice, defense counsel shall submit to the Court and plaintiffs’ counsel a written response to the proposed notice and opt-out form.      The Court notes and preserves the objections of all parties.      The Clerk is DIRECTED to send a certified copy of this Order to all counsel of record.      ENTERED this 30th day of December, 2004.                         /s/ Louis H. Bloom                   Honorable Louis H. Bloom     12/30/04 BS/MV/AR 23 --------------------------------------------------------------------------------   IN THE CIRCUIT COURT OF KAWAWHA COUNTY WEST VIRGINIA DEADRA D. CUMMINS, et als,      Plaintiffs       vs.   Civil Action No. 03-C-134 H & R BLOCK, INC., et als,      Defendants BEFORE: Hon. Louis H. Bloom Excerpt of Hearing RE: Class Certification December 22, 2004 Connie L. Cooke Official Reporter   --------------------------------------------------------------------------------     2      BE IT REMEMBERED, that the following is an excerpt from a hearing in the matter of DEADRA D. CUMMINS, et als, Plaintiffs versus H & R BLOCK, INC., et als, Defendants, upon Civil Action No. 03-C-134, as stated in the caption hereto, the following transpired:      THE COURT: What further would you inquire? Specifically, what questions would you like to ask? What discovery that you already have — I’m not going to allow you to duplicate anything that is in the record —      MR. RAMEY: Absolutely, and I don’t want to do that, your Honor.           First of all, one of the problems with the Complaint is it only mentions my clients, and it refers collectively to —      THE COURT: My question to you, sir, was what specific discovery would you want to undertake?      MR. RAMEY: I would want to undertake — I would want an explanation of the specific causes of action they are alleging against my clients, the specific facts upon which those —      THE COURT: This is a notice of pleading in West Virginia. I would like to know specifically   --------------------------------------------------------------------------------     3 what questions you would ask, and who would you ask them?      MR. RAMEY: I would ask what acts or omissions were committed by my clients specifically upon which, for example, in class certification, class certification is based.           I would ask for the production of any documents in the possession of the plaintiffs that were in furtherance of these issues of class certification.           One of my clients is Block Financial Corporation —      THE COURT: Then I would hear your arguments based on the record as developed by the plaintiff at this point. If you have arguments that your folks aren’t involved in this, now is the time to do it.      MR. RAMEY: Okay. The other questions I would ask is apparently the plaintiffs’ claim against Block Financial Corporation is that Block Financial Corporation had a participation interest in some of the loans that were made. I have not been given an opportunity, nor have the plaintiffs been asked, for example, Did you know about a participation interest?   --------------------------------------------------------------------------------     4      Had you known of a participation interest, would it have caused you not to enter into these loan transactions?           No one has asked those questions because may clients weren’t in the case, and I believe that I deserve, as a matter of due process and the Rules of Civil Procedure, to ask these plaintiffs specific questions regarding that particular claim.           For example, your Honor, McDonald’s, you go to McDonald’s, they pay franchise fees. I would ask these plaintiffs, Well, you claim that you would not have entered into these transactions if you knew that Block Financial Corporation had a participation interest in these loan transactions, but when you go to McDonald’s, were you aware that the local McDonald’s pays a franchise fee? Are you telling me that you would not buy a Big Mac because you now know, or you wouldn’t have bought a Big Mac back then had you known that the local franchise pays franchise fees?           No one asked these plaintiffs any of these questions, because my clients were involved in the case.           My other client is Block Services.   --------------------------------------------------------------------------------     5 And apparently all they’ve done is, banks that want to participate in the loan program pay a licensing fee. This has nothing to do with the plaintiffs in this case.           I would ask the plaintiffs the same question: If you were aware that the banks — that you thought, if that’s what your testimony is, were extending you the loan paid a fee in order to participate in that loan program, would it have made any difference to you? Do you feel you were damaged by that?           No one asked those questions. And before a class is certified against my clients, all I’m asking for is an opportunity to ask those questions, seek that information, develop the record so that I can come into this Court and in a meaningful manner argue to the Court based upon the evidence why you should not certify questions as to my two clients, who have only recently been brought into the case. And essentially, your Honor, my argument is no more than that. ***********   --------------------------------------------------------------------------------     6 STATE OF WEST VIRGINIA, COUNTY OF KANAWHA, to-wit :      I, Connie L. Cooke, Official Reporter for the Circuit Court of Kanawha County, do hereby certify that the foregoing is a true and correct excerpt from the hearing in the above captioned matter, as reported by me and transcribed into the English language.      Given under my hand this 22nd day of December, 2004.                         /s/ Connie L. Cooke                   Official Reporter       --------------------------------------------------------------------------------    B   --------------------------------------------------------------------------------   IN THE CIRCUIT COURT OF MOBILE COUNTY, ALABAMA LEVON MITCHELL and GERAL MITCHELL, on behalf of themselves and all others similarly situated,      Plaintiffs, vs.   CASE NO. CV-95-2067 H&R BLOCK, INC., RUTH R. WREN, jointly and individually,      Defendants. ORDER GRANTING CLASS CERTIFICATION      This matter is before the Court on the Plaintiffs’ Motion for Class Certification. Plaintiffs seek certification of claims for breach of fiduciary duty, unjust enrichment, and breach of contract. All of these claims arise out of Defendant H&R Block, Inc.’s (“Block”) Refund Anticipation Loan program. The Court finds, after a probing, rigorous analysis and examination of the pleadings, Plaintiffs’ Motion for Class Certification, the evidence submitted by Plaintiffs, all other evidence of record, the briefs of the parties, the oral argument of counsel, and the applicable law, that Plaintiffs have established their entitlement to class certification under Ala.R.Civ.P. 23 and Ala. Code 1975 § 6-5-641(e). Specifically, the Court finds that the Plaintiffs, as the parties with the burden of proof on class certification, have satisfied the requisites of Ala.R.Civ.P. 23(a) and 23(b)(3) for certification of a class. The Court understands that a class action is not maintainable by virtue of its designation as such in the pleadings. Therefore, the Court has probed extensively beyond the pleadings and has devoted much consideration to the evidence   --------------------------------------------------------------------------------   adduced in determining that each requirement of Rule 23(a) and Rule 23(b)(3) has been satisfied.      The Class shall consist of the following:      BREACH OF FIDUCIARY DUTY/UNJUST ENRICHMENT SUBCLASS All natural persons who (1) engaged H&R Block, Inc., or its franchisees, to obtain a Refund Anticipation Loan (“RAL”) In the State of Alabama, (2) who obtained a RAL for which H&R Block, Inc., received directly or indirectly from a third-party lender either a “licensing fee” payment and/or a portion of the finance charges paid by the customer pursuant to the loan, (3) at any time during the period from June 13, 1993, through December 31,1996, and (4) whose RAL application contained the following or substantially similar provisions: (a) the person authorizes H&R Block, or H&R Block and Its affiliates, to disclose to a lending Institution the person’s income tax returns, all information contained in such returns, and all information supplied to H&R Block, for the purpose of enabling the lending institution to determine whether or not to make an RAL; and (b) provides that H&R Block may not use or disclose such information for any purpose other than as stated in the RAL application. Excluded from the Class are H&R Block, Inc., any parent, subsidiary, or affiliate of H&R Block, Inc.; the officers, directors, agents, servants, or employees of any of the same; and the members of the immediate families of any such person. Likewise excluded from the Class are any members of the Judicial Branch of the State of Alabama, and the members of the Immediate families of any such person. BREACH OF CONTRACT SUBCLASS All natural persons who (1) engaged H&R Block, Inc., or Its franchisees, to obtain a Refund Anticipation Loan (“RAL”) In the State of Alabama, (2) who obtained a RAL for which H&R Block, Inc., received directly or indirectly from a third-party lender either a “licensing fee” payment and/or a portion of the finance charges paid by the customer pursuant to the loan, (3) at any time during the period from June 13, 1989, through December 31,1996, and (4) whose RAL application contained the following or substantially similar provisions: (a) the person 2 --------------------------------------------------------------------------------   authorizes H&R Block, or H&R Block and its affiliates, to disclose to a lending institution the person’s income tax returns, all information contained in such returns, and all information supplied to H&R Block, for the purpose of enabling the lending institution to determine whether or not to make an RAL; and (b) provides that H&R Block may not use or disclose such information for any purpose other than as stated In the RAL application. Excluded from the Class are H&R Block, Inc., any parent, subsidiary, or affiliate of H&R Block, Inc.; the officers, directors, agents, servants, or employees of any of the same; and the members of the Immediate families of any such person. Likewise excluded from the Class are any members of the Judicial Branch of the State of Alabama, and the members of the immediate families of any such person.      This certification is based upon the following factual and legal findings: I. FACTUAL BACKGROUND      Block offers tax preparation services to the general public. In addition to its tax preparation services, Block offers its customers a service called “Rapid Refund,” The Rapid Refund program functions in the following manner: for a fee, Block will electronically file a customer’s tax return with the Internal Revenue Service (“IRS”), Electronic filing enables the taxpayer to obtain a refund, if one is owed, in an expedited manner.      Block also offers a service known as “Refund Anticipation Loans” (“RALs”). Block’s customers must participate in the Rapid Refund program to be eligible for a RAL. RALs are obtained in the following manner: Block enters into arrangements with banking institutions (the “lender banks”), whereby they will extend loans to Block customers. The loans are secured by the customers’ anticipated tax refunds. With a RAL, Block’s customers can receive the loan proceeds within a few days, faster than a refund obtained through electronic filing can be received. The RALs are paid off later by the actual refund 3 --------------------------------------------------------------------------------   from the IRS. The lender banks charge a fee for the RAL, which is disclosed to the customer. This fee is deducted from the amount of the RAL.      Block prepares its customers’ RAL applications and transmits them, the information contained in its customers’ tax returns, and other information furnished by its customers, to the lender banks. Block solicits the lender banks’ acceptance of the RAL applications, receives the proceeds of the RALs, and delivers the proceeds to its customers. The RAL applications give Block authority to disclose its customers’ tax returns, and all information supplied to Block by its customers, to the lender banks. The RAL applications also expressly restrict Block from using this information for any purpose other than enabling the lender banks to determine whether or not to make a RAL, or as permitted by Treasury Regulation § 301.7216. The RAL applications do not permit Block to use this information for its own financial gain. Neither does Treasury Regulation 301.7216.1      Plaintiffs allege that under Block’s arrangement with the lender banks, Block received a “license fee,” characterized as a “kickback” by Plaintiffs, from the lender banks for each RAL.2 Plaintiffs further contend that although the RAL fee charged by the lender banks was disclosed to Block’s customers, the license fee paid to Block was not disclosed.3   1   This Treasury Regulation is presently codified at 26 C.F.R. § 301.7216-1, -2 and -3. It was in effect during the Class Periods in a materially identical form.   2   It is undisputed that Block received a license fee from RALs made through its company-owned offices for at least a portion of the Class Periods. Block contends that it did not receive license fees from RALs made to customers of its franchised offices, and that it did not receive license fees before 1992. The Court will address these contentions under its discussion of typicality, infra.   3   Block contends that the license fee was disclosed to the named Plaintiffs, and to everyone else who received a RAL through Mellon Bank in 1994. The Court will address this contention in its discussion of typicality, infra. It is established that the license fee was 4 --------------------------------------------------------------------------------   The license fee payment to Block constitutes a portion of the RAL fee charged by the lender banks. The amount of the license fee charged by the lender banks varied from year to year during the Class Periods, but was uniform for any given year.      Block also entered into “pooling agreements” or “participation agreements” with the lender banks. By the terms of these agreements, Block would buy 49.999999% of the RALs issued by the lender banks at a discount and realize a profit when the taxpayer’s tax refund paid off the loan.4 It is undisputed between the parties that, if Block received any money from the RALs during the class periods because of the pooling agreements, it did not disclose this fact to its customers.5      Named Plaintiffs Levon Mitchell and Geral Mitchell participated in Block’s Rapid Refund program and obtained RALs. Levon Mitchell and Geral Mitchell obtained the RAL upon which their class claims are based in 1995 (for tax year 1994). Their RAL was obtained through Armstrong Business Services, Inc., a Block-franchised office. II. LEGAL ANALYSIS       not disclosed to Block’s customers during the remainder of the Class Periods. Block acknowledges that there were no written disclosures In the RAL transactions other than, Block contends, in 1994. Block makes the purely speculative assertion that class members may have learned about the license fee “from their tax preparer or from press releases or other publicly disseminated documents.” (Block’s Post-Hearing Brief, p. 11). This is based upon one affidavit of a Block customer, which is vague and ambiguous. (Def. Exh. 56, 5). The Court will not credit such guesswork and conjecture.   4   Block contends that It received no income from pooling agreements attributable to RALs made in Alabama during the Class Periods. The Court will address this contention under its discussion of typicality, Infra.   5   Although not argued by Block, the Court notes that the alleged disclosure in 1994, discussed subsequently, could encompass the pooling agreements. 5 --------------------------------------------------------------------------------        Plaintiffs seek class certification pursuant to Ala. R. Civ. Proc. 23(b){3). As such, Plaintiffs must meet the criteria for Rule 23(a), as well as the elements set forth in Rule 23(b)(3). Rule 23(a) permits certification where: (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.      If the criteria of Rule 23(a) are satisfied, an action is maintainable as a Rule 23(b)(3) class action if: the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action Is superior to other available methods for the fair and efficient adjudication of the controversy.      “The question of class certification is a procedural one distinct from the merits of the action.” Mitchell v. H&R Block, Inc.,783 So. 2d 812, 816 (Ala. 2000). As the Alabama Supreme Court held in Allstate Ins. Co. v. Ware, 824 So. 2d 739, 744 (Ala. 2002): [T]he propriety of class certification does not depend on whether the putative class members will be able to prove the claims on the merits. In other words, a court deciding the issue of the propriety of class certification does not base the decision on the factual merits of the alleged class claims.      Bearing in mind the Alabama Supreme Court’s directive not to prejudge the merits of the proposed class claims at the certification stage, the Court will now address the requisites for class certification. 6 --------------------------------------------------------------------------------        A. Numerosity.      The requirement of Rule 23(a)(1) “relates to the difficulty or inconvenience in joining class members.” Ex parte Government Employees Insurance Co., 729 So, 2d 299, 303 (Ala. 1999). “Practicality of joinder is the primary issue in assessing whether the numerosity requirement of Rule 23(a )(1) is satisfied.” Winn v. Dixieland Food Stores, Inc., 125 F.R.D. 696,699 (M.D. Ala. 1989). An approximation of the potential number of class members will suffice in determining numerosity. Ex parte Government Employees Insurance Co., 729 So. 2d at 303.      There is no dispute over the existence of this element. Block has admitted in its briefs that the Class consists of tens of thousands of members. Block’s answers to Plaintiffs’ First Set of Interrogatories represented that In excess of 32,000 persons obtained RALs in 1993 and 1994 alone. Edward Feinstein, Block’s 30(b)(6) corporate representative, testified that between 40% and 95% of all Block clients who electronically file their returns utilize the RAL program.      The Court therefore finds that the Plaintiffs have proven that numerosity is present in this case.      B. Commonality.      “The commonality requirement has been liberally construed, and It is aimed at determining whether there is a need for combined treatment and a benefit to be derived therefrom.” Ex parte Government Employees Insurance Co., 729 So. 2d at 304 (citation omitted). “[T]here need be only a single issue common to all members of the class.” Alba Conte & Herbert Newberg, 1 Newberg on Class Actions, § 3:10, pp. 273-78 (4th ed. 2002). 7 --------------------------------------------------------------------------------   “A common nucleus of operative facts is usually enough to satisfy the commonality requirement of Rule 23(a)(2).” Cheminova America Corp. v. Corker, 779 So. 2d 1175,1180 (Ala. 2000). When the party opposing the class has engaged in some course of conduct that affects a group of persons and gives rise to a cause of action, one or more of the elements of that cause of action will be common to all of the persons affected.      1 Newberg on Class Actions, § 3:10 at 273-78. That is precisely what has occurred here: Block, through its RAL program, has engaged in a course of conduct that affected all members of the Class, a course of conduct which Plaintiffs allege has given rise to causes of action. There is a “common nucleus of operative facts” with respect to all Class members. Plaintiffs have identified the following issues of law and fact which the Court finds to be common to all members of the Class:   a.   Whether Block acted as the agent of the Plaintiffs in transmitting the RAL applications to the lender banks.     b.   Whether Block acted as the agent of the Plaintiffs in disclosing to the lender banks information supplied by Plaintiffs to Block, including Plaintiffs’ tax returns and the information contained therein.     c.   Whether Block used the information supplied to it by Plaintiffs and disclosed by Block to the lender banks for the purpose of its own financial gain.     d.   Whether Block received license fees because of an agency relationship with the Plaintiffs.     e.   Whether Block received profits from its participation in the pooling agreements with the lender banks.     f.   Whether Block owed a fiduciary duty to Plaintiffs to disclose to them that it would receive as a license fee from the lender banks part of the finance charge for the RALs that Plaintiffs 8 --------------------------------------------------------------------------------         paid to the lender banks, and whether Block owed a fiduciary duty not to receive such an undisclosed license fee.   g.   Whether Block owed a fiduciary duty to the Plaintiffs to reveal its relationships with the lender banks, to disclose that it was receiving profits from its use of the information supplied to it by Plaintiffs and disclosed by Block to the lender banks, and not to receive undisclosed profits from the lender banks.     h.   Whether Block contracted with Plaintiffs not to use for its own financial gain the Information supplied by Plaintiffs to Block and disclosed by Block to the lender banks, and if so, whether Block breached that contract.     i.   Whether Block has been unjustly enriched because it received or holds money which In equity and good conscience belongs to Plaintiffs, or because Plaintiffs conferred benefits upon Block as a result of detriment suffered by Plaintiffs.      The Court finds that Plaintiffs have proven the existence of the commonality requirement.      C. Typicality.      The claims of the class representatives must be typical of the claims of the class.      “A representative’s claim is typical [if it] arises from the same event or practice or course of conduct that gives rise to the claims of other class members and ... [is] based on the same legal theory.” Cheminova America Corp. v. Corker, 779 So. 2d at 1180-81 (alternations in original). The typicality requirement tests whether “the claims of the named plaintiffs have the same essential characteristics as the class at large.” Id. at 1180 (internal quotation marks omitted). “Where, as here, ‘the party seeking certification alleges that the same unlawful conduct was directed at the class representatives and the class itself, the typicality requirement is usually met irrespective of the varying fact patterns which underlie individual claims.” Id. (quoting Appleyard v. Wallace, 754 F.2d 955,958 (11 th Cir. 1985)). 9 --------------------------------------------------------------------------------   "[T]ypicality of claims seeks to assure that the interests of the representative are aligned with the common questions affecting the class.” 1 Newberg on Class Actions, § 3:13 at 319.      The Court will now apply these legal principles to the claims which Plaintiffs seek to have certified for class treatment. 1. The Breach of Fiduciary Duty Claim.      Plaintiffs’ breach of fiduciary duty claim is based upon the following provision contained in Plaintiffs’ 1995 (tax year 1994) RAL application: On the date I sign this application, I hereby authorize and request H&R Block and its affiliates to disclose to Beneficial National Bank and its agents (“BNB”) my federal income tax return for tax year 1994, any and all other information contained in such tax return, all information supplied to H&R Block, including IRS direct deposit information, In connection with the preparation of such tax return, and all other information contained in this form and any Information contained in any of my prior RAL applications which was disclosed to H&R Block. I authorize and consent to the disclosure of all the foregoing information for the purpose of enabling BNB to determine whether or not to make a Refund Anticipation Loan (“RAL”) to me in response to my application for such loan which is a part of this form.... H&R Block may not use or disclose such tax return information or such other information for any purpose (not otherwise permitted under Treas. Reg. Sec. 301.7216-2) other than as stated herein, except that BNB or its affiliates may use such Information to conduct system testing of the RAL program to update such system and keep it operational.      The Class Definitions reflect this provision of the Plaintiffs’ RAL application. Therefore, if an Alabama resident who obtained a RAL during the Class Periods did not use a RAL application with the above or substantially similar language, that person is not a member of the Class. The RAL applications introduced into evidence indicate that in 10 --------------------------------------------------------------------------------   Alabama for calendar years 1989 through 1996, only one lending institution, for only one year, did not use this RAL provision or a materially identical provision.      Plaintiffs’ breach of fiduciary duty claim is based upon agency. The test for determining whether an agency relationship exists is whether the alleged principal reserved a right of control over the manner of the alleged agent’s performance. Thrash v. Credit Acceptance Corp., 821 So. 2d 968, 972 (Ala. 2001). An agent engaged for a specific purpose is a special agent for that limited purpose only. City Stores Company v. Williams, 252 So. 2d 45, 51 (Ala. 1971). Plaintiffs allege that the above-quoted language of the RAL application made Block the special agent of its customers, for the limited purpose of transmitting their tax return information (and other information acquired by Block from them) to the lending institution.      The RAL application authorizes Block to disclose its customers’ tax and other information to the lending institution. This disclosure is for a specific purpose: “for the purpose of enabling [the lending institution] to determine whether or not to make a Refund Anticipation Loan.” The RAL application further provides: “H&R Block may not use or disclose such tax return information or such other information for any purpose (not otherwise permitted under Treas. Reg. Sec. 301.7216-2) other than as stated herein....” Neither the RAL application nor the referenced treasury regulation permit Block to use its customers’ information for its own financial gain.      Block acts on behalf of its customer in transmitting the customer’s information to the lending institution. The disclosure of information is made for the specific purpose of enabling the lending institution to decide whether to extend a RAL to the customer. The 11 --------------------------------------------------------------------------------   RAL application specifically prohibits Block from using or disclosing the information for any other purpose.      Plaintiffs allege that this restriction upon Block’s use of the customer’s tax and other information, contained in the RAL application which is signed by the customer, gives the customer the right of control over the manner in which Block uses the information. As such, Plaintiffs allege, the test for an agency relationship is satisfied. Specifically, Plaintiffs allege that this restriction makes Block the special agent of its customer for the limited purpose of transmitting the customer’s information to the lending institution.      It is well established that an agent owes a fiduciary duty to his principal within the line and scope of the agency. Miller v. Jackson Hospital and Clinic, 776 So. 2d 122,123 (Ala. 2000). The fiduciary obligation includes disclosure of all material facts within the subject matter of the agency, id., and prohibits an agent from profiting from the subject matter of the agency without the principal’s consent. Gardner v. Cumis Ins. Society, Inc., 582 So. 2d 1094,1096 (Ala. 1991). Plaintiffs allege that Block breached its fiduciary duty to the class members when it used or disclosed their tax information, a matter within the scope of Block’s special agency, to the lending institutions for Block’s own profit, to obtain license fees and an ownership interest in the RALs, and when Block failed to disclose these profits and its true relationship with the lending institutions to the class members.      In the prior appeal of this case, the Alabama Supreme Court reversed the denial of class certification by this Court’s predecessor judge, on the ground that the Court improperly considered the merits of Plaintiffs’ breach of fiduciary duty claim “by adjudicating, during the class certification hearing, the issue whether the loan documents and the restrictions contained in those documents created an agency relationship.” Mitchell 12 --------------------------------------------------------------------------------   v. H&R Block, Inc., 783 So. 2d 812, 815 (Ala. 2000). The Alabama Supreme Court further held: [T]he contractual-agency issue requires the trial court to do nothing more than look to see if a uniform document existed and whether it was used uniformly by H&R Block.      Id. at 816. Plaintiffs’ breach of fiduciary duty claim is based entirely upon what the Alabama Supreme Court termed “the contractual-agency issue.” In this regard, and pursuant to the Alabama Supreme Court’s instruction, this Court finds that a uniform document existed and that it was used uniformly by H&R Block. As noted, with the exception of the RAL application used by one lending institution for one year during the calendar years 1989 through 1996, the RAL applications used by H&R Block and its franchisee offices in the State of Alabama contained the provision quoted above, or a provision which was identical in all material respects. Thus, the Named Plaintiffs’ breach of fiduciary duty claim is typical of the Class members’ breach of fiduciary duty claim.      Consistent with the Alabama Supreme Court’s admonition not to adjudicate the merits of a claim in determining the propriety of class certification, the Court specifically does not reach the issue of whether this provision in the RAL applications created a special-agency relationship between Block and his customers, which would correspondingly give rise to a fiduciary duty on Block’s part within the line and scope of that agency. The Court does find, however, that the existence of a special-agency relationship and corresponding fiduciary duty can be determined based solely upon the uniform provision used by Block in its RAL applications on a class-wide basis. Either the language of this provision creates a special-agency relationship, or it does not. In this regard, it is important to note the manner in which the Plaintiffs have framed their claim. Plaintiffs do 13 --------------------------------------------------------------------------------   not rely on anything outside the RAL application as having created an agency relationship and fiduciary duty. Plaintiffs’ claim is based solely upon the language of the RAL application itself. 2. The Unjust Enrichment Claim.      A claim for unjust enrichment lies where the defendant holds money which in equity and good conscience belongs to the plaintiff, Dickinson v. Cosmos Broadcasting Co., 782 So. 2d 260, 266 (Ala. 2000), or where the plaintiff, to his detriment, has conferred a benefit upon the defendant. Opelika Production Credit Ass’n., Inc. v. Lamb, 361 So. 2d 95, 99 (Ala, 1978). Plaintiffs’ unjust enrichment claim is entirely derivative of their breach of fiduciary duty claim. This is abundantly clear from the allegations of Plaintiffs’ Complaint as last amended. Stated differently, the unjust enrichment claim will rise or fall based upon the same proof as Plaintiffs’ breach of fiduciary duty claim. Thus, it can be determined based upon the same provision uniformly used by Block in its RAL applications on a classwide basis.      As such, Plaintiffs’ unjust enrichment claim is typical of the Class Members’ unjust enrichment claims. In making this determination, the Court does not consider the merits of the unjust enrichment claim. 3. The Breach of Contract Claim.      Plaintiffs’ breach of contract claim is also based entirely upon the same uniform language contained in the RAL applications as the breach of fiduciary duty claim. Plaintiffs’ claim is based upon an allegation of a unilateral contract. [A] unilateral contract results from an exchange of a promise for an act; a bilateral contract results from an exchange of promises. [Citations omitted]. Thus, in a unilateral contract, 14 --------------------------------------------------------------------------------   there is no bargaining process or exchange of promises by parties as in a bilateral contract. [Citation omitted]. [O]nly one party makes an offer (or promise) which invites performance by another, and performance constitutes both acceptance of that offer and consideration. [Citation omitted]. Because a unilateral contract is one in which no promisor receives promise as consideration for his promise, only one party is bound.      SouthTrust Bank v. Williams, 775 So. 2d 184,188 (Ala. 2000) (alterations in original; internal quotation marks deleted). Plaintiffs allege that Block promised (or offered) in the above-quoted provision of the RAL application to transmit its customers’ tax (and other) information to a lending institution, for the purpose of enabling a lender to determine whether to extend a RAL, and further promised not to use the customer’s tax information for any other purpose. Plaintiffs allege that this promise (or offer) invited performance by the customer: execution of the RAL application authorizing the release of the customer’s tax information to the lending institution. Plaintiffs further allege that such a performance by the customer constituted both acceptance of Block’s offer and consideration. Plaintiffs contend that Block breached the alleged unilateral contract when it used its customers’ tax information to generate profit for itself, as discussed above — a purpose allegedly prohibited by the unilateral contract.      The Court finds that because the Plaintiffs allege the existence of a contract which is unilateral, as opposed to bilateral (a promise for a promise), the merits of this claim can be resolved solely by reference to the uniform provision quoted above in the RAL applications uniformly used by Block. As noted above, the Alabama Supreme Court has held that there is no bargaining process between the parties to a unilateral contract. As such, under the Plaintiffs’ breach of unilateral contract theory, the Court will not need to 15 --------------------------------------------------------------------------------   examine the state of mind of the individual Class members. Therefore, the named Plaintiffs’ breach of contract claims are typical of the breach of contract claims of the Class members.      The Court does not address the merits of the Plaintiffs’ breach of contract claim at this stage of the proceedings. 4. Block’s Challenges to Typicality.      Block challenges Plaintiffs’ proof of the typicality requirement in several respects. Initially, the Court notes that Block has advanced several arguments which are not directed to any specific class certification factor, but rather, are in actuality merits arguments. The Court will discuss these arguments now.      Block contended at oral argument that it did not receive license fees from its franchisee offices, as opposed to Block-owned offices. If true, this would significantly reduce the size of the Class, since the vast majority of Block’s offices in Alabama are franchisee-owned. However, whether Block received license fees from its franchisee offices is a merits issue, not a certification issue, and hence is not germane at this stage of the proceedings. Whether Plaintiffs can actually prove their claims against Block, one element of which is whether Block received license fees for its RALs during the Class Periods, is not an issue during class certification. Pursuant to Ala, Code 1975 § 6-5-641 (c), all discovery directed to the merits of Plaintiffs’ claims has been stayed. Thus, whether Block received license fees from its franchisee offices has not been fully developed, and is not ripe for adjudication in any event. Moreover, the Court notes that the deposition of 16 --------------------------------------------------------------------------------   Harry W. Buckley (Plaintiffs’ Supplemental Notice of Filing, Exh. 9, p. 135) indicates that Block did receive license fees from its franchisee-owned offices.6      Similarly, whether Block received any license fees before 1992 is a merits issue, and has not been fully developed because merits discovery has been stayed.      Block also contends that it, as opposed to its franchisees, did not participate in pooling agreements in Alabama during the Class Period. Whether or not Block profited directly from the pooling agreements is a merits question. Moreover, even if only Block’s franchisees directly participated in pooling agreements, that does not necessarily mean that Block did not ultimately profit from those pooling agreements, which could constitute a breach of the fiduciary duty alleged by Plaintiffs, Again, this is a merits question, which has not been fully developed.      Block also contends that the breach of contract claim is defective because Plaintiffs’ Complaint supposedly shows that Plaintiffs have not been damaged in this respect. This contention is based upon the following: with respect to their breach of contract claim, Plaintiffs allege that had Block not received license fees from lending institutions, Plaintiffs would have paid a correspondingly lower finance charge to the lending institutions for their RALs. (Plaintiffs’ Fourth Amended Complaint, ¶ 37).7 Plaintiffs stipulate that the lending institutions did not charge any excessive or unlawful interest rates, finance charges or loan   6  Defendants’ Motion to Exclude Plaintiffs’ Supplemental Exhibit 9 is denied for the reasons set out in Plaintiffs’ Response thereto.   7  In Block’s original brief opposing certification, it alleges, in footnote 11, that the license fee did not affect the cost of the finance charge to the RAL customer. There is no evidence to support this conclusory assertion. Moreover, whether the inclusion of the license fee increased the total finance charge to the customer is a merits question. 17 --------------------------------------------------------------------------------   fees, and further allege that the interest rates, finance charges, and loan fees charged by the lending institutions “are not an element of plaintiffs’ causes of actions set out herein.” (Plaintiffs’ Fourth Amended Complaint, ¶ 11). Thus, says Block, if the finance charges are not an element of the breach of contract claim, Plaintiffs have no damages. Block has misread Plaintiffs’ Complaint. Plaintiffs allege that license fee paid to Block constitutes a portion of the finance charge paid by Plaintiffs to the lending institutions. Simply because the lending institutions’ finance charges were not excessive does not mean that they would not have been less had there been no license fee included as a component. Plaintiffs correctly allege that the finance charges charged by the lending institutions are not an element of their claim. This is because Plaintiffs do not attack the total amount of the finance charge actually charged by the lending institutions; rather, Plaintiffs seek to recover the license fee component of the finance charge from Block, for alleged breach of contract.8      Proceeding to Block’s direct attacks upon the typicality requirement, Block contends that the named Plaintiffs are not members of the Class they seek to represent. Block bases this contention upon the following: the Fourth Amended Class Action Complaint alleges that the class members obtained a loan from banks, for which they paid a finance charge, and alleges that Block should not have received part of the bank’s finance charge as a “kickback,” while the Mitchells believe that they received their refund payment directly from Block, and believe that they paid Block a charge for this service.      First, Block’s argument is factually incorrect. Mrs. Mitchell testified in her deposition that although she misunderstood the nature of the RAL transaction when it occurred, at the   8  Block’s Motion to Dismiss the contract claim is denied without prejudice. Block can reassert this motion during the merits phase of this case, if it chooses to do so. 18 --------------------------------------------------------------------------------   time of her deposition she understood that she had received a loan from a bank, and further testified that she was complaining about a secret “kickback” to Block. Although Mr. Mitchell displayed confusion in his deposition, both he and Mrs. Mitchell have since filed affidavits in which they testify that they have now learned (after their depositions)9 that they received a loan from a bank, that Block received a secret “kickback” and otherwise profited from the transaction, and that they are asserting claims on behalf of the Class for this alleged self-profiteering.      Second, Block’s argument is immaterial. What Plaintiffs and the Class members “thought” is not a fact of consequence to the Plaintiffs’ claims as they have been framed and as they are based on the uniform Block RAL documents. “How the parties characterize the relationship is of no consequence; it is the facts of the relationship that control.” Thrash v. Credit Acceptance Corp., 821 So. 2d at 972 (discussing agency). Moreover, “[i]f relations exist which will constitute an agency, it will be an agency whether the parties understood the exact nature of the relation or not.” Storey v. Corkren, 156 So. 2d 484,487 (Ala. 1963). If a limited-purpose agency relationship existed between Block and Its customers, Block’s reaping of a profit from the subject matter of its agency was illegal as a matter of law. Miller v. Jackson Hospital and Clinic, 776 So. 2d at 124 (“acts of an agent which tend to violate [his] fiduciary obligation are prima facie voidable, and are considered, in law, as ‘frauds upon confidence bestowed’”); Gardner v. Cumis Insurance Society, Inc., 582 So. 2d at 1096 (“[An] agent may not [t]raffic with the subject-matter of his   9 The Court has considered the Plaintiffs’ affidavits because the affidavits explain any inconsistency between the testimony contained therein and the Plaintiffs’ depositions: the Plaintiffs were apprised of certain facts after their depositions had taken place. 19 --------------------------------------------------------------------------------   agency, without the consent of his principal, so as to reap the profit for himself.”) (alterations in original & citation omitted); Sevigny v. New South Federal Savings & Loan Assoc., 586 So. 2d 884,887 (Ala. 1991) (“An agent is not permitted to occupy a position that would allow her to profit as a result of that agency relationship.”). Thus, the mental operations of the Plaintiffs and the class members, as to what they may have thought the RAL transactions were about, are irrelevant. If there was an agency relationship based upon the uniform Block RAL documents, and Block profited from the subject matter of its agency, those profits were illegally obtained. Similarly, if the unambiguous language of the RAL application created a unilateral contract whereby Block promised not to use its customers’ information for its own financial gain, it is immaterial what the Mitchells (or the Class members) may have subjectively thought about the nature of the transaction.10      Block also contends that the named Plaintiffs fail the typicality test because of a disclosure contained on the back of one of their RAL checks. On the back of the named Plaintiffs’ 1994 (tax year 1993) RAL check is the statement that the customer’s electronic filer (Block) “may” receive a portion of the bank’s finance charge.11 Thus, says Block, the   10  The law of contracts is based upon the objective, not subjective, intent of the parties, as derived from the contract itself, where the language is unambiguous. Murray v. Alfab, Inc., 601 So. 2d 878, 886 (Ala. 1992). “‘Agreement consists of mutual expressions; it does not consist of harmonious intentions or states of mind.... [One] may be ‘bound’ by a contract in ways that he did not intend, foresee, or understand. The juristic effect (the resulting legal relations) of a man’s expressions in word or act may be very different from what he supposed it would be.” Lilley v. Gonzales, 417 So. 2d 161,163 (Ala. 1982) (quoting A. Corbin, Corbin on Contracts, § 9).   11  The claims for which the Named Plaintiffs seek class certification are based upon their 1995 (tax year 1994) RAL transaction. 20 --------------------------------------------------------------------------------   named Plaintiffs cannot represent the class members on their claim that the license fee was not disclosed.12      This contention is erroneous because the purported disclosure on the back of the check came too late. Block’s duty as set out in the RAL applications was to transmit its customers’ information to the lender banks. If Block owed a fiduciary duty because of a special agency, Block’s obligation was to disclose its profits before the customer signed the RAL application, or at least before Block accepted its appointment as a special agent by transmitting the customer’s information to the lender bank. Because of Block’s pre-existing agreement with the lender banks for the receipt of license fees, its after-the-fact disclosure of its profits, after it had completed its business on behalf of its alleged principal, and allegedly used the customer’s tax information for its own profit, was meaningless.13 For Identical reasons, Plaintiffs’ breach of contract claim is unaffected by the tardy disclosure.      Moreover, the purported disclosure was ineffective for another reason. The disclosure recites that the customer’s electronic filer (Block) “may” receive a portion of the lender bank’s finance charge. However, in actuality it was a certainty that the electronic   12   Block also contends that this disclosure effectively moots the class members’ claims for 1994 (tax year 1993), because all the RAL checks for that year (according to Block) contained this disclosure. This contention is incorrect for the same reasons that Block’s typicality argument is without merit, as discussed herein.   13   Block contends that the RAL transaction is not complete until the customer endorses the RAL check, because until that moment, the customer is free to cancel the transaction. (Block’s Post-Hearing Brief, p. 11 n. 6). This is true insofar as the lending institution is concerned. However, if a fiduciary duty existed, Block’s obligation was to disclose the license fee to its customer before Block used the customer’s tax information for its own profit — which use occurred when Block transmitted the customer’s tax information to the lender bank, because of Block’s preexisting license fee agreement with the lender banks. 21 --------------------------------------------------------------------------------   filer would receive a portion of the bank’s finance charge in the form of a license fee, because of the preexisting license fee arrangements with the lender banks. “To warn that the untoward may occur when the event is contingent is prudent; to caution that it is only possible for the unfavorable events to happen when they have already occurred Is deceit.” Huddleston v. Herman & MacLean, 640 F.2d 534, 544 (5th Clr, 1981), reversed on other grounds, Herman & MacLean v, Huddleston, 459 U.S. 375 (1983). Thus, the purported disclosure was ineffective for this reason as well.14      For the foregoing reasons, the Court finds that the Plaintiffs have proven that their claims are typical of the claims of the class members.      D. Adequacy.      The Class Representatives must fairly and adequately protect the interests of the class. The purpose of this requirement “is to protect the legal rights of absent class members.” Kirkpatrick v. J. C. Bradford & Co., 827 F. 2d 718, 726 (11th Cir. 1987). In Alabama, the adequacy requirement has two elements. “The adequacy-of-representation inquiry involves questions as to whether the plaintiffs counsel are qualified, experienced, and generally able to conduct the proposed litigation, and as to whether the plaintiffs have interests antagonistic to those of the rest of the class.” Ex parte Government Employees Ins. Co., 729 So. 2d at 309; accord, Cheminova, 779 So. 2d at 1181.   14   Block argued in Its original brief opposing class certification that this purported disclosure put Plaintiffs and the Class members on notice for subsequent years that Block “may” receive part of the finance charge for the RAL. This argument has been abandoned because it was not raised at the certification hearing or in Block’s Post-Hearing Brief. In any event, the false disclosure which treated a certainty as a contingency was Ineffective to place Plaintiffs and the Class members on notice that Block would receive a license fee in subsequent years, Finally, a disclosure in one year does not carry over to a subsequent year when the RAL documents were silent. 22 --------------------------------------------------------------------------------        Here, the named Plaintiffs have no interests antagonistic to those of the class they seek to represent. There are no internal conflicts of interest; the interests of the named Plaintiffs are coextensive with those of the class members. Proposed counsel for the Class have substantial experience pursuing complex litigation generally, and consumer class litigation in particular. The adequacy requirement is satisfied.      Block has also contended in its original brief that the Mitchells are inadequate class representatives because they supposedly do not understand the nature of their claims or the nature of the class action mechanism, and because they are unable to fund the costs of notice to the class. Block did not raise these issues at the certification hearing or in its Post-Hearing Brief. Therefore, the Court deems these contentions to have been abandoned. Moreover, the Court notes that the Plaintiffs’ affidavits on file recite that since their depositions, they have been made aware of the nature of their claims and the nature of their fiduciary responsibilities to the class, and that they have made arrangements with their attorneys to provide for class notice.      The Court finds that the Plaintiffs have proven that they will fairly and adequately protect the interests of the class.      The Court now turns to the requirements of Ala.R.Civ.P. 23(b)(3).      E. Predominance.      Questions of law or fact common to the members of the class must predominate over any questions affecting only individual members. The predominance test requires “[T]he existence of a group which is more bound together by a mutual interest in the settlement of common questions than it is divided by the individual members’ interest in matters peculiar to them.” Ex parte AmSouth Bancorporation, 717 So. 2d 357,363 (Ala. 23 --------------------------------------------------------------------------------   1998). “In deciding whether common questions of fact or law predominate, a court must examine each plaintiffs cause of action and consider what value the resolution of the class-wide issue will have in each class member’s underlying cause of action.” Reynolds Metals Co. v, Hill, 825 So. 2d 100, 104 (Ala. 2002) (citation omitted). Stated differently, “To predominate, common issues must constitute a significant part of individual class members’ cases.” Cheminova, 779 So. 2d at 1181.      In the case sub judice, the Class members’ claims are all dependent upon standardized RAL documents uniformly used by Block in a classwide manner. As such, resolution of the classwide issues based upon these uniform documents will be dispositive of each class member’s cause of action.      Block contends that predominance is defeated as to each of the Plaintiffs’ claims because, Block says, the pertinent language of the RAL application is ambiguous, and therefore, presents individual questions of document interpretation. The Court disagrees. “An ambiguity exists where a term is reasonably subject to more than one interpretation.” Ex parte Awtrey Realty Co., Inc., 827 So. 2d 104,107 (Ala. 2001). “The mere fact that adverse parties contend for different constructions does not in itself force the conclusion that the disputed language is ambiguous.” Id. Objectively viewed, the pertinent language of the RAL application is, obviously, not reasonably subject to more than one interpretation: “H&R Block may not use or disclose such tax return information or such other information for any purpose (not otherwise permitted under Treas. Reg. Sec. 301.7216-2) other than as stated herein...” The Court discerns no ambiguity here. This straightforward language means what it says. 24 --------------------------------------------------------------------------------        Block further contends that the predominance requirement is not met because the agency issue would require a determination of whether each individual class member reserved a right of control over Block’s actions. Block is incorrect. As discussed, the agency issue can be determined based solely upon the uniform language contained in the RAL applications. An examination of each class member’s state of mind is unnecessary and irrelevant. As Block admits in its Post-Hearing Brief, “Whether relations exist which will constitute an agency in this case depends on the relations of the parties as they exist under their agreements.” (Block’s Post-Hearing Brief, p. 10) (quotation marks deleted and emphasis added). The agreements in this case are uniform written documents.      Block further contends that predominance is destroyed with respect to the breach of fiduciary duty claim because Block, as an alleged agent, must have failed to disclose a material fact. Block has produced affidavits from some of its customers stating that the existence of the license fee was of no consequence to them. Thus, Block reasons, predominance is destroyed because there must be an individualized determination of whether each class member thought the undisclosed license fee was important or not. This contention fails because, as discussed, an agent’s failure to disclose profit reaped from the subject matter of the agency is illegal — and therefore material — as a matter of law. Thus, the various class members’ personal beliefs about the propriety of the license fee are irrelevant.      Block further contends that the predominance requirement is not met because the Class includes persons who obtained RALs from Block franchisees (as the Mitchells did), as well as persons who obtained RALs from Block-owned offices. Block points out that the franchisees are independent entities, and that Block cannot be liable for their actions unless 25 --------------------------------------------------------------------------------   they acted as Block’s agents. Block argues that a determination of agency would require numerous mini-trials on whether each of the approximately 190 Block franchisees in Alabama was acting as Block’s agent at any given time. Therefore, says Block, either predominance is completely destroyed, or at the least, the class must be limited to persons who obtained their RALs from Block-owned offices.      The Court disagrees. The Court finds that whether Block franchisees were acting as Block’s agents can be determined from the RAL documents, based upon the well-established concept of implied agency. While the creation of an agency relationship, so far as the principal and agent are concerned, arises from their consent and usually as the result of a contract, it is not essential that any actual contract exist or that compensation be expected by the agent or agreed to by the parties. While the relationship, in its full sense, arises out of a contractual or gratuitous agreement between the parties,... the agency and the assent of the parties thereto may be either express or implied... An express agency is an actual agency created as a result of the oral or written agreement of the parties, and an implied agency is also an actual agency, the existence of which as a fact is proved by deductions or inferences from the other facts and circumstances of the particular case, including the words and conduct of the parties.      Fisher v. Comer Plantation, Inc., 772 So. 2d 455, 465 (Ala. 2000) (quoting 3 Am.Jur.2d Agency § 18 (1986)).      In the case sub judice, whether the various franchisees were acting as Block’s agents for the purpose of the RAL transactions can be determined solely from the RAL applications themselves. The following observations apply to all RAL applications for calendar years 1989 through 1996, with the sole exception of the 1994 (tax year 1993) Mellon Bank RAL application: The RAL applications are all replete with references to “H&R 26 --------------------------------------------------------------------------------   Block” and “H&R Block, Inc.” For several years, the RAL applications state that the customer’s signature must be witnessed by “H&R Block.” As discussed, the RAL applications all provide that “H&R Block” can only use the customer’s information for specified purposes, not including for Its own financial gain. Significantly, all the RAL applications also authorize “H&R Block” to disclose the customer’s tax information to the lender banks. Just as significantly, the RAL applications over this period of years all authorize “H&R Block” to transmit the customer’s loan request to the lender bank.      This is evidence of a longstanding pattern of conduct from which agency or the absence thereof should be determinable on a classwide basis pursuant to the implied agency principle, with respect to all Block franchisees, solely from the language of the RAL documents.      At the certification hearing, Block challenged predominance by raising the issue of arbitration. However, Block’s counsel specifically conceded that arbitration “is not a big issue” at this juncture. That is an accurate characterization of the arbitration issue.      The arbitration issue arises because beginning in calendar year 1997 (tax year 1996), all Block customers signed retroactive arbitration agreements.15 Thus, Block can raise arbitration as an issue with respect to any Class members who, after the Class Periods, did further business with Block. First, this is a merits issue. Second, if Block prevails on an arbitration defense, it will be a simple matter to identify those Class members who did business with Block after the expiration of the Class Period and signed retroactive arbitration agreements. Block possesses the names, dates of birth, and social security   15   The Class Periods end with the calendar year 1996 (tax year 1995), before Block began using arbitration agreements. 27 --------------------------------------------------------------------------------   numbers of all of its customers for any given year; this information is contained on the RAL applications. A computer can eliminate from the Class all Class members who did subsequent business with Block (and thereby signed an arbitration agreement) in very short order. The Court notes that Block has not raised arbitration in any manner other than with respect to the predominance requirement.      The Court finds that Plaintiffs have proven that questions of law or fact common to the members of the Class predominate over any questions affecting only individual members.      F. Superiority.      There are four factors pertinent to this criterion.      The interest of Class members in individually controlling the prosecution of separate actions against Block is nonexistent because most or all of the Class members have damage claims that are uneconomical to pursue individually. “[O]ne of the primary functions of the class suit is to provide a device for vindicating claims which, taken individually, are too small to justify legal action but which are of significant size if taken as a group.” Brady v. LAC, Inc., 72 F.R.D. 22,28 (S.D.N.Y. 1976).      It is clearly desirable to concentrate the litigation of these claims in one forum, as opposed to litigating the thousands of statewide Class members’ claims on an individual, repetitive basis.      Management of the action should not pose any difficulty. As discussed, this action is based upon written documents, and uniform provisions contained therein, which were used in a uniform manner. Block is in possession of the social security numbers and addresses of its customers, and has detailed information concerning past class members, 28 --------------------------------------------------------------------------------   so that identification and notification of class members and distribution of benefits to them should pose no difficulty. Calculation of damages on a classwide basis will pose no manageability problems. Plaintiffs have proffered expert testimony that damages can readily be calculated on a classwide basis. With respect to the license fee, the only variable is that the amount of the license fee varied from year to year, and the amount of the license fee in a given year is known. Information in Block’s possession will reflect which Alabamians purchased RALs in a given year. With respect to the pooling agreements, Plaintiffs’ expert has testified that he can determine the amount of profit realized by Block from each Alabama RAL customer based upon an examination of books and records. Plaintiffs’ expert opines that all damages determinations can be made through simple arithmatical calculations based upon generally accepted accounting principles.      The final superiority factor is the pendency of other litigation. Neither the Court nor the parties are aware of any individual litigation concerning this controversy already commenced by members of the class. A national class action involving Block’s RAL program has been commenced in the United States District Court for the Northern District of Illinois. A settlement was reached and approved, and objectors appealed. On appeal, the United States Court of Appeals for the Seventh Circuit remanded the case for a redetermination of the settlement’s fairness and adequacy before a different district judge. Reynolds v. Beneficial National Bank, 288 F.3d 277 (7th Cir. 2002). On remand, the federal district court rejected the settlement, and disqualified the attorneys representing the settlement class, on the ground that they were inadequate representatives. Reynolds v. Beneficial National Bank, 2003 WL 1877416 (N.D. III.). Among other things, the district court found that formal discovery undertaken by settlement class counsel was 29 --------------------------------------------------------------------------------   “nonexistent.” Id. at *5, *7. Thus, the national class action appears to be back at square one. With the national class action in this posture, the Court finds that this Alabama-only class action is a superior vehicle for the fair and efficient adjudication of the controversy in Alabama.      Therefore, the Court finds that the Plaintiffs have proven that the instant class action is superior to other available methods for the fair and efficient adjudication of the controversy. III. CONCLUSION      Based upon the foregoing, the Court finds, after a rigorous analysis, that the Plaintiffs have carried their burden of proving the requisites for maintaining this action as a class action as set out in Ala.R.Civ.P. 23(a) and 23(b)(3). Accordingly, the Court certifies Plaintiffs’ claims for breach of fiduciary duty, unjust enrichment and breach of contract as a class action pursuant to Ala.R.Civ.P. 23(a) and 23(b)(3). The Court adopts the Class and Class Periods set out hereinabove in the Class Definition.      The Court notes that class certification is inherently conditional, and that as the case proceeds, this certification order can be vacated, modified, or further subclasses carved out, as may be appropriate,      The Court appoints as Lead Class Counsel, Steven A. Martino, W. Lloyd Copeland, and Taylor, Martino & Hedge, P.C.. The Court appoints as Class Counsel, Michael B. Hyman, Much, Shelist, Freed, Denenberg, Ament & Rubenstein, P.C., Steven E. Angstreich, Levy, Angstreich, Finney, Baldante, Rubenstein & Coren, P.C.      The Court is aware that Block has the right to appeal this Order within 42 days pursuant to Ala, Code 1975 § 6-5-642. If Block does not appeal, Lead Class Counsel are 30 --------------------------------------------------------------------------------   directed to propose a Class Notice Plan within 15 days from the expiration of the 42 day appeal period. If Block does appeal, and this Order is affirmed, Lead Class Counsel are directed to propose a Class Notice Plan within 15 days after the issuance of the Alabama Supreme Court’s certificate of judgment.      DONE this 11 day of July  , 2003.           /s/ HERMAN Y. THOMAS           HERMAN Y. THOMAS     Circuit Judge 31 --------------------------------------------------------------------------------   C                 --------------------------------------------------------------------------------             JOYCE A. GREEN, on behalf of herself and   :   IN THE all other persons similarly situated   :         :   CIRCUIT COURT Plaintiff,   :         :   FOR vs.   :         :   BALTIMORE CITY H&R BLOCK, INC., et al,   :     Defendants   :   Case No. 97195023/CC4111 ORDER MODIFYING THE CLASS DEFINITION      UPON CONSIDERATION of the Defendants’ Motion to Modify the Class Definition, the Plaintiff’s Response, and oral argument of the parties, it is this 10th day of July, 2002, by the Circuit Court for Baltimore City      ORDERED that the definition of the certified class is hereby modified to read as follows: All persons whose income tax forms were prepared at any H&R Block office or facility located in the State of Maryland who have participated in H&R Block’s Rapid Refund™ Program by obtaining a Refund Anticipation Loan (“RAL”) at any time during the period from January 1, 1992 to May 19, 2000 (the “Class”), excluding those persons who signed a RAL application containing an arbitration clause for any of the years 1997,1998 1999 or 2000. MARCELLA A. HOLLAND JUDGE (STAMP)       cc:   N. Louise Ellingsworth, Esquire     Louis J. Ebert, Esquire     Steven E. Angstreich, Esquire     Charles J. Piven, Esquire               /s/ FRANK M. CONAWAY, CLERK           FRANK M. CONAWAY, CLERK   (SEAL)   --------------------------------------------------------------------------------     --------------------------------------------------------------------------------             JOYCE A. GREEN   *   IN THE           Plaintiff   *   CIRCUIT COURT           v.   *   FOR           H & R BLOCK, INC., ETAL   *   BALTIMORE CITY           Defendants   *   CASE NO. 97195023/CC411 *********************************************************************************************************** MEMORANDUM OPINION AND ORDER      This action was initiated by Plaintiff Joyce A. Green individually, and on behalf of all persons whose income tax forms were prepared at any H & R Block office or facility located in the State of Maryland who had participated in H & R Block’s Rapid Refund Program by obtaining a Refund Anticipation Loan (“RAL”) during the time period January 1,1992 to the present. The Plaintiff has sued H & R Block, Inc., H & R Block Eastern Tax Services, Inc., H & R Block Tax Services, Inc., and Block Financial Corporation (hereinafter referred to collectively as “Block”), alleging deceptive and unfair practices, breach of fiduciary duty, and fraudulent concealment in connection with the Refund Anticipation Loan (“RAL”) program.      The Plaintiff in her Complaint and various pleadings has detailed the process that a person goes through to receive an RAL. After a taxpayer has his income tax form prepared by H & R Block, he may elect to apply to a lender participating with Block to receive the refund amount, or a portion of the refund, if it exceeds a certain amount, in the form of a loan. The taxpayer must pay another charge for the loan, in addition to the tax preparation fee and the electronic filing fee, which are also deducted from the loan, and ultimately paid from the taxpayer’s actual refund. Along with these is a finance charge which the Plaintiff alleges may reach $125. The loan proceeds are generally made available to the taxpayer approximately two   --------------------------------------------------------------------------------   to five days after the return is filed in the form of a check from Block which the taxpayer can pick up at the Block office. The IRS is directed to electronically deposit the actual refund directly with the lender bank at which time the bank deposits the proceeds into an account opened in the taxpayer’s name and uses that account to repay the loan. The Plaintiff alleges that she is one of thousands of Maryland consumers that have used this RAL procedure.      Plaintiff alleges that the lender bank pays Block certain fees, or “kickbacks” for every RAL that Block solicits or procures. Plaintiff alleges these fees are unauthorized and constitute a conflict of interest, and violate Block’s fiduciary duty to its taxpayer clients. Plaintiff also alleges that Block advertises the RAL, along with its companion program, Rapid Refund, in such a manner that makes customers believe they are receiving a refund, not a loan. Plaintiff has in its pleadings noted various advertisements of the Rapid Refund Program which, in sum, always asks the question, “Why wait for your tax refund, when you can get your money fast?” Plaintiff asserts that the persons targeted by Block for these RALs are generally lower income, financially unsophisticated persons who could not seek independent accountants, or lawyers, to help understand what the RAL program really was designed to do. They therefore, expect to get their money within two days and do believe that it is a refund as opposed to a loan against their refund. It is exasperated by the fact that the Rapid Refund Program is advertised with the RAL program, and never is the RAL program advertised alone. The Plaintiff also points out that Block receives another fee, or kickback, if the RAL customer cashes the check at a Sears store. According to the Amended Complaint, once a taxpayer comes into an H & R Block office, Block employees are instructed to discuss RALs with any customer who qualifies, regardless of whether the customer expresses any interest in the loan, or the so called “two day refund.” The 2 --------------------------------------------------------------------------------   written forms also do not delineate the fees, or the true cost of the RAL, leaving the customers to learn their actual interest rate when they receive their check, The complaint also notes that the terms of the RAL agreement are not negotiable and that they are set by the lending bank with Block’s input.      The Plaintiff alleges she participated in the H & R Block Rapid Refund Program in tax years 1991 through 1994, receiving RAL’s in 1992 through 1995. She alleges she has been damaged by participating in the Rapid Refund Program, and paying the exorbitant fees; that she has been victimized by her agents/fiduciaries’ undisclosed earning and by the violation of Block’s fiduciary duty owed to her as their customer.      The Plaintiff alleges she is not the lone victim of these unfair and deceptive tactics of Block and therefore, has filed a Motion for Class Certification pursuant to Rule 2-23l(a) and (b) (l)(b)(3) of the Maryland Rules of Procedure. The Plaintiff seeks to represent a class defined as “all persons whose income tax forms were prepared at any H & R Block office, or facility located in the State of Maryland, who have participated in H & R Block’s Rapid Refund Program by obtaining a Refund Anticipation Loan (“RAL”) at any time during the period from January 1, 1992 to the present,” Various pleadings have been filed in this case, and Motions to Dismiss the Amended Complaint were heard on May 15,2000 and were denied by this Court in a separate Opinion and Order filed simultaneously with this Opinion and Order. Therefore, the named Defendants remain as H & R Block, Inc., H & R Block Eastern Tax Services, Inc., H & R Block Tax Services, Inc., and Block Financial Corporation. All Defendants have filed responses in opposition to the Motion for Class Certification; and a hearing on the motion was held before this Court on May 15, 2000. Since the Maryland Rules are very specific about the factors to be 3 --------------------------------------------------------------------------------   considered in granting class certification, the Court will address the requirements under those Rules by the factors enumerated in the Rule in that order.   A.   Rule 2-231(a)         Rule 2-23l(a) provides as follows; One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.                   1. Numerosity      As the Court in Albertini v. Pete, Marwick, Main & Co., Case No. 90087031/CL111170 (Cir. Ct. Balto. City, Md., July 10,1992), correctly stated there is very little appellate authority from the Maryland Courts providing guidance as to the criteria for certification. However, in looking at the Federal Courts and other jurisdictions, the proper test under this prong is whether the class is sufficiently numerous as to make joinder of all members impracticable. Albertini also noted that a class of as few as twenty-five or thirty members raises the presumption that joinder would be impracticable.      In the instant case, Plaintiff is requesting a certification of a class which could amount, by the Defendant’s own records provided at prior hearings, to thousands of Maryland residents. In Defendant’s Answer to the Plaintiffs Complaint, it noted that Block is the largest tax preparation in the United States, responsible for preparing between ten and twelve percent of all tax returns filed with the Internal Revenue Service. In the Defendant’s Memorandum in Opposition to the Motion for Class Certification, Defendant skipped the first prong of “numerosity” altogether, merely stating in a footnote that they stipulate that the proposed class presently meets the 4 --------------------------------------------------------------------------------   numerosity requirement, and then proceeding to discuss nationwide settlements involving RALs in which Block has entered into in other parts of the country. With that in mind, the Court finds no reason to further discuss this first prong and finds that the Plaintiff has met its burden on numerosity.      2. Commonality      The second prong of Rule 2-231 (a) mandates that there be questions of low or fact common to the class. This requirement is noted for its ability to be easily satisfied.      There is a strain of cases in favor of the proposition that where a proposed class action stems from a comprehensive scheme or standardized “sales presentation” that involves uniform, publicly distributed documents, or repetitive, uniform oral representations, or omitted material facts, class certification has been found proper and warranted. Sewell v. Sprint PCS, L. P., Case No. 9718802/CC3879 (Cir. Ct. Balt, City, Md., June 29,1998).; Grainger v. State Securities Life Ins. Co., 547 F.2d 303 (5th Cir. 1977).; Vasquez y. Superior Court, 2 Cal. 3d 800 (1971).; Pruitt v. Rockefeller Center Properties Inc., 574 N.Y.S. 2d 672 (1991).      The Judiciary recognizes the importance of class action treatment of fraud and negligent misrepresentation claims in the context of protecting the consumer’s rights. In Vasquez, the Court noted that “[p]rotection of unwary consumers from being duped by unscrupulous sellers is an exigency of the utmost priority in contemporary society,” (4 Cal. 3d at 808.) and that "[i]ndividual actions by each of the defrauded consumers is often impracticable because the amount of individual recovery would be insufficient to justify bringing a separate action (for each of them); thus an unscrupulous seller retains the benefits of its wrongful conduct.” (Id.)      In this particular case, Plaintiffs argue that during the class period, Defendants took part 5 --------------------------------------------------------------------------------   in a concerted scheme to defraud citizens of our state by releasing false and misleading information which omitted and misrepresented material facts. The Plaintiff alleges, inter alia, in her Complaint that common questions of law and fact exist as to the following questions:   (1)   whether the Defendants fraudulently concealed the true nature of the Rapid Refund Program and the fees associated with RALs;     (2)   whether the Block Defendants owed to Plaintiff and the Class the fiduciary duties of one standing in a confidential relationship to another;     (3)   whether the Block Defendants owed to Plaintiff and the Class the fiduciary duties owed by an agent to its principal;     (4)   whether the Block Defendants received kickbacks from RAL lending institutions in violation of their fiduciary duties to Plaintiff and the Class;     (5)   whether the acts and practices of the Defendants were done willfully, maliciously, fraudulently and/or with actual malice; and     (6)   whether the Plaintiff and the Class have been damaged, injured or have suffered irreparable harm and, if so, the extent of such damages or injuries and/or the nature of the equitable and/or injunctive relief and statutory damages to which each member of the Class is entitled. The Court finds that these central issues satisfy the commonality requirement as there are questions of law and fact common to the proposed class.      3. Typicality      The third prong of Rule 2-231 (a) requires the representative Plaintiff to present claims that are typical of the proposed class. The class representative must show that his/her claims “‘arise from the same event or practice or course of conduct that gives rise to the claims of the other class members, and that the claims are based upon the same legal theory.’” Twyman v. 6 --------------------------------------------------------------------------------   Rockville Housing Authority, 99 F.R.D. 314, 321 (D. Md. 1983). However, it is to be understood that the typicality requirement does not mandate that the claims of the named representative be “identical to” those of the other class members. This requirement is met even though varying fact patterns support the claims or defenses of individual class members or there is a disparity in the damages claimed by the named parties and the other members of the class. National Constructors Ass’n v. National Electrical Contractors Ass’n, 498 F. Supp 510, 545 (D. Md. 1980) mod., 678 F. 2d 492 (4th Cir. 1982), cert. dismissed, 463 U.S. 1234 (1983). Typicality can also be achieved by demonstrating that the Plaintiff can “show that the issues of law or fact he or she share in common with the class occupy the same degree of centrality to his or her claims as to those of unnamed members.” See Weiss v. New York Hospital, 745 F. 2d 786, 809 n. 36 (3rd Cir. 1984), cert. denied 470 U.S. 1060 (1985) citing Donaldson v. Pillsbury, 554 F. 2d 825 (8th Cir.), cert. denied, 434 U.S. 856 (1977).      In the present case, the Plaintiff alleges that she and other members of the class were subjected to a pattern and practice of the Defendants’ misrepresenting the nature of the Rapid Refund Program to consumers and that Defendants took advantage of the Plaintiff and members of the proposed class by charging exorbitant interest rates on what was a fully secured, short term, loan for the purpose of generating substantial undisclosed fees and profit. Plaintiff also alleges that Block acted as an agent and the Court of Appeals has made the finding that Plaintiff has alleged sufficient facts supporting the existence of an agency relationship. Green v. H&R Block, et al., 355 Md. 488,735 A.2d 1039 (1999) at 527. Thus, assuming an agency relationship, Defendant Block owes a fiduciary duty to the Plaintiff and the proposed class.      The Defendants argue that the Plaintiff’s claims lack the necessary typicality to warrant 7 --------------------------------------------------------------------------------   her being accepted as a viable class representative. The Defendants cite the fact that the Plaintiff did not read her applications before signing them, she did not cash a RAL check at Sears, she requested a RAL in at least one year, and other such fine points (Defendant’s Memorandum of Law in Opposition to Plaintiff’s Motion for Class Certification pp.27–28). In making such an argument about the minute specificities of Plaintiff’s conduct as related to the conduct of the proposed class, the Defendants essentially ignore the fact that the claims are not required to be identical. The central issue of the class certification motion is one that deals with omitted information by a fiduciary (agent) saddled with the obligation of revealing all pertinent information to its principal. In this situation the Court cannot now ask the proposed class if they take issue with the fact that information was knowingly omitted from their purview. The proper question is;” Was information intentionally omitted from the knowledge of the Plaintiff and is this typical of the proposed class as a whole?”      Class members usually are given the opportunity to opt out of the class by a particular date, should they choose, if they take no offense to the actions of the Defendants or simply do not want to be a part of the class. Rule 2–231 (e). The Court’s focus is on the actions taken by the Defendants at the time the harm occurred, not whether or not the proposed class takes objection to such actions. The Court finds that the typicality requirement has been met.      4. Adequacy of Representation      The fourth factor to be considered under Maryland Rule 2-231 (a), is whether the representative party will fairly and adequately protect the interests of the class.      Case law notes that there are two components to be considered within this prong 1) the interests of the Plaintiff must coincide with the other members of the class; and 2) it must appear 8 --------------------------------------------------------------------------------   that the Plaintiff and selected counsel will vigorously prosecute the action. Disabled in Action of Baltimore v. Bridwell, 593 F.Supp. 1241, 1245 (D.Md. 1984).      The first component, as borne out by the discussion on “Typicality,” is clearly met. This Plaintiff’s interests are in sync with other members of the class she seeks to represent in the action. There are no antagonistic interests. The Defendant’s claims that she is not an adequate representative because she is not one of those customers who cashed her check at Sears or signed an RAL containing an arbitration clause does not equate to her having antagonistic interests, merely different and perhaps less damages as a result of any injury.      As to the second component of this prong, it is uncontradicted through pleadings and argument that the plaintiff in this case reviewed the Complaint, discussed it with her attorneys, has had other discussions with her attorneys, and appeared for deposition. Her testimony at deposition demonstrates that she understands the nature of the Complaint, and the reasons she is suing H & R Block, Inc., etal. In addition, while it is contested whether or not it meets Maryland’s law, the Plaintiff was able on deposition to give details of her fee arrangement with her attorneys. In addition, the Plaintiff presented a letter from counsel explaining the nature of her fee arrangement with them for the purposes of this case. The defendants point out that the copy presented to them and the Court is unsigned by either the counsel, or the plaintiff, and that a thorough discussion of what expenses are paid by the counsel, or what might be expected to be paid by the plaintiff, and any percentage arrangements, as sometimes you might find in contingency cases, is missing. Plaintiff, however, argues that in class action suits, it is not necessary to have such details in writing. Plaintiff’s deposition at pages 45 – 46 clearly indicates that her understanding of the fee agreement matches the letter when she states: “The agreement 9 --------------------------------------------------------------------------------   is that whatever the judge sees fit would be their payment, if there was any; if there wasn’t, then there wouldn’t be any fee.” Ms. Green also conveyed she is under no obligation to pay expenses whether she wins or loses. Also uncontradicted is that the plaintiff at deposition stated that she was representing all Rapid Refund customers in the United States as opposed to all RAL recipients in the State of Maryland as she pled in her Amended Complaint.      The Court finds that while the letter is scant, it does lay out the bare minimum requirements for a fee arrangement; and that coupled with the testimony from the plaintiff indicating her knowledge of the fee arrangement is sufficient to determine that she has, in fact, hired counsel, and knows the fee arrangement, In addition, the plaintiff does appear to be a knowledgeable client, understanding the gravamen of the case before her, and has followed through with filings, pleadings, court appearances, and a deposition. The Court finds the misstatement in her deposition with respect to how many persons she is seeking to represent in the class to be of little consequence in the overall view of her knowledge of the case. The Plaintiff, in fact, has taken her Complaint all the way to the Court of Appeals of Maryland after it was dismissed below and won a reversal and remand; and has remained as the moving party as the case goes forward once again in this Court. Her actions certainly suggest she is a knowledgeable, willing proponent of the cause, and will be an adequate representative for the class.      With respect to the counsel she has retained, records reflect that they are well-known attorneys in this field, and have filed numerous suits of this nature. The resumes of counsel, both local and outside, reveal superior qualifications by noting vast experience in this type of litigation, prior certifications won, including the one in the Albertini case before this Court. 10 --------------------------------------------------------------------------------   There is no question that they are knowledgeable and capable of pursuing this lawsuit, and have thus far actively pursued Ms. Green’s cause. There is no reason to doubt that they would not continue to provide more than adequate representation for the class.      In sum, the Court believes that the plaintiff has met her burden and will be an adequate representative for the class.      B. Requirements Under Maryland Rule 2-231 (b)      The Plaintiff, as an additional prerequisite to class certification, under Maryland Rule 2-231, must establish one of several factors under 231 (b)(3). The Plaintiff in this case has chosen to rely upon the predominant and superiority clauses of that Rule.           1. Predominance      “In determining whether the predominance standard is met, courts focus on the issue of liability, and if the liability issue is common to the class, common questions are held to predominate over individual ones.” Albertini v. Peat, Marwick, Main & Co. Case No. 9008703/CL111170, (Cir. Ct. Balt. City, Md., July 10, 1992); In Re Kirschner Medical Corp. Securities Litigation. 139 F.R.D. 74, 80, (D. Md. 1991). It is clear that several questions exist which align themselves perfectly with the issue of liability: whether or not Defendants’ acts activities and omissions amounted to violations of Maryland’s Consumer Protection Act (the Consumer Protection Act), fraudulent concealment and breaches of Defendants’ fiduciary duties and obligations; whether or not Plaintiff and the Class members were damaged by the violation of the Consumer Protection Act; whether or not Defendants must disgorge the secret profit they realized in breach of their duties; and whether or not declaratory relief is mandated are central questions. However, the overall issue of this motion is whether the Defendants, while wearing 11 --------------------------------------------------------------------------------   the hat of fiduciary (agent), intentionally omitted facts that the proposed class (principal) had a right to be privy to. The Court of Appeals also narrowed the issue down to this particular point: [r]ather Green’s central allegation relates to H&R Block’s failure to disclose the ‘true nature’ of its RAL program, in particular, the various ways it stands to benefit from the customer’s agreement with the lending bank. The Court finds that the issue of liability is common to the class. Green, at 526.      Defendants argue that the fraudulent omissions and negligent misrepresentations require proof of individual reliance and thus, certification under (b) (3) is inappropriate because individual issues of reliance will predominate over any common question of law and fact.      The court stated in Kirschner, “[i]n the event that individual issues of reliance pose difficulties as to case management at a later stage, there are mechanisms available to effectively litigate the reliance questions, without destroying the efficiency of class proceedings on other issues.” Kirschner at 83. Also, as stated in Albertini, there are several other avenues available to resolve reliance issues without sacrificing class certification (mini-hearings and questionnaires to name a few).      Furthermore, there is case law, as Plaintiff argues (in Plaintiffs Reply Brief in Support of Her Motion for Class Certification), that supports the idea that common misrepresentations obviates the need to gather individual testimony as to each element of a fraud or misrepresentation claim, especially where written misrepresentations or omissions are involved. Cope v. Metropolitan Life Insurance Company, 82 Ohio St. 3d 426, at 430, (1998) citing Shields v. Lefta, Inc., 888 F. Supp. 891, 893 (N.D. 111. 1995). This would seem to include individual issues of reliance. Therefore, the Court finds that common issues predominate over any questions affecting only individual members. 12 --------------------------------------------------------------------------------        2. Superiority      The second prong of plaintiff’s reliability under Maryland Rule 231(b)(3) requires that a class action be superior to other methods for the fair and efficient adjudication of the case.      The plaintiff first notes that the defendant should be estopped from objecting to the class action because it has entertained a class action in the State of Illinois in Zawickowski, et al v. Beneficial National Bank, et al, No. 98 (2178, N.Dist, 111., E.Dist). Defendant distinguishes that action as a settlement only class which is allowed under Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S Ct. 2231 (1997), and denotes different factors are considered for a settlement class certification, rather than a class certification for trial. The Courts have noted that the requirements for certification settlement purposes are less stringent “to encourage sweeping settlements of complex litigation,” Bowling v. Pfizer, 143 F.R.D. 141, 158 (S.D. Ohio 1992). The Court agrees with Defendant and, therefore, will not find that they have waived their right of objection to the class on this basis.      As plaintiff notes, obviously, the cost of trying this claim in separate cases would be extremely expensive to the individual customers who felt they were wronged. Evidence presented shows that the loss to each alleged injured party would be nominal, such as five to fifteen dollars per RAL. Faced with those types of damages, it is unlikely that one person would undertake the expense involved in this complex litigation. And in fact, case law notes that when the amount of money each person loses is small, then that is when class actions are most appropriate. Sewell v. Sprint PCS, L.P., supra.      In addition, class actions have the least burdensome effect on the judicial system, as they facilitate judicial economy and efficiency, as well as consistent judgments. A class action is 13 --------------------------------------------------------------------------------   preferable, in that it would provide a speedier and more comprehensive determination of the allegations at issue. It would also prevent inconsistent verdicts being entered against the defendants, and would spare the defendants, and the Court, repetitive piecemeal litigation.      While the defendant raises claims of mini trials being necessary to resolve issues of causation and reliance, the common questions of law and fact noted above would indicate that those issues would really go more towards damages, as opposed to the merit of the lawsuit. It is alleged that the failure to disclose the fee arrangement between H & R Block, Inc., and its lenders, the fact that the monies the clients received were actually loans, and not their refunds, and that Block received incentive, or “kickbacks” from the lending institutions, and from Sears where a lot of the checks were cashed, would be the same for all the members of the class. The specific details of each of their visits to the H & R Block for tax preparations, or their specific disclosure forms, would not be relevant. The defendant relies heavily on the issue that the Court must know whether each class member would have obtained a RAL had they known that Block were receiving a percentage of the fee, or receiving a kickback, or receiving any part of the proceeds from the cashing of the check. They also allege that the Court cannot assume that every member of the class was lured by the same Block ad; however, evidence shows that the ads were all similar, especially with regards to the key information that would make a person want to apply for the Rapid Refund RAL.      In sum, the Court finds that the members of the class are clearly identifiable and have similar claims, and that the benefits of judicial economy, consistent judgments, as well as the saving of trial costs for punitive class members, clearly make class action a superior remedy then individual lawsuits. 14 --------------------------------------------------------------------------------        C. CONCLUSION      For the reasons stated above, the Court finds that Plaintiff has satisfied the requirements of Rule 2-231 (a) and (b)(3), and will certify the class defined by Plaintiff. Pursuant to Rule 2-23 l(c), this determination may be altered or amended at anytime before a decision on the merits upon further review of the Court. Additionally, the Court shall invite from the parties a proposed order for the form of notice to be given members of the class. 15 --------------------------------------------------------------------------------                     JOYCE A. GREEN, on behalf of herself and   :       IN THE all other persons similarly situated   :                 :                 : :       CIRCUIT COURT     Plaintiff,   :                 :                 : :       FOR                vs.       :                 :                 :       BALTIMORE CITY H&R BLOCK, INC., et al,   :               :             Defendants   :       Case No. 97195023/CC4111 ORDER      Upon consideration of Plaintiff’s Motion for Class Certification, and any opposition thereto, it is this 19 day of May, 2000, by the Circuit Court for Baltimore City      ORDERED that Plaintiff’s Motion for Class Certification seeking certification of the following class: All persons whose income tax forms were prepared at any H&R Block office or facility located in the State of Maryland who have participated in H&R Block’s Rapid Refund Program by obtaining a Refund Anticipation Loan (“RAL”) at any time during the period from January 1, 1992 to the present. is GRANTED.      FURTHER ORDERED, that the Class, as described above, is hereby certified pursuant to Maryland Rule 2-231.             /s/ MARCELLA A. HOLLAND              MARCELLA A. HOLLAND     JUDGE     (SEAL) [ ILLEGIBLE ]   --------------------------------------------------------------------------------   D   --------------------------------------------------------------------------------        IN THE CIRCUIT COURT OF KANAWHA COUNTY, WEST VIRGINIA DEADRA D. CUMMINS, IVAN and LADONNA BELL, LEVON and GERAL MITCHELL, JOYCE A. GREEN, LYNN BECKER, RENEA GRIFFITH MARYANNE HOEKMAN and JUSTIN SEVEY, on their own behalf and on behalf of those similarly situated,      Plaintiffs, v.   Civil Action No. 03-C-134 H & R BLOCK, INC., H & R BLOCK TAX SERVICES, INC., H & R BLOCK EASTERN ENTERPRISE, successor to H & R BLOCK EASTERN TAX SERVICES, INC., BLOCK FINANCIAL CORPORATION, HRB ROYALTY, INC., and H & R BLOCK SERVICES, INC.,      Defendants.      [PROPOSED] FINAL ORDER OF JUDGMENT AND DISMISSAL      WHEREAS, the parties to this action, Plaintiffs Deadra Cummins, and Ivan and LaDonna Bell, and Defendants H&R Block, Inc., et al., along with the parties in three related and now consolidated actions, Mitchell v. H&R Block, Inc. et al., Case No. CV-95-2067 (Circuit Court of Mobile City, Ala.) (the “Mitchell Action”), Green v. H&R Block, Inc. et al., Case No. 97195023/CC411 (Circuit Court of Baltimore City, Maryland) (the “Green Action”), and Becker v. H&R Block, Inc., Case No. 5:04-cv-   --------------------------------------------------------------------------------   01074-CAB (N.D. Ohio) (removed from Summit County (Ohio) Court of Common Pleas) (the “Becker Action”) (hereinafter collectively these consolidated cases will be referred to as the Action) have agreed, subject to Court approval, to settle this Action upon the terms and conditions set forth in the Agreement of Settlement and the Exhibits annexed thereto (the “Settlement Agreement”), which has been filed with the Court as an attachment to the Motion for Final Approval (the “Motion”); and      WHEREAS, the Plaintiffs having made application, pursuant to West Virginia Rule of Civil Procedure 23, for an order finally approving the Agreement, which sets forth the terms and conditions for a proposed settlement of the Action and for dismissal of the Action with prejudice upon the terms and conditions set forth therein; and      WHEREAS, the Court preliminarily approved the Settlement Agreement by a Preliminary Approval Order dated             , 2005, and Notice was given to all members of the Settlement Class pursuant to the terms of the Preliminary Approval Order; and      WHEREAS, all defined terms contained herein shall have the same meanings as set forth in the Settlement Agreement; and      WHEREAS, the Court has read and considered the papers filed in support of the Motion, including the Settlement Agreement and the exhibits thereto, memoranda and arguments submitted on behalf of the Settlement Class and the Settling Defendants, and supporting declarations. The Court has also 2 --------------------------------------------------------------------------------   considered any written comments filed with the Clerk of the Court by absent class members. The Court held a hearing on                     , at which time the parties and all other interested persons were heard in support of and in opposition to the proposed settlement; and      WHEREAS, based on the papers filed with the Court and the presentations made to the Court by the parties and by other interested persons at the hearing, it appears to the Court that the settlement set forth in the Settlement Agreement is fair, adequate, and reasonable. Accordingly,      IT IS HEREBY ORDERED THAT:      1. For purposes of this settlement only, the Court has jurisdiction over the subject matter of the Action and personal jurisdiction over the parties and the members of the Settlement Classes described below.      2. Pursuant to Rule 23(b)(3) of the West Virginia Rules of Civil Procedure, the Court confirms its prior certification of the following Settlement Classes for purposes of settlement only:           (a) State Law Class: All residents of the several jurisdictions identified in the chart attached as Exhibit A who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate, or any H&R Block offices such as in Sears stores) from January 1, 2000 through December 23, 2005, and did not timely request exclusion from this class; 3 --------------------------------------------------------------------------------             (b) West Virginia Class: All West Virginia residents who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate, or any H&R Block offices such as in Sears stores) from January 1, 1994 through December 23, 2005, who did not previously request exclusion from the Cummins class or timely request exclusion from this class, other than those persons who previously requested exclusion from the Cummins class, subsequently obtained a RAL through any Settling Defendant or Affiliate in 2005, and did not timely request exclusion from this class with respect to such 2005 RAL.           (c) Becker Class: All Ohio residents who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any HRB Defendant or Affiliate, as defined herein, or any H&R Block offices such as in Sears stores) from January 1, 2000 through December 23, 2005, and did not timely request exclusion from this class.           (d) Mitchell/Green Class: All Maryland residents who applied for and obtained a RAL at any H&R Block office in Maryland from January 1, 1992 through December 31, 1996 and did not thereafter apply for and obtain a RAL subject to an arbitration provision, and all individuals who obtained a RAL from June 13, 1989 through December 31, 1996 through any “H&R Block” office in Alabama for which 4 --------------------------------------------------------------------------------   the Settling Defendants herein received a license fee payment or portion of the finance charge, and who did not previously request exclusion from their respective classes that were previously certified or timely request exclusion from this class.      3. The Court confirms the appointments of the class representatives and class counsel with respect to each Settlement Class, as follows:           (a) State Law Class: Justin Sevey, Maryanne Hoekman and Renea Griffith are appointed class representatives; and Daniel Hume, Esq., of Kirby Mclnerney & Squire, LLP, Ronald L. Futterman, Esq., Michael I. Behn, Esq., and William W. Thomas, Esq., of Futterman & Howard, Chtd, Michael B. Hyman, Esq., and William H. London, Esq., of Much Shelist Freed Denenberg Ament & Rubenstein, P.C., and Scott S. Segal, Esq. of The Segal Law Firm are appointed as class counsel to the State Law Class.           (b) West Virginia Class: Deadra Cummins, Ivan Bell and LaDonna Bell are appointed class representative and Brian A. Glasser, Esq., H. F. Salsbery, Esq., John Barrett, Esq., and Eric Snyder, Esq., of Bailey & Glasser, LLP are appointed class counsel to the West Virginia Class. Brian Glasser is also appointed Coordinating Counsel.           (c) Becker Class: Lynn Becker is appointed class representative and John Roddy, Esq., Gary Klein, Esq., and Elizabeth Ryan, Esq., of Roddy Klein & Ryan, Ronald Frederick, Esq. of Ronald Frederick & Associates, LLC, and Bruce L. Freeman, Esq., Freeman & Chiartas, are appointed class counsel to the Becker Class. 5 --------------------------------------------------------------------------------             (d) Mitchell/Green Class: Levon and Geral Mitchell and Joyce A. Green are appointed class representatives Steven A. Martino, Esq., Frederick T. Kuykendall III, Esq., and W. Lloyd Copeland, Esq. of Taylor, Martino & Kuykendall, Steven E. Angstreich, Esq., Michael Coren, Esq., Carolyn C. Lindheim, Esq., of Levy, Angstreich, Finney, Baldante, Rubenstein and Coren, P.C., Charles J. Piven, Esq., of Law Offices of Charles J. Piven, PA, and Marvin W. Masters, Esq., of The Masters Law Firm lc, are appointed class counsel to the Mitchell/Green Class.      4. With respect to each of the respective Settlement Classes, this Court confirms its previous preliminary findings in the Preliminary Approval Order that, for settlement purposes only, (a) the Settlement Class as defined above is so numerous that joinder of all members is impracticable; (b) there are questions of law or fact common to the Settlement Class; (c) the claims of the respective class representatives (the “Class Representatives”), identified in paragraph 3 above, are typical of the claims of their respective class; (d) the Class Representatives will fairly and adequately protect the interests of the Settlement Class; (e) the questions of law or fact common to the members of the Settlement Class predominate over the questions affecting only individual members, and (f) certification of the Settlement Class is superior to other available methods for the fair and efficient adjudication of the controversy. In the event the Settlement Agreement terminates pursuant to its terms or the certification of any Settlement Class does not become final for any reason, the conditional certification of such Settlement Class pursuant to this Order shall be vacated automatically and shall be null and void, and any such Settlement 6 --------------------------------------------------------------------------------   Class shall revert to its status immediately prior to the execution of the Settlement Agreement.      5. The Court finds that the Notice was given to members of the Settlement Class in accordance with the Preliminary Approval Order and such Notice by first-class mail and publication adequately informed members of the Settlement Classes of all material elements of the proposed settlement, constituted valid, due, and sufficient notice to all members of the Settlement Classes, constituted the best notice practicable under the circumstances, and fully satisfied all requirements of Rule 23(c) of the West Virginia Rules of Civil Procedure and applicable law.      6. The persons who made timely and valid requests for exclusion are excluded from the Settlement Classes and are not bound by this Order of Final Judgment and Dismissal. The identities of such persons are set forth in Exhibit B attached hereto.      7. The Settlement Agreement was arrived at as a result of arms’-length negotiations conducted in good faith by counsel for the Parties, with the assistance of an experienced mediator, and is supported by the Representatives of the Settlement Classes.      8. The Action presents issues as to liability and damages as to which there are substantial grounds for differences of opinion.      9. The Court finally approves the settlement of the Action in accordance with the terms of the Settlement Agreement and finds that the 7 --------------------------------------------------------------------------------   settlement is fair, reasonable, and adequate in all respects in light of the complexity, expense and duration of litigation and the risks involved in establishing liability, damages and in maintaining the class action through trial and appeal.      10. Payment of cash as provided under the Settlement Agreement constitutes fair value given in exchange for the release of the Released Claims against the Released Parties. The Court finds that the consideration to be paid to Settlement Class Members is well within the range of reasonableness considering the facts and circumstances of the RAL transactions at issue, the numerous types of claims and affirmative defenses asserted in the Action and other RAL litigation over many years, and the potential risks and likelihood of success of alternatively pursuing trial on the merits.      11. The Court orders the parties to the Settlement Agreement to perform their obligations thereunder pursuant to the terms of the Settlement Agreement.      12. The Court dismisses this Action, and the Released Claims, with prejudice and without costs (except as otherwise provided herein and in the Settlement Agreement) against Plaintiffs and all Settlement Class Members, and adjudges that the Released Claims and all of the claims described in the Settlement Agreement, Section I, Paragraphs 2 through 5 are released against the Released Parties.      13. The Court adjudges that the Class Representatives and all 8 --------------------------------------------------------------------------------   Settlement Class Members who receive money from the Settlement Fund under the Settlement Agreement shall be deemed to have, fully, finally and forever released, relinquished and discharged all Released Claims against the Released Parties, as defined by the Settlement Agreement. The Court further adjudges that each Settlement Class Member who did not timely and validly request exclusion from this settlement (the “Non-Opt Outs”), but for whatever reason did not submit a claim to receive money from the Settlement Fund, shall be deemed to have fully, finally and forever released and extinguished his or her right (if any ever existed) to adjudicate a Released Claim in any forum other than by individual arbitration as permitted by and in accordance with the arbitration provision of the 2005 RAL application, a copy of which is attached as Exhibit C to the Motion. In all other respects, such Non-Opt Outs do not release any Released Claims for a period of one year after the Effective Date, as defined in the Settlement Agreement, Section II, Paragraph 6, at which time such Non-Opt Outs shall be deemed to have, fully, finally and forever released, relinquished and discharged all Released Claims against the Released Parties.      14. The Court further adjudges that upon the Effective Date, each of the Released Parties and all signatories to the Settlement Agreement shall be deemed to have fully, finally and forever released, relinquished and discharged Plaintiffs, Class Counsel, and the Settling Defendants and their counsel in this Action from any claims (including Unknown Claims) for abuse of process, libel, malicious prosecution or similar claims arising out of, relating to, or in connection with the 9 --------------------------------------------------------------------------------   institution, prosecution, defense, assertion, or resolution of the Action, including any right under any statute or federal law to seek counsel fees and costs.      15. Plaintiffs and Settlement Class Members are permanently barred and enjoined from asserting, commencing, prosecuting or continuing any of the Released Claims or any of the claims described in the Settlement Agreement, Section I, Paragraphs 2 through 5 against the Released Parties, except in a manner consistent with paragraph 13, supra, to the extent applicable.      16. It is in the best interests of the Parties and the Settlement Class Members and consistent with principles of judicial economy that any dispute between any Settlement Class member (including any dispute as to whether any person is a Settlement Class Member) and any Released Party which in any way relates to the applicability or scope of the Settlement Agreement or this Final Order of Judgment and Dismissal should be presented exclusively to this Court for resolution by this Court. Therefore, without affecting the finality of this Final Order of Judgment and Dismissal in any way, the Court retains jurisdiction over: (a) implementation and enforcement of the Settlement Agreement until the final judgment contemplated hereby has become effective and each and every act agreed to be performed by the parties hereto shall have been performed pursuant to the Settlement Agreement; (b) any other action necessary to conclude this settlement and to administer, effectuate, interpret and monitor compliance with the provisions of the Settlement Agreement.      17. The Court approves of Class Counsel attorneys’ fees, costs and 10 --------------------------------------------------------------------------------   expenses for the Cummins class in the amount of                     , and for the State Law class, the Becker class, and the Mitchell/Green class in the total amount of                     . These amounts shall be paid from the Settlement Fund to Coordinating Counsel in accordance with the terms of the Settlement Agreement. Coordinating Counsel will then distribute the money among class counsel in his discretion.      18. The Court approves the service fee payment of $                     for Class Representative Deadra Cummins. This amount shall be paid from the Settlement Fund in accordance with the terms of the Settlement Agreement.      19. The Court approves the service fee payment of $                     for Class Representatives Ivan and LaDonna Bell. This amount shall be paid from the Settlement Fund in accordance with the terms of the Settlement Agreement.      20. The Court approves the service fee payment of $                     for Class Representative Joyce Green. This amount shall be paid from the Settlement Fund in accordance with the terms of the Settlement Agreement.      21. The Court approves the service fee payment of $                     for Class Representatives Levon and Geral Mitchell. This amount shall be paid from the Settlement Fund in accordance with the terms of the Settlement Agreement.      22. The Court approves the service fee payment of $                     for Class Representative Lynn Becker. This amount shall be paid from the Settlement Fund in accordance with the terms of the Settlement Agreement.      23. The Court approves the service fee payment of $                     for Class 11 --------------------------------------------------------------------------------   Representative Renea Griffith. This amount shall be paid from the Settlement Fund in accordance with the terms of the Settlement Agreement.      24. The Court approves the service fee payment of $                     for Class Representative Maryanne Hoekman. This amount shall be paid from the Settlement Fund in accordance with the terms of the Settlement Agreement.      25. The Court approves the service fee payment of $                     for Class Representative Justin Sevey. This amount shall be paid from the Settlement Fund in accordance with the terms of the Settlement Agreement.      26. Neither this Final Order of Judgment and Dismissal nor the Settlement Agreement is an admission or concession by any of the Settling Defendants or their Affiliates of any fault, omission, liability, or wrongdoing. This Final Order of Judgment and Dismissal shall not constitute a finding of either fact or law as to the merits or the validity or invalidity of any claims in this Action or a determination of any wrongdoing by the Settling Defendants, or a finding as to any obligation of the Settling Defendants or their Affiliates to take any actions agreed to be done or avoided as necessary in order to bring them into compliance with law. The final approval of the Settlement Agreement does not constitute any opinion, position, or determination of this Court, one way or the other, as to the merits of the claims and defenses of the Settling Defendants or the Settlement Class members.      27. All objections to the Settlement Agreement are overruled and denied in all respects. The Court finds that no just reason exists for delay in entering this 12 --------------------------------------------------------------------------------   Final Order of Judgment and Dismissal. Accordingly, the Clerk is hereby directed forthwith to enter this Final Order of Judgment and Dismissal.       DATED:                     , 2006               Hon. Louis Bloom 13 --------------------------------------------------------------------------------   A   --------------------------------------------------------------------------------   Exhibit A Settling Jurisdictions 1.   Arkansas   2.   Arizona   3.   California   4.   District of Columbia   5.   Florida   6.   Illinois   7.   Indiana   8.   Massachusetts   9.   Maryland   10.   Maine   11.   Michigan   12.   Minnesota   13.   Missouri   14.   Nebraska   15.   New Hampshire   16.   Nevada   17.   Oregon   18.   Pennsylvania   19.   Tennessee   20.   Utah   21.   Virginia   22.   Washington   23.   Wisconsin.   --------------------------------------------------------------------------------   E   --------------------------------------------------------------------------------   IN THE CIRCUIT COURT OF KANAWHA COUNTY, WEST VIRGINIA DEADRA D. CUMMINS, IVAN and LADONNA BELL, LEVON and GERAL MITCHELL, JOYCE A. GREEN, LYNN BECKER, RENEA GRIFFITH MARYANNE HOEKMAN and JUSTIN SEVEY, on their own behalf and on behalf of those similarly situated, Plaintiffs, v.   Civil Action No. 03-C-134 H & R BLOCK, INC., H & R BLOCK TAX SERVICES, INC., H & R BLOCK EASTERN ENTERPRISE, successor to H & R BLOCK EASTERN TAX SERVICES, INC., BLOCK FINANCIAL CORPORATION, HRB ROYALTY, INC., and H & R BLOCK SERVICES, INC., Defendants. [PROPOSED] ORDER PRELIMINARILY APPROVING CLASS ACTION SETTLEMENT AND PROVIDING FOR NOTICE (“PRELIMINARY APPROVAL ORDER”)      WHEREAS, the Court has been advised that the parties to this action, Plaintiffs Deadra D. Cummins, and Ivan and LaDonna Bell, and Defendants H&R Block, Inc., et al., along with the parties in three related actions, Mitchell v. H&R Block, Inc. et al., Case No. CV-95-2067 (Circuit Court of Mobile City, Ala.) (the “Mitchell Action”), Green v. H&R Block, Inc. et al., Case No. 97195023/CC411   --------------------------------------------------------------------------------   (Circuit Court of Baltimore City, Maryland) (the “Green Action”), and Becker v. H&R Block, Inc., Case No. 5:04-cv-01074-CAB (N.D. Ohio) (removed from Summit County (Ohio) Court of Common Pleas) (the “Becker Action”) (hereinafter collectively referred to as the Settling Actions) have agreed, subject to Court approval following notice to the Settlement Class and a hearing, to settle these actions upon the terms and conditions set forth in the Agreement of Settlement (“Agreement”), which has been filed with the Court as an attachment to the Motion for Preliminary Approval;      WHEREAS, the Plaintiffs having made application, pursuant to West Virginia Rule of Civil Procedure 23, for an order preliminarily approving the settlement of the Action in accordance with the Agreement of Settlement and the Exhibits annexed thereto, which set forth the terms and conditions for a proposed settlement of this action and the Settling Cases and for dismissal of the this action and the Settling Cases with prejudice upon the terms and conditions set forth therein; and      WHEREAS, the Plaintiffs have moved for leave to file a Consolidated and Amended Complaint, consolidating this action and the Settling Actions for purposes of settlement, and the plaintiffs have lodged with the Court a Consolidated and Amended Complaint; and      WHEREAS, all defined terms contained herein shall have the same meanings as set forth in the Agreement; and      WHEREAS, the Court having read and considered the Agreement, and 2 --------------------------------------------------------------------------------   based upon the Agreement and all of the files, records, and proceedings herein, and it appearing to the Court that upon preliminary examination the Agreement and settlement appears fair, reasonable and adequate, and that a hearing should and will be held after notice to the proposed Settlement Classes to confirm that the Agreement and settlement are fair, reasonable, and adequate, and to determine whether a Final Order of Judgment and Dismissal should be entered in this action based upon the Agreement;      IT IS HEREBY ORDERED THAT:      1. For purposes of settlement only, the Court has jurisdiction over the subject matter of the Settling Actions and personal jurisdiction over the parties and the members of the proposed Settlement Classes described below.      2. For purposes of settlement only, the Court allows the motion to consolidate this action and the Settling Actions (hereinafter collectively referred to as the “Action”), and accepts the Consolidated and Amended Complaint as filed. In the event that one or more of the Settlement Classes as provided in the Agreement is not approved by the Court, such Consolidated and Amended Complaint will be stricken and this order vacated automatically, as far as they relate to any such disapproved Settlement Class, (i) concurrently with any order rejecting approval of this Agreement or disapproving any such Settlement Class or, (ii) in the event that the Court grants final approval of one or more Settlement Classes as provided in the Agreement but such final approval order is subsequently reversed or modified on appeal, concurrently with any order remanding the Action to this Court, in either 3 --------------------------------------------------------------------------------   case without the need for any further order of this Court, and in either such instance any Settlement Class that is not approved by the Court or for which certification is reversed or modified on appeal will revert to its status immediately prior to the execution of the Agreement.      3. The Agreement and the settlement contained therein are preliminarily approved as fair, reasonable, and adequate.      4. Pursuant to Rule 23(b)(3) of the West Virginia Rules of Civil Procedure, the Court certifies the following Settlement Classes for purposes of settlement only:          (a) State Law Class: All residents of the several jurisdictions identified in the chart attached hereto as Exhibit 1 who applied for and obtained a Refund Anticipation Loan (a “RAL”) through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate (as defined in the Agreement), as defined herein, or any H&R Block offices such as in Sears stores) from January 1, 2000 through December 23, 2005;          (b) West Virginia Class: All West Virginia residents who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any HRB Defendant or Affiliate, as defined herein, or any H&R Block offices such as in Sears 4 --------------------------------------------------------------------------------   stores) from January 1, 1994 through December 23, 2005 who have not previously requested exclusion from the Cummins class; provided, however, that persons who opted-out of the certified Cummins litigation class and who obtained a RAL through any Settling Defendant or Affiliate in 2005, will receive another opt-out opportunity for their 2005 RALs only.           (c) Becker Class: All Ohio residents who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate, as defined herein, or any H&R Block offices such as in Sears stores) from January 1, 2000 through December 23, 2005.           (d) Mitchell/Green Class: All Maryland residents who applied for and obtained a RAL at any H&R Block office in Maryland from January 1, 1992 through December 31, 1996 and did not thereafter apply for and obtain a RAL subject to an arbitration provision, and all Alabama residents who obtained a RAL from June 13, 1989 through December 31, 1996 through any “H&R Block” office in Alabama for which the Settling Defendants herein received a license fee payment or portion of the finance charge, and who did not previously request exclusion from their respective class.      5. The Court makes the following appointments with respect to each Settlement Class, for purposes of settlement only:           (a) State Law Class: Justin Sevey, Maryanne Hoekman and Renea 5 --------------------------------------------------------------------------------   Griffith are appointed class representatives; and Daniel Hume, Esq., of Kirby Mclnerney & Squire, LLP, Ronald L. Futterman, Esq., Michael I. Behn, Esq., and William W. Thomas, Esq., of Futterman & Howard, Chtd, and Michael B. Hyman, Esq., William H. London, Esq., of Much Shelist Freed Denenberg Ament & Rubenstein, P.C., and Scott S. Segal, Esq. of The Segal Law Firm are appointed as class counsel to the State Law Class.      (b) West Virginia Class: Deadra Cummins, Ivan Bell and LaDonna Bell are appointed class representative and Brian A. Glasser, Esq., H. F. Salsbery, Esq., John Barrett, Esq., and Eric Snyder, Esq., of Bailey & Glasser, LLP are appointed class counsel to the West Virginia Class. Brian Glasser is also appointed Coordinating Class Counsel.      (c) Becker Class: Lynn Becker is appointed class representative and John Roddy, Esq., Gary Klein, Esq., and Elizabeth Ryan, Esq., of Roddy Klein & Ryan, Ronald Frederick, Esq. of Ronald Frederick & Associates, LLC, and Bruce L. Freeman, Esq. of Freeman & Chiartas are appointed class counsel to the Becker Class.      (d) Mitchell/Green Class: Levon and Geral Mitchell and Joyce A. Green are appointed class representatives and Steven A. Martino, Esq., Frederick T. Kuykendall III, Esq., and W. Lloyd Copeland, Esq. of Taylor, Martino & Kuykendall, Steven E. Angstreich, Esq., Michael Coren, Esq., Carolyn C. Lindheim, Esq., of Levy, Angstreich, Finney, Baldante, Rubenstein and Coren, P.C., Charles J. Piven, Esq. of Law Offices of Charles A. Piven, P.A., and Marvin W. Masters of The 6 --------------------------------------------------------------------------------   Masters Law Firm, L.C., are appointed class counsel to the Mitchell/Green class.      6. With respect to each of the respective Settlement Classes, this Court preliminarily finds for settlement purposes only that: (a) the Settlement Class as defined above is so numerous that joinder of all members is impracticable; (b) there are questions of law or fact common to the Settlement Class; (c) the claims of the respective class representatives (the “Class Representatives”), identified in paragraph 3, are typical of the claims of their respective class; (d) the Class Representatives will fairly and adequately protect the interests of their respective class; (e) the questions of law or fact common to the members of the Settlement Class predominate over the questions affecting only individual members, and (e) certification of the Settlement Class is superior to other available methods for the fair and efficient adjudication of the controversy. In the event the Agreement terminates pursuant to its terms for any reason, the conditional certification of the Settlement Classes pursuant to this Order shall be vacated automatically and shall be null and void, and this action shall revert to its status immediately prior to the execution of the Agreement.      7. The Court approves as to form the mail Notices attached hereto as Exhibit 2, and the Summary Notice attached hereto as Exhibit 3. The mailing of the Notice and the publication of the Summary Notice made as directed in this Order meet the requirements of Rule 23(c), and constitute the best notice practicable under the circumstances and sufficient notice to all members of the Settlement Classes, and the forms and methods of notice comply fully with all applicable law. 7 --------------------------------------------------------------------------------        8. The Administrator shall, no later than March 15, 2006, cause to be mailed by first class mail to the last known address of all Settlement Class Members, an appropriate Notice, along with a claim form. Any mail returned with a forwarding address will be promptly re-mailed to such address. The form of such Notices must be substantially in the form attached hereto as Exhibit 2, as applicable. In addition, the Administrator shall, no later than March 15, 2006, cause a Summary Notice be published twice in USA Today, two weeks apart. The form of such Summary Notice must be substantially in the form attached hereto as Exhibit 3. The Administrator is directed to file with the Court, and serve upon Coordinating Class Counsel and counsel for the Settling Defendants, prior to the Final Hearing, a declaration of such mailings and publication.      9. The Settling Defendants shall pay the Notice Costs, as provided by the Agreement, Section II, Paragraph 10, and Section X, Paragraphs 3 and 4.      10. The Court will order additional publication notice in Alabama and Maryland at the expense of the Mitchell/Green Class. Counsel for the Mitchell/Green Class is instructed to file with this Court a plan for additional publication notice in Alabama and Maryland within 30 days.      11. A hearing (the “Final Hearing”) shall be held on                     , at                      a.m. to determine whether the proposed settlement of this Action is fair, reasonable, and adequate and should be approved. The parties’ respective briefs and supporting papers in support of the proposed settlement shall be filed on or before                      ___, 2006. The Final Hearing described in this paragraph may be 8 --------------------------------------------------------------------------------   postponed, adjourned, transferred or continued by order of the Court without further notice to the Settlement Class. After the Final Hearing, the Court may enter a Final Order of Judgment and Dismissal in accordance with the Agreement that will adjudicate the rights of all class members.      12. Any member of a Settlement Class who is not excluded from that Settlement Class and who objects to the approval of the proposed settlement may appear at the Final Hearing in person or through counsel to show cause why the proposed settlement should not be approved as fair, reasonable, and adequate.      13. Objections to the proposed settlement shall be heard, and any papers or briefs submitted in support of objections shall be considered by the Court only if, on or before May 1, 2006, said objectors file with the Clerk of the Court, a statement of his/her objection, as well as the specific reason(s), if any, for each objection, including any legal support the Settlement Class Member wishes to bring to the Court’s attention and any evidence the Settlement Class Member wishes to introduce in support of the objection. Objectors must serve copies thereof, together with proof of service, on or before that date upon both Coordinating Counsel and counsel for the Settling Defendants (by mail, hand or by facsimile transmission): Coordinating Counsel: Brian Glasser Bailey & Glasser, LLP 227 Capitol Street Charleston, West Virginia 25301 Fax: (304)342-1110 Settling Defendants’ Counsel: Matthew M. Neumeier Jenner & Block LLP 9 --------------------------------------------------------------------------------   One IBM Plaza ‘Chicago, IL 60611-7603 Fax (312) 840-7749 Charles R. Bailey Bailey & Wyant PLLC P.O. Box 3710 Charleston, WV 25337 Fax (304) 343-3133      The objections must state the name and number of this action. No Settlement Class member shall be entitled to be heard and no objection shall be considered unless these requirements are satisfied.      14. Any Settlement Class member who does not make his objection to the settlement in the manner provided herein shall be deemed to have waived any such objection by appeal, collateral attack, or otherwise.      15. Any member of a Settlement Class who desires to be excluded from that Settlement Class must mail or otherwise deliver to the Administrator, as stated in the Notice and Summary Notice, an appropriate written request for exclusion, including his or her name, address, telephone number and Social Security number, that is personally signed by the Settlement Class Member, which request must be postmarked no later than May 1, 2006 (the Opt-Out Date), and actually received by the Administrator. No Settlement Class Member, or any person acting on behalf of or in concert or in participation with that Settlement Class Member, may request exclusion of any other Settlement Class Member from a Settlement Class. The original requests for exclusion shall be filed with the Clerk of the Court by the 10 --------------------------------------------------------------------------------   Administrator not later than 30 days after the Opt-Out Date. The filing shall redact the social security number of the person requesting exclusion, except for the last three digits. Copies of requests for exclusion will be provided by the Administrator to Class Counsel and counsel for the Settling Defendants not later than five days after the Opt-Out Date. If this Agreement is approved, any and all persons within a Settlement Class who have not submitted a timely, valid and proper written request for exclusion from that Settlement Class will be bound by the releases and other terms and conditions set forth therein and all proceedings, orders and judgments in the Action, even if those persons have previously initiated or subsequently initiate individual litigation or other proceedings against the Settling Defendants (or any of them) relating to the claims released pursuant to or covered by the terms of the Agreement. The names and addresses of all excluded individuals shall be attached as an exhibit to the Final Order of Judgment and Dismissal.      16. Any Settlement Class Member may enter an appearance in this action, at his or her own expense, individually or through counsel of his or her own choice. All Settlement Class Members who do not enter an appearance will be deemed to have been represented by Class Counsel.      17. All discovery and other pretrial proceedings in this action are stayed and suspended until further order of this Court except such actions as may be necessary to implement the Agreement and this Order.      18. In the event that one or more of the Settlement Classes as provided in the Agreement is not approved by the Court, or for any reason the parties fail to 11 --------------------------------------------------------------------------------   obtain a Final Order of Judgment and Dismissal for one or more of the Settlement Classes as contemplated in the Agreement, or the Agreement is terminated pursuant to its terms, then the Agreement and all orders entered in connection with any such disapproved Settlement Class hereafter shall become null and void and of no further force and effect as far as they relate to any such disapproved Settlement Class, and shall not be used or referred to for any purposes whatsoever. In such event, the Agreement and all negotiations and proceedings as far as they relate to any such disapproved Settlement Class shall be withdrawn without prejudice as to the rights of any and all parties thereto, who shall be restored to their respective positions as of the date of the execution of the Agreement.      19. In sum, the dates for performance are as follows:                   Class Notice Mailed by:   March 15, 2006                       Publication Notice Complete on:   March 15, 2006                       Claim Forms Postmarked by:   June 30, 2006                       Requests for Exclusion Postmarked by:   May 1, 2006                       Filing and Service of Objections by:   May 1, 2006                       Final Approval Submissions:                           Final Approval Hearing:                                         DATED:       , 2005                                           Hon. Louis Bloom 12 --------------------------------------------------------------------------------   1   --------------------------------------------------------------------------------   Exhibit 1 Settling Jurisdictions   1.   Arkansas     2.   Arizona     3.   California     4.   District of Columbia     5.   Florida     6.   Illinois     7.   Indiana     8.   Massachusetts     9.   Maryland     10.   Maine     11.   Michigan     12.   Minnesota     13.   Missouri     14.   Nebraska     15.   New Hampshire     16.   Nevada     17.   Oregon     18.   Pennsylvania     19.   Tennessee     20.   Utah     21.   Virginia     22.   Washington     23.   Wisconsin.   --------------------------------------------------------------------------------   2   --------------------------------------------------------------------------------   If You Got A Refund Anticipation Loan Through An H&R Block Office Between January 1, 1994 and December 23, 2005. You Could Get A Payment From A Class Action Settlement A Court Has Authorized This Notice. Please Read It, It Describes Important Rights You Have And Requires That You Make A Choice About How to Proceed. Important Dates [ILLEGIBLE] ANSWERS TO FREQUENTLY-ASKED QUESTIONS 1.   Why Did I Get This Notice?   2.   What Is This Lawsuit About?   3.   Why Is This A Class Action?   4.   Why Is There A Settlement?   5.   How Do I Know If I Am Part Of The Settlement?   6.   What Does The Settlement Provide?   7.   How Much Will My Payments Be?   8.   How Can I Get A Payment?   9.   When Would I Get My Payment?   10.   Am I Giving Anything Up To Get A Payment Or Stay In The Class?   11.   Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)?   12.   What Do I Do If I Want To Exclude Myself?   13.   When And Where Will The Court Decide Whether To Approve The Settlement?   14.   Do I Have To Come To The Hearing?   15.   What If I Do Nothing?   16.   What If I Want To Object To The Settlement?   17.   What Is the Difference Between Excluding Myself And Objecting?   18.   Who Are The Lawyers For The Class?   19.   How Will Class Counsel’s Fees And Expenses Be Paid?   20.   Does The Class Representative Get Additional Compensation?   21.   What If The Court Does Not Approve The Settlement?   22.   Where Do I Get Additional Information? -1- --------------------------------------------------------------------------------   1. Why Did I Get This Notice? You got at least one Refund Anticipation Loan (“RAL”) through an H&R Block office between January 1, 1994 and December 23, 2005. You received this notice to inform you about settlement of a class action lawsuit that may affect your rights. This notice provides information about all of your options, so that you can evaluate those options before the Court decides whether to approve the settlement. Those options include making a claim for money from the settlement (see Questions 7-9), excluding yourself from the settlement (Questions 11 & 12) or raising concerns about the fairness of the settlement (Question 16). This package explains the lawsuit, the settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the Circuit Court of Kanawha County, West Virginia (“the Court”). 2. What Is This Lawsuit About? This case combines several lawsuits that were filed against H&R Block, Inc. and various related corporations. For simplicity, the H& R Block defendants are referred to throughout the rest of this notice as simply “Block.” The cases were filed against Block in different parts of the country at different times, but all essentially make the same claim — that Block violated particular state laws in the way it made RALs available. The lawyers in these cases have filed with the Court an Amended and Consolidated Class Action Complaint (called the “Consolidated Action” from here on), which brings together all of the claims made in these cases. One of the principal claims the Consolidated Action makes is that Block violated the Credit Services Organization Acts of the affected jurisdictions, or violated similar laws. Block denies that it violated any laws, did anything wrong, or that anyone was harmed by its conduct. Block nevertheless has agreed to settle the Consolidated Action solely to avoid the burden, expense, risk and uncertainty of continuing the various lawsuits. Block and the plaintiffs in the Consolidated Actions have reached agreement on a Settlement of the claims in the Consolidated Action including claims that had been pending previously in Ohio, Maryland, and Alabama. The Settlement, if approved, would resolve all litigation involving RALs which Block sold in West Virginia between January 1, 1994 and December 23, 2005. Other cases are also being settled at the same time, in the same settlement agreement, covering legal rights of individuals in a number of other jurisdictions.   --------------------------------------------------------------------------------   3. Why Is This A Class Action? In a class action, one or more people called Class Representatives (in this case Deadra D. Cummins, Ivan Bell and LaDonna Bell), sue on behalf of people who have similar claims. All these people are a Class or Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. Circuit Court Judge Louis Bloom is in charge of this class action. 4. Why Is There A Settlement? The Court did not decide in favor of Block or any of the Plaintiffs in the various lawsuits. The Plaintiffs in those lawsuits think they could have won if they went to trial. Block thinks the Plaintiffs would have lost. In fact, in most cases, Block thinks that the Plaintiffs would not have even been able to continue their cases in court, because Block’s RAL contract required them to try their claims before an arbitrator. But there was no trial and no arbitration. Instead, both sides agreed to a settlement. This avoids the cost of a trial, and the people affected have an opportunity to be paid. The Class Representatives and the attorneys think the settlement is best for all Class Members. 5. How Do I Know If I Am Part Of The Settlement? You received this notice because records identified you as a Cummins class member. That means that you fit the description of the class which the Court certified for this settlement. The Court decided that everyone who fits this description is a Class Member: All West Virginia residents who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate, or any H&R Block offices such as in Sears stores) from January 1, 1994 through December 23, 2005, who did not previously request exclusion from the Cummins class, other than those persons who previously requested exclusion from the Cummins class, subsequently obtained a RAL through any Settling Defendant or Affiliate in 2005. There are three other classes that are part of the overall Settlement. The following classes are composed of people who live in one of the following jurisdictions and got a RAL through an H&R Block office during the specified years: a.) The Becker Class (Ohio residents) — January 1, 2000 to December 23, 2005; b.) The Mitchell/Green Class (residents of Maryland and Alabama) — Maryland — January 1, 1992 to May 19, 2000, excluding those people who obtained RALs   --------------------------------------------------------------------------------   after 1996 whose RAL application contains an arbitration clause; Alabama — June 13, 1989 through December 31, 1996; c.) The State Law Class (residents of 22 states and the District of Columbia) — January 1, 2000 through December 23, 2005: Arkansas, Arizona, California, District of Columbia, Florida, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, Nevada, Oregon, Pennsylvania, Tennessee, Utah, Virginia, Washington or Wisconsin. 6. What Does The Settlement Provide? Block has agreed to provide additional information to customers who obtain RALs and to pay a total of $62.5 million, plus costs of notice estimated at $4 million, to settle this case. The total Block will pay is called the “common fund.” You are a member of the Cummins class. Cummins class members are entitled to $32.5 million of the $62.5 million, before deductions for the pro rata portion of administration costs, attorney’s fees and expenses relating to the Cummins Class, and service fees paid to the class representatives, Deadra D. Cummins, Ivan Bell and LaDonna Bell. The State Law class will divide more than $22.5 million; the Becker class will divide more than $5.8 million; and the Mitchell/Green (Maryland and Alabama) class will divide over $1.6 million; all before the same deductions are made for administration costs, attorney’s fees and expenses, and service fees applicable to each class. Members of the different classes who submit claims will receive different amounts because each of these cases is at a different stage of proceedings, holds different risks and different chances of success. Each class settlement was negotiated based upon these differences. The four classes are represented independently. 7. How Much Will My Payments Be? In order to receive any payment, you must return a claim form (see Question 8 and the attached claim form). Every Class Member who returns a valid claim form will receive at least some distribution from the common fund. Your share of the fund will depend on the number of valid claim forms that Cummins Class Members send in and how many RALs you had. If every class member submitted a claim, your share of the common fund would be a minimum of $60.90 for each RAL you obtained during the class period. However, only a percentage of class members will actually submit claim forms. For example, if one of every two class members return claim forms, your share of the fund would be $121.80 for each RAL you obtained ($60.90 times two). Please remember that this is only an example; the amount you receive from the settlement could be greater or smaller. Your share will be reduced by whatever percentage of the common fund is taken up with administration costs, attorney’s fees, expenses, and service payments. It is unlikely that such costs will exceed 35%, but they   --------------------------------------------------------------------------------   could be higher or lower. The maximum amount any class member can receive is $175 for each RAL obtained during the class period. 8. How Can I Get A Payment? To qualify for payment, you must send in a complete and valid claim form. A claim form is attached to this Notice. You may also get a claim form from the Settlement Administrator’s website [[www.INSERTWEBADDRESS.com]]. Read the instructions carefully, fill out the form, include all the information the form asks for, sign it, and mail it so that it is postmarked no later than June 30, 2006. You may also email the claim form to the Settlement Administrator at [[email protected]]. If you email the claim form, you must do so no later than midnight on June 30, 2006. 9. When Would I Get My Payment? The Court will hold a hearing at time/date/month/2006 at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301, to decide whether to approve the settlement. If the Court approves the settlement after that, there may be appeals. It’s always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. The settlement administrator will keep the settlement website at [www.INSERTWEBADDRESS.com] updated so that everyone who is in the class may keep informed of the progress of the settlement. Please be patient. Note: It is unlikely that you will receive your payment until six months or more after the date you send in a claim form. 10. Am I Giving Up Anything To Get A Payment Or Stay In The Class? Unless you exclude yourself, also called “opting out” (see Question 12), you will be considered a member of the class, which means that you can’t sue, continue to sue, or be part of any other lawsuit against Block about the legal issues in this case. Giving up your claims is called a “release.” Unless you exclude yourself from the settlement, you will release your claims whether or not you submit a claim form and receive payment. However, certain claims are not released even if you stay in the class. All claims made in other currently existing class actions that relate to the RAL or other products and services offered by Block are not released. Claims under state law based solely on allegations that a tax preparer failed (A) to properly prepare a tax return or (B) to maintain the confidentiality of taxpayer information resulting in injury based on “stolen identity” or similar misuse of taxpayer information or theft of a RAL check; and claims to enforce the terms and conditions of the Settlement Agreement, are similarly not released. Class members who do not exclude themselves, but do not make a claim for money from this settlement may choose to arbitrate their individual claims   --------------------------------------------------------------------------------   against Block for another year after the settlement is finalized. Although Class Counsel recommend this settlement, they take no position on your likelihood of succeeding on an individual basis in an arbitration case. You should obtain independent legal help if you need more information about the economic value of the arbitration alternative to excluding yourself or making a claim for money under the settlement. The settlement requires Block to follow certain business practices with future RALs, and provides Block with an incentive to register as a Credit Service Organization (“CSO”) in the jurisdictions covered by the settlement. Block has two years to decide whether to register and come into compliance with the various CSO statutes. Important: If you decide to go back to Block to obtain a RAL during the two-year period Block has to register as a CSO in the various jurisdictions, and Block does register and comply with your jurisdiction’s CSO statute in that two-year period, then you will not be able to sue Block for any new RAL violation that you claim happened during the two-year period. But, if Block does not register as a CSO and comply with the CSO statute in your jurisdiction, you will be able to sue based on any new RAL violation that you claimed happened during that period. In addition, any deadline on when you can sue Block (called the “statute of limitations”) will be suspended for the two-year period. 11. Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)? Yes, you may “opt out” and exclude yourself from the Settlement Class. If you opt out, you will not receive any payment from the common fund, you will not release any claims you may have against Block, and you will not be bound by anything that happens in the Consolidated Action. If you opt out, you will be free to pursue whatever legal rights you may have by pursuing your own lawsuit against Block at your own risk and expense. 12. What Do I Do If I Want To Exclude Myself? In order to opt out and exclude yourself from the Settlement Class, you must mail a “Request for Exclusion” to the Settlement Administrator at address. Your Request for Exclusion must be in writing and must be postmarked no later than May 1, 2006. To be effective, a Request for Exclusion must contain: (a) the name of this case (Cummins, v. H & R Block, Inc.); (b) your name, address, social security number and telephone number; (c) a statement that you want to opt out of the lawsuit; and (d) your signature. If the Request for Exclusion is not postmarked by the deadline, you will be included automatically in the Settlement Class and you may be eligible to receive Settlement payments as summarized above. Even if you do not file a claim, you will be legally bound by the proposed Settlement, including provisions releasing Block.   --------------------------------------------------------------------------------   13. When And Where Will The Court Decide Whether To Approve The Settlement? The Court will hold a Fairness Hearing on time/date/ at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301. At this hearing the Court will consider whether the settlement is fair, reasonable, and adequate. If there are objections, the Court will consider them. The Court will listen to people who have asked to speak at the hearing. The Court may also decide how much to pay to Class Counsel. After the hearing, the Court will decide whether to approve the settlement. We do not know how long these decisions will take. The hearing can be continued at any time by the Court without any further notice to you. 14. Do I Have To Come To The Hearing? No. You are not required to attend the hearing. But you are welcome to come at your own expense. If you wish to speak, you may ask the Court for permission to speak at the Fairness Hearing. To do so, you must send a letter saying that it is your “Notice of Intention to Appear in Cummins v. H&R Block.” Be sure to include your name, address, telephone number, and your signature. Your Notice of Intention to Appear must be received no later than May 1, 2006, and be sent to the Clerk of the Court, Class Counsel, and Defense Counsel, at the addresses in Question 16. You cannot speak at the hearing if you excluded yourself, because once you exclude yourself, the settlement does not affect your rights. 15. What If I Do Nothing? If you do nothing, you’ll get no money from this settlement. But, unless you exclude yourself, you won’t be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Block about the legal issues in this case. You would, however, be able to arbitrate your claims against Block for another year, as described in Question 10. 16. What If I Want To Object To The Settlement? If you’re a Class Member who has not requested exclusion, you can object to the settlement if you don’t like it. If you wish to object, you must write a letter stating your objections, the specific reasons for each objection (including any legal support you want to bring to the Court’s attention) and a description of any evidence you wish to introduce in support of your objections. You must include your name, address, telephone number and your signature. Also include the name and number of this action (Cummins v. H&R Block, Inc., Civil Action No. 03-C-134). Your letter must be received in these four different places no later than May 1, 2006: (i) Coordinating Counsel: Brian A. Giasser, Esq.   --------------------------------------------------------------------------------   Bailey & Glasser, LLP 227 Capitol Street Charleston, WV 25301 (ii) Defendants’ Counsel:               Matthew M. Neumeier   Charles R. Bailey     Jenner & Block LLP   Bailey & Wyant PLLC     One IBM Plaza   P.O. Box 3710     Chicago, IL 60611   Charleston, WV 25337-3710 (iii) The Court: Clerk of Court Kanawha County Circuit Court 111 Court Street Charleston, WV 25301 17. What Is The Difference Between Excluding Myself And Objecting? Excluding yourself is telling the Court that you don’t want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. Objecting is telling the Court that you don’t like something about the settlement and you don’t want the Court to approve it. You can object only if you stay in the Class. 18. Who Are The Lawyers For The Cummins Class? The Court has appointed the following law firm to represent you and other Cummins Class Members. These lawyers are called Class Counsel. If you want to be represented by your own lawyer, you may hire one at your own expense. Brian A. Glasser H. F. Salsbery John W. Barrett Eric B. Snyder Bailey & Glasser LLP 227 Capitol Street Charleston,WV 25301 19. How Will Class Counsel’s Fees And Expenses Be Paid? Class Counsel will make an application to the Court for approval of an award of attorneys’ fees and expenses in an amount not more than one-third of the portion of the common fund attributable to the Cummins Class. The fees would pay Class Counsel for investigating the facts, litigating the case, and negotiating   --------------------------------------------------------------------------------   the settlement. The Court will determine the amount of any fees and expenses awarded to Class Counsel. 20. Does The Class Representative Get Additional Compensation? Subject to Court approval, the named plaintiffs in the five cases which make up the Consolidated Action will seek “service awards” for their active participation in this litigation. Any such “service award” will be paid from the portions of the common fund attributable to the cases those plaintiffs brought. The Cummins class representatives will seek a service award in an amount to be determined by the Court. 21. What If The Court Does Not Approve The Settlement? If the Court does not approve the proposed Settlement as being fair, adequate and reasonable, the Settlement Agreement will be null and void, and all parties will be returned to their respective pre-Settlement status in the various lawsuits that the proposed Settlement hopes to resolve. 22. Where Do I Get Additional Information? This notice summarizes the proposed settlement. You can find answers to common questions about the settlement, plus other helpful information at the Settlement Administrator’s website [www.INSERTWEBADDRESS.com]. You can also get a copy of the Settlement Agreement from the website, or by writing to the Settlement Administrator at ####. If you cannot get the information you need from this notice or from the Settlement Administrator, you may contact Cummins Class Counsel. Please Do Not Contact The Court Or Block For Information. BY ORDER OF THE COURT The Honorable Louis Bloom Circuit Judge Kanawha County, West Virginia Dated:                                          , 2005   --------------------------------------------------------------------------------   If You Got A Refund Anticipation Loan Through An H&R Block Office Between January 1, 2000 And December 23, 2005, You Could Get A Payment From A Class Action Settlement A Court Has Authorized This Notice. Please Read It, It Describes Important Rights You Have And Requires That You Make A Choice About How to Proceed. Important Dates [ILLEGIBLE] ANSWERS TO FREQUENTLY-ASKED QUESTIONS 1.   Why Did I Get This Notice?   2.   What Is This Lawsuit About?   3.   Why Is This A Class Action?   4.   Why Is There A Settlement?   5.   How Do I Know If I Am Part Of The Settlement?   6.   What Does The Settlement Provide?   7.   How Much Will My Payments Be?   8.   How Can I Get A Payment?   9.   When Would I Get My Payment?   10.   Am I Giving Anything Up To Get A Payment Or Stay In The Class?   11.   Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)?   12.   What Do I Do If I Want To Exclude Myself?   13.   When And Where Will The Court Decide Whether To Approve The Settlement?   14.   Do I Have To Come To The Hearing?   15.   What If I Do Nothing?   16.   What If I Want To Object To The Settlement?   17.   What Is the Difference Between Excluding Myself And Objecting?   18.   Who Are The Lawyers For The Class?   19.   How Will Class Counsel’s Fees And Expenses Be Paid?   20.   Does The Class Representative Get Additional Compensation?   21.   What If The Court Does Not Approve The Settlement?   22.   Where Do I Get Additional Information? -1- --------------------------------------------------------------------------------   1. Why Did I Get This Notice? You got at least one Refund Anticipation Loan (“RAL”) through an H&R Block office between January 1, 2000 and December 23, 2005. You received this notice to inform you about settlement of a class action lawsuit that may affect your rights. This notice provides information about all of your options, so that you can evaluate those options before the Court decides whether to approve the settlement. Those options include making a claim for money from the settlement (see Questions 7-9), excluding yourself from the settlement (Questions 11 & 12) or raising concerns about the fairness of the settlement (Question 16). This package explains the lawsuit, the settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the Circuit Court of Kanawha County, West Virginia (“the Court”). 2. What Is This Lawsuit About? This case combines several lawsuits that were filed against H&R Block, Inc. and various related corporations. For simplicity, the H& R Block defendants are referred to throughout the rest of this notice as simply “Block.” The cases were filed against Block in different parts of the country at different times, but all essentially make the same claim — that Block violated particular state laws in the way it made RALs available. The lawyers in these cases have filed with the Court an Amended and Consolidated Class Action Complaint (called the “Consolidated Action” from here on), which brings together all of the claims made in these cases. One of the principal claims the Consolidated Action makes is that Block violated the Credit Services Organization Acts of the affected jurisdictions, or violated similar laws. Block denies that it violated any laws, did anything wrong, or that anyone was harmed by its conduct. Block nevertheless has agreed to settle the Consolidated Action solely to avoid the burden, expense, risk and uncertainty of continuing the various lawsuits. Block and the plaintiffs in the Consolidated Actions have reached agreement on a Settlement of the claims in the Consolidated Action including claims that had been pending previously in Ohio, Maryland, and Alabama. The Settlement, if approved, would resolve all litigation involving RALs which Block sold in Ohio between January 1, 2000 and December 23, 2005. Other cases are also being settled at the same time, in the same settlement agreement, covering legal rights of individuals in a number of other jurisdictions.   --------------------------------------------------------------------------------   3. Why Is This A Class Action? In a class action, one or more people called Class Representatives (in this case Lynn Becker), sue on behalf of people who have similar claims. All these people are a Class or Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. Circuit Court Judge Louis Bloom is in charge of this class action. 4. Why Is There A Settlement? The Court did not decide in favor of Block or any of the Plaintiffs in the various lawsuits. The Plaintiffs in those lawsuits think they could have won if they went to trial. Block thinks the Plaintiffs would have lost. In fact, in most cases, Block thinks that the Plaintiffs would not have even been able to continue their cases in court, because Block’s RAL contract required them to try their claims before an arbitrator. But there was no trial and no arbitration. Instead, both sides agreed to a settlement. This avoids the cost of a trial, and the people affected have an opportunity to be paid. The Class Representative and the attorneys think the settlement is best for all Class Members. 5. How Do I Know If I Am Part Of The Settlement? You received this notice because records identified you as a Becker class member. That means that you fit the description of the class which the Court certified for this settlement. The Court decided that everyone who fits this description is a Class Member: All Ohio residents who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate, as defined herein, or any H&R Block offices such as in Sears stores) from January 1, 2000 through December 23, 2005. There are three other classes that are part of the overall Settlement. The following classes are composed of people who live in one of the following jurisdictions and got a RAL through an H&R Block office during the specified years: a.) The Cummins Class (West Virginia residents) — January 1, 1994 to December 23, 2005; b.) The Mitchell/Green Class (residents of Maryland and Alabama) — Maryland — January 1, 1992 to May 19, 2000, excluding those people who obtained RALs after 1996 whose RAL application contains an arbitration clause; Alabama — June 13, 1989 through December 31, 1996;   --------------------------------------------------------------------------------   c.) The State Law Class (residents of 22 states and the District of Columbia) — January 1, 2000 through December 23, 2005: Arkansas, Arizona, California, District of Columbia, Florida, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, Nevada, Oregon, Pennsylvania, Tennessee, Utah, Virginia, Washington or Wisconsin. 6. What Does The Settlement Provide? Block has agreed to provide additional information to customers who obtain RALs and to pay a total of $62.5 million, plus costs of notice estimated at $4 million, to settle this case. The total Block will pay is called the “common fund.” You are a member of the Becker class. Becker class members are entitled to more than $5.8 million of the $62.5 million, before deductions for the pro rata portion of administration costs, attorney’s fees and expenses relating to the Becker Class, and service fees paid to the class representative, Lynn Becker. The Cummins class members will divide $32.5 million; the State Law class will divide more than $22.5 million; and the Mitchell/Green (Maryland and Alabama) class will divide more than $1.6 million; all before the same deductions are made for administration costs, attorney’s fees and expenses, and service fees applicable to each class. Members of the different classes who submit claims will receive different amounts because each of these cases is at a different stage of proceedings, holds different risks and different chances of success. Each class settlement was negotiated based upon these differences. The four classes are represented independently. 7. How Much Will My Payments Be? In order to receive any payment, you must return a claim form (see Question 8 and the attached claim form). Every Class Member who returns a valid claim form will receive at least some distribution from the common fund. Your share of the fund will depend on the number of valid claim forms that Becker Class Members send in and how many RALs you had. If every class member submitted a claim, your share of the common fund would be a minimum of $3.66 for each RAL you obtained during the class period. However, only a percentage of class members will actually submit claim forms. For example, if only one of every four class members return claim forms, your share of the fund would be $14.64 for each RAL you obtained ($3.66 times four). Your share will be reduced by whatever percentage of the common fund is taken up with administration costs, attorney’s fees, expenses, and service payments. It is unlikely that such costs will exceed 30%, but they could be higher or lower. Please remember that this is only an example; the amount you receive from the settlement could be greater or smaller.   --------------------------------------------------------------------------------   8. How Can I Get A Payment? To qualify for payment, you must send in a complete and valid claim form. A claim form is attached to this Notice. You may also get a claim form from the Settlement Administrator’s website [[www.INSERTWEBADDRESS.com]]. Read the instructions carefully, fill out the form, include all the information the form asks for, sign it, and mail it so that it is postmarked no later than June 30, 2006. You may also email the claim form to the Settlement Administrator at [claims@ INSERTWEBADDRESS.com]. If you email the claim form, you must do so no later than midnight on June 30, 2006. 9. When Would I Get My Payment? The Court will hold a hearing at time/date/month/2006 at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301, to decide whether to approve the settlement. If the Court approves the settlement after that, there may be appeals. It’s always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. The settlement administrator will keep the settlement website at [www.INSERTWEBADDRESS.com] updated so that everyone who is in the class may keep informed of the progress of the settlement. Please be patient. Note: It is unlikely that you will receive your payment until six months or more after the date you send in a claim form. 10. Am I Giving Up Anything To Get A Payment Or Stay In The Class? Unless you exclude yourself, also called “opting out” (see Question 12), you will be considered a member of the class, which means that you can’t sue, continue to sue, or be part of any other lawsuit against Block about the legal issues in this case. Giving up your claims is called a “release.” Unless you exclude yourself from the settlement, you will release your claims whether or not you submit a claim form and receive payment. However, certain claims are not released even if you stay in the class. All claims made in other currently existing class actions that relate to the RAL or other products and services offered by Block are not released. Claims under state law based solely on allegations that a tax preparer failed (A) to properly prepare a tax return or (B) to maintain the confidentiality of taxpayer information resulting in injury based on “stolen identity” or similar misuse of taxpayer information or theft of a RAL check; and claims to enforce the terms and conditions of the Settlement Agreement, are similarly not released. Class members who do not exclude themselves, but do not make a claim for money from this settlement may choose to arbitrate their individual claims against Block for another year after the settlement is finalized. Although Class Counsel recommend this settlement, they take no position on your likelihood of succeeding on an individual basis in an arbitration case. You should obtain   --------------------------------------------------------------------------------   independent legal help if you need more information about the economic value of the arbitration alternative to excluding yourself or making a claim for money under the settlement. The settlement requires Block to follow certain business practices with future RALs, and provides Block with an incentive to register as a Credit Service Organization (“CSO”) in the jurisdictions covered by the settlement. Block has two years to decide whether to register and come into compliance with the various CSO statutes. Important: If you decide to go back to Block to obtain a RAL during the two-year period Block has to register as a CSO in the various jurisdictions, and Block does register and comply with your jurisdiction’s CSO statute in that two-year period, then you will not be able to sue Block for any new RAL violation that you claim happened during the two-year period. But, if Block does not register as a CSO and comply with the CSO statute in your jurisdiction, you will be able to sue based on any new RAL violation that you claimed happened during that period. In addition, any deadline on when you can sue Block (called the “statute of limitations”) will be suspended for the two-year period. 11. Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)? Yes, you may “opt out” and exclude yourself from the Settlement Class. If you opt out, you will not receive any payment from the common fund, you will not release any claims you may have against Block, and you will not be bound by anything that happens in the Consolidated Action. If you opt out, you will be free to pursue whatever legal rights you may have by pursuing your own lawsuit against Block at your own risk and expense. 12. What Do I Do If I Want To Exclude Myself? In order to opt out and exclude yourself from the Settlement Class, you must mail a “Request for Exclusion” to the Settlement Administrator at address. Your Request for Exclusion must be in writing and must be postmarked no later than May 1, 2006. To be effective, a Request for Exclusion must contain: (a) the name of this case (Cummins. v. H & R Block, Inc.); (b) your name, address, social security number and telephone number; (c) a statement that you want to opt out of the lawsuit; and (d) your signature. If the Request for Exclusion is not postmarked by the deadline, you will be included automatically in the Settlement Class and you may be eligible to receive Settlement payments as summarized above. Even if you do not file a claim, you will be legally bound by the proposed Settlement, including provisions releasing Block.   --------------------------------------------------------------------------------   13. When And Where Will The Court Decide Whether To Approve The Settlement? The Court will hold a Fairness Hearing on time/date/ at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301. At this hearing the Court will consider whether the settlement is fair, reasonable, and adequate. If there are objections, the Court will consider them. The Court will listen to people who have asked to speak at the hearing. The Court may also decide how much to pay to Class Counsel. After the hearing, the Court will decide whether to approve the settlement. We do not know how long these decisions will take. The hearing can be continued at any time by the Court without any further notice to you. 14. Do I Have To Come To The Hearing? No. You are not required to attend the hearing. But you are welcome to come at your own expense. If you wish to speak, you may ask the Court for permission to speak at the Fairness Hearing. To do so, you must send a letter saying that it is your “Notice of Intention to Appear in Cummins v. H&R Block.” Be sure to include your name, address, telephone number, and your signature. Your Notice of Intention to Appear must be received no later than May 1, 2006, and be sent to the Clerk of the Court, Class Counsel, and Defense Counsel, at the addresses in Question 16. You cannot speak at the hearing if you excluded yourself, because once you exclude yourself, the settlement does not affect your rights. 15. What If I Do Nothing? If you do nothing, you’ll get no money from this settlement. But, unless you exclude yourself, you won’t be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Block about the legal issues in this case. You would, however, be able to arbitrate your claims against Block for another year, as described in Question 10. 16. What If I Want To Object To The Settlement? If you’re a Class Member who has not requested exclusion, you can object to the settlement if you don’t like it. If you wish to object, you must write a letter stating your objections, the specific reasons for each objection (including any legal support you want to bring to the Court’s attention) and a description of any evidence you wish to introduce in support of your objections. You must include your name, address, telephone number and your signature. Also include the name and number of this action (Cummins v. H & R Block, Inc., Civil Action No. 03-C-134). Your letter must be received in these four different places no later than May 1, 2006: (i) Coordinating Counsel: Brian A. Glasser, Esq.   --------------------------------------------------------------------------------   Bailey & Glasser, LLP 227 Capitol Street Charleston, WV 25301 (ii) Defendants’ Counsel:               Matthew M. Neumeier   Charles R. Bailey     Jenner & Block LLP   Bailey & Wyant PLLC     One IBM Plaza   P.O. Box 3710     Chicago, IL 60611   Charleston, WV 25337-3710 (iii) The Court: Clerk of Court Kanawha County Circuit Court 111 Court Street Charleston, WV 25301 17. What Is The Difference Between Excluding Myself And Objecting? Excluding yourself is telling the Court that you don’t want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. Objecting is telling the Court that you don’t like something about the settlement and you don’t want the Court to approve it. You can object only if you stay in the Class. 18. Who Are The Lawyers For The Becker Class? The Court has appointed the following law firms to represent you and other Becker Class Members. These lawyers are called Class Counsel. If you want to be represented by your own lawyer, you may hire one at your own expense.               Ronald Frederick   John Roddy     Ronald Frederick & Assoc., LLC   Gary Klein     55 Public Square, Suite 1300   Elizabeth Ryan     Cleveland, Ohio 44113   Roddy, Klein & Ryan         727 Atlantic Avenue         Boston, MA 02111 19. How Will Class Counsel’s Fees And Expenses Be Paid? Class Counsel will make an application to the Court for approval of an award of attorneys’ fees and expenses in an amount not more than 25% of the portion of the common fund attributable to the Becker Class. The fees would pay Class Counsel for investigating the facts, litigating the case, and negotiating the   --------------------------------------------------------------------------------   settlement. The Court will determine the amount of any fees and expenses awarded to Class Counsel. 20. Does The Class Representative Get Additional Compensation? Subject to Court approval, the named plaintiffs in the five cases which make up the Consolidated Action will seek “service awards” for their active participation in this litigation. Any such “service award” will be paid from the portions of the common fund attributable to the cases those plaintiffs brought. Lynn Becker will seek a “service award” of $5,000. The Court will determine whether Ms. Becker receives a “service award” and the amount of that award. 21. What If The Court Does Not Approve The Settlement? If the Court does not approve the proposed Settlement as being fair, adequate and reasonable, the Settlement Agreement will be null and void, and all parties will be returned to their respective pre-Settlement status in the various lawsuits that the proposed Settlement hopes to resolve. 22. Where Do I Get Additional Information? This notice summarizes the proposed settlement. You can find answers to common questions about the settlement, plus other helpful information at the Settlement Administrator’s website [www.INSERTWEBADDRESS.com]. You can also get a copy of the Settlement Agreement from the website, or by writing to the Settlement Administrator at ####. If you cannot get the information you need from this notice or from the Settlement Administrator, you may contact Becker Class Counsel. Please Do Not Contact The Court Or Block For Information. BY ORDER OF THE COURT The Honorable Louis Bloom Circuit Judge Kanawha County, West Virginia Dated:                                          , 2005   --------------------------------------------------------------------------------   If You Got A Refund Anticipation Loan Through An H&R Block Office In Maryland Between January 1, 1992 And December 31, 1996, Or In Alabama from June 13, 1989 through December 31, 1996. You Could Get A Payment From A Class Action Settlement A Court Has Authorized This Notice. Please Read It, It Describes Important Rights You Have And Requires That You Make A Choice About How to Proceed. Important Dates [ILLEGIBLE] ANSWERS TO FREQUENTLY-ASKED QUESTIONS 1.   Why Did I Get This Notice?   2.   What Is This Lawsuit About?   3.   Why Is This A Class Action?   4.   Why Is There A Settlement?   5.   How Do I Know If I Am Part Of The Settlement?   6.   What Does The Settlement Provide?   7.   How Much Will My Payments Be?   8.   How Can I Get A Payment?   9.   When Would I Get My Payment?   10.   Am I Giving Anything Up To Get A Payment Or Stay In The Class?   11.   Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)?   12.   What Do I Do If I Want To Exclude Myself?   13.   When And Where Will The Court Decide Whether To Approve The Settlement?   14.   Do I Have To Come To The Hearing?   15.   What If I Do Nothing?   16.   What If I Want To Object To The Settlement?   17.   What Is the Difference Between Excluding Myself And Objecting?   18.   Who Are The Lawyers For The Class?   19.   How Will Class Counsel’s Fees And Expenses Be Paid?   20.   Does The Class Representative Get Additional Compensation?   21.   What If The Court Does Not Approve The Settlement?   22.   Where Do I Get Additional Information? -1- --------------------------------------------------------------------------------   1. Why Did I Get This Notice? You got at least one Refund Anticipation Loan (“RAL”) through an H&R Block office in Maryland between January 1, 1992 and December 31,1996, or through an H&R Block office in Alabama between June 13, 1989 and December 31, 1996. You received this notice to inform you about settlement of a class action lawsuit that may affect your rights. This notice provides information about all of your options, so that you can evaluate those options before the Court decides whether to approve the settlement. Those options include making a claim for money from the settlement (see Questions 7-9), excluding yourself from the settlement (Questions 11 & 12) or raising concerns about the fairness of the settlement (Question 16). This package explains the lawsuit, the settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the Circuit Court of Kanawha County, West Virginia (“the Court”). 2. What Is This Lawsuit About? This case combines several lawsuits that were filed against H&R Block, Inc. and various related corporations. For simplicity, the H&R Block defendants are referred to throughout the rest of this notice as simply “Block.” The cases were filed against Block in different parts of the country at different times, but all essentially make the same claim — that Block violated particular state laws in the way it made RALs available. The lawyers in these cases have filed with the Court an Amended and Consolidated Class Action Complaint (called the “Consolidated Action” from here on), which brings together all of the claims made in these cases. One of the principal claims the Consolidated Action makes is that Block violated the Credit Services Organization Acts of the affected jurisdictions, or violated similar laws. Block denies that it violated any laws, did anything wrong, or that anyone was harmed by its conduct. Block nevertheless has agreed to settle the Consolidated Action solely to avoid the burden, expense, risk and uncertainty of continuing the various lawsuits. Block and the plaintiffs in the Consolidated Actions have reached agreement on a Settlement of the claims in the Consolidated Action including claims that had been pending previously in Ohio, Maryland, and Alabama. The Settlement, if approved, would resolve all litigation involving RALs which Block sold in Alabama between June 13, 1989 and December 31, 1996, and in Maryland between January 1, 1992 and December 31, 1996. Other cases are also being settled at   --------------------------------------------------------------------------------   the same time, in the same settlement agreement, covering legal rights of individuals in a number of other jurisdictions. 3. Why Is This A Class Action? In a class action, one or more people called Class Representatives (in this case Levon Mitchell and Geral Mitchell of Alabama, and Joyce A. Green of Maryland) sue on behalf of people who have similar claims. All these people are a Class or Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. Circuit Court Judge Louis Bloom is in charge of this class action. 4. Why Is There A Settlement? The Court did not decide in favor of Block or any of the Plaintiffs in the various lawsuits. The Plaintiffs in those lawsuits think they could have won if they went to trial. Block thinks the Plaintiffs would have lost. In fact, in most cases, Block thinks that the Plaintiffs would not have even been able to continue their cases in court, because Block’s RAL contract required them to try their claims before an arbitrator. But there was no trial and no arbitration. Instead, both sides agreed to a settlement. This avoids the cost of a trial, and the people affected have an opportunity to be paid. The Class Representatives and the attorneys think the settlement is best for all Class Members. 5. How Do I Know If I Am Part Of The Settlement? You received this notice because records identified you as a Mitchell/Green class member. That means that you fit the description of the class which the Court certified for this settlement. The Court decided that everyone who fits this description is a Class Member: All Maryland residents who applied for and obtained a RAL at any H&R Block office in Maryland from January 1, 1992 through December 31, 1996 and did not thereafter apply for and obtain a RAL subject to an arbitration provision, and all individuals who obtained a RAL from June 13, 1989 through December 31, 1996 through any “H&R Block” office in Alabama for which the Settling Defendants herein received a license fee payment or portion of the finance charge, and who did not previously request exclusion from their respective classes that were previously certified or timely request exclusion from this class. There are three other classes that are part of the overall Settlement. The following classes are composed of people who live in one of the following jurisdictions and got a RAL through an H&R Block office during the specified years: a.) The Cummins Class (West Virginia residents) — January 1, 1994 to December 23, 2005;   --------------------------------------------------------------------------------   b.) The Becker Class (residents of Ohio) — January 1, 2000 to December 23, 2005 c.) The State Law Class (residents of 22 states and the District of Columbia) — January 1, 2000 through December 23, 2005: Arkansas, Arizona, California, District of Columbia, Florida, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, Nevada, Oregon, Pennsylvania, Tennessee, Utah, Virginia, Washington or Wisconsin. 6. What Does The Settlement Provide? Block has agreed to provide additional information to customers who obtain RALs and to pay a total of $62.5 million, plus costs of notice estimated at $4 million, to settle this case. The total Block will pay is called the “common fund.” You are a member of the Mitchell/Green class. Mitchell/Green class members are entitled to over $1.6 million of the $62.5 million, before deductions for the pro rata portion of administration costs, attorney’s fees and expenses relating to the Mitchell/Green class, and service fees paid to the class representatives, Joyce A. Green, Levon Mitchell and Geral Mitchell. The Cummins class members will divide $32.5 million; the State Law class will divide more than $22.5 million; and the Becker class will divide more than $5.8 million; all before the same deductions are made for administration costs, attorney’s fees and expenses, and service fees applicable to each class. Members of the different classes who submit claims will receive different amounts because each of these cases is at a different stage of proceedings, holds different risks and different chances of success. Each class settlement was negotiated based upon these differences. The four classes are represented independently. 7. How Much Will My Payments Be? In order to receive any payment, you must return a claim form (see Question 8 and the attached claim form). Every Class Member who returns a valid claim form will receive at least some distribution from the common fund. Your share of the fund will depend on the number of valid claim forms that Mitchell/Green Class Members send in and how many RALs you had. If every class member submitted a claim, your share of the common fund would be a minimum of $3.66 for each RAL you obtained during the class period. However, only a percentage of class members will actually submit claim forms. For example, if only one of every four class members return claim forms, your share of the fund would be $14.64 for each RAL you obtained ($3.66 times four). Your share will be reduced by whatever percentage of the common fund is taken up with administration costs, attorney’s fees, expenses, and service payments. It is unlikely that such costs will exceed 30%, but they could be higher or lower. Please remember that   --------------------------------------------------------------------------------   this is only an example; the amount you receive from the settlement could be greater or smaller. 8. How Can I Get A Payment? To qualify for payment, you must send in a complete and valid claim form. A claim form is attached to this Notice. You may also get a claim form from the Settlement Administrator’s website [[www.INSERTWEBADDRESS.com]]. Read the instructions carefully, fill out the form, include all the information the form asks for, sign it, and mail it so that it is postmarked no later than June 30, 2006. You may also email the claim form to the Settlement Administrator at [[email protected]]. If you email the claim form, you must do so no later than midnight on June 30, 2006. 9. When Would I Get My Payment? The Court will hold a hearing at time/date/month/2006 at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301, to decide whether to approve the settlement. If the Court approves the settlement after that, there may be appeals. It’s always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. The settlement administrator will keep the settlement website at [www.INSERTWEBADDRESS.com] updated so that everyone who is in the class may keep informed of the progress of the settlement. Please be patient. Note: It is unlikely that you will receive your payment until six months or more after the date you send in a claim form. 10. Am I Giving Up Anything To Get A Payment Or Stay In The Class? Unless you exclude yourself, also called “opting out” (see Question 12), you will be considered a member of the class, which means that you can’t sue, continue to sue, or be part of any other lawsuit against Block about the legal issues in this case. Giving up your claims is called a “release.” Unless you exclude yourself from the settlement, you will release your claims whether or not you submit a claim form and receive payment. However, certain claims are not released even if you stay in the class. All claims made in other currently existing class actions that relate to the RAL or other products and services offered by Block are not released. Claims under state law based solely on allegations that a tax preparer failed (A) to properly prepare a tax return or (B) to maintain the confidentiality of taxpayer information resulting in injury based on “stolen identity” or similar misuse of taxpayer information or theft of a RAL check; and claims to enforce the terms and conditions of the Settlement Agreement, are similarly not released. Class members who do not exclude themselves, but do not make a claim for money from this settlement may choose to arbitrate their individual claims   --------------------------------------------------------------------------------   against Block for another year after the settlement is finalized. Although Class Counsel recommend this settlement, they take no position on your likelihood of succeeding’on an individual basis in an arbitration case. You should obtain independent legal help if you need more information about the economic value of the arbitration alternative to excluding yourself or making a claim for money under the settlement. The settlement requires Block to follow certain business practices with future RALs. 11. Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)? Yes, you may “opt out” and exclude yourself from the Settlement Class. If you opt out, you will not receive any payment from the common fund, you will not release any claims you may have against Block, and you will not be bound by anything that happens in the Consolidated Action. If you opt out, you will be free to pursue whatever legal rights you may have by pursuing your own lawsuit against Block at your own risk and expense. 12. What Do I Do If I Want To Exclude Myself? In order to opt out and exclude yourself from the Settlement Class, you must mail a “Request for Exclusion” to the Settlement Administrator at address. Your Request for Exclusion must be in writing and must be postmarked no later than May 1, 2006. To be effective, a Request for Exclusion must contain: (a) the name of this case (Cummins. v. H &R Block, Inc.); (b) your name, address, social security number and telephone number; (c) a statement that you want to opt out of the lawsuit; and (d) your signature. If the Request for Exclusion is not postmarked by the deadline, you will be included automatically in the Settlement Class and you may be eligible to receive Settlement payments as summarized above. Even if you do not file a claim, you will be legally bound by the proposed Settlement, including provisions releasing Block. 13. When And Where Will The Court Decide Whether To Approve The Settlement? The Court will hold a Fairness Hearing on time/date/ at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301. At this hearing the Court will consider whether the settlement is fair, reasonable, and adequate. If there are objections, the Court will consider them. The Court will listen to people who have asked to speak at the hearing. The Court may also decide how much to pay to Class Counsel. After the hearing, the Court will decide whether to approve the settlement. We do not know how long these decisions will take. The hearing can be continued at any time by the Court without any further notice to you.   --------------------------------------------------------------------------------   14. Do I Have To Come To The Hearing? No, You are not required to attend the hearing. But you are welcome to come at your own expense. If you wish to speak, you may ask the Court for permission to speak at the Fairness Hearing. To do so, you must send a letter saying that it is your “Notice of Intention to Appear in Cummins v. H&R Block.” Be sure to include your name, address, telephone number, and your signature. Your Notice of Intention to Appear must be received no later than May 1, 2006, and be sent to the Clerk of the Court, Class Counsel, and Defense Counsel, at the addresses in Question 16. You cannot speak at the hearing if you excluded yourself, because once you exclude yourself, the settlement does not affect your rights. 15. What If I Do Nothing? If you do nothing, you’ll get no money from this settlement. But, unless you exclude yourself, you won’t be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Block about the legal issues in this case. You would, however, be able to arbitrate your claims against Block for another year, as described in Question 10. 16. What If I Want To Object To The Settlement? If you’re a Class Member who has not requested exclusion, you can object to the settlement if you don’t like it. If you wish to object, you must write a letter stating your objections, the specific reasons for each objection (including any legal support you want to bring to the Court’s attention) and a description of any evidence you wish to introduce in support of your objections. You must include your name, address, telephone number and your signature. Also include the name and number of this action (Cummins v. H&R Block, Inc., Civil Action No. 03-C-134). Your letter must be received in these four different places no later than May 1, 2006: (i) Coordinating Counsel: Brian A. Glasser, Esq. Bailey & Glasser, LLP 227 Capitol Street Charleston, WV 25301   --------------------------------------------------------------------------------         (ii) Defendants’ Counsel:           Matthew M. Neumeier   Charles R. Bailey Jenner & Block LLP   Bailey & Wyant PLLC One IBM Plaza   P.O. Box 3710 Chicago, IL 60611   Charleston, WV 25337-3710 (iii) The Court: Clerk of Court Kanawha County Circuit Court 111 Court Street Charleston, WV 25301 17. What Is The Difference Between Excluding Myself And Objecting? Excluding yourself is telling the Court that you don’t want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. Objecting is telling the Court that you don’t like something about the settlement and you don’t want the Court to approve it. You can object only if you stay in the Class. 18. Who Are The Lawyers For The Mitchell/Green Class? The Court has appointed the following law firms to represent you and other Mitchell/Green Class Members. These lawyers are called Class Counsel. If you want to be represented by your own lawyer, you may hire one at your own expense.       Steven E. Angstreich, Esq.   Steven A. Martino, Esq. Michael Coren, Esq.   Frederick T. Kuykendall, III, Esq. Carolyn C. Lindheim, Esq.   W. Lloyd Copeland, Esq. Levy Angstreich Finney Baldante   Taylor, Martino & Kuykendall Rubenstein & Coren, P.C.   51 St. Joseph Street 1616 Walnut Street, 5th Floor   Mobile, AL 36602 Philadelphia, PA 19103           Charles J. Piven, Esq.     Law Offices of Charles J. Piven, P.A.     The World Trade Center — Baltimore     401 East Pratt Street, Suite 2525     Baltimore, Maryland 21202       --------------------------------------------------------------------------------   19. How Will Class Counsel’s Fees And Expenses Be Paid? Class Counsel will make an application to the Court for approval of an award of attorneys’ fees and expenses in an amount not more than 25% of the portion of the common fund attributable to the Mitchell/Green Class. The fees would pay Class Counsel for investigating the facts, litigating the case, and negotiating the settlement. The Court will determine the amount of any fees and expenses awarded to Class Counsel. 20. Does The Class Representative Get Additional Compensation? Subject to Court approval, the named plaintiffs in the five cases which make up the Consolidated Action will seek “service awards” for their active participation in this litigation. Any such “service award” will be paid from the portions of the common fund attributable to the cases those plaintiffs brought. Joyce A. Green, Levon Mitchell and Geral Mitchell will seek a “service award” of $5,000. The Court will determine whether they receive a “service award” and the amount of that award. 21. What If The Court Does Not Approve The Settlement? If the Court does not approve the proposed Settlement as being fair, adequate and reasonable, the Settlement Agreement will be null and void, and all parties will be returned to their respective pre-Settlement status in the various lawsuits that the proposed Settlement hopes to resolve. 22. Where Do I Get Additional Information? This notice summarizes the proposed settlement. You can find answers to common questions about the settlement, plus other helpful information at the Settlement Administrator’s website [www.INSERTWEBADDRESS.com]. You can also get a copy of the Settlement Agreement from the website, or by writing to the Settlement Administrator at ####. If you cannot get the information you need from this notice or from the Settlement Administrator, you may contact Mitchell/Green Class Counsel. Please Do Not Contact The Court Or Block For Information. BY ORDER OF THE COURT The Honorable Louis Bloom Circuit Judge Kanawha County, West Virginia Dated:                                          , 2005   --------------------------------------------------------------------------------   If You Got A Refund Anticipation Loan Through An H&R Block Office Between January 1, 2000 and December 23, 2005. You Could Get A Payment From A Class Action Settlement A Court Has Authorized This Notice. Please Read It, It Describes Important Rights You Have And Requires That You Make A Choice About How to Proceed. Important Dates [ILLEGIBLE] ANSWERS TO FREQUENTLY-ASKED QUESTIONS 1. Why Did I Get This Notice? 2. What Is This Lawsuit About? 3. Why Is This A Class Action? 4. Why Is There A Settlement? 5. How Do I Know If I Am Part Of The Settlement? 6. What Does The Settlement Provide? 7. How Much Will My Payments Be? 8. How Can I Get A Payment? 9. When Would I Get My Payment? 10. Am I Giving Anything Up To Get A Payment Or Stay In The Class? 11. Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)? 12. What Do I Do If I Want To Exclude Myself? 13. When And Where Will The Court Decide Whether To Approve The Settlement? 14. Do I Have To Come To The Hearing? 15. What If I Do Nothing? 16. What If I Want To Object To The Settlement? 17. What Is the Difference Between Excluding Myself And Objecting? 18. Who Are The Lawyers For The Class? 19. How Will Class Counsel’s Fees And Expenses Be Paid? 20. Does The Class Representative Get Additional Compensation? 21. What If The Court Does Not Approve The Settlement? 22. Where Do I Get Additional Information? -1- --------------------------------------------------------------------------------   1. Why Did I Get This Notice? You got at least one Refund Anticipation Loan (“RAL”) through an H&R Block office between January 1, 2000 and December 23, 2005. You received this notice to inform you about settlement of a class action lawsuit that may affect your rights. This notice provides information about all of your options, so that you can evaluate those options before the Court decides whether to approve the settlement. Those options include making a claim for money from the settlement (see Questions 7-9), excluding yourself from the settlement (Questions 11 & 12) or raising concerns about the fairness of the settlement (Question 16). This package explains the lawsuit, the settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the Circuit Court of Kanawha County, West Virginia (“the Court”). 2. What Is This Lawsuit About? This case combines several lawsuits that were filed against H&R Block, Inc. and various related corporations. For simplicity, the H& R Block defendants are referred to throughout the rest of this notice as simply “Block.” The cases were filed against Block in different parts of the country at different times, but all essentially make the same claim — that Block violated particular state laws in the way it made RALs available. The lawyers in these cases have filed with the Court an Amended and Consolidated Class Action Complaint (called the “Consolidated Action” from here on), which brings together all of the claims made in these cases. One of the principal claims the Consolidated Action makes is that Block violated the Credit Services Organization Acts of the affected jurisdictions, or violated similar laws. Block denies that it violated any laws, did anything wrong, or that anyone was harmed by its conduct. Block nevertheless has agreed to settle the Consolidated Action solely to avoid the burden, expense, risk and uncertainty of continuing the various lawsuits. Block and the plaintiffs in the Consolidated Actions have reached agreement on a Settlement of the claims in the Consolidated Action including claims that had been pending previously in Ohio, Maryland, and Alabama. The Settlement, if approved, would resolve all litigation involving RALs which Block sold in Arkansas, Arizona, California, District of Columbia, Florida, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, Nevada, Oregon, Pennsylvania, Tennessee, Utah, Virginia, Washington and Wisconsin between January 1, 2000 and December 23, 2005.   --------------------------------------------------------------------------------   Other cases are also being settled at the same time, in the same settlement agreement, covering legal rights of individuals in a number of other jurisdictions. 3. Why Is This A Class Action? In a class action, one or more people called Class Representatives (in this case Renea Griffith, Maryanne Hoekman and Justin Sevey), sue on behalf of people who have similar claims. All these people are a Class or Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. Circuit Court Judge Louis Bloom is in charge of this class action. 4. Why Is There A Settlement? The Court did not decide in favor of Block or any of the Plaintiffs in the various lawsuits. The Plaintiffs in those lawsuits think they could have won if they went to trial. Block thinks the Plaintiffs would have lost. In fact, in most cases, Block thinks that the Plaintiffs would not have even been able to continue their cases in court, because Block’s RAL contract required them to try their claims before an arbitrator. But there was no trial and no arbitration. Instead, both sides agreed to a settlement. This avoids the cost of a trial, and the people affected have an opportunity to be paid. The Class Representatives and the attorneys think the settlement is best for all Class Members. 5. How Do I Know If I Am Part Of The Settlement? You received this notice because records identified you as a State Law class member. That means that you fit the description of the class which the Court certified for this settlement. The Court decided that everyone who fits this description is a Class Member: All residents of Arkansas, Arizona, California, District of Columbia, Florida, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, Nevada, Oregon, Pennsylvania, Tennessee, Utah, Virginia, Washington and Wisconsin who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate, or any H&R Block offices such as in Sears stores) from January 1, 2000 through December 23, 2005. There are three other classes that are part of the overall Settlement. The following classes are composed of people who live in one of the following jurisdictions and got a RAL through an H&R Block office during the specified years: a.) The Cummins Class (West Virginia residents) — January 1, 1994 to December 23, 2005;   --------------------------------------------------------------------------------   b.) The Mitchell/Green Class (residents of Maryland and Alabama) — Maryland — January 1,1992 to May 19, 2000, excluding those people who obtained RALs after 1996 whose RAL application contains an arbitration clause; Alabama — June 13, 1989 through December 31, 1996; c.) The Becker Class (residents of Ohio) — January 1, 2000 through December 23, 2005. 6. What Does The Settlement Provide? Block has agreed to provide additional information to customers who obtain RALs and to pay a total of $62.5 million, plus costs of notice estimated at $4 million, to settle this case. The total Block will pay is called the “common fund.” You are a member of the State Law Class. State Law class members are entitled to over $22.5 million of the $62.5 million, before deductions for the pro rata portion of administration costs, attorney’s fees and expenses relating to the State Law class, and service fees paid to the class representatives, Renea Griffith, Maryanne Hoekman and Justin Sevey. The Cummins class members will divide $32.5 million; the Becker class will divide over $5.8 million; and the Mitchell/Green (Maryland and Alabama) class will divide more than $1.6 million; all before the same deductions are made for administration costs, attorney’s fees and expenses, and service fees applicable to each class. Members of the different classes who submit claims will receive different amounts because each of these cases is at a different stage of proceedings, holds different risks and different chances of success. Each class settlement was negotiated based upon these differences. The four classes are represented independently. 7. How Much Will My Payments Be? In order to receive any payment, you must return a claim form (see Question 8 and the attached claim form). Every Class Member who returns a valid claim form will receive at least some distribution from the common fund. Your share of the fund will depend on the number of valid claim forms that State Law Class Members send in and how many RALs you had. If every class member submitted a claim, your share of the common fund would be a minimum of $1.67 for each RAL you obtained during the class period. However, only a percentage of class members will actually submit claim forms. For example, if only one of every four class members return claim forms, your share of the fund would be $6.68 for each RAL you obtained ($1.67 times four). Your share will be reduced by whatever percentage of the common fund is taken up with administration costs, attorney’s fees, expenses, and service payments. It is unlikely that such costs will exceed 30%, but they could be higher or lower. Please remember that this is only an example; the amount you receive from the settlement could be greater or smaller.   --------------------------------------------------------------------------------   8. How Can I Get A Payment? To qualify for payment, you must send in a complete and valid claim form. A claim form is attached to this Notice. You may also get a claim form from the Settlement Administrator’s website [[www.INSERTWEBADDRESS.com]]. Read the instructions carefully, fill out the form, include all the information the form asks for, sign it, and mail it so that it is postmarked no later than June 30, 2006. You may also email the claim form to the Settlement Administrator at [[email protected]]. If you email the claim form, you must do so no later than midnight on June 30, 2006. 9. When Would I Get My Payment? The Court will hold a hearing at time/date/month/2006 at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301, to decide whether to approve the settlement. If the Court approves the settlement after that, there may be appeals. It’s always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. The settlement administrator will keep the settlement website at [www.INSERTWEBADDRESS.com] updated so that everyone who is in the class may keep informed of the progress of the settlement. Please be patient. Note: It is unlikely that you will receive your payment until six months or more after the date you send in a claim form. 10. Am I Giving Up Anything To Get A Payment Or Stay In The Class? Unless you exclude yourself, also called “opting out” (see Question 12), you will be considered a member of the class, which means that you can’t sue, continue to sue, or be part of any other lawsuit against Block about the legal issues in this case. Giving up your claims is called a “release.” Unless you exclude yourself from the settlement, you will release your claims whether or not you submit a claim form and receive payment. However, certain claims are not released even if you stay in the class. All claims made in other currently existing class actions that relate to the RAL or other products and services offered by Block are not released. Claims under state law based solely on allegations that a tax preparer failed (A) to properly prepare a tax return or (B) to maintain the confidentiality of taxpayer information resulting in injury based on “stolen identity” or similar misuse of taxpayer information or theft of a RAL check; and claims to enforce the terms and conditions of the Settlement Agreement, are similarly not released. Class members who do not exclude themselves, but do not make a claim for money from this settlement may choose to arbitrate their individual claims against Block for another year after the settlement is finalized. Although Class Counsel recommend this settlement, they take no position on your likelihood of succeeding on an individual basis in an arbitration case. You should obtain   --------------------------------------------------------------------------------   independent legal help if you need more information about the economic value of the arbitration alternative to excluding yourself or making a claim for money under the settlement. The settlement requires Block to follow certain business practices with future RALs, and provides Block with an incentive to register as a Credit Service Organization (“CSO”) in the jurisdictions covered by the settlement. Block has two years to decide whether to register and come into compliance with the various CSO statutes. Important: If you decide to go back to Block to obtain a RAL during the two-year period Block has to register as a CSO in the various jurisdictions, and Block does register and comply with your jurisdiction’s CSO statute in that two-year period, then you will not be able to sue Block for any new RAL violation that you claim happened during the two-year period. But, if Block does not register as a CSO and comply with the CSO statute in your jurisdiction, you will be able to sue based on any new RAL violation that you claimed happened during that period. In addition, any deadline on when you can sue Block (called the “statute of limitations”) will be suspended for the two-year period. 11. Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)? Yes, you may “opt out” and exclude yourself from the Settlement Class. If you opt out, you will not receive any payment from the common fund, you will not release any claims you may have against Block, and you will not be bound by anything that happens in the Consolidated Action. If you opt out, you will be free to pursue whatever legal rights you may have by pursuing your own lawsuit against Block at your own risk and expense. 12. What Do I Do If I Want To Exclude Myself? In order to opt out and exclude yourself from the Settlement Class, you must mail a “Request for Exclusion” to the Settlement Administrator at address. Your Request for Exclusion must be in writing and must be postmarked no later than May 1, 2006. To be effective, a Request for Exclusion must contain: (a) the name of this case (Cummins. v. H & R Block, Inc.); (b) your name, address, social security number and telephone number; (c) a statement that you want to opt out of the lawsuit; and (d) your signature. If the Request for Exclusion is not postmarked by the deadline, you will be included automatically in the Settlement Class and you may be eligible to receive Settlement payments as summarized above. Even if you do not file a claim, you will be legally bound by the proposed Settlement, including provisions releasing Block.   --------------------------------------------------------------------------------   13. When And Where Will The Court Decide Whether To Approve The Settlement? The Court will hold a Fairness Hearing on time/date/ at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301. At this hearing the Court will consider whether the settlement is fair, reasonable, and adequate. If there are objections, the Court will consider them. The Court will listen to people who have asked to speak at the hearing. The Court may also decide how much to pay to Class Counsel. After the hearing, the Court will decide whether to approve the settlement. We do not know how long these decisions will take. The hearing can be continued at any time by the Court without any further notice to you. 14. Do I Have To Come To The Hearing? No. You are not required to attend the hearing. But you are welcome to come at your own expense. If you wish to speak, you may ask the Court for permission to speak at the Fairness Hearing. To do so, you must send a letter saying that it is your “Notice of Intention to Appear in Cummins v. H&R Block.” Be sure to include your name, address, telephone number, and your signature. Your Notice of Intention to Appear must be received no later than May 1, 2006, and be sent to the Clerk of the Court, Class Counsel, and Defense Counsel, at the addresses in Question 16. You cannot speak at the hearing if you excluded yourself, because once you exclude yourself, the settlement does not affect your rights. 15. What If I Do Nothing? If you do nothing, you’ll get no money from this settlement. But, unless you exclude yourself, you won’t be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Block about the legal issues in this case. You would, however, be able to arbitrate your claims against Block for another year, as described in Question 10. 16. What If I Want To Object To The Settlement? If you’re a Class Member who has not requested exclusion, you can object to the settlement if you don’t like it. If you wish to object, you must write a letter stating your objections, the specific reasons for each objection (including any legal support you want to bring to the Court’s attention) and a description of any evidence you wish to introduce in support of your objections. You must include your name, address, telephone number and your signature. Also include the name and number of this action (Cummins v. H & R Block, Inc., Civil Action No. 03-C-134). Your letter must be received in these four different places no later than May 1, 2006: (i) Coordinating Counsel: Brian A.Glasser, Esq.   --------------------------------------------------------------------------------         Bailey & Glasser, LLP     227 Capitol Street     Charleston, WV 25301           (ii) Defendants’ Counsel:           Matthew M. Neumeier   Charles R. Bailey Jenner & Block LLP   Bailey & Wyant PLLC One IBM Plaza   P.O. Box 3710 Chicago, IL 60611   Charleston, WV 25337-3710       (iii) The Court:           Clerk of Court     Kanawha County Circuit Court     111 Court Street     Charleston, WV 25301     17. What Is The Difference Between Excluding Myself And Objecting? Excluding yourself is telling the Court that you don’t want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. Objecting is telling the Court that you don’t like something about the settlement and you don’t want the Court to approve it. You can object only if you stay in the Class. 18. Who Are The Lawyers For The State Law Class? The Court has appointed the following law firms to represent you and other State Law Class Members. These lawyers are called Class Counsel. If you want to be represented by your own lawyer, you may hire one at your own expense.       Daniel Hume, Esq.   Ronald L. Futterman, Esq. Kirby Mclnerney & Squire. LLP   Michael l. Behn, Esq. 830 Third Avenue, 10th Floor   William W. Thomas, Esq. New York, NY 10022   Futterman & Howard, Chtd.     122 S. Michigan Ave. Suite 1850 Michael B. Hyman, Esq.   Chicago, IL 60603 William H. London, Esq.     Much Shelist Freed Denenberg     Ament & Rubenstein, P.C.     191 North Wacker, Suite 1800     Chicago, IL 60606       --------------------------------------------------------------------------------   19. How Will Class Counsel’s Fees And Expenses Be Paid? Class Counsel will make an application to the Court for approval of an award of attorneys’ fees and expenses in an amount not more than 25% of the portion of the common fund attributable to the State Law Class. The fees would pay Class Counsel for investigating the facts, litigating the case, and negotiating the settlement. The Court will determine the amount of any fees and expenses awarded to Class Counsel. 20. Does The Class Representative Get Additional Compensation? Subject to Court approval, the named plaintiffs in the five cases which make up the Consolidated Action will seek “service awards” for their active participation in this litigation. Any such “service award” will be paid from the portions of the common fund attributable to the cases those plaintiffs brought. Renea Griffith, Maryanne Hoekman and Justin Sevey will seek a “service award” of $5,000. The Court will determine whether they receive “service awards” and the amount of their award. 21. What If The Court Does Not Approve The Settlement? If the Court does not approve the proposed Settlement as being fair, adequate and reasonable, the Settlement Agreement will be null and void, and all parties will be returned to their respective pre-Settlement status in the various lawsuits that the proposed Settlement hopes to resolve. 22. Where Do I Get Additional Information? This notice summarizes the proposed settlement. You can find answers to common questions about the settlement, plus other helpful information at the Settlement Administrator’s website [www.INSERTWEBADDRESS.com]. You can also get a copy of the Settlement Agreement from the website, or by writing to the Settlement Administrator at ####. If you cannot get the information you need from this notice or from the Settlement Administrator, you may contact State Law Class Counsel. Please Do Not Contact The Court Or Block For Information. BY ORDER OF THE COURT The Honorable Louis Bloom Circuit Judge Kanawha County, West Virginia Dated:                                          , 2005   --------------------------------------------------------------------------------   3   --------------------------------------------------------------------------------   SUMMARY NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION AND HEARING If You Got A Refund Anticipation Loan From H&R Block This Notice Concerns Settlement Of A Lawsuit Which May Affect You      This Notice is given pursuant to Rule 23 of the West Virginia Rules of Civil Procedure and the December___, 2005 Order of the Circuit Court of Kanawha County, West Virginia (“Court”) in a case called Cummins v. H&R Block, Inc., Civil Action No. 03-C-134. A settlement has been proposed in a class action lawsuit about the way that H&R Block offered refund anticipation loans (“RALs”). If you qualify, you may send in a claim form to get money, you can exclude yourself from the settlement, or you can object to it. The Circuit Court Of Kanawha County, West Virginia (“the Court”) authorized this notice. Before any money is paid, the Court will have a hearing to decide whether to approve the settlement. What Is The Lawsuit About?      The lawsuit claimed that H&R Block violated certain state laws in the way it offered RALs. H&R Block denies that it did anything wrong. The Court did not decide which side was right. But both sides agreed to the settlement to resolve the case and get benefits to RAL customers. The two sides disagree on how much money could have been won if the RAL customers who brought the suit had won at a trial. Who Is Included In The Settlement?      You are a Class Member if you got a RAL through an H&R Block office between 2000 and 2005 and live in one of the following jurisdictions:      Arkansas, Arizona, California, District of Columbia, Florida, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, Nevada, Oregon, Pennsylvania, Tennessee, Utah, Virginia, Washington or Wisconsin.      You are also a Class Member if you live in one of the following states and got a RAL through an H&R Block office during the specified years:      West Virginia — 1994 through 2005      Maryland — 1992 through 1996      Alabama — June 13, 1989 through 1996      Ohio — 2000 through 2005 How Do I Ask For A Payment?      You can get a detailed notice about the settlement and your rights to claim money under it at [www.INSERTWEBADDRESS.com] or by calling toll free 1-800-000-0000. This detailed notice and claim form package contains everything you need. The quickest way to get the notice and claim form package is to visit the Settlement Administrator’s website:      [www.INSERTWEBADDRESS.com]      To qualify for a payment, you must send in a claim form. Claim forms must be postmarked by June 30, 2006. What Are Your Other Options?      If you decide to remain a member of the settlement class but do not submit a claim form, you will not receive any money from the settlement but you will still be entitled to pursue an individual claim against Block in an arbitration forum for a period of one year. If you don’t want to be legally bound by the settlement, you must exclude yourself by May 1, 2006, or you won’t be able to sue, or continue to sue, H&R Block about the legal claims in this case in any forum. If you exclude yourself, you can’t get money from this settlement. If you stay in the settlement, you may object to it by May 1, 2006. The detailed notice explains how to exclude yourself or object. The Court will hold a hearing in this case on day/date/2006, to consider whether to approve the settlement and a request by the eight law firms representing the different Class Members for an award of attorneys’ fees and costs for investigating the facts, litigating the case, and negotiating the settlement. You may ask to appear at the hearing, but you don’t have to. For more information, call the Settlement Administrator toll free at 1-800-000-0000, visit the website [www.INSERTWEBADDRESS.com], or write to the Settlement Administrator at address. Please do not contact the Court or Block for information.   --------------------------------------------------------------------------------   F   --------------------------------------------------------------------------------   Exhibit F A. Ohio Class is comprised of approximately 1,577,473 RALS and the settlement is no less than $5,800,000. B. Alabama/Maryland* Class is comprised of approximately 441,284 RALs as follows for no less than $1.616.000.   1.   Maryland — 189,686     2.   Alabama — 251,598 C. State Law Class is comprised of approximately 13,493,522 RALs as follows for up to $22,584,000 where each RAL is equally weighted.   1.   Arkansas — 336,382     2.   Arizona — 456,772     3.   California — 2,267,362     4.   District of Columbia — 42,854     5.   Florida — 1,507,174     6.   Illinois — 1,098,554     7.   Indiana — 910,136     8.   Massachusetts — 368,334     9.   Maryland — 256,781     10.   Maine — 135,277     11.   Michigan — 1,095,482     12.   Minnesota — 233,535     13.   Missouri — 643,164     14.   Nebraska — 159,615     15.   New Hampshire — 130,004     16.   Nevada — 192,080     17.   Oregon — 171,786     18.   Pennsylvania — 990,962     19.   Tennessee — 997,321     20.   Utah — 120,315     21.   Virginia — 670,956     22.   Washington — 334,123     23.   Wisconsin — 334,553   * Based on best available data   --------------------------------------------------------------------------------   G   --------------------------------------------------------------------------------   (HSBC LOGO) [c03790c0379001.gif] APPLICATION FOR A REFUND ANTICIPATION LOAN AND A REFUND ACCOUNT       Applicant’s Name   Applicant’s Social Security/Taxpayer Identification #                               ,                     ,                           Joint Applicant’s Name   Joint Applicant’s Social Security/Taxpayer Identification #                               ,                     ,                          I am applying for a Refund Anticipation Loan (“RAL”) from HSBC Bank USA, National Association (“HSBC”) in the maximum amount for which HSBC will approve me. In this application (“Application”), “ERO” means each of H&R Block, Inc. and each of its affiliates and subsidiaries (and franchisees thereof); “Transmitter” means my electronic tax return transmitter, which may be the same as my ERO; and “IRS” means the Internal Revenue Service. 1. IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. TO HELP THE GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT, WHAT THIS MEANS FOR ME: WHEN I OPEN AN ACCOUNT, YOU WILL ASK FOR MY NAME, ADDRESS, DATE OF BIRTH, AND OTHER INFORMATION THAT WILL ALLOW YOU TO IDENTIFY ME. I MAY ALSO BE ASKED TO PRODUCE MY DRIVER’S LICENSE OR OTHER IDENTIFYING DOCUMENTS. 2. Collections. In consideration of the ease and convenience of the following method of paying any delinquent debt I owe or the other applicant owes to HSBC Taxpayer Financial Services Inc. (“HSBC TFS”), my ERO or Transmitter for prior years, or Bank One, River City Bank, First Security Bank, Republic Bank, Santa Barbara Bank & Trust or First Bank of Delaware (the “Other RAL Lenders”), and provided that such debt has not been discharged in bankruptcy, I authorize and direct the repayment of such debt, calculated as of the date of my Application, by means of (a) having such debt deducted from the proceeds of my RAL, or (b) having my request for new loan proceeds denied or the amount for which I have applied reduced and having such debt repaid to those entities by offset or otherwise from my tax refund directly transmitted into my Refund Account with HSBC. If I owe delinquent debt to more than one of the entitles listed above, I authorize and direct HSBC to pay such debts in the following order: HSBC TFS, Other RAL Lenders, and ERO. I also authorize and instruct HSBC, HSBC TFS, and the Other RAL Lenders to disclose to each other information about their respective credit experiences concerning my present and prior RALs, Refund Anticipation Checks (“RACs”) or similar financial services, and my prior tax returns. PLEASE NOTE: If I have delinquent debt, I understand that HSBC or its servicer may be acting as a debt collector to collect a debt and that any information obtained will be used for that purpose. By signing below, I am indicating that I fully understand that I am applying for a loan and that I have read, understand and agree to the terms set forth in this Application above and on the following pages, including but not limited to: (a) Section 2 in which I agree that HSBC may use amounts received from my tax refund to pay certain delinquent debts; and (b) Section 11 in which I agree, upon my or HSBC’s election, to arbitrate any Claims that I may have. I also acknowledge that I have 30 days from today’s date to reject the Arbitration Provision by following the procedure described in Section 11. If I receive a RAL, I promise to pay the amount set forth in the “Total of Payments” section on my Loan Agreement and Disclosure Statement or subsequent replacement TILA Disclosure Statement, if any, on demand or when the anticipated refund from the IRS is electronically deposited into my refund account, whichever comes first, and I agree to repay the RAL whether or not my tax refund is paid in whole or in part to HSBC.             (Applicant — Primary Taxpayer Signature)   Date             (Joint Applicant — Spouse Signature, If Joint Return)   Date             Witness     HSBC Toll-Free Customer Service Number 1-800-524-0628 or visit us on the web at hsbctfshrb.com for more information. HSBC COPY   --------------------------------------------------------------------------------   3. Applicable Law. This Application and all the other documents executed in connection with this Application or my RAL (collectively, “Documents”) shall be governed by and construed, interpreted, and enforced in accordance with federal law and, to the extent state law applies, the law of the State of Delaware (without reference to conflict of laws principles). 4. Important Information About RALs. I understand that: (a) I can file my federal income tax return electronically without obtaining a RAL; (b) the IRS will send me a refund check or electronically deposit my refund to my existing bank account: (c) the IRS normally sends a refund check by mail within 3 weeks after an electronic filing; (d) the IRS normally makes an electronic deposit in an average of about 12 days after an electronic filing; (e) HSBC tries to make proceeds of an instant RAL available on the day of application and a Classic RAL available on the first business day after application; (f) HSBC cannot guarantee when any proceeds of a RAL or an IRS refund will be available to me: and (g) a RAL may cost substantially more than other sources of credit, and I may want to consider using other sources of credit. 5. Deposit Authorization. (a) After I sign my Application, my ERO and/or my Transmitter will electronically transmit my tax return to the IRS and my Application to HSBC, I understand that I will sign or authorize an IRS Transmittal Form 8453 or IRS e-file signature authorization (“Deposit Authorization”) as part of my Application and electronic tax filing, and that the Deposit Authorization and this Application provide an irrevocable agreement to have my tax refund disbursed to HSBC, and irrevocably transfers to HSBC all of my rights, title, and interest in the proceeds of my tax refund for purposes of the RAL I have requested and other purposes authorized by this Application. (b) If my Application is denied or cancelled, and HSBC receives my tax refund, HSBC will forward to me promptly any proceeds of my refund after deducting amounts permitted by this Agreement. (c) If for any reason, any part of the anticipated tax refund is disallowed or offset by the IRS, or if I should receive a refund check in the mail, I will advise HSBC immediately and promptly pay HSBC any amounts owing with respect to my Application or a RAL, and pay my ERO and/or my Transmitter any fees owed to them involving my tax return. 6. Refund Account. (a) I request that a Refund Account be opened at HSBC upon receipt of my tax refund for the purposes of ensuring the repayment of my RAL and other amounts described in the Documents. The Annual Percentage Yield and interest rate on the Refund Account will be 0%. This means I will not receive any interest on funds in the Refund Account. I understand that I cannot make withdrawals from the Refund Account and that the funds in the Refund Account will be disbursed only as expressly provided in the Documents. (b) HSBC may deduct any amounts I owe HSBC, my ERO, my Transmitter or their affiliates from my tax refund, any funds received in the Refund Account, and any proceeds of a RAL. My engagement with the ERO for services in connection with my 2004 income tax return will end, and I am required to pay all fees to the ERO for services rendered by the ERO, when I pick up my check for a RAL (or when HSBC electronically transfers my proceeds to me or to another entity at my direction). If a check or an electronic transfer of proceeds is not made available to me because I do not receive a tax refund, then I am required to pay all fees to the ERO for services rendered by the ERO on demand, HSBC also may withdraw amounts deposited into the Refund Account from my tax refund to pay any check I receive for a RAL that I endorse and present for payment or to disburse money to me in accordance with my Application. (c) I will not receive a periodic statement for the Refund Account, but I will receive notice if funds in the Refund Account are not sufficient to repay my RAL or are used for any purpose other than repayment of my RAL or disbursement to me. HSBC may, immediately after disbursement of all funds in the Refund Account, close the account without further notice to or authorization from me. 7. Refund Account Fee. I will pay HSBC a fee of $24.95 for the administration of the Refund Account and any disbursements to me from that account (“Refund Account Fee”), I irrevocably commit to pay the Refund Account Fee after the Deposit Authorization is filed with the IRS regardless of whether (a) I apply for a RAL or (b) my Application is approved or denied. The Refund Account Fee is not imposed directly or indirectly as an incident to or condition of any extension of credit. I can avoid the Refund Account Fee if I direct that my tax refund not be deposited to HSBC before filing my Deposit Authorization with the IRS. 8. No Fiduciary/Agency Duty. I understand that for various fees received, my ERO is acting only at my tax preparer (if applicable), my electronic filer and the deliverer of checks for RALs with respect to this RAL transaction. I understand that an affiliate of my ERO may purchase an interest in my RAL issued by HSBC. I further understand that my ERO is not acting in a fiduciary, confidential, or agency capacity with respect to me in connection with this transaction and has no other duties to me beyond the preparation of my tax return (if applicable), the transmission of my tax return information to HSBC, the electronic filing of my tax return with the IRS, and the delivery of checks for RALs. I acknowledge that I have independently evaluated and decided to apply for a RAL, and that I am not relying on any recommendation from my ERO. I also understand that HSBC is not acting in a fiduciary, confidential, or agency capacity with respect to me in connection with this transaction.   --------------------------------------------------------------------------------   9. Disclosure Information. (a) “Information” means my 2004 federal and state income tax returns, any information obtained in connection with my tax return (including information relating to a possible offset of my tax refund or the possibility that my tax return is incorrect), and any information relating to my Application or a RAL, RAC, or similar financial service I have received or requested from HSBC. (b) “Authorized Parties” means HSBC, HSBC TFS, my ERO, my Transmitter, and their respective affiliates and agents, and includes the Fraud Service Bureau operated for HSBC. (c) The Authorized Parties may share Information to process my Application, to determine whether to provide a RAL, to provide RALs to me, to collect delinquent RALs, RACs, or ERO fees, to prevent fraud, and to otherwise administer or promote the program for RALs and RACs. (d) The Authorized Parties may disclose information to the IRS, state tax agencies and other financial institutions that provide RALs, RACs, or other financial services. (e) The Authorized Parties may call, or input my Information on any website of, the IRS or state tax agencies, in connection with my Application to, among other things, determine the status of my tax return. The IRS and state tax agencies may disclose information about me and my tax returns to the Authorized Parties. (f) My ERO may not use or disclose Information for any purpose, except as permitted under Treas. Reg. Sec. 301.7216-2 or as provided in this Application. (g) I consent to HSBC sharing information as provided in the Privacy Statement. 10. Service Fees. (a) Reissued Check Fee: I agree to pay $10 each time that a check is reissued at my request for any reason. If I request that such a check be sent by overnight mail, I agree to pay the charges for sending it by overnight mail. (b) Document Fees If I ask HSBC to provide me with a copy of my Application, loan agreement, billing statement or other document HSBC may charge me $10 per document. 11. Arbitration Provision. Any claim, dispute or controversy between me and HSBC (as specifically defined below for purposes of this Arbitration Provision), whether in contract or tort (intentional or otherwise), whether pre-existing, present or future, and including constitutional, statutory, common law, regulatory, and equitable claims in any way relating to (a) any of these or any other Documents or any RAL or RAC that I have previously requested or received from HSBC, (b) advertisements, promotions, or oral or written statements related to this or any other Application for a RAL or any RAL or RAC that I have previously requested or received from HSBC, (c) the relationship of HSBC and me relating to any of these or any other Documents or any RAL or RAC that I have previously requested or received from HSBC; and (d) except as provided below, the validity, enforceability or scope of this Arbitration Provision or any part thereof, including but not limited to, the issue whether any particular claim, dispute or controversy must be submitted to arbitration (collectively the “Claim”), shall be resolved, upon the election of either me or HSBC, by binding arbitration pursuant to this Arbitration Provision and the applicable rules of the American Arbitration Association (“AAA”) or the National Arbitration Forum (“NAF”) in effect at the time the Claim is filed. I shall have the right to select one of these arbitration administrators (the “Administrator”). The arbitrator must be a lawyer with more than ten (10) years of experience or a retired or former judge. In the event of a conflict between this Arbitration Provision and the rules of the Administrator, this Arbitration Provision shall govern. In the event of a conflict between this Arbitration Provision and the balance of this Application or any other Documents, this Arbitration Provision shall govern. Notwithstanding any language in this Arbitration Provision to the contrary, no arbitration may be administered, without the consent of all parties to the arbitration, by any organization that has in place a formal or informal policy that is inconsistent with and purports to override the terms of this Arbitration Provision, including the Class Action Wavier Provision defined below.      HSBC hereby agrees not to invoke its right to arbitrate an individual Claim I may bring in small claims court or an equivalent court, if any, so long as the Claim is pending only in that court. No class actions or private attorney general actions in court or in arbitration or joinder or consolidation of claims in court or in arbitration with other persons, are permitted without the consent of HSBC and me. The validity and effect of the preceding sentence (herein referred to as the “Class Action Waiver Provision”) shall be determined exclusively by a court and not by the Administrator or any arbitrator. Neither the Administrator nor any arbitrator shall have the power or authority to waive, modify or fail to enforce the Class Action Waiver Provision, and any attempt to do so, whether by rule, policy, arbitration decision or otherwise, shall be invalid and unenforceable.      Any arbitration hearing that I attend will take place in a location that is reasonably convenient for me. On any Claim I file, I will pay the first $50.00 of the filing fee. At my request, HSBC will pay the remainder of the filing fee and any administrative or hearing fees charged by the Administrator, up to $1,500.00 on any Claim asserted by me in the arbitration. If I should be required to pay any additional fees to the Administrator, HSBC will consider a request by me to pay all or part of the additional fees; however, HSBC shall not be obligated to pay any additional fees unless the arbitrator grants me an award. If the arbitrator grants an award in my favor, HSBC will reimburse me for any additional fees paid or owed by me to the Administrator up to the amount of the fees that would have been charged if the original Claim had been for the amount of the actual award in my favor. If the arbitrator issues an award in HSBC’s favor, I will not be required to reimburse HSBC for any fees HSBC has previously paid to the Administrator or for which HSBC is responsible.      This Arbitration Provision is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16 (the “FAA”). The arbitrator shall apply substantive law consistent with the FAA, and not by any state law concerning arbitration. The arbitrator shall follow and apply applicable substantive law to the HSBC COPY   --------------------------------------------------------------------------------   extent consistent with the FAA, statutes of limitation and claims of privilege and shall be authorized to award all remedies permitted by applicable substantive law, including, without limitation, compensatory, statutory and punitive damages, declaratory, injunctive and other equitable relief and attorneys’ fees and costs. The arbitrator will follow rules of procedure and evidence consistent with the FAA, this Arbitration Provision and, to the extent consistent with this Arbitration Provision, the Administrator’s rules Upon request of either party, the arbitrator shall prepare a short reasoned written opinion supporting the arbitration award. Judgment upon the award may be entered in any court having jurisdiction. The arbitrator’s award will be final and binding except for: (a) any appeal right under the FAA: and (b) any appeal of Claims involving more than $100,000. For such Claims, any party may appeal the award to a three-arbitrator panel appointed by the Administrator, which will reconsider de novo (i.e., in its entirety) any aspect or all aspects of the initial award that is appealed. The panel’s decision will be final and binding, except for any appeal right under the FAA. Unless applicable law provides otherwise, the appealing party will pay the appeal’s costs (i.e., the amounts owed to the Administrator and the arbitrators), regardless of its outcome. However, HSBC will consider in good faith any reasonable request for HSBC to bear up to the full costs of the appeal. Nothing in this Arbitration Provision shall be construed to prevent HSBC’s use of offset or other contractual rights involving payment of my income tax refund or other amount on deposit with HSBC to pay off any RAL, RAC, or similar financial service, or ERO or other foes, now or thereafter owed by me to HSBC or any Other RAL Lender or ERO or third party pursuant to the Documents or similar prior documents.      I ACKNOWLEDGE THAT I HAVE A RIGHT TO LITIGATE CLAIMS IN COURT BEFORE A JUDGE OR JURY, BUT I PREFER TO RESOLVE ANY SUCH CLAIMS THROUGH ARBITRATION AND HEREBY KNOWINGLY AND VOLUNTARILY WAIVE MY RIGHTS TO LITIGATE SUCH CLAIMS IN COURT BEFORE A JUDGE OR JURY, UPON ELECTION OF ARBITRATION BY HSBC OR BY ME. I ACKNOWLEDGE THAT I WILL NOT HAVE THE RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OF CLAIMANTS OR AS A PRIVATE ATTORNEY GENERAL PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION. I UNDERSTAND THAT, IF I AM A MEMBER OF THE PUTATIVE CLASS IN CUMMINS, ET AL. V. H&R BLOCK, INC., ET AL., CASE NO. 03-C-134 IN THE CIRCUIT COURT OF KANAWHA COURT, WV. THIS ARBITRATION CLAUSE MAY NOT ACT AS A WAIVER OF THE RIGHTS AND CLAIMS I MAY HAVE IN THAT ACTION.      This Arbitration Provision shall supersede all prior Arbitration Provisions contained in any previous RAL or RAC application or related agreement and shall survive repayment of any RAL or RAC and termination of my accounts: provided, however, that if I reject this Arbitration Provision as set below, any prior Arbitration Provisions shall remain in full force and effect. If any portion of this Arbitration Provision is deemed invalid or unenforceable, it will not invalidate the remaining portions of this Arbitration Provision. However, if a determination is made that the Class Action Waiver Provision is unenforceable, this Arbitration Provision (other than this sentence) and any prior Arbitration Provision shall be null and void.      To reject this Arbitration Provision, I must send HSBC, c/o HSBC Taxpayer Financial Services Inc., Account Research, P.O. Box 18097, Jacksonville, FL 32229, a signed writing (“Rejection Notice”) that is received within thirty (30) days after the date I sign this Application. The Rejection Notice must identify the transaction involved and must include my name, address, and social security number and must be signed by all persons signing this Application as Applicant(s). I may send the Rejection Notice in any manner I see fit as long as it is received at the specified address within the specified time. No other methods can be used to reject the Arbitration Agreement. If the Rejection Notice is sent on my behalf by a third party, such third party must include evidence of his or her authority to submit the Rejection Notice on my behalf.      As used in this Arbitration Provision, the term “HSBC” shall mean HSBC Bank USA, National Association. HSBC TFS, Household Bank, f.s.b., Beneficial National Bank, and H&R Block, Inc., and each of their parents, wholly or majority-owned subsidiaries, affiliates, or predecessors, successors, assigns and the franchisees of any of them, and each of their officers, directors, agents, and employees.      Contacting the Administrator: If I have a question about the arbitration Administrator mentioned in this Arbitration Provision or if I would like to obtain a copy of its arbitration rules, I can contact the Administrator as follows: American Arbitration Association, 335 Madison Avenue, New York, NY 10017, www.adr.org; National Arbitration Forum, P.O. Box 50191, Minneapolis, MN 55405, www.arb-forum.com. 12. Survival. The provisions of this Application shall survive the execution of the Loan Agreement and Disclosure Statement and the disbursement of funds. 13. Miscellaneous. (a) References to “I” or “me” or “my” in the Documents shall refer individually to each applicant for a RAL and to both applicants, and the obligations of such individuals under the Documents will be joint and several, The filing of an injured spouse form shall not relieve either applicant of any such obligations under the Documents. (b) If any provision of the Documents or part thereof is deemed invalid, such invalidity will not affect any other provision of the Documents or part thereof. (c) HSBC may obtain a consumer report on me, and other information from third parties, in connection with   --------------------------------------------------------------------------------   evaluating my Application, or collecting or reviewing my RAL or accounts. (d) HSBC may assign all or a portion of any rights or obligations relating to a RAL to a third party, including HSBC TFS, my ERO, an affiliate of my ERO, a franchiser of my ERO, or an affiliate of HSBC, without notice to me or my consent. (e) Supervisory personnel of HSBC or its agents may listen to and record my telephone calls. (f) I agree that you may send any notices and billing statements to the address of the primary applicant and not to the address of the joint applicant if such address is different. (g) I agree HSBC may transfer, sell, participate or assign all or a portion of my RAL, and its rights, duties and obligations relating to my RAL, to third parties, including HSBC TFS, its affiliates, successors and assigns without notice to me or my consent. 14. State Notices. California residents: Married persons may apply for a separate account. Lowa Residents: NOTICE TO CONSUMER: 1. Do not sign this paper before you read it. 2. You are entitled to a copy of this paper. 3. You may prepay the unpaid balance at any time without penalty and may be entitled to receive a refund of unearned charges in accordance with the law. New York residents: Consumer reports may be requested in connection with this account or any updates, renewals, or extensions thereof. Upon my request, HSBC will inform me of the names and addresses of any consumer reporting agencies which have provided HSBC with such reports. Ohio residents: The Ohio law against discrimination requires that all creditors make credit equally available to all creditworthy customers, and that credit reporting agencies maintain separate credit histories on each individual upon request. The Ohio Civil Rights commission administers compliance with these laws. Pennsylvania residents: If this loan becomes in default, HSBC or its assignee intends to collect default charges. Utah residents: Any prepaid finance charge not exceeding 5% of the original amount of the loan shall be fully earned on the date the loan is extended, and shall be nonrefundable in the event the loan is repaid prior to the date it is due. Any additional prepaid finance charge is earned proportionally over the term of the loan, and, in the event of such prepayment, the unearned portion of such charge, calculated on a pro rata basis according to the remaining term of the loan, shall be refunded. Wisconsin residents: No provision of a marital property agreement, a unilateral statement under Wisconsin Stats. s. 766.59 or a court decree under Wisconsin Stats. s. 766.70 adversely affects the interest of the creditor unless the creditor, prior to the time the credit is granted, is furnished a copy of the agreement, statement or decree or has actual knowledge of the adverse provision when the obligation to the creditor is incurred. All obligations described herein are being incurred in the interest of my marriage or family. A married Wisconsin resident applicant must mail the name and address of his or her spouse, as well as the applicant’s name and social security number, to HSBC c/o HSBC Taxpayer Services, 200 Somerset Corporate Blvd., Bridgewater, NJ 08807, within two days. 15. Certification. I certify that the following information is true with respect to the RAL I am requesting: (1) I do not owe any tax due and/or any tax liens from prior tax years, nor have I previously filed a 2004 federal income tax return. (2) I do not have any delinquent child support, alimony payments, student loans, V.A. loans or other federally sponsored loans. (3) Presently, I do not have a petition (whether voluntary or involuntary) filed nor do I anticipate filing a petition under federal bankruptcy laws. (4) I have not had a RAL with any lender from a prior year that has been discharged in bankruptcy. (5) I have not paid any estimated tax and/or did not have any amount of my 2003 refund applied to my 2004 tax return. (6) I am not presently making regular payments to the IRS for prior year unpaid taxes. (7) I do not have a Power of Attorney presently in effect or on file with the Internal Revenue Service (“IRS”) to direct my federal income tax refund to any third party. (8) I am not filing a 2004 federal Income tax return using a substitute W-2, Form 4852, or any other form of substitute wage and tax documentation, unless the source of the Form 4852 is a Military Leave and Earnings Statement. (9) I am not filing a Form 8862 (Earned Income Credit Eligibility) with my 2004 federal income tax return. (10) I am not currently incarcerated in a state or federal prison nor do I have 2004 income earned while an inmate at a penal institution and claiming the Earned Income Credit. (11) The 2004 income I have reported is not solely from Schedule C or C-EZ (Profit or Loss from Business). (12) If Schedule C is present and EIC claimed, and return is self-prepared or other prepared, I am a statutory employee and the W-2 indicates statutory employee in Box 15. (13) I am not filing Form 8379 (Injured Spouse Claim & Allocation) with my 2004 federal income tax return. (14) I am not filing Form 1310 (Statement of Person Claiming Refund Due Deceased Taxpayer) with the 2004 federal income tax return or filing a federal income tax return Form 1040 on behalf of deceased taxpayer. (15) I do not have an amount paid with request for an extension to file on Line 68, Field 1190 of Form 1040. (16) Everything that I have stated in this Application is correct. HSBC COPY   --------------------------------------------------------------------------------   HSBC TAXPAYER FINANCIAL SERVICES DIVISION OF HSBC BANK USA, NATIONAL ASSOCIATION Privacy Statement Applicability This Privacy Statement only applies to customers’ accounts with the HSBC Taxpayer Financial Services division of HSBC Bank USA, National Association (“HSBC”). All other HSBC accounts are governed by the HSBC Bank USA National Association Personal Banking Policy. Introduction — Our Commitment to You HSBC is proud to be part of a financial services organization that has been providing superior products and services to its customers for many years. We greatly appreciate the trust that you and millions of customers have placed in us, and we will protect that trust by continuing to respect the privacy of all our applicants and customers even if our formal customer relationship ends. How We Handle Information we Obtain It is important for you to know that in order to ensure that our customers get the very best service and the highest quality products, HSBC collects demographic information (like your name and address) and credit information (like information related to your accounts with us and others). This information comes either directly from you, for instance, from your application and transactions on your account; or, it may come from an outside source such as your credit bureau report. In addition, if you visit our Internet web site, we may collect certain information about your Internet usage. Because some of the information we gather is not publicly available, we take great care to ensure that this information is kept safe from unauthorized access, and we would never share the information in violation of any regulation or law. Because we respect your privacy and we value your trust, the only employees or companies who can access your private personal information are those who use it to service your account or provide services to you or to us. HSBC diligently maintains physical, electronic and procedural safeguards that comply with applicable federal standards to guard your private personal information and to assist us in preventing unauthorized access to that information. How We Share Information with Companies Affiliated with Us From time to time, for general business purposes such as fraud control, or when we think it may benefit you, we do share certain information with our affiliated companies, except as prohibited by applicable law. These affiliated companies all provide financial services, such as banking, consumer finance, insurance, mortgage, and brokerage services. Some examples include companies doing business under the names Household, Beneficial, or HSBC. We may also share certain information with non-financial service providers that become affiliated with us in the future (such as travel, auto, or shopping clubs), except us prohibited by applicable law. The information we share might come from your application, for instance your name, address, telephone number, social security number, and e-mail address. Also, the information we share could include your transactions with us or our affiliated companies (such as your account balance, payment history, and parties to the transaction), your Internet usage, or your credit card usage. Except for Vermont residents, the information we share could also include your assets, income, or credit reports. How We Share Information under a Joint Marketing Agreement We may also provide information to non-affiliated financial companies (such as a tax preparer, mortgage banker or insurance service provider) with whom we have a joint marketing agreement. The sharing of information with these types of companies is permitted by law. The information we may share also comes from the sources described above and might include your name, address, phone number, and account experience with us. How We Share Information with Other Third Parties Except for California or Vermont residents, we also may share information with non-affiliated companies that are able to extend special offers we feel might be of value to you. These companies may be financial services providers (such as mortgage bankers or insurance agents) or they may be non-financial companies (such as retailers, tax preparers, or marketing companies). These offers are typically for products and services that you might not otherwise hear about. The information we may provide them comes from the sources described above and might include your name, address and phone number. You may tell us not to share information with non-affiliated companies in this way by completing the form below. For California and Vermont residents, applicable law requires us to obtain your permission in order to share information about you in this way, and we have chosen not to share your information in this way.   --------------------------------------------------------------------------------   We may also provide information to non-affiliated companies that perform operational, collection, or fraud control services related to your account. The sharing of information with these types of companies is permitted by law. Such a company might include a financial company (such as an insurance service provider) or a non-financial company (such as a data processor or internet service provider) with whom we have an agreement. The information we may share also comes from the sources described above and might include your name, address, phone number, and account experience with us. Finally, we provide information about you to non-affiliated companies such as credit reporting agencies and companies which provide services related to your account. This information sharing is also permitted by law. We reserve the right to change our privacy practices at any time in accordance with applicable law. Notice of such changes will be provided if required by applicable law. How to Opt-Out (non-affiliated companies) (Applicable to residents of all states except California and Vermont) If you do not want us to share your private information with non-affiliated companies (unless we are permitted or required by law to do so), please let us know by simply calling 1-800-365-2641. If you have previously informed us of your preference, you do not need to do so again. We will be happy to comply with your “opt-out” request, which will only apply to the HSBC account you have designated on the form by account number. An opt-out request by any party on a joint account will apply to all parties on the joint account .Opt-out requests will not apply to information sharing that is permitted by law. Please allow sufficient time for us to process your request, How to Opt-Out (affiliated companies) (Applicable to residents of all states except Vermont) If you do not want us to share your credit information (such as your credit bureau information) with companies that are affiliated with us, please let us know by simply calling 1-800-365-2641. If you have previously informed us of your preference, you do not need to do so again. This request will not apply to information about your transactions or experience with HSBC (such as account information, account usage, or payment history), except as required by law, and will only apply to the HSBC account you have designated on the form by account number. An opt-out request by any party on a joint account will apply to all parties on the joint account.   Atenciòn clientes hispanoparlantes: Esta Declaraciòn Sobre la Privacidad proporciona informaciòn sobre còmo manejamos informaciòn personal no publica acerca de nuestors clientes, las circunstancias bajo’las cuales podemos compartir tal informaciòn con otras personas, y còmo usted puede pedir que no compartamos esa informaciòn con terceros que no sean afillados nuestros. Si quisiera que le proporcionemos una traducciòn al espafiol de la Declaraciòn Sobre la Privacidad en su totalidad, sirvase comunicarse con nosotros llamàndonos gratis al 1-800-365-2641. HSBC COPY   --------------------------------------------------------------------------------   H   --------------------------------------------------------------------------------   SUMMARY NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION AND HEARING If You Got A Refund Anticipation Loan From H&R Block This Notice Concerns Settlement Of A Lawsuit Which May Affect You      This Notice is given pursuant to Rule 23 of the West Virginia Rules of Civil Procedure and the December                     , 2005 Order of the Circuit Court of Kanawha County, West Virginia (“Court”) in a case called Cummins v. H&R Block, Inc., Civil Action No. 03-C-134. A settlement has been proposed in a class action lawsuit about the way that H&R Block offered refund anticipation loans (“RALs”). If you qualify, you may send in a claim form to get money, you can exclude yourself from the settlement, or you can object to it. The Circuit Court Of Kanawha County, West Virginia (“the Court”) authorized this notice. Before any money is paid, the Court will have a hearing to decide whether to approve the settlement. What Is The Lawsuit About?      The lawsuit claimed that H&R Block violated certain state laws in the way it offered RALs. H&R Block denies that it did anything wrong. The Court did not decide which side was right. But both sides agreed to the settlement to resolve the case and get benefits to RAL customers. The two sides disagree on how much money could have been won if the RAL customers who brought the suit had won at a trial. Who Is Included In The Settlement?      You are a Class Member if you got a RAL through an H&R Block office between 2000 and 2005 and live in one of the following jurisdictions:      Arkansas, Arizona, California, District of Columbia, Florida, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, Nevada, Oregon, Pennsylvania, Tennessee, Utah, Virginia, Washington or Wisconsin.      You are also a Class Member if you live in one of the following states and got a RAL through an H&R Block office during the specified years: West Virginia — 1994 through 2005 Maryland — 1992 through 1996 Alabama — June 13, 1989 through 1996 Ohio — 2000 through 2005 How Do I Ask For A Payment?      You can get a detailed notice about the settlement and your rights to claim money under it at [www.INSERTWEBADDRESS.com] or by calling toll free 1-800-000-0000. This detailed notice and claim form package contains everything you need. The quickest way to get the notice and claim form package is to visit the Settlement Administrator’s website:      [www.INSERTWEBADDRESS.com]      To qualify for a payment, you must send in a claim form. Claim forms must be postmarked by June 30, 2006. What Are Your Other Options?      If you decide to remain a member of the settlement class but do not submit a claim form, you will not receive any money from the settlement but you will still be entitled to pursue an individual claim against Block in an arbitration forum for a period of one year. If you don’t want to be legally bound by the settlement, you must exclude yourself by May 1, 2006, or you won’t be able to sue, or continue to sue, H&R Block about the legal claims in this case in any forum. If you exclude yourself, you can’t get money from this settlement. If you stay in the settlement, you may object to it by May 1, 2006. The detailed notice explains how to exclude yourself or object. The Court will hold a hearing in this case on day/date/2006, to consider whether to approve the settlement and a request by the eight law firms representing the different Class Members for an award of attorneys’ fees and costs for investigating the facts, litigating the case, and negotiating the settlement. You may ask to appear at the hearing, but you don’t have to. For more information, call the Settlement Administrator toll free at 1-800-000-0000, visit the website [www.INSERTWEBADDRESS.com], or write to the Settlement Administrator at address. Please do not contact the Court or Block for information.   --------------------------------------------------------------------------------   If You Got A Refund Anticipation Loan Through An H&R Block Office Between January 1, 1994 and December 23, 2005. You Could Get A Payment From A Class Action Settlement A Court Has Authorized This Notice. Please Read It, It Describes Important Rights You Have And Requires That You Make A Choice About How to Proceed. Important Dates To receive a payment from the settlement your Claim Form (attached) must be postmarked no later than June 30, 2006 (See Question 8). If you prefer to exclude yourself from the settlement (“opt out”), your request must be postmarked no later than May 1, 2006 (See Question 12). Any notice of appearance or objections must be received by May 1, 2006 (See Question 16). Date of Fairness Hearing: day/month/2006 (See Question 13). ANSWERS TO FREQUENTLY-ASKED QUESTIONS       1. Why Did I Get This Notice? 12.  What Do I Do If I Want To Exclude Myself?       2. What Is This Lawsuit About? 13.  When And Where Will The Court Decide Whether To Approve The Settlement?       3. Why Is This A Class Action? 14.  Do I Have To Come To The Hearing?       4. Why Is There A Settlement? 15.  What If I Do Nothing?       5. How Do I Know If I Am Part Of The Settlement? 16.  What If I Want To Object To The Settlement?       6. What Does The Settlement Provide? 17.  What Is the Difference Between Excluding Myself And Objecting?       7. How Much Will My Payments Be? 18.  Who Are The Lawyers For The Class?       8. How Can I Get A Payment? 19.  How Will Class Counsel’s Fees And Expenses Be Paid?       9. When Would I Get My Payment? 20.  Does The Class Representative Get Additional Compensation?       10. Am I Giving Anything Up To Get A Payment Or Stay In The Class? 21.  What If The Court Does Not Approve The Settlement?       11. Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)? 22.  Where Do I Get Additional Information? -1- --------------------------------------------------------------------------------   1. Why Did I Get This Notice? You got at least one Refund Anticipation Loan (“RAL”) through an H&R Block office between January 1,1994 and December 23, 2005. You received this notice to inform you about settlement of a class action lawsuit that may affect your rights. This notice provides information about all of your options, so that you can evaluate those options before the Court decides whether to approve the settlement. Those options include making a claim for money from the settlement (see Questions 7-9), excluding yourself from the settlement (Questions 11 & 12) or raising concerns about the fairness of the settlement (Question 16). This package explains the lawsuit, the settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the Circuit Court of Kanawha County, West Virginia (“the Court”). 2. What Is This Lawsuit About? This case combines several lawsuits that were filed against H&R Block, Inc. and various related corporations. For simplicity, the H& R Block defendants are referred to throughout the rest of this notice as simply “Block.” The cases were filed against Block in different parts of the country at different times, but all essentially make the same claim — that Block violated particular state laws in the way it made RALs available. The lawyers in these cases have filed with the Court an Amended and Consolidated Class Action Complaint (called the “Consolidated Action” from here on), which brings together all of the claims made in these cases. One of the principal claims the Consolidated Action makes is that Block violated the Credit Services Organization Acts of the affected jurisdictions, or violated similar laws. Block denies that it violated any laws, did anything wrong, or that anyone was harmed by its conduct. Block nevertheless has agreed to settle the Consolidated Action solely to avoid the burden, expense, risk and uncertainty of continuing the various lawsuits. Block and the plaintiffs in the Consolidated Actions have reached agreement on a Settlement of the claims in the Consolidated Action including claims that had been pending previously in Ohio, Maryland, and Alabama. The Settlement, if approved, would resolve all litigation involving RALs which Block sold in West Virginia between January 1,1994 and December 23, 2005. Other cases are also being settled at the same time, in the same settlement agreement, covering legal rights of individuals in a number of other jurisdictions.   --------------------------------------------------------------------------------   3. Why Is This A Class Action? In a class action, one or more people called Class Representatives (in this case Deadra D. Cummins, Ivan Bell and LaDonna Bell), sue on behalf of people who have similar claims. All these people are a Class or Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. Circuit Court Judge Louis Bloom is in charge of this class action. 4. Why Is There A Settlement? The Court did not decide in favor of Block or any of the Plaintiffs in the various lawsuits. The Plaintiffs in those lawsuits think they could have won if they went to trial. Block thinks the Plaintiffs would have lost. In fact, in most cases, Block thinks that the Plaintiffs would not have even been able to continue their cases in court, because Block’s RAL contract required them to try their claims before an arbitrator. But there was no trial and no arbitration. Instead, both sides agreed to a settlement. This avoids the cost of a trial, and the people affected have an opportunity to be paid. The Class Representatives and the attorneys think the settlement is best for all Class Members. 5. How Do I Know If I Am Part Of The Settlement? You received this notice because records identified you as a Cummins class member. That means that you fit the description of the class which the Court certified for this settlement. The Court decided that everyone who fits this description is a Class Member: All West Virginia residents who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate, or any H&R Block offices such as in Sears stores) from January 1,1994 through December 23, 2005, who did not previously request exclusion from the Cummins class, other than those persons who previously requested exclusion from the Cummins class, subsequently obtained a RAL through any Settling Defendant or Affiliate in 2005. There are three other classes that are part of the overall Settlement. The following classes are composed of people who live in one of the following jurisdictions and got a RAL through an H&R Block office during the specified years: a.) The Becker Class (Ohio residents) — January 1,2000 to December 23, 2005; b.) The Mitchell/Green Class (residents of Maryland and Alabama) — Maryland — January 1,1992 to May 19, 2000, excluding those people who obtained RALs   --------------------------------------------------------------------------------   after 1996 whose RAL application contains an arbitration clause; Alabama - June 13, 1989 through December 31, 1996; c.) The State Law Class (residents of 22 states and the District of Columbia) - January 1, 2000 through December 23, 2005: Arkansas, Arizona, California, District of Columbia, Florida, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, Nevada, Oregon, Pennsylvania, Tennessee, Utah, Virginia, Washington or Wisconsin. 6. What Does The Settlement Provide? Block has agreed to provide additional information to customers who obtain RALs and to pay a total of $62.5 million, plus costs of notice estimated at $4 million, to settle this case. The total Block will pay is called the “common fund.” You are a member of the Cummins class. Cummins class members are entitled to $32.5 million of the $62.5 million, before deductions for the pro rata portion of administration costs, attorney’s fees and expenses relating to the Cummins Class, and service fees paid to the class representatives, Deadra D. Cummins, Ivan Bell and LaDonna Bell. The State Law class will divide more than $22.5 million; the Becker class will divide more than $5.8 million; and the Mitchell/Green (Maryland and Alabama) class will divide over $1.6 million; all before the same deductions are made for administration costs, attorney’s fees and expenses, and service fees applicable to each class. Members of the different classes who submit claims will receive different amounts because each of these cases is at a different stage of proceedings, holds different risks and different chances of success. Each class settlement was negotiated based upon these differences. The four classes are represented independently. 7. How Much Will My Payments Be? In order to receive any payment, you must return a claim form (see Question 8 and the attached claim form). Every Class Member who returns a valid claim form will receive at least some distribution from the common fund. Your share of the fund will depend on the number of valid claim forms that Cummins Class Members send in and how many RALs you had. If every class member submitted a claim, your share of the common fund would be a minimum of $60.90 for each RAL you obtained during the class period. However, only a percentage of class members will actually submit claim forms. For example, if one of every two class members return claim forms, your share of the fund would be $121.80 for each RAL you obtained ($60.90 times two). Please remember that this is only an example; the amount you receive from the settlement could be greater or smaller. Your share will be reduced by whatever percentage of the common fund is taken up with administration costs, attorney’s fees, expenses, and service payments. It is unlikely that such costs will exceed 35%, but they   --------------------------------------------------------------------------------   could be higher or lower. The maximum amount any class member can receive is $175 for each RAL obtained during the class period. 8. How Can I Get A Payment? To qualify for payment, you must send in a complete and valid claim form. A claim form is attached to this Notice. You may also get a claim form from the Settlement Administrator’s website [[www.INSERTWEBADDRESS.com]]. Read the instructions carefully, fill out the form, include all the information the form asks for, sign it, and mail it so that it is postmarked no later than June 30, 2006. You may also email the claim form to the Settlement Administrator at [claims@ INSERTWEBADDRESS.com]. If you email the claim form, you must do so no later than midnight on June 30, 2006. 9. When Would I Get My Payment? The Court will hold a hearing at time/date/month/2006 at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301, to decide whether to approve the settlement. If the Court approves the settlement after that, there may be appeals. It’s always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. The settlement administrator will keep the settlement website at [www.INSERTWEBADDRESS.com] updated so that everyone who is in the class may keep informed of the progress of the settlement. Please be patient. Note: It is unlikely that you will receive your payment until six months or more after the date you send in a claim form. 10. Am I Giving Up Anything To Get A Payment Or Stay In The Class? Unless you exclude yourself, also called “opting out” (see Question 12), you will be considered a member of the class, which means that you can’t sue, continue to sue, or be part of any other lawsuit against Block about the legal issues in this case. Giving up your claims is called a “release.” Unless you exclude yourself from the settlement, you will release your claims whether or not you submit a claim form and receive payment. However, certain claims are not released even if you stay in the class. All claims made in other currently existing class actions that relate to the RAL or other products and services offered by Block are not released. Claims under state law based solely on allegations that a tax preparer failed (A) to properly prepare a tax return or (B) to maintain the confidentiality of taxpayer information resulting in injury based on “stolen identity” or similar misuse of taxpayer information or theft of a RAL check; and claims to enforce the terms and conditions of the Settlement Agreement, are similarly not released. Class members who do not exclude themselves, but do not make a claim for money from this settlement may choose to arbitrate their individual claims   --------------------------------------------------------------------------------   against Block for another year after the settlement is finalized. Although Class Counsel recommend this settlement, they take no position on your likelihood of succeeding on an individual basis in an arbitration case. You should obtain independent legal help if you need more information about the economic value of the arbitration alternative to excluding yourself or making a claim for money under the settlement. The settlement requires Block to follow certain business practices with future RALs, and provides Block with an incentive to register as a Credit Service Organization (“CSO”) in the jurisdictions covered by the settlement. Block has two years to decide whether to register and come into compliance with the various CSO statutes. Important: If you decide to go back to Block to obtain a RAL during the two-year period Block has to register as a CSO in the various jurisdictions, and Block does register and comply with your jurisdiction’s CSO statute in that two-year period, then you will not be able to sue Block for any new RAL violation that you claim happened during the two-year period. But, if Block does not register as a CSO and comply with the CSO statute in your jurisdiction, you will be able to sue based on any new RAL violation that you claimed happened during that period. In addition, any deadline on when you can sue Block (called the “statute of limitations”) will be suspended for the two-year period. 11. Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)? Yes, you may “opt out” and exclude yourself from the Settlement Class. If you opt out, you will not receive any payment from the common fund, you will not release any claims you may have against Block, and you will not be bound by anything that happens in the Consolidated Action. If you opt out, you will be free to pursue whatever legal rights you may have by pursuing your own lawsuit against Block at your own risk and expense. 12. What Do I Do If I Want To Exclude Myself? In order to opt out and exclude yourself from the Settlement Class, you must mail a “Request for Exclusion” to the Settlement Administrator at address. Your Request for Exclusion must be in writing and must be postmarked no later than May 1, 2006. To be effective, a Request for Exclusion must contain: (a) the name of this case (Cummins, v. H&R Block, Inc.); (b) your name, address, social security number and telephone number; (c) a statement that you want to opt out of the lawsuit; and (d) your signature. If the Request for Exclusion is not postmarked by the deadline, you will be included automatically in the Settlement Class and you may be eligible to receive Settlement payments as summarized above. Even if you do not file a claim, you will be legally bound by the proposed Settlement, including provisions releasing Block.   --------------------------------------------------------------------------------   13. When And Where Will The Court Decide Whether To Approve The Settlement? The Court will hold a Fairness Hearing on time/date/at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301. At this hearing the Court will consider whether the settlement is fair, reasonable, and adequate. If there are objections, the Court will consider them. The Court will listen to people who have asked to speak at the hearing. The Court may also decide how much to pay to Class Counsel. After the hearing, the Court will decide whether to approve the settlement. We do not know how long these decisions will take. The hearing can be continued at any time by the Court without any further notice to you. 14. Do I Have To Come To The Hearing? No. You are not required to attend the hearing. But you are welcome to come at your own expense. If you wish to speak, you may ask the Court for permission to speak at the Fairness Hearing. To do so, you must send a letter saying that it is your “Notice of Intention to Appear in Cummins v. H&R Block.” Be sure to include your name, address, telephone number, and your signature. Your Notice of Intention to Appear must be received no later than May 1, 2006, and be sent to the Clerk of the Court, Class Counsel, and Defense Counsel, at the addresses in Question 16. You cannot speak at the hearing if you excluded yourself, because once you exclude yourself, the settlement does not affect your rights. 15. What If I Do Nothing? If you do nothing, you’ll get no money from this settlement. But, unless you exclude yourself, you won’t be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Block about the legal issues in this case. You would, however, be able to arbitrate your claims against Block for another year, as described in Question 10. 16. What If I Want To Object To The Settlement? If you’re a Class Member who has not requested exclusion, you can object to the settlement if you don’t like it. If you wish to object, you must write a letter stating your objections, the specific reasons for each objection (including any legal support you want to bring to the Court’s attention) and a description of any evidence you wish to introduce in support of your objections. You must include your name, address, telephone number and your signature. Also include the name and number of this action (Cummins v. H &R Block, Inc., Civil Action No. 03-C-134). Your letter must be received in these four different places no later than May 1, 2006: (i) Coordinating Counsel: Brian A.Glasser, Esq.   --------------------------------------------------------------------------------   Bailey & Glasser, LLP 227 Capitol Street Charleston, WV 25301       (ii) Defendants’ Counsel:           Matthew M. Neumeier   Charles R. Bailey Jenner & Block LLP   Bailey & Wyant PLLC One IBM Plaza   P.O. Box 3710 Chicago, IL 60611   Charleston, WV 25337-3710 (iii) The Court: Clerk of Court Kanawha County Circuit Court 111 Court Street Charleston, WV 25301 17. What Is The Difference Between Excluding Myself And Objecting? Excluding yourself is telling the Court that you don’t want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. Objecting is telling the Court that you don’t like something about the settlement and you don’t want the Court to approve it. You can object only if you stay in the Class. 18. Who Are The Lawyers For The Cummins Class? The Court has appointed the following law firm to represent you and other Cummins Class Members. These lawyers are called Class Counsel. If you want to be represented by your own lawyer, you may hire one at your own expense. Brian A. Glasser H.F. Salsbery John W. Barrett Eric B. Snyder Bailey & Glasser LLP 227 Capitol Street Charleston, WV 25301 19. How Will Class Counsel’s Fees And Expenses Be Paid? Class Counsel will make an application to the Court for approval of an award of attorneys’ fees and expenses in an amount not more than one-third of the portion of the common fund attributable to the Cummins Class. The fees would pay Class Counsel for investigating the facts, litigating the case, and negotiating   --------------------------------------------------------------------------------   the settlement. The Court will determine the amount of any fees and expenses awarded to Class Counsel. 20. Does The Class Representative Get Additional Compensation? Subject to Court approval, the named plaintiffs in the five cases which make up the Consolidated Action will seek “service awards” for their active participation in this litigation. Any such “service award” will be paid from the portions of the common fund attributable to the cases those plaintiffs brought. The Cummins class representatives will seek a service award in an amount to be determined by the Court. 21. What If The Court Does Not Approve The Settlement? If the Court does not approve the proposed Settlement as being fair, adequate and reasonable, the Settlement Agreement will be null and void, and all parties will be returned to their respective pre-Settlement status in the various lawsuits that the proposed Settlement hopes to resolve. 22. Where Do I Get Additional Information? This notice summarizes the proposed settlement. You can find answers to common questions about the settlement, plus other helpful information at the Settlement Administrator’s website [www.INSERTWEBADDRESS.com]. You can also get a copy of the Settlement Agreement from the website, or by writing to the Settlement Administrator at ####. If you cannot get the information you need from this notice or from the Settlement Administrator, you may contact Cummins Class Counsel.      Please Do Not Contact The Court Or Block For information. BY ORDER OF THE COURT The Honorable Louis Bloom Circuit Judge Kanawha County, West Virginia Dated:                     , 2005   --------------------------------------------------------------------------------   If You Got A Refund Anticipation Loan Through An H&R Block Office Between January 1, 2000 And December 23, 2005, You Could Get A Payment From A Class Action Settlement A Court Has Authorized This Notice. Please Read It, It Describes Important Rights You Have And Requires That You Make A Choice About How to Proceed. Important Dates To receive a payment from the settlement your Claim Form (attached) must be postmarked no later than June 30, 2006 (See Question 8). If you prefer to exclude yourself from the settlement (“opt out”), your request must be postmarked no later than May 1, 2006 (See Question 12). Any notice of appearance or objections must be received by May 1, 2006 (See Question 16). Date of Fairness Hearing: day/month/2006 (See Question 13).       ANSWERS TO FREQUENTLY-ASKED QUESTIONS       1. Why Did I Get This Notice? 12.  What Do I Do If I Want To Exclude Myself?       2. What Is This Lawsuit About? 13.  When And Where Will The Court Decide Whether To Approve The Settlement?       3. Why Is This A Class Action? 14.  Do I Have To Come To The Hearing?       4. Why Is There A Settlement? 15.  What If I Do Nothing?       5. How Do I Know If I Am Part Of The Settlement? 16.  What If I Want To Object To The Settlement?       6. What Does The Settlement Provide? 17.  What Is the Difference Between Excluding Myself And Objecting?       7. How Much Will My Payments Be? 18.  Who Are The Lawyers For The Class?       8. How Can I Get A Payment? 19.  How Will Class Counsel’s Fees And Expenses Be Paid?       9. When Would I Get My Payment? 20.  Does The Class Representative Get Additional Compensation?       10. Am I Giving Anything Up To Get A Payment Or Stay In The Class? 21.  What If The Court Does Not Approve The Settlement? -1- --------------------------------------------------------------------------------           11.  Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)?   22. Where Do I Get Additional Information? 1. Why Did I Get This Notice? You got at least one Refund Anticipation Loan (“RAL”) through an H&R Block office between January 1, 2000 and December 23, 2005. You received this notice to inform you about settlement of a class action lawsuit that may affect your rights. This notice provides information about all of your options, so that you can evaluate those options before the Court decides whether to approve the settlement. Those options include making a claim for money from the settlement (see Questions 7-9), excluding yourself from the settlement (Questions 11 & 12) or raising concerns about the fairness of the settlement (Question 16). This package explains the lawsuit, the settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the Circuit Court of Kanawha County, West Virginia (“the Court”). 2. What Is This Lawsuit About? This case combines several lawsuits that were filed against H&R Block, Inc. and various related corporations. For simplicity, the H& R Block defendants are referred to throughout the rest of this notice as simply “Block.” The cases were filed against Block in different parts of the country at different times, but all essentially make the same claim – that Block violated particular state laws in the way it made RALs available. The lawyers in these cases have filed with the Court an Amended and Consolidated Class Action Complaint (called the “Consolidated Action” from here on), which brings together all of the claims made in these cases. One of the principal claims the Consolidated Action makes is that Block violated the Credit Services Organization Acts of the affected jurisdictions, or violated similar laws. Block denies that it violated any laws, did anything wrong, or that anyone was harmed by its conduct. Block nevertheless has agreed to settle the Consolidated Action solely to avoid the burden, expense, risk and uncertainty of continuing the various lawsuits. Block and the plaintiffs in the Consolidated Actions have reached agreement on a Settlement of the claims in the Consolidated Action including claims that had been pending previously in Ohio, Maryland, and Alabama. The Settlement, if approved, would resolve all litigation involving RALs which Block sold in Ohio between January 1, 2000 and December 23, 2005. Other cases are also being settled at the same time, in the same settlement agreement, covering legal rights of individuals in a number of other jurisdictions.   --------------------------------------------------------------------------------   3. Why Is This A Class Action? In a class action, one or more people called Class Representatives (in this case Lynn Becker), sue on behalf of people who have similar claims. All these people are a Class or Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. Circuit Court Judge Louis Bloom is in charge of this class action. 4. Why Is There A Settlement? The Court did not decide in favor of Block or any of the Plaintiffs in the various lawsuits. The Plaintiffs in those lawsuits think they could have won if they went to trial. Block thinks the Plaintiffs would have lost. In fact, in most cases, Block thinks that the Plaintiffs would not have even been able to continue their cases in court, because Block’s RAL contract required them to try their claims before an arbitrator. But there was no trial and no arbitration. Instead, both sides agreed to a settlement. This avoids the cost of a trial, and the people affected have an opportunity to be paid. The Class Representative and the attorneys think the settlement is best for all Class Members. 5. How Do I Know If I Am Part Of The Settlement? You received this notice because records identified you as a Becker class member. That means that you fit the description of the class which the Court certified for this settlement. The Court decided that everyone who fits this description is a Class Member: All Ohio residents who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate, as defined herein, or any H&R Block offices such as in Sears stores) from January 1, 2000 through December 23, 2005. There are three other classes that are part of the overall Settlement. The following classes are composed of people who live in one of the following jurisdictions and got a RAL through an H&R Block office during the specified years: a.) The Cummins Class (West Virginia residents) — January 1, 1994 to December 23, 2005; b.) The Mitchell/Green Class (residents of Maryland and Alabama) — Maryland — January 1, 1992 to May 19, 2000, excluding those people who obtained RALs after 1996 whose RAL application contains an arbitration clause; Alabama — June 13, 1989 through December 31, 1996;   --------------------------------------------------------------------------------   c.) The State Law Class (residents of 22 states and the District of Columbia) — January 1, 2000 through December 23, 2005: Arkansas, Arizona, California, District of Columbia, Florida, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, Nevada, Oregon, Pennsylvania, Tennessee, Utah, Virginia, Washington or Wisconsin. 6. What Does The Settlement Provide? Block has agreed to provide additional information to customers who obtain RALs and to pay a total of $62.5 million, plus costs of notice estimated at $4 million, to settle this case. The total Block will pay is called the “common fund.” You are a member of the Becker class. Becker class members are entitled to more than $5.8 million of the $62.5 million, before deductions for the pro rata portion of administration costs, attorney’s fees and expenses relating to the Becker Class, and service fees paid to the class representative, Lynn Becker. The Cummins class members will divide $32.5 million; the State Law class will divide more than $22.5 million; and the Mitchell/Green (Maryland and Alabama) class will divide more than $1.6 million; all before the same deductions are made for administration costs, attorney’s fees and expenses, and service fees applicable to each class. Members of the different classes who submit claims will receive different amounts because each of these cases is at a different stage of proceedings, holds different risks and different chances of success. Each class settlement was negotiated based upon these differences. The four classes are represented independently. 7. How Much Will My Payments Be? In order to receive any payment, you must return a claim form (see Question 8 and the attached claim form). Every Class Member who returns a valid claim form will receive at least some distribution from the common fund. Your share of the fund will depend on the number of valid claim forms that Becker Class Members send in and how many RALs you had. If every class member submitted a claim, your share of the common fund would be a minimum of $3.66 for each RAL you obtained during the class period. However, only a percentage of class members will actually submit claim forms. For example, if only one of every four class members return claim forms, your share of the fund would be $14.64 for each RAL you obtained ($3.66 times four). Your share will be reduced by whatever percentage of the common fund is taken up with administration costs, attorney’s fees, expenses, and service payments. It is unlikely that such costs will exceed 30%, but they could be higher or lower. Please remember that this is only an example; the amount you receive from the settlement could be greater or smaller.   --------------------------------------------------------------------------------   8. How Can I Get A Payment? To qualify for payment, you must send in a complete and valid claim form. A claim form is attached to this Notice. You may also get a claim form from the Settlement Administrator’s website [[www.INSERTWEBADDRESS.com]]. Read the instructions carefully, fill out the form, include all the information the form asks for, sign it, and mail it so that it is postmarked no later than June 30, 2006. You may also email the claim form to the Settlement Administrator at [claims@ INSERTWEBADDRESS.com]. If you email the claim form, you must do so no later than midnight on June 30, 2006. 9. When Would I Get My Payment? The Court will hold a hearing at time/date/month/2006 at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301, to decide whether to approve the settlement. If the Court approves the settlement after that, there may be appeals. It’s always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. The settlement administrator will keep the settlement website at [www.INSERTWEBADDRESS.com] updated so that everyone who is in the class may keep informed of the progress of the settlement. Please be patient. Note: It is unlikely that you will receive your payment until six months or more after the date you send in a claim form. 10. Am I Giving Up Anything To Get A Payment Or Stay In The Class? Unless you exclude yourself, also called “opting out” (see Question 12), you will be considered a member of the class, which means that you can’t sue, continue to sue, or be part of any other lawsuit against Block about the legal issues in this case. Giving up your claims is called a “release.” Unless you exclude yourself from the settlement, you will release your claims whether or not you submit a claim form and receive payment. However, certain claims are not released even if you stay in the class. All claims made in other currently existing class actions that relate to the RAL or other products and services offered by Block are not released. Claims under state law based solely on allegations that a tax preparer failed (A) to properly prepare a tax return or (B) to maintain the confidentiality of taxpayer information resulting in injury based on “stolen identity” or similar misuse of taxpayer information or theft of a RAL check; and claims to enforce the terms and conditions of the Settlement Agreement, are similarly not released. Class members who do not exclude themselves, but do not make a claim for money from this settlement may choose to arbitrate their individual claims against Block for another year after the settlement is finalized. Although Class Counsel recommend this settlement, they take no position on your likelihood of succeeding on an individual basis in an arbitration case. You should obtain   --------------------------------------------------------------------------------   independent legal help if you need more information about the economic value of the arbitration alternative to excluding yourself or making a claim for money under the settlement. The settlement requires Block to follow certain business practices with future RALs, and provides Block with an incentive to register as a Credit Service Organization (“CSO”) in the jurisdictions covered by the settlement. Block has two years to decide whether to register and come into compliance with the various CSO statutes. Important: If you decide to go back to Block to obtain a RAL during the two-year period Block has to register as a CSO in the various jurisdictions, and Block does register and comply with your jurisdiction’s CSO statute in that two-year period, then you will not be able to sue Block for any new RAL violation that you claim happened during the two-year period. But, if Block does not register as a CSO and comply with the CSO statute in your jurisdiction, you will be able to sue based on any new RAL violation that you claimed happened during that period. In addition, any deadline on when you can sue Block (called the “statute of limitations”) will be suspended for the two-year period. 11. Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)? Yes, you may “opt out” and exclude yourself from the Settlement Class. If you opt out, you will not receive any payment from the common fund, you will not release any claims you may have against Block, and you will not be bound by anything that happens in the Consolidated Action. If you opt out, you will be free to pursue whatever legal rights you may have by pursuing your own lawsuit against Block at your own risk and expense. 12. What Do I Do If I Want To Exclude Myself? In order to opt out and exclude yourself from the Settlement Class, you must mail a “Request for Exclusion” to the Settlement Administrator at address. Your Request for Exclusion must be in writing and must be postmarked no later than May 1, 2006. To be effective, a Request for Exclusion must contain: (a) the name of this case (Cummins, v. H & R Block, Inc.); (b) your name, address, social security number and telephone number; (c) a statement that you want to opt out of the lawsuit; and (d) your signature. If the Request for Exclusion is not postmarked by the deadline, you will be included automatically in the Settlement Class and you may be eligible to receive Settlement payments as summarized above. Even if you do not file a claim, you will be legally bound by the proposed Settlement, including provisions releasing Block.   --------------------------------------------------------------------------------   13. When And Where Will The Court Decide Whether To Approve The Settlement? The Court will hold a Fairness Hearing on time/date/ at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301. At this hearing the Court will consider whether the settlement is fair, reasonable, and adequate. If there are objections, the Court will consider them. The Court will listen to people who have asked to speak at the hearing. The Court may also decide how much to pay to Class Counsel. After the hearing, the Court will decide whether to approve the settlement. We do not know now long these decisions will take. The hearing can be continued at any time by the Court without any further notice to you. 14. Do I Have To Come To The Hearing? No. You are not required to attend the hearing. But you are welcome to come at your own expense. If you wish to speak, you may ask the Court for permission to speak at the Fairness Hearing. To do so, you must send a letter saying that it is your “Notice of Intention to Appear in Cummins v. H&R Block.” Be sure to include your name, address, telephone number, and your signature. Your Notice of Intention to Appear must be received no later than May 1, 2006, and be sent to the Clerk of the Court, Class Counsel, and Defense Counsel, at the addresses in Question 16. You cannot speak at the hearing if you excluded yourself, because once you exclude yourself, the settlement does not affect your rights. 15. What If I Do Nothing? If you do nothing, you’ll get no money from this settlement. But, unless you exclude yourself, you won’t be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Block about the legal issues in this case. You would, however, be able to arbitrate your claims against Block for another year, as described in Question 10. 16. What If I Want To Object To The Settlement? If you’re a Class Member who has not requested exclusion, you can object to the settlement if you don’t like it. If you wish to object, you must write a letter stating your objections, the specific reasons for each objection (including any legal support you want to bring to the Court’s attention) and a description of any evidence you wish to introduce in support of your objections. You must include your name, address, telephone number and your signature. Also include the name and number of this action (Cummins v. H & R Block, Inc., Civil Action No. 03-C-134). Your letter must be received in these four different places no later than May 1, 2006: (i) Coordinating Counsel: Brian A.Glasser, Esq.   --------------------------------------------------------------------------------   Bailey & Glasser, LLP 227 Capitol Street Charleston, WV 25301       (ii) Defendants’ Counsel:           Matthew M. Neumeier   Charles R. Bailey Jenner & Block LLP   Bailey & Wyant PLLC One IBM Plaza   P.O. Box 3710 Chicago, IL 60611   Charleston, WV 25337-3710 (iii) The Court: Clerk of Court Kanawha County Circuit Court 111 Court Street Charleston, WV 25301 17. What Is The Difference Between Excluding Myself And Objecting? Excluding yourself is telling the Court that you don’t want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. Objecting is telling the Court that you don’t like something about the settlement and you don’t want the Court to approve it. You can object only if you stay in the Class. 18. Who Are The Lawyers For The Becker Class? The Court has appointed the following law firms to represent you and other Becker Class Members. These lawyers are called Class Counsel. If you want to be represented by your own lawyer, you may hire one at your own expense.       Ronald Frederick   John Roddy Ronald Frederick & Assoc., LLC   Gary Klein 55 Public Square, Suite 1300   Elizabeth Ryan Cleveland, Ohio 44113   Roddy, Klein & Ryan     727 Atlantic Avenue     Boston, MA 02111 19. How Will Class Counsel’s Fees And Expenses Be Paid? Class Counsel will make an application to the Court for approval of an award of attorneys’ fees and expenses in an amount not more than 25% of the portion of the common fund attributable to the Becker Class. The fees would pay Class Counsel for investigating the facts, litigating the case, and negotiating the   --------------------------------------------------------------------------------   settlement. The Court will determine the amount of any fees and expenses awarded to Class Counsel. 20. Does The Class Representative Get Additional Compensation? Subject to Court approval, the named plaintiffs in the five cases which make up the Consolidated Action will seek “service awards” for their active participation in this litigation. Any such “service award” will be paid from the portions of the common fund attributable to the cases those plaintiffs brought. Lynn Becker will seek a “service award” of $5,000. The Court will determine whether Ms. Becker receives a “service award” and the amount of that award. 21. What If The Court Does Not Approve The Settlement? If the Court does not approve the proposed Settlement as being fair, adequate and reasonable, the Settlement Agreement will be null and void, and all parties will be returned to their respective pre-Settlement status in the various lawsuits that the proposed Settlement hopes to resolve. 22. Where Do I Get Additional Information? This notice summarizes the proposed settlement. You can find answers to common questions about the settlement, plus other helpful information at the Settlement Administrator’s website [www.INSERTWEBADDRESS.com]. You can also get a copy of the Settlement Agreement from the website, or by writing to the Settlement Administrator at ####. If you cannot get the information you need from this notice or from the Settlement Administrator, you may contact Becker Class Counsel.      Please Do Not Contact The Court Or Block For Information. BY ORDER OF THE COURT The Honorable Louis Bloom Circuit Judge Kanawha County, West Virginia Dated:                     , 2005   --------------------------------------------------------------------------------   If You Got A Refund Anticipation Loan Through An H&R Block Office In Maryland Between January 1, 1992 And December 31, 1996, Or In Alabama from June 13, 1989 through December 31, 1996. You Could Get A Payment From A Class Action Settlement A Court Has Authorized This Notice. Please Read It, It Describes Important Rights You Have And Requires That You Make A Choice About How to Proceed. Important Dates To receive a payment from the settlement your Claim Form (attached) must be postmarked no later than June 30, 2006 (See Question 8). If you prefer to exclude yourself from the settlement (“opt out”), your request must be postmarked no later than May 1, 2006 (See Question 12). Any notice of appearance or objections must be received by May 1, 2006 (See Question 16). Date of Fairness Hearing: day/month/2006 (See Question 13). ANSWERS TO FREQUENTLY-ASKED QUESTIONS       1. Why Did I Get This Notice?   12. What Do I Do If I Want To Exclude Myself?       2. What Is This Lawsuit About?   13. When And Where Will The Court Decide Whether To Approve The Settlement?       3. Why Is This A Class Action?   14. Do I Have To Come To The Hearing?       4. Why Is There A Settlement?   15. What If I Do Nothing?       5. How Do I Know If I Am Part Of The Settlement?   16. What If I Want To Object To The Settlement?       6. What Does The Settlement Provide?   17. What Is the Difference Between Excluding Myself And Objecting?       7. How Much Will My Payments Be?   18. Who Are The Lawyers For The Class?       8. How Can I Get A Payment?   19. How Will Class Counsel’s Fees And Expenses Be Paid?       9. When Would I Get My Payment?   20. Does The Class Representative Get Additional Compensation?       10. Am I Giving Anything Up To Get A Payment Or Stay In The Class?   21. What If The Court Does Not Approve The Settlement?       11. Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)?   22. Where Do I Get Additional Information? -1- --------------------------------------------------------------------------------   1. Why Did I Get This Notice? You got at least one Refund Anticipation Loan (“RAL”) through an H&R Block office in Maryland between January 1, 1992 and December 31, 1996, or through an H&R Block office in Alabama between June 13, 1989 and December 31, 1996. You received this notice to inform you about settlement of a class action lawsuit that may affect your rights. This notice provides information about all of your options, so that you can evaluate those options before the Court decides whether to approve the settlement. Those options include making a claim for money from the settlement (see Questions 7-9), excluding yourself from the settlement (Questions 11 & 12) or raising concerns about the fairness of the settlement (Question 16). This package explains the lawsuit, the settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the Circuit Court of Kanawha County, West Virginia (“the Court”). 2. What Is This Lawsuit About? This case combines several lawsuits that were filed against H&R Block, Inc. and various related corporations. For simplicity, the H& R Block defendants are referred to throughout the rest of this notice as simply “Block.” The cases were filed against Block in different parts of the country at different times, but all essentially make the same claim — that Block violated particular state laws in the way it made RALs available. The lawyers in these cases have filed with the Court an Amended and Consolidated Class Action Complaint (called the “Consolidated Action” from here on), which brings together all of the claims made in these cases. One of the principal claims the Consolidated Action makes is that Block violated the Credit Services Organization Acts of the affected jurisdictions, or violated similar laws. Block denies that it violated any laws, did anything wrong, or that anyone was harmed by its conduct. Block nevertheless has agreed to settle the Consolidated Action solely to avoid the burden, expense, risk and uncertainty of continuing the various lawsuits. Block and the plaintiffs in the Consolidated Actions have reached agreement on a Settlement of the claims in the Consolidated Action including claims that had been pending previously in Ohio, Maryland, and Alabama. The Settlement, if approved, would resolve all litigation involving RALs which Block sold in Alabama between June 13, 1989 and December 31, 1996, and in Maryland between January 1, 1992 and December 31, 1996. Other cases are also being settled at   --------------------------------------------------------------------------------   the same time, in the same settlement agreement, covering legal rights of individuals in a number of other jurisdictions. 3. Why Is This A Class Action? In a class action, one or more people called Class Representatives (in this case Levon Mitchell and Geral Mitchell of Alabama, and Joyce A. Green of Maryland) sue on behalf of people who have similar claims. All these people are a Class or Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. Circuit Court Judge Louis Bloom is in charge of this class action. 4. Why Is There A Settlement? The Court did not decide in favor of Block or any of the Plaintiffs in the various lawsuits. The Plaintiffs in those lawsuits think they could have won if they went to trial. Block thinks the Plaintiffs would have lost. In fact, in most cases, Block thinks that the Plaintiffs would not have even been able to continue their cases in court, because Block’s RAL contract required them to try their claims before an arbitrator. But there was no trial and no arbitration. Instead, both sides agreed to a settlement. This avoids the cost of a trial, and the people affected have an opportunity to be paid. The Class Representatives and the attorneys think the settlement is best for all Class Members. 5. How Do I Know If I Am Part Of The Settlement? You received this notice because records identified you as a Mitchell/Green class member. That means that you fit the description of the class which the Court certified for this settlement. The Court decided that everyone who fits this description is a Class Member: All Maryland residents who applied for and obtained a RAL at any H&R Block office in Maryland from January 1, 1992 through December 31, 1996 and did not thereafter apply for and obtain a RAL subject to an arbitration provision, and all individuals who obtained a RAL from June 13, 1989 through December 31, 1996 through any “H&R Block” office in Alabama for which the Settling Defendants herein received a license fee payment or portion of the finance charge, and who did not previously request exclusion from their respective classes that were previously certified or timely request exclusion from this class. There are three other classes that are part of the overall Settlement. The following classes are composed of people who live in one of the following jurisdictions and got a RAL through an H&R Block office during the specified years: a.) The Cummins Class (West Virginia residents) — January 1, 1994 to December 23, 2005;   --------------------------------------------------------------------------------   b.) The Becker Class (residents of Ohio) — January 1, 2000 to December 23, 2005 c.) The State Law Class (residents of 22 states and the District of Columbia) —January 1, 2000 through December 23, 2005: Arkansas, Arizona, California, District of Columbia, Florida, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, Nevada, Oregon, Pennsylvania, Tennessee, Utah, Virginia, Washington or Wisconsin. 6. What Does The Settlement Provide? Block has agreed to provide additional information to customers who obtain RALs and to pay a total of $62.5 million, plus costs of notice estimated at $4 million, to settle this case. The total Block will pay is called the “common fund.” You are a member of the Mitchell/Green class. Mitchell/Green class members are entitled to over $1.6 million of the $62.5 million, before deductions for the pro rata portion of administration costs, attorney’s fees and expenses relating to the Mitchell/Green class, and service fees paid to the class representatives, Joyce A. Green, Levon Mitchell and Geral Mitchell. The Cummins class members will divide $32.5 million; the State Law class will divide more than $22.5 million; and the Becker class will divide more than $5.8 million; all before the same deductions are made for administration costs, attorney’s fees and expenses, and service fees applicable to each class. Members of the different classes who submit claims will receive different amounts because each of these cases is at a different stage of proceedings, holds different risks and different chances of success. Each class settlement was negotiated based upon these differences. The four classes are represented independently. 7. How Much Will My Payments Be? In order to receive any payment, you must return a claim form (see Question 8 and the attached claim form). Every Class Member who returns a valid claim form will receive at least some distribution from the common fund. Your share of the fund will depend on the number of valid claim forms that Mitchell/Green Class Members send in and how many RALs you had. If every class member submitted a claim, your share of the common fund would be a minimum of $3.66 for each RAL you obtained during the class period. However, only a percentage of class members will actually submit claim forms. For example, if only one of every four class members return claim forms, your share of the fund would be $14.64 for each RAL you obtained ($3.66 times four). Your share will be reduced by whatever percentage of the common fund is taken up with administration costs, attorney’s fees, expenses, and service payments. It is unlikely that such costs will exceed 30%, but they could be higher or lower. Please remember that   --------------------------------------------------------------------------------   this is only an example; the amount you receive from the settlement could be greater or smaller. 8. How Can I Get A Payment? To qualify for payment, you must send in a complete and valid claim form. A claim form is attached to this Notice. You may also get a claim form from the Settlement Administrator’s website [[www.INSERTWEBADDRESS.com]]. Read the instructions carefully, fill out the form, include all the information the form asks for, sign it, and mail it so that it is postmarked no later than June 30, 2006. You may also email the claim form to the Settlement Administrator at [[email protected]]. If you email the claim form, you must do so no later than midnight on June 30, 2006. 9. When Would I Get My Payment? The Court will hold a hearing at time/date/month/2006 at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301, to decide whether to approve the settlement. If the Court approves the settlement after that, there may be appeals. It’s always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. The settlement administrator will keep the settlement website at [www.INSERTWEBADDRESS.com] updated so that everyone who is in the class may keep informed of the progress of the settlement. Please be patient. Note: It is unlikely that you will receive your payment until six months or more after the date you send in a claim form. 10. Am I Giving Up Anything To Get A Payment Or Stay In The Class? Unless you exclude yourself, also called “opting out” (see Question 12), you will be considered a member of the class, which means that you can’t sue, continue to sue, or be part of any other lawsuit against Block about the legal issues in this case. Giving up your claims is called a “release.” Unless you exclude yourself from the settlement, you will release your claims whether or not you submit a claim form and receive payment. However, certain claims are not released even if you stay in the class. All claims made in other currently existing class actions that relate to the RAL or other products and services offered by Block are not released. Claims under state law based solely on allegations that a tax prepare failed (A) to properly prepare a tax return or (B) to maintain the confidentiality of taxpayer information resulting in injury based on “stolen identity” or similar misuse of taxpayer information or theft of a RAL check; and claims to enforce the terms and conditions of the Settlement Agreement, are similarly not released. Class members who do not exclude themselves, but do not make a claim for money from this settlement may choose to arbitrate their individual claims   --------------------------------------------------------------------------------   against Block for another year after the settlement is finalized. Although Class Counsel recommend this settlement, they take no position on your likelihood of succeeding on an individual basis in an arbitration case. You should obtain independent legal help if you need more information about the economic value of the arbitration alternative to excluding yourself or making a claim for money under the settlement. The settlement requires Block to follow certain business practices with future RALs. 11. Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)? Yes, you may “opt out” and exclude yourself from the Settlement Class. If you opt out, you will not receive any payment from the common fund, you will not release any claims you may have against Block, and you will not be bound by anything that happens in the Consolidated Action. If you opt out, you will be free to pursue whatever legal rights you may have by pursuing your own lawsuit against Block at your own risk and expense. 12. What Do I Do If I Want To Exclude Myself? In order to opt out and exclude yourself from the Settlement Class, you must mail a “Request for Exclusion” to the Settlement Administrator at address. Your Request for Exclusion must be in writing and must be postmarked no later than May 1, 2006. To be effective, a Request for Exclusion must contain: (a) the name of this case (Cummins. v. H & R Block, Inc.); (b) your name, address, social security number and telephone number; (c) a statement that you want to opt out of the lawsuit; and (d) your signature. If the Request for Exclusion is not postmarked by the deadline, you will be included automatically in the Settlement Class and you may be eligible to receive Settlement payments as summarized above. Even if you do not file a claim, you will be legally bound by the proposed Settlement, including provisions releasing Block. 13. When And Where Will The Court Decide Whether To Approve The Settlement? The Court will hold a Fairness Hearing on time/date/ at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301. At this hearing the Court will consider whether the settlement is fair, reasonable, and adequate. If there are objections, the Court will consider them. The Court will listen to people who have asked to speak at the hearing. The Court may also decide how much to pay to Class Counsel. After the hearing, the Court will decide whether to approve the settlement. We do not know how long these decisions will take. The hearing can be continued at any time by the Court without any further notice to you.   --------------------------------------------------------------------------------   14. Do I Have To Come To The Hearing? No. You are not required to attend the hearing. But you are welcome to come at your own expense. If you wish to speak, you may ask the Court for permission to speak at the Fairness Hearing. To do so, you must send a letter saying that it is your “Notice of Intention to Appear in Cummins v. H&R Block.” Be sure to include your name, address, telephone number, and your signature. Your Notice of Intention to Appear must be received no later than May 1, 2006, and be sent to the Clerk of the Court, Class Counsel, and Defense Counsel, at the addresses in Question 16. You cannot speak at the hearing if you excluded yourself, because once you exclude yourself, the settlement does not affect your rights. 15. What If I Do Nothing? If you do nothing, you’ll get no money from this settlement. But, unless you exclude yourself, you won’t be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Block about the legal issues in this case. You would, however, be able to arbitrate your claims against Block for another year, as described in Question 10. 16. What If I Want To Object To The Settlement? If you’re a Class Member who has not requested exclusion, you can object to the settlement if you don’t like it. If you wish to object, you must write a letter stating your objections, the specific reasons for each objection (including any legal support you want to bring to the Court’s attention) and a description of any evidence you wish to introduce in support of your objections. You must include your name, address, telephone number and your signature. Also include the name and number of this action (Cummins v. H & R Block, Inc., Civil Action No. 03-C-134). Your letter must be received in these four different places no later than May 1, 2006: (i) Coordinating Counsel: Brian A.Glasser, Esq. Bailey & Glasser, LLP 227 Capitol Street Charleston, WV 25301   --------------------------------------------------------------------------------   (ii) Defendants’ Counsel:       Matthew M. Neumeier   Charles R. Bailey Jenner & Block LLP   Bailey & Wyant PLLC One IBM Plaza   P.O. Box 3710 Chicago, IL 60611   Charleston, WV 25337-3710 (iii) The Court: Clerk of Court Kanawha County Circuit Court 111 Court Street Charleston, WV 25301 17. What Is The Difference Between Excluding Myself And Objecting? Excluding yourself is telling the Court that you don’t want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. Objecting is telling the Court that you don’t like something about the settlement and you don’t want the Court to approve it. You can object only if you stay in the Class. 18. Who Are The Lawyers For The Mitchell/Green Class? The Court has appointed the following law firms to represent you and other Mitchell/Green Class Members. These lawyers are called Class Counsel. If you want to be represented by your own lawyer, you may hire one at your own expense.       Steven E. Angstreich, Esq.   Steven A. Martino, Esq. Michael Coren, Esq.   Frederick T. Kuykendall, III, Esq. Carolyn C. Lindheim, Esq.   W. Lloyd Copeland, Esq. Levy Angstreich Finney Baldante   Taylor, Martino & Kuykendall Rubenstein & Coren, P.C.   51 St. Joseph Street 1616 Walnut Street, 5thFloor   Mobile, AL 36602 Philadelphia, PA 19103     Charles J. Piven, Esq. Law Office of Charles J. Piven, P.A. The World Trade Center— Baltimore 401 East Pratt Street, Suite 2525 Baltimore, Maryland 21202   --------------------------------------------------------------------------------   19. How Will Class Counsel’s Fees And Expenses Be Paid? Class Counsel will make an application to the Court for approval of an award of attorneys’ fees and expenses in an amount not more than 25% of the portion of the common fund attributable to the Mitchell/Green Class. The fees would pay Class Counsel for investigating the facts, litigating the case, and negotiating the settlement. The Court will determine the amount of any fees and expenses awarded to Class Counsel. 20. Does The Class Representative Get Additional Compensation? Subject to Court approval, the named plaintiffs in the five cases which make up the Consolidated Action will seek “service awards” for their active participation in this litigation. Any such “service award” will be paid from the portions of the common fund attributable to the cases those plaintiffs brought. Joyce A. Green, Levon Mitchell and Geral Mitchell will seek a “service award” of $5,000. The Court will determine whether they receive a “service award” and the amount of that award. 21. What If The Court Does Not Approve The Settlement? If the Court does not approve the proposed Settlement as being fair, adequate and reasonable, the Settlement Agreement will be null and void, and all parties will be returned to their respective pre-Settlement status in the various lawsuits that the proposed Settlement hopes to resolve. 22. Where Do I Get Additional Information? This notice summarizes the proposed settlement. You can find answers to common questions about the settlement, plus other helpful information at the Settlement Administrator’s website [www.INSERTWEBADDRESS.com]. You can also get a copy of the Settlement Agreement from the website, or by writing to the Settlement Administrator at ####. If you cannot get the information you need from this notice or from the Settlement Administrator, you may contact Mitchell/Green Class Counsel.      Please Do Not Contact The Court Or Block For Information. BY ORDER OF THE COURT The Honorable Louis Bloom Circuit Judge Kanawha County, West Virginia Dated:                     , 2005   --------------------------------------------------------------------------------   If You Got A Refund Anticipation Loan Through An H&R Block Office Between January 1, 2000 and December 23, 2005. You Could Get A Payment From A Class Action Settlement A Court Has Authorized This Notice. Please Read It, It Describes Important Rights You Have And Requires That You Make A Choice About How to Proceed. Important Dates To receive a payment from the settlement your Claim Form (attached) must be postmarked no later than June 30, 2006 (See Question 8). If you prefer to exclude yourself from the settlement (“opt out”), your request must be postmarked no later than May 1, 2006 (See Question 12). Any notice of appearance or objections must be received by May 1, 2006 (See Question 16). Date of Fairness Hearing: day/month/2006 (See Question 13). ANSWERS TO FREQUENTLY-ASKED QUESTIONS                   1.   Why Did I Get This Notice?     12.     What Do I Do If I Want To Exclude Myself?                   2.   What Is This Lawsuit About?     13.     When And Where Will The Court Decide Whether To Approve The Settlement?                   3.   Why Is This A Class Action?     14.     Do I Have To Come To The Hearing?                   4.   Why Is There A Settlement?     15.     What If I Do Nothing?                   5.   How Do I Know If I Am Part Of The Settlement?     16.     What If I Want To Object To The Settlement?                   6.   What Does The Settlement Provide?     17.     What Is the Difference Between Excluding Myself And Objecting?                   7.   How Much Will My Payments Be?     18.     Who Are The Lawyers For The Class?                   8.   How Can I Get A Payment?     19.     How Will Class Counsel’s Fees And Expenses Be Paid?                   9.   When Would I Get My Payment?     20.     Does The Class Representative Get Additional Compensation?                   10.   Am I Giving Anything Up To Get A Payment Or Stay In The Class?     21.     What If The Court Does Not Approve The Settlement?                   11   Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)?     22.     Where Do I Get Additional Information? - 1 - --------------------------------------------------------------------------------   1. Why Did I Get This Notice? You got at least one Refund Anticipation Loan (“RAL”) through an H&R Block office between January 1, 2000 and December 23, 2005. You received this notice to inform you about settlement of a class action lawsuit that may affect your rights. This notice provides information about all of your options, so that you can evaluate those options before the Court decides whether to approve the settlement. Those options include making a claim for money from the settlement (see Questions 7-9), excluding yourself from the settlement (Questions 11 & 12) or raising concerns about the fairness of the settlement (Question 16). This package explains the lawsuit, the settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the Circuit Court of Kanawha County, West Virginia (“the Court”). 2. What Is This Lawsuit About? This case combines several lawsuits that were filed against H&R Block, Inc. and various related corporations. For simplicity, the H & R Block defendants are referred to throughout the rest of this notice as simply “Block.” The cases were filed against Block in different parts of the country at different times, but all essentially make the same claim — that Block violated particular state laws in the way it made RALs available. The lawyers in these cases have filed with the Court an Amended and Consolidated Class Action Complaint (called the “Consolidated Action” from here on), which brings together all of the claims made in these cases. One of the principal claims the Consolidated Action makes is that Block violated the Credit Services Organization Acts of the affected jurisdictions, or violated similar laws. Block denies that it violated any laws, did anything wrong, or that anyone was harmed by its conduct. Block nevertheless has agreed to settle the Consolidated Action solely to avoid the burden, expense, risk and uncertainty of continuing the various lawsuits. Block and the plaintiffs in the Consolidated Actions have reached agreement on a Settlement of the claims in the Consolidated Action including claims that had been pending previously in Ohio, Maryland, and Alabama. The Settlement, if approved, would resolve all litigation involving RALs which Block sold in Arkansas, Arizona, California, District of Columbia, Florida, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, Nevada, Oregon, Pennsylvania, Tennessee, Utah, Virginia, Washington and Wisconsin between January 1, 2000 and December 23, 2005.   --------------------------------------------------------------------------------   Other cases are also being settled at the same time, in the same settlement agreement, covering legal rights of individuals in a number of other jurisdictions. 3. Why Is This A Class Action? In a class action, one or more people called Class Representatives (in this case Renea Griffith, Maryanne Hoekman and Justin Sevey), sue on behalf of people who have similar claims. All these people are a Class or Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. Circuit Court Judge Louis Bloom is in charge of this class action. 4. Why Is There A Settlement? The Court did not decide in favor of Block or any of the Plaintiffs in the various lawsuits. The Plaintiffs in those lawsuits think they could have won if they went to trial. Block thinks the Plaintiffs would have lost. In fact, in most cases, Block thinks that the Plaintiffs would not have even been able to continue their cases in court, because Block’s RAL contract required them to try their claims before an arbitrator. But there was no trial and no arbitration. Instead, both sides agreed to a settlement. This avoids the cost of a trial, and the people affected have an opportunity to be paid. The Class Representatives and the attorneys think the settlement is best for all Class Members. 5. How Do I Know If I Am Part Of The Settlement? You received this notice because records identified you as a State Law class member. That means that you fit the description of the class which the Court certified for this settlement. The Court decided that everyone who fits this description is a Class Member: All residents of Arkansas, Arizona, California, District of Columbia, Florida, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, Nevada, Oregon, Pennsylvania, Tennessee, Utah, Virginia, Washington and Wisconsin who applied for and obtained a RAL through any medium, by any name, advertised, marketed, offered or made by or through any lender through any office operating under the trade name of “H&R Block” (including franchise or sub-franchise offices of any Settling Defendant or Affiliate, or any H&R Block offices such as in Sears stores) from January 1, 2000 through December 23, 2005. There are three other classes that are part of the overall Settlement. The following classes are composed of people who live in one of the following jurisdictions and got a RAL through an H&R Block office during the specified years: a.) The Cummins Class (West Virginia residents) — January 1, 1994 to December 23, 2005;   --------------------------------------------------------------------------------   b.) The Mitchell/Green Class (residents of Maryland and Alabama) — Maryland — January 1, 1992 to May 19, 2000, excluding those people who obtained RALs after 1996 whose RAL application contains an arbitration clause; Alabama — June 13, 1989 through December 31, 1996; c.) The Becker Class (residents of Ohio) — January 1, 2000 through December 23, 2005. 6. What Does The Settlement Provide? Block has agreed to provide additional information to customers who obtain RALs and to pay a total of $62.5 million, plus costs of notice estimated at $4 million, to settle this case. The total Block will pay is called the “common fund.” You are a member of the State Law Class. State Law class members are entitled to over $22.5 million of the $62.5 million, before deductions for the pro rata portion of administration costs, attorney’s fees and expenses relating to the State Law class, and service fees paid to the class representatives, Renea Griffith, Maryanne Hoekman and Justin Sevey. The Cummins class members will divide $32.5 million; the Becker class will divide over $5.8 million; and the Mitchell/Green (Maryland and Alabama) class will divide more than $1.6 million; all before the same deductions are made for administration costs, attorney’s fees and expenses, and service fees applicable to each class. Members of the different classes who submit claims will receive different amounts because each of these cases is at a different stage of proceedings, holds different risks and different chances of success. Each class settlement was negotiated based upon these differences. The four classes are represented independently. 7. How Much Will My Payments Be? In order to receive any payment, you must return a claim form (see Question 8 and the attached claim form). Every Class Member who returns a valid claim form will receive at least some distribution from the common fund. Your share of the fund will depend on the number of valid claim forms that State Law Class Members send in and how many RALs you had. If every class member submitted a claim, your share of the common fund would be a minimum of $1.67 for each RAL you obtained during the class period. However, only a percentage of class members will actually submit claim forms. For example, if only one of every four class members return claim forms, your share of the fund would be $6.68 for each RAL you obtained ($1.67 times four). Your share will be reduced by whatever percentage of the common fund is taken up with administration costs, attorney’s fees, expenses, and service payments. It is unlikely that such costs will exceed 30%, but they could be higher or lower. Please remember that this is only an example; the amount you receive from the settlement could be greater or smaller.   --------------------------------------------------------------------------------   8. How Can I Get A Payment? To qualify for payment, you must send in a complete and valid claim form. A claim form is attached to this Notice. You may also get a claim form from the Settlement Administrator’s website [[www.INSERTWEBADDRESS.com]]. Read the instructions carefully, fill out the form, include all the information the form asks for, sign it, and mail it so that it is postmarked no later than June 30, 2006. You may also email the claim form to the Settlement Administrator at [[email protected]]. If you email the claim form, you must do so no later than midnight on June 30, 2006. 9. When Would I Get My Payment? The Court will hold a hearing at time/date/month/2006 at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301, to decide whether to approve the settlement. If the Court approves the settlement after that, there may be appeals. It’s always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. The settlement administrator will keep the settlement website at [www.INSERTWEBADDRESS.com] updated so that everyone who is in the class may keep informed of the progress of the settlement. Please be patient. Note: It is unlikely that you will receive your payment until six months or more after the date you send in a claim form. 10. Am I Giving Up Anything To Get A Payment Or Stay In The Class? Unless you exclude yourself, also called “opting out” (see Question 12), you will be considered a member of the class, which means that you can’t sue, continue to sue, or be part of any other lawsuit against Block about the legal issues in this case. Giving up your claims is called a “release.” Unless you exclude yourself from the settlement, you will release your claims whether or not you submit a claim form and receive payment. However, certain claims are not released even if you stay in the class. All claims made in other currently existing class actions that relate to the RAL or other products and services offered by Block are not released. Claims under state law based solely on allegations that a tax preparer failed (A) to properly prepare a tax return or (B) to maintain the confidentiality of taxpayer information resulting in injury based on “stolen identity” or similar misuse of taxpayer information or theft of a RAL check; and claims to enforce the terms and conditions of the Settlement Agreement, are similarly not released. Class members who do not exclude themselves, but do not make a claim for money from this settlement may choose to arbitrate their individual claims against Block for another year after the settlement is finalized. Although Class Counsel recommend this settlement, they take no position on your likelihood of succeeding on an individual basis in an arbitration case. You should obtain   --------------------------------------------------------------------------------   independent legal help if you need more information about the economic value of the arbitration alternative to excluding yourself or making a claim for money under the settlement. The settlement requires Block to follow certain business practices with future RALs, and provides Block with an incentive to register as a Credit Service Organization (“CSO”) in the jurisdictions covered by the settlement. Block has two years to decide whether to register and come into compliance with the various CSO statutes. Important: If you decide to go back to Block to obtain a RAL during the two-year period Block has to register as a CSO in the various jurisdictions, and Block does register and comply with your jurisdiction’s CSO statute in that two-year period, then you will not be able to sue Block for any new RAL violation that you claim happened during the two-year period. But, if Block does not register as a CSO and comply with the CSO statute in your jurisdiction, you will be able to sue based on any new RAL violation that you claimed happened during that period. In addition, any deadline on when you can sue Block (called the “statute of limitations”) will be suspended for the two-year period. 11. Can I Exclude Myself From The Settlement (Sometimes Called “Opting Out”)? Yes, you may “opt out” and exclude yourself from the Settlement Class. If you opt out, you will not receive any payment from the common fund, you will not release any claims you may have against Block, and you will not be bound by anything that happens in the Consolidated Action. If you opt out, you will be free to pursue whatever legal rights you may have by pursuing your own lawsuit against Block at your own risk and expense. 12. What Do I Do If I Want To Exclude Myself? In order to opt out and exclude yourself from the Settlement Class, you must mail a “Request for Exclusion” to the Settlement Administrator at address. Your Request for Exclusion must be in writing and must be postmarked no later than May 1, 2006. To be effective, a Request for Exclusion must contain: (a) the name of this case (Cummins, v. H & R Block, Inc.); (b) your name, address, social security number and telephone number; (c) a statement that you want to opt out of the lawsuit; and (d) your signature. If the Request for Exclusion is not postmarked by the deadline, you will be included automatically in the Settlement Class and you may be eligible to receive Settlement payments as summarized above. Even if you do not file a claim, you will be legally bound by the proposed Settlement, including provisions releasing Block.   --------------------------------------------------------------------------------   13. When And Where Will The Court Decide Whether To Approve The Settlement? The Court will hold a Fairness Hearing on time/date/ at the Kanawha County Judicial Annex, 111 Court Street, Charleston, West Virginia 25301. At this hearing the Court will consider whether the settlement is fair, reasonable, and adequate. If there are objections, the Court will consider them. The Court will listen to people who have asked to speak at the hearing. The Court may also decide how much to pay to Class Counsel. After the hearing, the Court will decide whether to approve the settlement. We do not know how long these decisions will take. The hearing can be continued at any time by the Court without any further notice to you. 14. Do I Have To Come To The Hearing? No. You are not required to attend the hearing. But you are welcome to come at your own expense. If you wish to speak, you may ask the Court for permission to speak at the Fairness Hearing. To do so, you must send a letter saying that it is your “Notice of Intention to Appear in Cummins v. H&R Block.” Be sure to include your name, address, telephone number, and your signature. Your Notice of Intention to Appear must be received no later than May 1, 2006, and be sent to the Clerk of the Court, Class Counsel, and Defense Counsel, at the addresses in Question 16. You cannot speak at the hearing if you excluded yourself, because once you exclude yourself, the settlement does not affect your rights. 15. What If I Do Nothing? If you do nothing, you’ll get no money from this settlement. But, unless you exclude yourself, you won’t be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Block about the legal issues in this case. You would, however, be able to arbitrate your claims against Block for another year, as described in Question 10. 16. What If I Want To Object To The Settlement? If you’re a Class Member who has not requested exclusion, you can object to the settlement if you don’t like it. If you wish to object, you must write a letter stating your objections, the specific reasons for each objection (including any legal support you want to bring to the Court’s attention) and a description of any evidence you wish to introduce in support of your objections. You must include your name, address, telephone number and your signature. Also include the name and number of this action (Cummins v. H & R Block, Inc., Civil Action No. 03-C-134). Your letter must be received in these four different places no later than May 1, 2006: (i) Coordinating Counsel: Brian A. Giasser, Esq.   --------------------------------------------------------------------------------   Bailey & Glasser, LLP 227 Capitol Street Charleston, WV 25301 (ii) Defendants’ Counsel: Matthew M. Neumeier   Charles R. Bailey Jenner & Block LLP   Bailey & Wyant PLLC One IBM Plaza   P.O. Box 3710 Chicago,IL 60611   Charleston, WV 25337-3710 (iii) The Court: Clerk of Court Kanawha County Circuit Court 111 Court Street Charleston, WV 25301 17. What Is The Difference Between Excluding Myself And Objecting? Excluding yourself is telling the Court that you don’t want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. Objecting is telling the Court that you don’t like something about the settlement and you don’t want the Court to approve it. You can object only if you stay in the Class. 18. Who Are The Lawyers For The State Law Class? The Court has appointed the following law firms to represent you and other State Law Class Members. These lawyers are called Class Counsel. If you want to be represented by your own lawyer, you may hire one at your own expense.       Daniel Hume, Esq.   Ronald L. Futterman, Esq. Kirby Mclnerney & Squire. LLP   Michael I. Behn, Esq. 830 Third Avenue, 10th Floor   William W. Thomas, Esq. New York, NY 10022   Futterman & Howard, Chtd.     122 S. Michigan Ave. Suite 1850 Michael B. Hyman, Esq.   Chicago, IL 60603 William H. London, Esq.     Much Shelist Freed Denenberg Ament & Rubenstein, P.C.     191 North Wacker, Suite 1800     Chicago, IL 60606       --------------------------------------------------------------------------------   19. How Will Class Counsel’s Fees And Expenses Be Paid? Class Counsel will make an application to the Court for approval of an award of attorneys’ fees and expenses in an amount not more than 25% of the portion of the common fund attributable to the State Law Class. The fees would pay Class Counsel for investigating the facts, litigating the case, and negotiating the settlement. The Court will determine the amount of any fees and expenses awarded to Class Counsel. 20. Does The Class Representative Get Additional Compensation? Subject to Court approval, the named plaintiffs in the five cases which make up the Consolidated Action will seek “service awards” for their active participation in this litigation. Any such “service award” will be paid from the portions of the common fund attributable to the cases those plaintiffs brought. Renea Griffith, Maryanne Hoekman and Justin Sevey will seek a “service award” of $5,000. The Court will determine whether they receive “service awards” and the amount of their award. 21. What If The Court Does Not Approve The Settlement? If the Court does not approve the proposed Settlement as being fair, adequate and reasonable, the Settlement Agreement will be null and void, and all parties will be returned to their respective pre-Settlement status in the various lawsuits that the proposed Settlement hopes to resolve. 22. Where Do I Get Additional Information? This notice summarizes the proposed settlement. You can find answers to common questions about the settlement, plus other helpful information at the Settlement Administrator’s website [www.INSERTWEBADDRESS.com]. You can also get a copy of the Settlement Agreement from the website, or by writing to the Settlement Administrator at ####. If you cannot get the information you need from this notice or from the Settlement Administrator, you may contact State Law Class Counsel.      Please Do Not Contact The Court Or Block For Information. BY ORDER OF THE COURT The Honorable Louis Bloom Circuit Judge Kanawha County, West Virginia Dated:                     , 2005   --------------------------------------------------------------------------------   I   --------------------------------------------------------------------------------   H & R Block Refund Anticipation Loan Settlement Claim Form If the Settlement is approved by the Court you may be entitled to receive cash if you fill out this form and mail it to: Settlement Administrator “H&R Block RAL Settlement” PO Box 99999 Chicago, IL 88888 This Claim Form must be postmarked by June 30, 2006. ONLY ONE CLAIM FORM IS ALLOWED PER SETTLEMENT CLASS MEMBER, NO MATTER HOW MANY REFUND ANTICIPATION LOANS (“RALs”) YOU OBTAINED OR WHERE YOU OBTAINED THEM. YOU CAN RECEIVE PAYMENT FOR EACH RAL YOU OBTAINED BY RETURNING ONE FORM. MARRIED SETTLEMENT CLASS MEMBERS WHO FILED JOINT TAX RETURNS SHOULD RETURN ONLY ONE FORM BETWEEN THEM. Name: Joe Smith Current Mailing Address: 123 Main St, Chicago, IL 88888 Directions: If the pre-printed information above is NOT CORRECT, please correct the information: Current Name for Settlement Check:                                                              Current Mailing Address:                                                                                                                                                                                                                               Please also provide the following information (please print in ink or type): Your Social Security Number:                                          Your Previous Social Security Number(s) (if applicable):                      If you obtained any of your RALs under a different name, please state that name:                                                                                                                          If you obtained your RAL(s) jointly with another person or persons, please provide the name of each such person (Joint Borrower):   --------------------------------------------------------------------------------                                                                                                                            Please Provide the Social security Number(s) of any Joint Borrowers (if applicable)                                                                                                                          Your phone number (optional): (                    )                    -                      I affirm that this form contain any correct mailing address and social security number. Claimant’s Signature                                    Date:                     MAILING INSTRUCTIONS If you wish to receive payment from the settlement fund, you want mail this completed form no later than June 30, 2006 to: Settlement Administrator [address] [city, state] This form must be postmarked no later than June 30, 2006.   --------------------------------------------------------------------------------   A   --------------------------------------------------------------------------------   Appendix A PROPOSED H&R BLOCK COMMITMENTS PERTAINING TO REFUND ANTICIPATION LOANS A. H&R Block Associate Training Objective: Ensure that all Tax Professionals, Tax Professional Assistants, Client Service Coordinators, Office Support Coordinators, Office Managers, Office Supervisors, Client Care Specialists, Phone Specialists, District Managers, Assistant District Managers, Administrative Assistants who support any of these positions, and any similar or successor positions (“client contact associates”) who work in H&R Block tax offices or administrative locations such as call centers that provide support to H&R Block tax offices are trained to deliver refund anticipation loans to their clients in a manner that accurately and non-coercively presents all of the client’s tax filing options and all of the client’s disposition options for the client’s refund or balance due (“settlement options”) and enables the client to make an informed choice from among the available alternatives. This objective will be implemented through a commitment to the following business standards and practices:   1)   H&R Block will produce training curriculum, updated at least annually, that provides tax office associates and other client contact associates who work in H&R Block tax offices or administrative locations with in-depth knowledge of all tax filing and settlement options. This training, which will be mandatory for all H&R Block tax professionals and other client contact associates, will counsel associates not to pre-judge clients’ interest or propensity to choose any particular option, and will emphasize that clients should be fully informed of all options in order to make the most personally appropriate choice.     2)   The training module for the refund anticipation loan product will cover all product features in depth, including these elements at minimum:   i)   A RAL is a short-term loan based upon the client’s anticipated tax refund, and it must be repaid whether or not the IRS actually delivers the refund for the expected dollar amount.     ii)   A RAL is provided by a third party lender, (institution name). H&R Block is not the creditor, or a credit service provider, or a loan broker in this transaction.     iii)   Part of the fee charged by the lender (to be described based on then-current pricing structure) will be owed whether or not the RAL is approved.     iv)   The annual percentage rate (APR) for a RAL is higher when compared to many other forms of credit.     v)   H&R Block may purchase a financial interest in the RALs it originates.     vi)   If the client owes debt for prior years’ refund anticipation loans to any RAL provider, or owes H&R Block tax preparation or other fees, those debts may be deducted from the amount of the client’s RAL or, in the event a RAL is denied, from the client’s refund amount.     vii)   Pursuant to the Refund Anticipation Loan Application signed by the tax client, disputes that arise from the client’s RAL decision (other than an individual claim the client brings in small claims court) will be settled by arbitration if elected by either party and no class actions can be brought in the arbitration forum.     viii)   H&R Block may use client information to market other products in accordance with IRS regulations. 1 --------------------------------------------------------------------------------   Appendix A Proposed H&R Block Commitments   2   3)   The training module for refund anticipation loans will cover product delivery requirements in depth, including these elements at minimum:   i)   Tools used to inform clients about refund anticipation loans and other options at client intake and during tax interview,     ii)   Procedures for proper completion and retention of refund anticipation loan paperwork including the application, loan agreement, and Truth-In-Lending- Act disclosure?     iii)   Necessity of verifying and documenting client identification, as required by the USA Patriot Act.     iv)   RAL check distribution process, including methods for confirming identity when clients pick up checks.   4)   Every tax office associate and other client contact associate who works in an H&R Block tax office or administrative location will be required to sign a statement affirming that he/she has received training on refund anticipation loan products, and agreeing to represent, explain and/or deliver the products as defined in sections (2) and (3) above. B. Product Delivery Objective: Ensure that the presentation and delivery of refund anticipation loans to clients in H&R Block tax offices is straightforward and non-coercive, and provides clients with the information they need to make an informed choice from among the available alternatives. This objective will be implemented through a commitment to the following business standards and practices:   1)   Every H&R Block client will be provided with a written description of all available filing and settlement options. The lowest-cost alternatives (e-filing or mailing the return, receiving a refund by direct deposit or IRS check, or paying the balance due from personal funds) will be presented first. The higher-cost alternatives, including refund anticipation checks and refund anticipation loans, will be presented last, and will be clearly described as third party bank offerings available for an additional fee.     2)   Every H&R Block client, during the tax preparation process when the amount of the client’s refund or balance due is known, will be presented with a side-by-side comparison of all applicable filing and settlement options in a screen shot in substantially the same form as Exhibit 1 hereto. For refund clients, this comparison will show the fees and timeline for refund delivery associated with each option, and the options will be arrayed from lowest client cost to greatest client cost.     3)   Every H&R Block client who elects a refund anticipation loan will be provided with additional disclosures before this product election is finalized and the return is e-filed. These disclosures will be available for review in Spanish as well as English upon request, and will inform the client:   i)   A RAL is a short-term loan based upon the client’s anticipated tax refund, and it must be repaid whether or not the IRS actually delivers the refund for the expected dollar amount.     ii)   A RAL is provided by a third party lender, (institution name). H&R Block is not the creditor, or a credit service provider, or a loan broker in this transaction.   --------------------------------------------------------------------------------   Appendix A Proposed H&R Block Commitments   3   iii)   Part of the fee charged by the lender (to be described based on then-current pricing structure) will be owed whether or not the RAL is approved.     iv)   A RAL may be canceled within 48 hours of application. However, the IRS will nevertheless direct the client’s refund to the lending bank per instructions it received when the return was e-filed. This lender may charge the client a partial fee to cover the costs of handling the client’s refund, which will typically be delivered in 8-15 days.     v)   The annual percentage rate (APR) for a RAL is higher when compared to many other forms of credit.     vi)   H&R Block may purchase a financial interest in the RALs it originates.     vii)   If the client owes debt for prior years’ refund anticipation loans to any RAL provider, or owes H&R Block tax preparation or other fees, those debts may be deducted from the amount of the client’s RAL or, in the event a RAL is denied, from the client’s refund amount.     viii)   Pursuant to the Refund Anticipation Loan Application signed by the tax client, disputes that arise from the client’s RAL decision (other than an individual claim the client brings in small claims court) will be settled by arbitration if elected by either party and no class actions can be brought in the arbitration forum.     ix)   H&R Block may use client information to market other products in accordance with IRS regulations.   4)   A product reference card will be produced annually that summarizes the refund anticipation loan product attributes and disclosures. This will be made available at every tax workstation to help tax associates discuss refund anticipation loans with their clients.     5)   H&R Block tax office associates will inform clients who elect refund anticipation loans that there are lower-cost ways to obtain a refund that do not involve the bank fees associated with RALs. This information, delivered to the client in a written and/or electronic format as part of a personalized advice report, will suggest that opening a bank account would allow the un-banked client to take advantage of the IRS direct deposit option that typically yields the client’s refund in 8-15 days. Messaging to clients who are known to have bank accounts will also emphasize the IRS direct deposit option. C. Advertising & Marketing Objective: Ensure that all H&R Block advertising and marketing materials are clear, accurate and consistent in their presentation of refund anticipation loan products. This objective will be implemented through a commitment to the following business standards and practices:   1)   Any reference to a refund anticipation loan product in H&R Block advertising and marketing materials will describe the product as a “refund anticipation loan” rather than any contraction or alternate construction such as “loan”, “refund loan”, “tax loan”, “your money”, “your tax refund”, “rapid refund” or “refund advance”.     2)   Any reference to H&R Block’s “Instant Money” product will use “Instant Money refund anticipation loan” rather than any contraction or alternate construction such as “Instant   --------------------------------------------------------------------------------   Appendix A Proposed H&R Block Commitments   4 Money loan”, “Instant Money refund loan”, “Instant Money tax loan”, or ‘Instant Money refund advance”.   3)   Advertising and marketing materials using the acronym “RAL” will define that acronym in its first occurrence by use of the phrase “refund anticipation loan (RAL)”.     4)   H&R Block advertising and marketing materials will refer to the proceeds of a refund anticipation loan as a “loan check”, “refund anticipation loan check”, “RAL check” or similar wording. H&R Block advertising and marketing materials will not use references like “refund”, “rapid refund”, “refund check”, “refund amount”, “your money”, “your tax refund” or “your money fast” when describing the proceeds of a refund anticipation loan.     5)   H&R Block advertising and marketing for standard refund anticipation loans Will include clear and conspicuous disclosure, as that phrase is contemporaneously defined by the Federal Trade Commission, that informs the audience:   i)   A refund account fee and an additional fee, disclosed as a finance charge, are charged by (institution name), the lender,     ii)   RAL amount or refund amount (in the event a RAL is denied) may be reduced by debts, if any, owed for prior year refund anticipation loans or other fees owed to H&R Block, such as tax preparation fees,     iii)   Clients who e-file their returns and specify direct deposit to their own bank accounts will typically receive their refunds in 8-15 days.   6)   H&R Block advertising and marketing for same-day (“Instant Money”) refund anticipation loans will include clear and conspicuous disclosure, as that phrase is contemporaneously defined by the Federal Trade Commission, that informs the audience:   (l)   A refund account fee and an additional fee, disclosed as a finance charge, are charged by (institution name), the lender.     ii)   Availability is based on credit qualification. Clients not qualifying for a full same-day RAL may receive a partial same-day RAL and/or a RAL available as soon as one day later.     iii)   RAL amount or refund amount (in the event a RAL is denied) may be reduced by debts, if any, owed for prior year refund anticipation loans or other fees owed to H&R Block, such as tax preparation fees.     iv)   Clients who e-file their returns and specify direct deposit to their own bank accounts will typically receive their refunds in 8-15 days. D. Compliance & Performance Assessment Objective: Ensure that H&R Block standards pertaining to the marketing and delivery of refund anticipation loans are met. This objective will be implemented through a commitment to the following business standards and practices:   1)   The Compliance and Legal departments will have authority to approve, modify, or veto any element of H&R Block refund anticipation loan training, product delivery systems and processes, and marketing & advertising that does not conform to the standards specified in Sections A, B and C of this document.   --------------------------------------------------------------------------------   Appendix A Proposed H&R Block Commitments   5   2)   H&R Block will designate one or more members of its Tax Compliance unit to oversee all training, delivery systems, and marketing & advertising pertaining to refund anticipation loans.     3)   H&R Block will utilize “mystery shopping” at a representative sample of tax offices each tax season to assess compliance with company standards for in office refund anticipation loan product delivery.     4)   H&R Block will require each District Manager to review compliance with refund anticipation loan disclosure, documentation, and product delivery standards throughout each tax season by use of a checklist to be completed during office visits. Results of these visits would be forwarded to the Compliance Department for review.   --------------------------------------------------------------------------------   (FILING OPTION SCREEN) [c03790c0379002.gif]   --------------------------------------------------------------------------------   B   --------------------------------------------------------------------------------   APPLICATION FOR A REFUND ANTICIPATION LOAN AND TO OPEN A DEPOSIT ACCOUNT               Applicant’s Name   Applicant’s Social Security/Taxpayer Identification #                                                         Joint Applicant’s Name   Joint Applicant’s Social Security/Taxpayer Identification #                                                I am applying for a Refund Anticipation Loan (“RAL”) from HSBC Bank USA, National Association (“HSBC”) in the maximum amount for which HSBC will approve me. In this application (“Application”), “H&R Block” means each of H&R Block, Inc. and each of its affiliates and subsidiaries (and franchisees thereof); “Transmitter” means my electronic tax return transmitter, which may be the same H&R Block; and “IRS” means the Internal Revenue Service. 1. IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. TO HELP THE GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHAT THIS MEANS FOR ME: WHEN I OPEN AN ACCOUNT, YOU WILL ASK FOR MY NAME, ADDRESS, DATE OF BIRTH, AND OTHER INFORMATION THAT WILL ALLOW YOU TO IDENTIFY ME. I MAY ALSO BE ASKED TO PRODUCE MY DRIVER’S LICENSE OR OTHER IDENTIFYING DOCUMENTS. 2. Collections. In consideration of the ease and convenience of the following method of paying any delinquent debt I owe or the other applicant owes to HSBC Taxpayer Financial Services inc. (“HSBC TFS”), H&R Block or Transmitter for prior years, or Bank One, River City Bank, First Security Bank, Republic Bank, Santa Barbara Bank & Trust or First Bank of Delaware (the “Other RAL Lenders”), and provided that such debt has not been discharged in bankruptcy, I authorize and direct the repayment of such debt, calculated as of the date of my Application, by means of (a) having such debt deducted from the proceeds of my RAL, or (b) having my request for new loan proceeds denied or the amount for which I have applied reduced and having such debt repaid to those entities by offset or otherwise from my tax refund directly transmitted into my Refund Account with HSBC. If I owe delinquent debt to more than one of the entities listed above, I authorize and direct HSBC to pay such debts in the following order: HSBC TFS, Other RAL Lenders, and ERO. I also authorize and instruct HSBC, HSBC TFS, and the Other RAL Lenders to disclose to each other information about their respective credit experiences concerning my present and prior RALs, Refund Anticipation Checks (“RACs”) or similar financial services, and my prior tax returns. PLEASE NOTE: If I have delinquent debt, I understand that HSBC or its servicer may be acting as a debt collector to collect a debt and that any Information obtained will be used for that purpose. 3. Applicable Law. This Application and all the other documents executed in connection with this Application or my RAL (collectively, “Documents”) shall be governed by and construed, interpreted, and enforced in accordance with federal law and, to the extent state law applies, the law of the State of Delaware (without reference to conflict of laws principles). 4. Important Information About RALs. I understand that (a) I can file my federal income lax return electronically without obtaining a RAL; (b) the IRS will send me a refund check or electronically deposit my refund to my existing bank account; (c) the IRS normally makes an electronic deposit in an average of about 12 days after an electronic filing; (d) HSBC tries to make proceeds of an Instant RAL available on the day of application and a Classic RAL available on the first business day after application; (e) HSBC cannot guarantee when any proceeds of a RAL or an IRS refund will be available to me; and (f) a RAL may cost substantially more than other sources of credit, and 1 may want to consider using other sources of credit. -1- --------------------------------------------------------------------------------   5. Deposit Authorization. (a) After I sign my Application, H&R Block and/or my Transmitter will electronically transmit my tax return to the IRS and my Application to HSBC. I understand that I will sign or authorize an IRS Transmittal Form 8453 or IRS e-file signature authorization (“Deposit Authorization”) as part of my Application and electronic tax filing, and that the Deposit Authorization and this Application provide an irrevocable agreement to have my tax refund disbursed to HSBC, and irrevocably transfers to HSBC all of my rights, title, and interest in the proceeds of my tax refund for purposes of the RAL I have requested and other purposes authorized by this Application. (b) If my Application is denied or cancelled, and HSBC receives my tax refund, HSBC will forward to me promptly any proceeds of my refund after deducting amounts permitted by this Agreement. (c) If for any reason, any part of the anticipated tax refund is disallowed or offset by the IRS, or if I should receive a refund check in the mail, I will advise HSBC immediately and promptly pay HSBC any amounts owing with respect to my Application or a RAL, and pay H&R Block and/or my Transmitter any fees owed to them involving my tax return. 6. Refund Account. (a) I request that a deposit account (“Refund Account”) be opened at HSBC upon receipt of my tax refund for the purposes of ensuring the repayment of my RAL and other amounts described in the Documents. The Annual Percentage Yield and interest rate on the Refund Account will be 0%. This means I will not receive any interest on funds in the Refund Account. I understand that I cannot make withdrawals from the Refund Account and that the funds in the Refund Account will be disbursed only as expressly provided in the Documents. (b) HSBC may deduct any amounts I owe HSBC, H&R Block, my Transmitter or their affiliates from my tax refund, any funds received in the Refund Account, and any proceeds of a RAL. My engagement with H&R Block for services in connection with my 2004 income tax return will end, and I am required to pay all fees to H&R Block for services rendered by H&R Block, when I pick up my check for a RAL (or when HSBC electronically transfers my proceeds to me or to another entity at my direction). If a check or an electronic transfer of proceeds is not made available to me because I do not receive a tax refund, then I am required to pay all fees to H&R Block for services rendered by H&R Block on demand. HSBC also may withdraw amounts deposited into the Refund Account from my tax refund to pay any check I receive for a RAL that I endorse and present for payment or to disburse money to me in accordance with my Application. (c) I will not receive a periodic statement for the Refund Account, but I will receive notice if funds in the Refund Account are not sufficient to repay my RAL or are used for any purpose other than repayment of my RAL or disbursement to me. HSBC may, immediately after disbursement of all funds in the Refund Account, close the account without further notice to or authorization from me. 7. Refund Account Fee. I will pay HSBC a fee of $24.95 for the administration of the Refund Account and any disbursements to me from that account (“Refund Account Fee”). I irrevocably commit to pay the Refund Account Fee after the Deposit Authorization is filed with the IRS regardless of whether (a) I apply for a RAL or (b) my Application is approved or denied. The Refund Account Fee is not imposed directly or indirectly as an incident to or condition of any extension of credit. I can avoid the Refund Account Fee if I direct that my tax refund not be deposited to HSBC before filing my Deposit Authorization with the IRS. 8. No Fiduciary/Agency Duty. I understand that for various fees received, H&R Block is acting only as my tax preparer (if applicable), my electronic filer and the deliverer of checks for RALs with respect to this RAL transaction. I understand that an affiliate of my ERO has the right to purchase an interest in my RAL issued by HSBC. I further understand that H&R Block is not acting in a fiduciary, confidential, or agency capacity with respect to me in connection with this transaction and has no other duties to me beyond the preparation of my tax return (if applicable), the transmission of my tax return information to HSBC, the electronic filing of my tax return with the IRS, and the delivery of checks for RALs. I acknowledge that I have independently evaluated and decided to apply for a RAL, and that I am not relying on any recommendation from H&R Block . I also understand that HSBC is not acting in a fiduciary, confidential, or agency capacity with respect to me in connection with this transaction. 9. Disclosure Information. (a) “Information” means my 2004 federal and state income tax returns, any information obtained in connection with my tax return (including information relating to a possible offset of my tax refund or the possibility that my tax return is incorrect), and any information relating to my Application or a RAL, RAC, or similar financial service I have received or requested from HSBC. (b) “Authorized Parties” means HSBC, HSBC TFS, H&R Block, my Transmitter, and their respective affiliates and agents, and includes the Fraud -2- --------------------------------------------------------------------------------   Service Bureau operated for HSBC. (c) The Authorized Parties may share Information to process my Application, to determine whether to provide a RAL, to provide RALs to me, to collect delinquent RALs, RACs, or fees payable to H&R Block, to prevent fraud, and to otherwise administer or promote the program for RALs and RACs. (d) The Authorized Parties may disclose Information to the IRS, state tax agencies and other financial institutions that provide RALs, RACs, or other financial services. (e) the Authorized Parties may call, or input my Information on any website of, the IRS or state tax agencies, in connection with my Application to, among other things, determine the status of my tax return. The IRS and state tax agencies may disclose information about me and my tax returns to the Authorized Parties. (f) H&R Block may not use or disclose Information for any purpose, except as permitted under Treas. Reg. Sec.301.7216-2 or as provided in this Application. (g) I consent to HSBC sharing information as provided in the Privacy Policy. 10. Service Fees. (a) Reissued Check Fee: I agree to pay $10 each time that a check is reissued at my request for any reason. If I request that such a check be sent by overnight mail, I agree to pay the charges for sending it by overnight mail. (b) Document Fee: If I ask HSBC to provide me with a copy of my Application, loan agreement, billing statement or other document HSBC may charge me $10 per document. 11. Arbitration Provision. Any claim, dispute or controversy between me and HSBC (as specifically defined below for purposes of this Arbitration Provision), whether in contract or tort (intentional or otherwise), whether pre-existing, present or future, and including constitutional, statutory, common law, regulatory, and equitable claims in any way relating to (a) any of these or any other Documents or any RAL or RAC that I have previously requested or received from HSBC, (b) advertisements, promotions, or oral or written statements related to this or any other Application for a RAL or any RAL or RAC that I have previously requested or received from HSBC, (c) the relationship of HSBC and me relating to any of these or any other Documents or any RAL or RAC mat I have previously requested or received from HSBC; and (d) except as provided below, the validity, enforceability or scope of this Arbitration Provision or any part thereof, including but not limited to, the issue whether any particular claim, dispute or controversy must be submitted to arbitration (collectively the “Claim”), shall be resolved, upon the election of either me or HSBC, by binding arbitration pursuant to this Arbitration Provision and the applicable rules of the American Arbitration Association (“AAA”) or the National Arbitration Forum (“NAF”) in effect at the time the Claim is filed. I shall have the right to select one of these arbitration administrators (the “Administrator”). The arbitrator must be a lawyer with more than ten (10) years of experience or a retired or former judge. In the event of a conflict between this Arbitration Provision and the rules of the Administrator, this Arbitration Provision shall govern. In the event of a conflict between this Arbitration Provision and the balance of this Application or any other Documents, this Arbitration Provision shall govern. Notwithstanding any language in this Arbitration Provision to the contrary, no arbitration may Be administered, without the consent of all parties to the arbitration, by any organization that has in place a formal or informal policy that is inconsistent with and purports to override the terms of this Arbitration Provision, including the Class Action Wavier Provision defined below. HSBC hereby agrees not to invoke its right to arbitrate an individual Claim I may bring in small claims court or an equivalent court, if any, so long as the Claim is pending only in that court. No class actions or private attorney general actions in court or in arbitration or joinder or consolidation of claims in court or in arbitration with other persons, are permitted without the consent of HSBC and me. The validity and effect of the preceding sentence (herein referred to as the “Class Action Waiver Provision”) shall be determined exclusively by a court and not by the Administrator or any arbitrator. Neither the Administrator nor any arbitrator shall have the power or authority to waive, modify or fail to enforce the Class Action Waiver Provision, and any attempt to do so, whether by rule, policy, arbitration decision or otherwise, shall be invalid and unenforceable. Any arbitration hearing that I attend will take place in a location that is reasonably convenient for me. On any Claim I file, I will pay the first $50.00 of the filing fee. At my request, HSBC will pay the remainder of the filing fee and any administrative or hearing fees charged by the Administrator, up to $1,500.00 on any Claim asserted by me in the arbitration. If I should be required to pay any additional fees to the Administrator, HSBC will consider a request by me to pay all or part of the additional fees; however, HSBC shall not be obligated to pay any additional fees unless the arbitrator grants me an award. If the arbitrator grants an award in my favor, HSBC will reimburse me for any additional fees paid or owed by me to the Administrator up to the amount of the fees that would have been charged if the original Claim had been for the amount of the actual award in my favor. If the arbitrator issues an award in HSBC’s favor, I will not be required to reimburse HSBC for any fees HSBC has previously paid to the Administrator or for which HSBC is responsible. -3- --------------------------------------------------------------------------------        This Arbitration Provision is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16 (the “FAA”). The arbitrator shall apply substantive law consistent with the FAA, and not by any state law concerning arbitration. The arbitrator shall follow and apply applicable substantive law to the extent consistent with the FAA, statutes of limitation and claims of privilege and shall be authorized to award all remedies permitted by applicable substantive law, including, without limitation, compensatory, statutory and punitive damages, declaratory, injunctive and other equitable relief and attorneys’ fees and costs. The arbitrator will follow rules of procedure and evidence consistent with the FAA, this Arbitration Provision and, to the extent consistent with this Arbitration Provision, the Administrator’s rules. Upon request of either party, the arbitrator shall prepare a short reasoned written opinion supporting the arbitration award. Judgment upon the award may be entered in any court having jurisdiction. The arbitrator’s award will be final and binding except for. (a) any appeal right under the FAA; and (b) any appeal of Claims involving more than $100,000. For such Claims, any party may appeal the award to a three-arbitrator panel appointed by the Administrator, which will reconsider de novo (i.e., in its entirety) any aspect or all aspects of the initial award that is appealed. The panel’s decision will be final and binding, except for any appeal right under the FAA. Unless applicable law provides otherwise, the appealing party will pay the appeal’s costs (i.e., the amounts owed to the Administrator and the arbitrators), regardless of its outcome. However, HSBC will consider in good faith any reasonable request for HSBC to bear up to the full costs of the appeal. Nothing in this Arbitration Provision shall be construed to prevent HSBC’s use of offset or other contractual rights involving payment of my income tax refund or other amount on deposit with HSBC to pay off any RAL, RAC, or similar financial service, or H&R Block or other fees, now or thereafter owed by me to HSBC or any Other RAL Lender or H&R Block or third party pursuant to the Documents or similar prior documents.      I ACKNOWLEDGE THAT I HAVE A RIGHT TO LITIGATE CLAIMS IN COURT BEFORE A JUDGE OR JURY, BUT I PREFER TO RESOLVE ANY SUCH CLAIMS THROUGH ARBITRATION AND HEREBY KNOWINGLY AND VOLUNTARILY WAIVE MY RIGHTS TO LITIGATE SUCH CLAIMS IN COURT BEFORE A JUDGE OR JURY, UPON ELECTION OF ARBITRATION BY HSBC OR BY ME. I ACKNOWLEDGE THAT I WILL NOT HAVE THE RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OF CLAIMANTS OR AS A PRIVATE ATTORNEY GENERAL PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION. I UNDERSTAND THAT, IF I AM A MEMBER OF THE PUTATIVE CLASS IN CUMMINS, ET AL. V. H&R BLOCK, INC, ET AL., CASE NO. 03-C-134 IN THE CIRCUIT COURT OF KANAWHA COURT, WV, THIS ARBITRATION CLAUSE MAY NOT ACT AS A WAIVER OF THE RIGHTS AND CLAIMS I MAY HAVE IN THAT ACTION.      This Arbitration Provision shall supersede all prior Arbitration Provisions contained in any previous RAL or RAC application or related agreement and shall survive repayment of any RAL or RAC and termination of my account; provided, however, that if I reject this Arbitration Provision as set below, any prior Arbitration Provisions shall remain in full force and effect. If any portion of this Arbitration Provision is deemed invalid or unenforceable, it will not invalidate the remaining portions of this Arbitration Provision. However, if a determination is made that the Class Action Waiver Provision is unenforceable, this Arbitration Provision (other than this sentence) and any prior Arbitration Provision shall be null and void.      To reject this Arbitration Provision, I must send HSBC, c/o HSBC Taxpayer Financial Services Inc., Account Research, P.O. Box 18097, Jacksonville, FL 32229, a signed writing (“Rejection Notice”) that is received within thirty (30) days after the date I sign this Application. The Rejection Notice must identify the transaction involved arid must include my name, address, and social security number and must be signed by all persons signing this Application as Applicant(s). I may send the Rejection Notice in any manner I see fit as long as it is received at the specified address within the specified time. No other methods can be used to reject the Arbitration Agreement. If the Rejection Notice is sent on my behalf by a third party, such third party must include evidence of his or her authority to submit the Rejection Notice on my behalf.      As used in this Arbitration Provision, the term “HSBC” shall mean HSBC Bank USA, National Association, HSBC TFS, Household Bank, f.s.b., Beneficial National Bank, and H&R Block, Inc., and each of their parents, wholly or majority-owned subsidiaries, affiliates, or predecessors, successors, assigns and the franchisees of any of them, and each of their officers, directors, agents, and employees. -4- --------------------------------------------------------------------------------        Contacting the Administrator: If I have a question about the arbitration Administrator mentioned in this Arbitration Provision or if I would like to obtain a copy of its arbitration rules, I can contact the Administrator as follows: American Arbitration Association, 335 Madison Avenue, New York, NY 10017, www.adr.org; National Arbitration Forum, P.O. Box 50191, Minneapolis, MN 55405, www.arb-forum.com. 12. Survival. The provisions of this Application shall survive the execution of the Loan Agreement and Disclosure Statement and the disbursement of funds. 13. Miscellaneous. (a) References to “I” or “me” or “my” in the Documents shall refer individually to each applicant for a RAL and to both applicants, and the obligations of such individuals under the Documents will be joint and several. The filing of an injured spouse form shall not relieve either applicant of any such obligations under the Documents. (b) If any provision of the Documents or part thereof is deemed invalid, such invalidity will not affect any other provision of the Documents or part thereof. (c) HSBC may obtain a consumer report on me, and other information from third parties, in connection with evaluating my Application, or collecting or reviewing my RAL or accounts. (d) HSBC may assign all or a portion of any rights or obligations relating to a RAL to a third party, including HSBC TFS, H&R BlockO, an affiliate of H&R Block, a franchiser of H&R Block, or an affiliate of HSBC, without notice to me or my consent. (e) Supervisory personnel of HSBC or its agents may listen to and record my telephone calls. (f) I agree that you may send any notices and billing statements to the address of the primary applicant and not to the address of the joint applicant if such address is different. (g) I agree HSBC may transfer, sell, participate or assign all or a portion of my RAL, and its rights, duties and obligations relating to my RAL, to third parties, including HSBC TFS, its affiliates, successors and assigns without notice to me or my consent. 14. State Notices. California residents: Married persons may apply for a separate account. Iowa Residents: NOTICE TO CONSUMER: 1. Do not sign this paper before you read it. 2. You are entitled to a copy of this paper. 3. You may prepay the unpaid balance at any time without penalty and may be entitled to receive a refund of unearned charges in accordance with the law. New York residents: Consumer reports may be requested in connection with this account or any updates, renewals, or extensions thereof. Upon my request, HSBC will inform me of the names and addresses of any consumer reporting agencies which have provided HSBC with such reports. Ohio residents: The Ohio law against discrimination requires that all creditors make credit equally available to all creditworthy customers, and that credit reporting agencies maintain separate credit histories on each individual upon request. The Ohio Civil Rights commission administers compliance with these laws. Pennsylvania residents: If this loan becomes in default, HSBC or its assignee intends to collect default charges. Utah residents: Any prepaid finance charge not exceeding 5% of the original amount of the loan shall be fully earned on the date the loan is extended, and shall be nonrefundable in the event the loan is repaid prior to the date it is due. Any additional prepaid finance charge is earned proportionally over the term of the loan, and, in the event of such prepayment, the unearned portion of such charge, calculated on a pro rata basis according to the remaining term of the loan, shall be refunded. Wisconsin residents: No provision of a marital property agreement, a unilateral statement under Wisconsin Stats. s. 766.59 or a court decree under Wisconsin Stats. s. 766.70 adversely affects the interest of the creditor unless the creditor, prior to the time the credit is granted, is furnished a copy of the agreement, statement or decree or has actual knowledge of the adverse provision when the obligation to the creditor is incurred. All obligations described herein are being incurred in the interest of my marriage or family. A married Wisconsin resident applicant must mail the name and address of his or her spouse, as well as the applicant’s name and social security number, to HSBC c/o HSBC Taxpayer Services, 200 Somerset Corporate Blvd., Bridgewater, NJ 08807, within two days. 15. Certification. I certify that the following information is true with respect to the RAL I am requesting; (1) I do not owe any tax due and/or any tax lines from prior tax years, nor have I previously filed a 2004 federal income tax return. (2) I do not have any delinquent child support, alimony payments, student loans, V.A, loans or other federally sponsored loans. (3) Presently, I do not have a petition (whether voluntary or involuntary) filed nor do I anticipate filing a petition under federal bankruptcy laws. (4) I have not had a RAL with any lender from a prior year that has been discharged in bankruptcy. (5) I have not paid any estimated tax and/or did not have any amount of my 2003 refund applied to my 2004 tax return. (6) I am not presently making regular payments to the IRS for prior year unpaid taxes. (7) I do not have a Power of Attorney presently in effect or on file with the Internal Revenue Service (“IRS”) to direct my federal income tax refund to any third party. (8) I am not filing a 2004 federal income tax return using a substitute W-2, Form 4852, or any other form of substitute wage and tax documentation, unless the -5- --------------------------------------------------------------------------------   source of the Form 4852 is a Military Leave and Earnings Statement. (9) I am not filing a Form 8862 (Earned Income Credit Eligibility) with my 2004 federal income tax return. (10) I am not currently incarcerated in a state or federal prison nor do I have 2004 income earned while an inmate at a penal institution and claiming the Earned Income Credit. (11) The 2004 income I have reported is not solely from Schedule C or C-EZ(Profit or Loss from Business). (12) If Schedule C is present and EIC claimed, and return is self-prepared or other prepared, I am a statutory employee and the W-2 indicates statutory employee in Box 15. (13) I am not filing Form 8379 (Injured Spouse Claim & Allocation) with my 2004 federal income tax return. (14) I am not filing Form 1310 (Statement of Person Claiming Refund Due Deceased Taxpayer) with the 2004 federal income tax return or filing a federal income tax return Form 1040 on behalf of deceased taxpayer. (15) I do not have an amount paid with request for an extension to file on Line 68, Field 1190 of Form 1040. (16) Everything that 1 have stated in this Application is correct. -6- --------------------------------------------------------------------------------   HSBC TAXPAYER FINANCIAL SERVICES DIVISION OF HSBC BANK USA, NATIONAL ASSOCIATION Privacy Statement Applicability This Privacy Statement only applies to customers’ accounts with the HSBC Taxpayer Financial Services division of HSBC Bank USA, National Association (“HSBC”). All other HSBC accounts are governed by the HSBC Bank USA National Association Personal Banking Policy. Introduction-Our Commitment to You HSBC is proud to be part of a financial services organization that has been providing superior products and services to its customers for many years. We greatly appreciate the trust that you and millions of customers have placed in us, and we will protect that trust by continuing to respect the privacy of all our applicants and customers even if our formal customer relationship ends. How We Handle Information we Obtain It is important for you to know that in order to ensure that our customers get the very best service and the highest quality products, HSBC collects demographic information (like your name and address) and credit information (like information related to your accounts with us and others). This information comes either directly from you, for instance, from your application and transactions on your account; or, it may come from an outside source such as your credit bureau report. In addition. if you visit our Internet web site, we may collect certain information about your Internet usage. Because some of the information we gather is not publicly available, we take great care to ensure that this information is kept safe from unauthorized access, and we would never share the information in violation of any regulation or law. Because we respect your privacy and we value your trust, the only employees or companies who can access your private personal information are those who use it to service your account or provide services to you or to us. HSBC diligently maintains physical, electronic and procedural safeguards that comply with applicable federal standards to guard your private personal information and to assist us in preventing unauthorized access to that information. How We Share Information with Companies Affiliated with Us From time to time, for general business purposes such as fraud control, or when we think it may benefit you, we do share certain information with our affiliated companies, except as prohibited by applicable law. These affiliated companies all provide financial services, such as banking, consumer finance, insurance, mortgage, and brokerage services. Some examples include companies doing business under the names Household, Beneficial, or HSBC. We may also share certain information with non-financial service providers that become affiliated with us in the future (such as travel, auto, or shopping clubs), except as prohibited by applicable law. The information we share might come from your application, for instance your name, address, telephone number, social security number, and e-mail address. Also, the information we share could include your transactions with us or our affiliated companies (such as your account balance, payment history, and parties to the transaction), your Internet usage, or your credit card usage. Except for Vermont residents, the information we share could also include your assets, income, or credit reports. How We Share Information under a Joint Marketing Agreement We may also provide information non-affiliated financial companies (such as a tax preparer, mortgage banker or insurance service provider) with whom we have a joint marketing agreement. The sharing of information with these types of companies is permitted by law. The information we may share also conies from the sources described above and might include your name, address, phone number, and account experience with us. How We Share Information with Other Third Parties Except for California or Vermont residents, we also may share information with non-affiliated companies that are able to extend special offers we feel might be of value to you. These companies may be financial services providers (such as mortgage bankers or insurance agents) or they may be non-financial companies (such as retailers, tax preparers, or marketing companies). These offers are typically for products and services that you might not otherwise hear about. The information we may provide them comes from the sources described above and might -7- --------------------------------------------------------------------------------   include your name, address and phone number. You may tell us not to share information with non-affiliated companies in this way by completing the form below. For California and Vermont residents, applicable law requires us to obtain your permission in order to share information about you in this way, and we have chosen not to share your information in this way. We may also provide information to non-affiliated companies that perform operational, collection, or fraud control services related to your account. The sharing of information with these types of companies is permitted by law. Such a company might include a financial company (such as an insurance service provider) or a non-financial company (such as a data processor or internet service provider) with whom we have an agreement. The information we may share also comes from the sources described above and might include your name, address, phone number, and account experience with us. Finally, we provide information about you to non-affiliated companies such as credit reporting agencies and companies which provide services related to your account. This information sharing is also permitted by law. We reserve the right to change our privacy practices at any time in accordance with applicable law. Notice of such changes will be provided if required by applicable law. How to Opt-Out (non-affiliated companies) (Applicable to residents of all states except California and Vermont) If you do not want us to share your private information with non-affiliated companies (unless we are permitted or required by law to do so), please let us know by simply calling 1-800-365-2641. If you have previously informed us of your preference, you do not need to do so again. We will be happy to comply with your “opt-out” request, which will only apply to the HSBC account you have designated on the form by account number. An opt-out request by any party on a joint account will apply to all parties on the joint account. Opt-out requests will not apply to information sharing that is permitted by law. Please allow sufficient time for us to process your request. How to Opt-Out (affiliated companies) (Applicable to residents of all states except Vermont) If you do not want us to share your credit information (such as your credit bureau information) with companies that are affiliated with us, please let us know by simply calling 1-800-365-2641. If you have previously informed us of your preference, you do not need to do so again. This request will not apply to information about your transactions or experience with HSBC (such as account information, account usage, or payment history), except as required by law, and will only apply to the HSBC account you have designated on the form by account number. An opt-out request by any party on a joint account will apply to all parties on the joint account.   Atenciòn clientes his panoparlantes: Esta Declaraciòn Sobre la Privacidad proporciona informaciòn sobre còmo manejamos informaciòn personal no publica acerca de nuestors clientes, las circunstancias bajo las cuales podemos compartir tal informaciòn con otras personas, y còmo usted puede pedir que no compartamos esa informaciòn con terceros que no sean afiliados nuestros. Si quisiera que le proporcionemos una traducciòn al espafiol de la Declaraciòn Sobre la Privacidad en su totalidad, sirvase comunicarse con nosotros llamàndonos gratis al 1-800-365-2641. -8- --------------------------------------------------------------------------------   -9- --------------------------------------------------------------------------------   [The following line and language will be inserted at the end of the HRB RAL Application.]   By signing below, I am indicating that I fully understand that I am applying for a loan and that I have read, understand and agree to the terms set forth in this Application above and on the following pages, including but not limited to: (a) Section 2 in which I agree that HSBC may use amounts received from my tax refund to pay certain delinquent debts; and (b) Section I in which I agree, upon my or HSBC’s election, to arbitrate any Claims that I may have. I also acknowledge that I have 30 days from today’s date to reject the Arbitration Provision by following the procedure described in Section 11. If I receive a RAL, I promise to pay the amount set forth in the “Total of Payments” section on my Loan Agreement and Disclosure Statement or subsequent replacement TILA Disclosure Statement, if any, on demand or when the anticipated refund from the IRS is electronically deposited into my refund account, whichever comes first, and I agree to repay the RAL whether or not my tax refund is paid in whole or in part to HSBC.             (Applicant — Primary Taxpayer Signature)     Date                 (Joint Applicant — Spouse Signature, If Joint Return)     Date                 Witness         HSBC Taxpayer Financial Services Toll-Free Customer Service Number 1-800-524-0628 or visit us on the web at hsbctfshrb.com for more information.   --------------------------------------------------------------------------------   LOAN AGREEMENT AND DISCLOSURE STATEMENT In this Loan Agreement and Disclosure Statement (“Agreement”), “RAL” means a Refund Anticipation Loan, “HSBC” means HSBC Bank USA, National Association, “I”, “me” and “my” means each person who has applied to HSBC for a RAL. “H&R Block” means each of H&R Block, Inc., and each of its affiliates and subsidiaries (and franchisees thereof). The following Truth in Lending Act (“TILA”) disclosures are based on a RAL in the amount specified in item 10 of the Itemization of Amount Financed. I will receive a replacement TILA Disclosure Statement if I am approved for a RAL in a different amount. In addition, I may receive a duplicate copy of this TILA Disclosure Statement if I am approved for a RAL in the amount on which this disclosure is based, and the RAL is disbursed to me by check. Truth in Lending Act Disclosure Statement           1. Amount Financed (the amount of credit provided to me or on my behalf)   $ _______   (e)           2. FINANCE CHARGE (the dollar amount the credit will cost me)   $ _______   (e)           3. Total of Payments (the amount I will have paid after I have made all payments as scheduled)   $ _______   (e)           4. ANNUAL PERCENTAGE RATE (the cost of my credit as a yearly rate)     _______ %(e)   “e” = estimate   If line is left blank, amount is “0” Creditor: My creditor is HSBC Bank USA, National Association. Demand Feature: My loan will be repayable on demand or when the anticipated tax refund is electronically deposited in my Refund Account, whichever is earlier. Payment Schedule: HSBC estimates that the Total of Payments set forth above will be due in a single payment approximately 12 days from the date of this Agreement. Security Interest: I am providing HSBC with a security interest in my tax refund payment by the IRS, and, except for Virginia residents, in all funds deposited in the Refund Account and that Refund Account. Late Charge: A late charge equal to 1.5% of the unpaid Total of Payments may be imposed on the date 35 days after payment of my loan is demanded, and on the same date of each succeeding month (or if there is no such date, the last date of the month). Prepayment: If I pay off early, I will not be entitled to a refund of part or all of the Finance Charge. Contract Reference: Refer to the Application and the accompanying Loan Agreement for additional information about nonpayment, default, any right to accelerate the maturity of the obligation, and any prepayment rebates or penalties. Required Deposit: The Annual Percentage Rate does not take into account my required deposit.   --------------------------------------------------------------------------------             Itemization of Amount Financed                   1. Amount paid directly to me   $ _____ (e)           2. Amount paid for my Refund Account Fee to HSBC   $ _____             3. Amount paid for Tax Prep to H&R Block   $ _____             4. Amount paid for prior year items owed to H&R Block   $ _____             5. Amount paid for System Administration Fee to H&R Block   $ _____             6. Amount paid for Peace of Mind to H&R Block   $ _____             7. Amount paid for E Filing to H&R Block   $ _____             8. Amount Financed (Items l+2+3+4+5+6+7)   $ _____ (e)           9. Prepaid FINANCE CHARGE (RAL Fee to HSBC)   $ _____ (e)           10. Total RAL (Items 8+9)   $ _____ (e)             “(e)” = estimate   If line is left blank, amount is “0” Loan Agreement 1. Obligation on RAL.      (a) I am obligated, on the date I sign this Agreement, to accept a RAL if HSBC approves my Application, unless HSBC approves me for a smaller RAL than the amount set forth in the Total of Payments section in the TILA Disclosure Statement above. If I am approved for a smaller RAL, I will be provided with a replacement TILA Disclosure Statement and I will be obligated to accept the smaller RAL if I accept the RAL proceeds check. My loan will begin, and HSBC will earn the finance charge, when I am approved for the RAL and the proceeds check or stored value card is made available or a transfer is initiated to my bank account.      (b) I may cancel my RAL transaction, or my obligation to accept a RAL, for up to 48 hours after I become obligated to accept the RAL. To do so, I must return to HSBC or the office where I received my RAL proceeds check any check I have received (or cash in the amount of the RAL proceeds check if I have cashed the check or received a transfer to my bank account), and comply with other requirements set by HSBC. I understand that, if I use my right to cancel, my finance charge will be refunded to me, HSBC will provide me with any tax refund only after HSBC receives the refund from the IRS, and I must still pay a Refund Account Fee. 2. Security Interest. If I receive a RAL, I grant HSBC a security interest in the property described in the TILA Disclosure Statement as collateral for my obligations to repay the RAL and perform my other obligations under the Application and this Agreement. 3. Deductions. My Prepaid Finance Charge, Refund Account Fee, fees for the completion and system administration of my income tax return by H&R Block, and prior year debt owed to H&R Block shall be deducted from the proceeds of my RAL. 4. Other Charges. (a) I agree to pay a returned check charge of $19 if any check or similar instrument I give HSBC is not honored. (b) I agree to pay a late charge as described in the TILA Disclosure Statement if I do not repay my loan when due. (c) In the event that I pay my account by telephone, I agree to pay up to a $10 fee for each such 2 --------------------------------------------------------------------------------   payment. HSBC reserves the right to change such fee from time to time. I may call Customer Service for a current fee schedule. (d) I also agree to pay any attorney’s fees and collection agency costs incurred by HSBC or its affiliates to collect any delinquent RAL as permitted by law, 5. Instant RAL. If I receive an Instant RAL, and if the electronic filing of my return is rejected by the Internal Revenue Service (“IRS”), I authorize H&R Block to insert my Refund Account number at HSBC, together with HSBC’s routing transit number, on my signed paper returns, and mail them to the IRS. 6. Application of Payments. Each payment I make on the RAL will be applied in any order determined by HSBC. BY SIGNING BELOW, I AGREE TO THE TERMS OF THIS LOAN AGREEMENT, AND TO THE APPLICATION, WHICH INCLUDES AN ARBITRATION CLAUSE WHICH MAY SUBSTANTIALLY LIMIT MY RIGHTS IN THE EVENT OF A DISPUTE. I ALSO ACKNOWLEDGE RECEIVING A COMPLETED COPY OF THIS LOAN AGREEMENT AND DISCLOSURE STATEMENT. CAUTION: IT IS IMPORTANT THAT YOU THOROUGHLY READ THIS CONTRACT BEFORE YOU SIGN IT. NOTICE TO CUSTOMER (a)   DO NOT SIGN THIS IF IT CONTAINS ANY BLANK SPACES.   (b)   YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN.   (c)   YOU HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THIS AGREEMENT AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE.                                     Date:     (Seal)   (Seal)                               Signature of Applicant   Signature of Joint Applicant     3 --------------------------------------------------------------------------------   INFORMATION, IDENTIFICATION AND INSTRUCTIONS IN CONNECTION WITH APPLICATION FOR A REFUND ANTICIPATION LOAN AND TO OPEN A DEPOSIT ACCOUNT System Protected by US. Patent Nos. 4,890,228,5,193,057, and 5,963,921 1. INFORMATION Applicant’s Name                                                                              (                    ) First                      M.I.                      Last                      Maiden                                                                                       Home Address                                                                                       Mailing Address Social Security/Taxpayer Identification #___- ___- ___ Date of Birth                     /                     /                     Home Phone # (                     )                     -                     (Required) Work Phone #(               )             -              (Required, if employed) Residence: o Own o Rent o Other Checking Account: oYes o No Savings Account: oYes o No Joint Applicant-Spouse(if joint return)                                                                               (                    ) First                      M.I.                      Last                      Maiden                                                                                                Home Address                                                                                                Mailing Address Social Security/Taxpayer Identification #___- ___- ___ Date of Birth                     /                     /                      Home Phone # (               )              -             (Required,if different) Work Phone #(             )            -        (Required, if employed) Residence: o Own o Rent o Other Checking Account: oYes o No Savings Account: oYes o No 2.   IDENTIFICATION       The following unexpired identification (“ID”) has been provided:                       For Applicant’s photo ID:       For Applicant’s second ID, if required:       Type of ID       Type of ID                           ID Number, if any       Number, if any                           Place of Issuance       Place of Issuance                           Date of Issuance, if any       Date of Issuance, If any                           Expiration Date, if any       Expiration Date, if any                           Additional Information       Additional Information                                             For Joint Applicant’s photo ID:   For Joint Applicant’s second ID, if required:       Type of ID       Type of ID                           ID Number, if any       ID Number, if any                           Place of Issuance :       Place of Issuance                           Date of Issuance, if any       Date of Issuance, if any                           Expiration Date, if any       Expiration Date, if any                           Additional Information       Additional Information                       3.   PAYMENT INSTRUCTIONS   A.   If I receive an Instant Refund Anticipation, Loan  (“RAL”), I would like to receive the proceeds of my Instant RAL by check.     B.   If I receive a Classic RAL, I would like to receive the proceeds of my Classic RAL by check, unless the boxes below are completed, in which case I choose to receive my funds via direct deposit into may bank o savings account o checking account. My bank account number into which I authorize HSBC Bank USA, National   --------------------------------------------------------------------------------         Association (“HSBC”) to direct my funds is         o o o o o o o o o o o o o o o o o.         The routing transit number (RTN) of the bank where my account resides, which is required for my loan funds to be accurately deposited into my bank account listed above, is o o o o o o o o o.     C.   If my refund is greater than the amount of my RAL, I would like to receive the proceeds of my excess refund by check, unless the boxes below are completed, in which case I choose to receive my proceeds by direct deposit into my o savings account o checking account o IRA account o HRBFA(H&R Block Financial Advisors) account. My account number into which I authorize HSBC to direct my funds is o o o o o o o o o o o o o o o o o.         The routing transit number (RTN) of the financial institution where my account resides, which is required for my funds to be accurately deposited into my account listed above, is o o o o o o o o o.     D.   Notwithstanding any request above to receive proceeds by direct deposit, if I am approved for a RAL in an amount smaller than the amount specified in item 10 of the Itemization of Amount Financed in the Loan Agreement and Disclosure Statement provided herewith, the RAL and any excess refund will be disbursed by check. By signing below I am indicating that I fully understand that I am applying for a loan and that I confirm that the information set forth herein is true and correct.             (Applicant — Primary Taxpayer Signature)     Date                 (Joint Applicant — Spouse Signature, If Joint Return)     Date                 Witness         Toll-Free Customer Service Number 1-800-524-0628 2 --------------------------------------------------------------------------------   APPLICATION FOR A REFUND ANTICIPATION LOAN, REFUND ANTICIPATION CHECK, OR REFUND PROCESSING TRANSFER AND TO OPEN A DEPOSIT ACCOUNT System Protected by U.S. Patent Nos. 4,890,228,5,193,057, and 5,963,921      This Application is submitted to HSBC Bank USA, National Association (“HSBC”) for a Refund Anticipation Check (“RAC”), Refund Processing Transfer (“RPT”), or Refund Anticipation Loan (“RAL”), and a Refund Account In (his Application, “Bank Product” means a RAC, RPT, or RAL; “ERO” means my electronic tax return originator; “Transmitter” means my electronic tax return transmitter, which may be the same as my ERO; and “IRS” means the Internal Revenue Service.      Customer Commitment      Understanding Your Options and Responsibilities as a RAL Customer the servicer of your loan, HSBC Taxpayer Financial Services Inc. works closely with your tax preparer and the bank to provide refund anticipation loans (RALs). As part our commitment to the highest standords in responsible lending, we would like to provide with the following explanation of your options and responsibilities. If you are owed a federal tax refund, you have a right to choose how you will receive money. Please understand there are several options available to you at varying costs, [ILLEGIBLE] of which are free. (2) A refund anticipation loan (RAL) is one of these options, but it is not your federal tax refund and it is not free. A RAL is a loan that you must pay even if the Internal Revenue Service (IRS) does not issue your tax refund. (3) As a customer, you deserve to have the Information you need to make an informed [ILLEGIBLE] so please take time to read and understand the terms and fees associated with a RAL. (4) You have a responsibility to ask questions regarding your RAL and we have [ILLEGIBLE] responsibility to make certain you have clear answers. Please call our toll-free customer hotline at 1-800-5240628. (5) You have a responsibility to communicate outstanding debts or liens you owe to the government. Be honest with yourself and the bank about your ability to repay the loan. (6) You are guaranteed the right to change our mind about obtaining a RAL within 48 hours after signing the loan agreement. For further details on canceling your obligation, please consult your loan agreement. (7) e are committed to providing you with additional financial education tools and resources. We encourage you to access important budgeting, savings and debt management formation toll-free through the National Foundation for Credit Counseling at 1-800-388-2227 (English), or 1-800- (82-9832 (espaftol), or by visiting ourCreditCounts.com (English) or SuCreditoCuenta.comTM (espaftol). (8) If you have further questions about the RAL product, or feel that any of the above commitments [ILLEGIBLE] responsibilities have not been met, please call our toll-free customer hotline at 1-800-524-0628. As an example, the information below is provided to help make sure you know your options                                           Timing of Check or Filing Option/Delivery Option   Relative Cost*   Direct Deposit” Paper Return Mailed to IRS   Refund Check     $     Cost of tax preparation   8 to 8 weeks Paper Return Mailed to IRS   Direct Deposit     $     Cost of tax preparation   5 weeks [ILLEGIBLE] - filed return   Direct Deposit     $$     Cost of tax preparation & e-filing, if any   8 to 14 days [ILLEGIBLE] -filed return   RAC or RPT     $$$     Same as e-filed above plus cost of RAC/RPT   8 to 14 days [ILLEGIBLE] - filed return   RAL   $ $$$     Same as e-Filed above plus cost of RAL   1 to 2 days Since costs may vary between facilitators, the relative costs are shown as $ for least expensive to $$$$ for most expensive. Options available may vary by facilitator.   *   While actual times may vary, these are approximate times and may help you in making your choice. (Times are based on www.irs.gov information and provider experience.) 1.   INFORMATION Applicant’s Name                                                                                  First                      M.I.                      Last                                                              Home Address                                                              Mailing Address (if different from above) Social Security/Taxpayer Identification #___- ___- ___ Date of Birth                     /                     /                     Joint Applicant - Spouse(if joint return)                                                              (                    ) First                      M.I.                      Last                      Maiden                                                              Home Address                                                              Mailing Address (if different from above) Social Security/Taxpayer Identification #___- ___- ___ Date of Birth                     /                     /                     -1- --------------------------------------------------------------------------------   2.   IDENTIFICATION My identification information will be entered and retained electronically.   3.   REQUEST FOR A RAL, FEDERAL RAC, or FEDERAL RPT (ONLY ONE BOX MAY BE MARKED IN THIS SECTION 3)       o I apply for a Refund Anticipation Loan secured by my federal income tax refund (“RAL”) in the maximum amount for which HSBC will approve me.       o I apply for a Refund Anticipation Check based on my federal income tax refund (“Federal RAC”) in the maximum amount for which HSBC will approve me.       o I apply for a Refund Processing Transfer based on my federal income tax refund (“Federal RPT”) in the maximum amount for which HSBC will approve me.   4.   REQUEST FOR A STATE RAC (MAY ONLY BE REQUESTED IF A REQUEST IS ALSO MADE IN SECTION 3)       o I apply for a Refund Anticipation Check for each state from which I receive a state income tax refund (each a “State RAC”) in the maximum amount for which HSBC will approve me.   5.   PAYMENT INSTRUCTIONS   A.   If I receive an Instant RAL or Federal RAC, I would like to receive the proceeds of my Instant RAL or Federal RAC by check, unless I notify my ERO that I choose to receive such proceeds through a stored value card, where available.     B.   If I receive a Federal RPT, State RAC, or Classic RAL, or if my refund is in excess of any product I obtain, I would like to receive the proceeds of my Federal RPT, State RAC, Classic RAL, or excess refund amount by check, unless I notify my ERO that I choose to receive such proceeds through a stored value card, where I available, or through direct deposit into the bank account with the account number and routing transit number I have provided in connection with the processing of this Application.     C.   Notwithstanding any request to receive proceeds by direct deposit or by stored value card, if I am approved for a RAL in an amount smaller than the amount specified in item 12 of the Itemization of Amount Financed in the Loan Agreement and Disclosure Statement provided herewith, the RAL and any excess refund will be disbursed by check.     D.   If I choose to receive proceeds by a stored value card, I agree to the terms set forth in the stored value card agreement provided to me, which is incorporated herein by reference. Certain fees shall apply. 6.   IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. TO HELP THE GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHAT THIS MEANS FOR ME: WHEN I OPEN AN ACCOUNT, YOU WILL ASK FOR MY NAME, ADDRESS, DATE OF BIRTH, AND OTHER INFORMATION THAT WILL ALLOW YOU TO IDENTIFY ME. YOU MAY ALSO ASK TO SEE MY DRIVER’S LICENSE OR OTHER IDENTIFYING DOCUMENTS.   7.   Applicable Law. This Application and all other documents executed in connection with this Application for my Bank Product (collectively, “Documents”), shall be governed by and construed, interpreted, and enforced in accordance with federal law and, to the extent state law applies, the law of the State of Delaware (without reference to conflict of laws principles).   8.   Important Information About Bank Products. I understand that: (a) I can file my federal income tax return electronically without obtaining a Bank Product; (b) the IRS will send me a refund check or electronically deposit my refund to my existing bank account; (c) the IRS normally makes an electronic deposit in an average of about 12 days after an electronic filing; (d) I will not receive the proceeds of a RAC or RPT until HSBC receives my tax refund from the IRS; (e) HSBC tries to make proceeds of an Instant RAL available on the day of application and a Classic RAL available on the first business day after application; (f) HSBC cannot guarantee when any proceeds of 2 --------------------------------------------------------------------------------         a Bank Product or an IRS or state tax refund will be available to me; and (g) a RAL may cost substantially more than other sources of credit, and I may want to consider using other sources of credit.     9.   Deposit Authorization. (a) After I sign my Application, my ERO and/or my Transmitter will electronically transmit my tax return to the IRS and my Application to HSBC. I understand that I will sign or authorize an IRS Transmittal Form 8453, IRS e-file signature authorization, and/or appropriate state deposit authorization form (“Deposit Authorization”) as part of my Application and electronic tax filing, and that the Deposit Authorization and this Application provide an irrevocable agreement to have my tax refund disbursed to HSBC, and irrevocably transfers to HSBC all of my rights, title, and interest in the proceeds of my tax refund, for purposes of the Bank Product I have requested and other purposes authorized by this Application. (b) If my Deposit Authorization results in a state tax refund being received in my Refund Account, I agree that such refund may be disbursed to HSBC to pay any RAL I have obtained before being otherwise disbursed. (c) If My Application is denied or cancelled, and HSBC receives my tax refund, HSBC will forward to me promptly any proceeds of my refund after deducting amounts permitted by this Agreement. (d) If I apply for a RAL, and if for any reason, any part of the anticipated tax refund is disallowed or offset by the IRS, or if I should receive a refund check in the mail, I will advise HSBC immediately and promptly pay HSBC any amounts owing with respect to my Application or RAL, and pay my ERO any fees owed to them involving my tax return. If I apply for RAC or RPT, and in the event a RAC or RPT, is not issued, I still owe and agree to pay any fees owed to the ERO and refund account fees, and if a RAC or RPT is issued, you will look only to amounts received into the refund account, up to the amount of the RAC or RPT, as the consideration for the RAC or RPT.     10.   Refund Account.(a) I request that a deposit account (“Refund Account”) be opened at HSBC upon receipt of my tax refund for the purposes of ensuring the repayment of my Bank Product and other amounts described in the Documents. The Annual Percentage Yield and interest rate on the Refund Account will be 0%. This means I will not receive any interest on funds in the Refund Account. I understand I cannot make withdrawals from the Refund Account and that the funds in the Refund Account will be disbursed only as expressly provided in the Documents. (b) HSBC may deduct any amounts I owe HSBC, my ERO, my Transmitter or their affiliates from my tax refund, any funds received in the Refund Account, and any proceeds of a Bank Product. My engagement with the ERO for services in connection with my 2004 income tax return will end, and I am required to pay all fees to the ERO for services rendered by the ERO, when my Bank Product check is made available to me (or when HSBC electronically transfers my proceeds to me or to another entity at my direction). If a check or an electronic transfer of proceeds is not made available to me because I do not receive a tax refund, then I am required to pay all fees to the ERO for services rendered by the ERO on demand. HSBC also may withdraw amounts deposited into the Refund Account from my tax refund to pay any check I receive for a Bank Product that I endorse and present for payment or to disburse money to me in accordance with my Application. (c) I will not receive a periodic statement for the Refund Account, but I will receive notice if funds in the Refund Account are not sufficient to repay my Bank Product or are used for any purpose other than repayment of my Bank Product or disbursement to me. HSBC may, immediately after disbursement of all funds in the Refund Account, close the account without further notice to or authorization from me.     11.   Refund Account Fee. I will pay HSBC a fee of $27.95 if I apply for a Federal RAC or a RAL and receive my proceeds by check or through a stored value card, where available, or $14.95 if I apply for a Federal RPT or a RAL and receive my proceeds by direct deposit, for the administration of the Refund Account and any disbursements to me from that account (“Refund Account Fee”). I irrevocably commit to pay the Refund Account Fee after the Deposit Authorization is filed with the IRS and regardless of whether (a) I apply for a Bank Product or (b) my Application is approved or denied. The Refund Account Fee is not imposed directly or indirectly as an incident to or condition of any extension of credit. I can avoid the Refund Account Fee if I direct that my tax refund not be deposited to HSBC before filing my Deposit Authorization with the IRS.     12.   Collections. In consideration of the ease and convenience of the following method of paying any delinquent debt I owe or the other applicant owes to HSBC, HSBC Taxpayer Financial Services Inc. (“HSBC TFS”), my ERO or Transmitter for prior years, or Bank One, River City Bank, First Security Bank, Republic Bank or Santa Barbara Bank & Trust (the “Other RAL Lenders”), and provided that such debt has not been discharged in bankruptcy, I authorize and direct the repayment of such debt, calculated as of the date of my Application, by means of (a) having such debt deducted from the proceeds of my Bank Product, or (b) having my Application denied or the amount for which I have applied reduced and having such debt repaid to those entities by offset or otherwise from my tax refund directly transmitted into my Refund Account at HSBC. If I owe delinquent debt to more than one of the entities listed above, I authorize and direct HSBC to pay such debts in the following order, HSBC, HSBC TFS, Other RAL Lenders, and ERO. I also authorize and Instruct HSBC and the Other RAL Lenders to disclose to each other information about their respective credit 3 --------------------------------------------------------------------------------       experiences concerning my present and prior Bank Products or similar financial services, and my prior tax returns. PLEASE NOTE: If I have delinquent debt, I understand that HSBC or HSBC TFS may be acting as a debt collector hereunder to collect a debt and that any information obtained will be used for that purpose. 13.   No Fiduciary/Agency Duty. I understand that for various fees received, my ERO is acting only as my tax preparer (if applicable), my electronic filer, the deliverer of checks for Bank Products, or as the purchaser of an interest in certain Bank Products issued by HSBC (if applicable) with respect to this Bank Product transaction. I further understand that my ERO is not acting in a fiduciary, confidential, or agency capacity with respect to me in connection with this transaction and has no other duties to me beyond the preparation of my tax return (if applicable), the transmission of my tax return information to HSBC, the electronic filing of my tax return with the IRS, and the delivery of checks for Bank Products. I acknowledge that I have independently evaluated and decided to apply for a Bank Product, and that I am not relying on any recommendation from my ERO. I also understand that HSBC I not acting in a fiduciary, confidential, or agency capacity with respect to me in connection with this transaction.   14.   Disclosure of Information. (a) “Information” means my 2004 federal and state income tax returns, any information obtained in connection with my tax return (including information relating to a possible offset of my tax refund or the possibility that my tax return is incorrect), and any information relating to my Application or a Bank Product or similar financial service I have received or requested from HSBC. (b) “Authorized Parties” means HSBC, HSBC TFS, my ERO, my Transmitter, and their respective affiliates and agents, and includes the Fraud Service Bureau operated for HSBC. (c) The Authorized Parties may share Information to process my Application, to determine whether to provide a Bank Product, to provide Bank Products to me, to collect delinquent Bank Products or ERO fees, to prevent fraud, and to otherwise administer or promote the program for Bank Products. (d) The Authorized Persons may disclose Information to the IRS, state tax agencies and other financial institutions that provide Bank Products or other financial services. (e) The Authorized Parties may call, or input my information on any website of, the IRS or state tax agencies in connection with my Application to, among other things, determine the status of my tax return. The IRS and state tax agencies may disclose information about me and my tax returns to the Authorized Parties. (f) My ERO may not use or disclose Information for any purpose, except as permitted under Treas. Reg. Sec. 301.7216-2 or as provided in these Terms. (g) I consent to HSBC sharing information as provided in the Privacy Statement.   15.   Service Fees. (a) Reissued Check Fee: I agree to pay $10 each time that a check is reissued at my request for any reason. If I request that such a check be sent by overnight mail, I agree to pay the charges for sending it by overnight mail. (b) Document Fee: If I ask for a copy of my Application, loan agreement, billing statement or other document, I may be charged me $10 per document.   16.   Arbitration Provision. Any claim, dispute or controversy between me and HSBC (as specifically defined below for purposes of this Arbitration Provision), whether in contract or tort (intentional or otherwise), whether pre-existing, present or future, and including constitutional, statutory, common law, regulatory, and equitable claims in any way relating to (a) any of these or any other Documents or any RAC, RPT, or RAL that I have previously requested or received from HSBC, (b) advertisements, promotions, or oral or written statements related to this or any other Application for a RAL or RAC, RPT, or RAL that I have previously requested or received from HSBC, (c) the relationship of HSBC and me relating to any of these or any other Documents or any RAC, RPT, or RAL that I have previously requested or received from HSBC; and (d) except as provided below, the validity, enforceability or scope of this Arbitration Provision or any part thereof, including, but not limited to, the issue of whether any particular claim, dispute or controversy must be submitted to arbitration (collectively the “Claim”), shall be resolved, upon the election of either me or HSBC, by binding arbitration pursuant to this Arbitration Provision and the applicable rules of either the JAMS or the National Arbitration Forum (“NAF”) in effect at the time the Claim is filed. I shall have the right to select one of these arbitration administrators (the “Administrator”). The arbitrator must be a lawyer with more than ten (10) years of experience or a retired or former judge. In the event of a conflict between this Arbitration Provision and the rules of the Administrator, this Arbitration Provision shall govern. In the event of a conflict between this Arbitration Provision and the balance of this Application or any other Documents, this Arbitration Provision shall govern.       HSBC hereby agrees not to invoke its right to arbitrate an individual Claim I may bring in small claims court or an equivalent court, if any, so long as the Claim is pending only in that court. No class actions or private attorney 4 --------------------------------------------------------------------------------       general actions in court or in arbitration or joinder or consolidation of claims in court or in arbitration with other persons, are permitted without the consent of the parties hereto. The validity and effect of the preceding sentence (hereinafter referred to as the “class action waiver provision”) shall be determined exclusively by a court and not by an arbitrator. Any arbitration hearing that I attend will take place in a location that is reasonably convenient for me. On any Claim I file, I will pay the first $50.00 of the filing fee. At my request, HSBC will pay the remainder of the filing fee and any administrative or hearing fees charged by the Administrator, up to $1,500,00 on any Claim asserted by me in the arbitration. If I should be required to pay any additional fees to the Administrator, HSBC will consider a request by me to pay all or part of the additional fees; however, HSBC shall not be obligated to pay any additional fees unless the arbitrator grants me an award. If the arbitrator grants an award in my favor, HSBC will reimburse me for any additional fees paid or owed by me to the Administrator up to the amount of the fees that would have been charged if the original Claim had been for the amount of the actual award in my favor. If the arbitrator issues an award in HSBC’s favor, I will not be required to reimburse HSBC for any fees HSBC has previously paid to the Administrator or for which HSBC is responsible.       This Arbitration Provision is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16 (the “FAA”), and not by any state law concerning arbitration. The arbitrator shall follow and apply applicable substantive law to the extent consistent with the FAA, statutes of limitation and claims of privilege and shall be authorized to award all remedies permitted by applicable substantive law, including, without limitation, compensatory, statutory and punitive damages, declaratory, injunctive and other equitable relief and attorneys’ fees and costs. The arbitrator will follow rules of procedure and evidence consistent with the FAA, this Arbitration Provision and the Administrator’s rules. Upon request of either party, the arbitrator shall prepare a short reasoned written opinion supporting the arbitration award. Judgment upon the award may be entered in any court having jurisdiction. The arbitrator’s award will be final and binding except for: (a) any appeal right under the FAA; and (b) Claims involving more than $100,000. For such Claims, any party may appeal the award to a three-arbitrator panel appointed by the Administrator, which will reconsider de novo (i.e., in its entirety) any aspect or all aspects of the initial award that is appealed. The panel’s decision will be final and binding, except for any appeal right under the FAA. Unless applicable law provides otherwise, the appealing party will pay the appeal’s costs (i.e., the amounts owed to the Administrator and the arbitrators), regardless of its outcome. However, HSBC will consider in good faith any reasonable request for HSBC to bear up to the full costs of the appeal. Nothing in this Arbitration Provision shall be construed to prevent HSBC’s use of offset or other contractual rights involving payment of my income tax refund or other amount on deposit with HSBC to pay off any Bank Product or similar financial service, or ERO or other fees, now or thereafter owed by me to HSBC or any Other RAL Lender or ERO or third party pursuant to the Documents or similar prior documents.       I ACKNOWLEDGE THAT I HAVE A RIGHT TO LITIGATE CLAIMS IN COURT BEFORE A JUDGE OR JURY, BUT I PREFER TO RESOLVE ANY SUCH CLAIMS THROUGH ARBITRATION AND HEREBY KNOWINGLY AND VOLUNTARILY WAIVE MY RIGHTS TO LITIGATE SUCH CLAIMS IN COURT BEFORE A JUDGE OR JURY, UPON ELECTION OF ARBITRATION BY HSBC OR BY ME. I ACKNOWLEDGE THAT I WILL NOT HAVE THE RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OF CLAIMANTS OR AS A PRIVATE ATTORNEY GENERAL PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION.       This Arbitration Provision shall supersede any prior Arbitration Provision contained in any previous Bank Product application or related agreement and shall survive repayment of any Bank Product and termination of my account; provided, however, that if I reject this Arbitration Provision as set forth below, all prior Arbitration Provisions shall remain in full force and effect. If any portion of this Arbitration Provision is deemed invalid or unenforceable, it will not invalidate the remaining portions of this Arbitration Provision.       To reject this Arbitration Provision, I must send HSBC, c/o HSBC Taxpayer Financial Services Inc., Account Research, P.O. Box 18097, Jacksonville, FL 32229, a signed writing (“Rejection Notice”) that is received within thirty (30) days after the date I sign this Application. The Rejection Notice must identify the transaction involved and must include my name, address, and social security number and must be signed by all persons signing this Application as Applicant(s). I may send the Rejection Notice in any manner I see fit as long as it is received at the specified address within the specified time. No other methods can be used to reject the Arbitration Provision. If the Rejection Notice is sent on my behalf by a third party, such third party must include evidence of his or her authority to submit the Rejection Notice on my behalf.       As used in this Arbitration Provision, the term “HSBC” shall mean HSBC Bank USA, National Association, the Custodian, HSBC TFS, Household Bank, f.s.b., and Beneficial National Bank, and each of their parents, wholly or 5 --------------------------------------------------------------------------------       majority-owned subsidiaries, affiliates, predecessors, and successors, and each of their officers, directors, and employees.       Contacting Arbitration Administrators: If I have a question about the arbitration administrators mentioned in this Arbitration Provision or if I would like to obtain a copy of their arbitration rules, I can contact them as follows: JAMS, 45 Broadway, 28th Floor, New York, NY 10017, www.jamsadr.com; National Arbitration Forum, P.O. Box 50191, Minneapolis, MN 55405, www.arb-forum.com.   17.   Advance RAL. If I have an outstanding Advance RAL, I instruct HSBC to pay off the Advance RAL by deducting the amount I owe from my tax refund.   18.   Survival. The provisions of the Application and Terms shall survive the execution of the Loan Agreement and Disclosure Statement and the disbursement of funds.   19.   Miscellaneous, (a) References to “I” or “me” or “my” in the Documents shall refer individually to each applicant for a Bank Product and to both applicants, and the obligations of such individuals under the Documents will be joint and several. (b) If any provision of the Documents or part thereof is deemed invalid, such invalidity will not affect any other provision of the Documents or part thereof. (c) HSBC may obtain a consumer report on me, and other information from third parties, in connection with evaluating my Application, or collecting or reviewing my Bank Product or accounts. (d) HSBC may assign all or a portion of any rights or obligations relating to a Bank Product to a third party, including HSBC TFS, my ERO, an affiliate of my ERO, a franchiser of my ERO, or an affiliate of HSBC, without notice to me or my consent. (e) Supervisory personnel of HSBC or its agents may listen to and record my telephone calls.   20.   State Notices. California residents: Married persons may apply for a separate account. Iowa Residents: NOTICE TO CONSUMER: 1. Do not sign this paper before you read it. 2. You are entitled to a copy of this paper. 3. You may prepay the unpaid balance at any time without penalty and may be entitled to receive a refund of unearned charges in accordance with the law. New York residents: Consumer reports may be requested in connection with this account or any updates, renewals, or extensions thereof. Upon my request, HSBC will inform me of the names and addresses of any consumer reporting agencies which have provided HSBC with such reports. Ohio residents: The Ohio law against discrimination requires that all creditors make credit equally available to all creditworthy customers, and that credit reporting agencies maintain separate credit histories on each individual upon request. The Ohio Civil Rights commission administers compliance with these laws. Pennsylvania residents: If this loan becomes in default, HSBC or its assignee intends to collect default charges. Utah residents: Any prepaid finance charge not exceeding 5% of the original amount of the loan shall be fully earned on the date the loan is extended, and shall be nonrefundable in the event the loan is repaid prior to the date it is due. Any additional prepaid finance charge is earned proportionally over the term of the loan, and, in the event of such prepayment, the unearned portion of such charge, calculated on a pro rata basis according to the remaining term of the loan, shall be refunded. Wisconsin residents: No provision of a marital property agreement, a unilateral statement under Wisconsin Stats. s. 766.59 or a court decree under Wisconsin Stats. s. 766.70 adversely affects the interest of the creditor unless the creditor, prior to the time the credit is granted, is furnished a copy of the agreement, statement or decree or has actual knowledge of the adverse provision when the obligation to the creditor is incurred. All obligations described herein are being incurred in the interest of my marriage or family. A married Wisconsin resident applicant must mail the name and address of his or her spouse, as well as the applicant’s name and social security number to HSBC c/o HSBC Taxpayer Financial Services, 200 Somerset Corporate Blvd., Bridgewater, NJ 08807, within two days. For state qualification purposes, HSBC may also be known under its dba, Imperial Thrift and Loan Association.   21.   Certification.       If I am requesting a RAL, I certify that the following information is true with respect to the RAL I am requesting; (1) I do not owe any tax due and/or any tax liens from prior tax years, nor have I previously filed a 2004 federal income tax return. (2) I do not have any delinquent child support, alimony payments, student loans, V.A. loans or other federally sponsored loans. (3) Presently, I do not have a petition (whether voluntary or involuntary) filed nor do I anticipate filing a petition under federal bankruptcy laws. (4) I have not had a RAL with any lender, from a prior year that has been discharged in bankruptcy. (5) I have not paid any estimated tax and/or did not have any amount of my 2003 refund applied to my 2004 tax return. (6) I am not presently making regular payments to the IRS for prior year unpaid taxes. (7) I do not have a Power of Attorney presently in effect or on file with the Internal Revenue Service (“IRS”) to direct my federal income tax refund to any third party. (8) I am not filing a 2004 federal income tax return using a substitute W-2, From 4852, or any other form of substitute wage and tax documentation, 6 --------------------------------------------------------------------------------       unless the source of the Form 4852 is a Military Leave and Earnings Statement. (9) I am not filing a Form 8862 (Earned Income Credit Eligibility) with my 2004 federal income tax return. (10) I am not currently incarcerated in a state or federal prison nor do I have 2004 income earned while an inmate at a penal institution and claiming the Earned Income Credit. (11) The 2004 income I have reported is not solely from Schedule C or C-EZ (Profit or Loss from Business). (12) If Schedule C is present, EIC claimed, and return is self-prepared or other prepared, I am a statutory employee and the W-2 indicates statutory employee in Box 15. (13) I am not filing Form 8379 (Injured Spouse Claim & Allocation) with my 2004 federal income tax return. (14) I am not filing Form 1310 (Statement of Person Claiming Refund Due Deceased Taxpayer) with the 2004 federal income tax return or filing a federal income tax return Form 1040 on behalf of deceased taxpayer. (15) I do not have an amount paid with request for an extension to file on Line 68, Field 1190 of Form 1040. (16) Everything that I have stated in this Application it correct.       If I am requesting a RAC or RPT, I certify that the following is true: (1) Presently, I do not have a petition (whether voluntary or involuntary) filed nor do I anticipate filing a petition under federal bankruptcy laws. (2) I have not had a RAL with HSBC, or any other RAL lender, from a prior year that has been discharged in bankruptcy. (3) Everything that I have stated in this Application is correct. 7 --------------------------------------------------------------------------------   HSBC TAXPAYER FINANCIAL SERVICES DIVISION OF HSBC BANK USA, NATIONAL ASSOCIATION Privacy Statement Applicability This Privacy Statement only applies to customers’ accounts with the HSBC Taxpayer Financial Services division of HSBC Bank USA, National Association (“HSBC”). All other HSBC accounts are governed by the HSBC Bank, USA National Association Personal Banking Policy. Introduction — Our Commitment to You HSBC is proud to be part of a financial services organization that has been providing superior products and services to its customers for many years. We greatly appreciate the trust that you and millions of customers have placed in us, and we will protect that trust by continuing to respect the privacy of all our applicants and customers even if our formal customer relationship ends. How We Handle Information we Obtain It is important for you to know that in order to ensure that our customers get the very best service and the highest quality products, HSBC collects demographic information (like your name and address) and credit information (like information related to your accounts with us and others). This information comes either directly from you, for instance, from your application and, transactions on your account; or, it may come from an outside source such as your credit bureau report. In addition, if you visit our Internet web site, we may collect certain information about your Internet usage. Because some of the information we gather is not publicly available, we take great care to ensure that this information is kept safe from unauthorized access, and we would never share the information in violation of any regulation or law. Because we respect your privacy and we value your trust, the only employees or companies who can access your private personal information are those who use it to service your account or provide services to you or to us. HSBC diligently maintains physical, electronic and procedural safeguards that comply with applicable federal standards to guard your private personal information and to assist us in preventing unauthorized access to that information. How We Share Information with Companies Affiliated with Us From time to time, for general business purposes such as fraud control, or when we think it may benefit you, we do share certain information with our affiliated companies, except as prohibited by applicable law. These affiliated companies all provide financial services, such as banking, consumer finance, insurance, mortgage, and brokerage services. Some examples include companies doing business under the names Household, Beneficial, or HSBC. We may also share certain information with non-financial service providers that become affiliated with us in the future (such as travel, auto, or shopping clubs), except as prohibited by applicable law. The information we share might come from your application, for instance your name, address, telephone number, social security number, and e-mail address. Also, the information we share could include your transactions with us or our affiliated companies (such as your account balance, payment history, and parties to the transaction), your Internet usage, or your credit card usage. Except for Vermont residents, the information we share could also include your assets, income, or credit reports. How We Share Information under a Joint Marketing Agreement We may also provide information to non-affiliated financial companies (such as a tax preparer, mortgage banker or insurance service provider) with whom we have a joint marketing agreement. The sharing of information with these types of companies is permitted by law. The information we may share also comes from the sources described above and might include your name, address, phone number, and account experience with us. How We Share Information with Other Third Parties Except for California or Vermont residents, we also may share information with non-affiliated companies that are able to extend special offers we feel might be of value to you. These companies may be financial services providers (such as mortgage bankers or insurance agents) or they may be non-financial companies (such as retailers, tax preparers, or marketing companies). These offers are typically for products and services that you might not otherwise bear about. The information we may provide them comes from the sources described above and might include your name, address and phone number. You may tell us not to share information with non-affiliated companies in this way by completing the form below. For California and Vermont residents, applicable law requires 8 --------------------------------------------------------------------------------   us to obtain your permission in order to share information about you in this way, and we have chosen not to share your information in this way. We may also provide information to non-affiliated companies that perform operational, collection, or fraud control services related to your account. The sharing of information with these types of companies is permitted by law. Such a company might include a financial company (such as an insurance service provider) or a non-financial company (such as a data processor or internet service provider) with whom we have an agreement. The information we may share also comes from the sources described above and might include your name, address, phone number, and account experience with us. Finally, we provide information about you to non-affiliated companies such as credit reporting agencies and companies which provide services related to your account. This information sharing is also permitted by law. We reserve the right to change our privacy practices at any time in accordance with applicable law. Notice of such changes will be provided if required by applicable law. How to Opt-Out (non-affiliated companies) (Applicable to residents of all states except California and Vermont) If you do not want us to share your private information with non-affiliated companies (unless we are permitted or required by law to do so), please let us know by simply calling 1-800-365-2641. If you have previously informed us of your preference, you do not need to do so again. We will be happy to comply with your “opt-out” request, which will only apply to the HSBC account you have designated on the form by account number. An opt-out request by any party on a joint account will apply to all parties on the joint account. Opt-out requests will not apply to information sharing that is permitted by law. Please allow sufficient time for us to process your request. How to Opt-Out (affiliated companies) (Applicable to residents of all states except Vermont) If you do not want us to share your credit information (such as your credit bureau information) with companies that are affiliated with us, please let us know by simply calling 1-800-365-2641. If you have previously informed us of your preference, you do not need to do so again. This request will not apply to information about your transactions or experience with HSBC (such as account information, account usage, or payment history), except as required by law, and will only apply to the HSBC account you have designated on the form by account number. An opt-out request by any party on a joint account will apply to all parties on the joint account.   Atencòin clientes hispanoparlantes: Esta Declaraciòn Sobre la Privacidad proporciona informaciòn sobre còmo manejamos informaciòn personal no publica acerca de nuestors clientes, las circunstancias bajo las cuales podemos compartir tal informaciòn con otras personas, y còmo usted puede pedir que no compartamos esa informaciòn con terceros que no sean afiliados nuestros. Si quisiers que le proporcionemos una traducciònal espafiol de la Declaraciòn Sobre la Privacidad en su totalidad, sirvase comunicarse con nosotros Ilamàndonos gratis al 1-800-365- 9 --------------------------------------------------------------------------------   [Insert this line and language at the end of the application.]   By signing below I am indicating that I have read, understand and agree to the terms set forth in this Application, including: (a) Section 12 in which I agree that HSBC may use amounts received from my tax refund to pay delinquent debts I owe HSBC or others; and (b) Section 16 in which I agreed, upon my or HSBC’s election, to arbitrate any Claims that I may have. I also acknowledge that I have 30 days from today’s date to reject the Arbitration Provision by following the procedure described in Section 16. If I receive a RAL, I promise to pay the amount set forth in the “Total of Payments” section on my Loan Agreement and Disclosure Statement or subsequent replacement TILA Disclosure Statement, if any, on the earlier of (a) on demand, (b) when the anticipated refund from the IRS is electronically deposited into my deposit account with HSBC, or (c) 24 days after my loan is approved if I receive my proceeds on a stored value card and if ray anticipated tax refund has not been received in full by that date, and I agree to repay the RAL whether or not my tax refund is paid in whole or in part to HSBC.             (Applicant — Primary Taxpayer Signature)   (Joint Applicant — Spouse Signature, If Joint Return)                 I certify that I have received my cashier’s check(s)       from HSBC on     .                     (Check #)       (Date)                                                                                      (Client’s Signature)                 I certify that I have received my cashier’s check(s)       from HSBC on     .                     (Check #)       (Date)                                                                                      (Client’s Signature) HSBC Taxpayer Financial Services Toll-Free Customer Service Number 1-800-524-0628 or visit us on the web at hsbctfs.com for more information.   --------------------------------------------------------------------------------   LOAN AGREEMENT AND DISCLOSURE STATEMENT In this Loan Agreement and Disclosure Statement (“Agreement”), “RAL” means a Refund Anticipation Loan, “HSBC” means HSBC Bank USA, National Association, “I”, “me” and “my” means each person who has applied to HSBC for a RAL. “ERO” means my electronic return originator. “HSBC TFS” means HSBC Taxpayer Financial Services Inc. Truth in Lending Act (“TILA”) Disclosure Statement   --------------------------------------------------------------------------------   THE FOLLOWING DISCLOSURE BOX IS APPLICABLE ONLY IF MY TOTAL RAL IS IN THE AMOUNT SPECIFIED IN ITEM 3 AND I RECEIVE NO FURTHER ADVANCE.           1. Amount Financed (the amount of credit provided to me or on my behalf)   $                      (e)           2. FINANCE CHARGE (the dollar amount the credit will cost me)   $                      (e)           3. Total of Payments (the amount I will have paid after I have made all payments as scheduled)   $                      (e)           4. ANNUAL PERCENTAGE RATE (the cost of my credit as a yearly rate)                          %(e)         “e”= estimate   If line is left blank, amount if “0” THE FOLLOWING DISCLOSURE BOX IS APPLICABLE IF MY TOTAL RAL EQUALS THE LESSER OF A) MY FEDERAL TAX REFUND OR B) $7000. HOWEVER, IF IT IS SUBSEQUENTLY DETERMINED THAT I AM APPROVED FOR A TOTAL RAL IN AN AMOUNT DIFFERENT THAN THE AMOUNT SPECIFIED IN ITEM 3 BELOW, I WILL RECEIVE A REPLACEMENT SET OF TRUTH IN LENDING DISCLOSURES.           1. Amount Financed (the amount of credit provided to me or on my behalf)   $                      (e)           2. FINANCE CHARGE (the dollar amount the credit will cost me)   $                      (e)           3. Total of Payments (the amount I will have paid after I have made all payments as scheduled)   $                      (e)           4. ANNUAL PERCENTAGE RATE (the cost of my credit as a yearly rate)                          %(e)         “e”= estimate   If line is left blank, amount is “0” Creditor: My creditor is HSBC Bank USA, National Association. Demand Feature: My loan will be repayable on the earlier of (a) on demand, (b) when the anticipated tax refund is electronically deposited in my Refund Account with HSBC,or (c) 24 days after ray loan is approved if I receive my proceeds on a stored value card and if my anticipated tax refund has not been received in full by that date. Payment Schedule: HSBC estimates that the total loan amount will be due in a single payment approximately 12 days from the date of this Agreement. Security Interest: I am providing HSBC with a security interest in my tax refund payment by the IRS and/or any state taxing authority, in all funds deposited in the Refund Account, and, except for Virginia residents, in that Refund Account. Late Charge: A late charge equal to 1.5% of the unpaid Total of Payments may be imposed on the date 35 days after payment of my loan is demanded, and on the same date of each succeeding month (or if there is no such date, the last date of the month). Prepayment: If I pay off early, I will not be entitled to a refund of part or all of the Finance Charge. Contract Reference: Refer to the Application and the Loan Agreement for additional information about nonpayment, default, any right to accelerate the maturity of the obligation, and any prepayment rebates or penalties. Required Deposit: The Annual Percentage Rate does not take into account my required deposit. 2 --------------------------------------------------------------------------------   THE FOLLOWING ITEMIZATION OF AMOUNT FINANCED IS APPLICABLE ONLY IF MY TOTAL RAL IS IN THE AMOUNT SPECIFIED IN ITEM 14 AND I RECEIVE NO FURTHER ADVANCE.           Itemization of Amount Financed                   1. Amount paid directly to me   $                      (e)           2. Amount paid for my Refund Account Fee to HSBC   $                                  3. Amount paid for Tax Prep to [ERO Name]   $                                  4. Amount paid for Debt owed to [ ERO Name ]   $                                  5. Amount paid to [Transmitter Name]   $                                  6. Amount paid to [Service Bureau Name]   $                                  7. Amount paid for Doc Prep to [ERO]   $                                  8. Amount paid for E-filing to [ERO Name]   $                                  9. Amount paid for ________ to [Name]   $                                  10. Amount paid for ________ to HSBC   $                                  11. Amount paid previously to me for an Instant RAL   $                                  12. Amount Financed (Items l+2+3+4+5+6+7+8+9+10+11)   $                      (e)           13. Total Prepaid FINANCE CHARGE (RAL Fee to HSBC)   $                      (e)           14. Total RAL (Items 12+13)   $                                “(e)”=estimate   If line is left blank, amount is “0” 3 --------------------------------------------------------------------------------   THE FOLLOWING ITEMIZATION OF AMOUNT FINANCED IS APPLICABLE IF I RECEIVE A SUBSEQUENT ADVANCE. HOWEVER, IF IT IS SUBSEQUENTLY DETERMINED THAT I AM APPROVED FOR A RAL IN AN AMOUNT DIFFERENT THAN THE AMOUNT SPECIFIED IN ITEM 14 BELOW, I WILL RECEIVE A REPLACEMENT ITEMIZATION OF AMOUNT FINANCED WITH MY CHECK.           Itemization of Amount Financed                   1. Amount paid directly to me   $                      (e)           2. Amount paid for my Refund Account Fee to HSBC   $                                  3. Amount paid for Tax Prep to [ERO Name]   $                                  4. Amount paid for Debt owed to [ERO Name)   $                                  5. Amount paid to [Transmitter Name]   $                                  6. Amount paid to [Service Bureau Name]   $                                  7. Amount paid for Doc Prep to [ERO]   $                                  8. Amount paid for E-filing to [ERO Name]   $                                  9. Amount paid for to [Name]   $                                  10. Amount paid for______ to HSBC   $                                  11. Amount paid previously to me for an Instant RAL   $                                  12. Amount Financed (Items 1+2+3+4+5+6+7+8+9+10+11)   $                      (e)           13. Total Prepaid FINANCE CHARGE (RAL Fee to HSBC)   $                      (e)           14. Total RAL (Items 12+13)   $                                “(e)”=estimate   If line is left blank, amount is “0” Loan Agreement 1. Obligation on RAL.      (a) I am obligated, on the date I sign this Agreement, to accept a RAL if HSBC approves my Application, unless HSBC approves me for a smaller RAL than me amount set forth in the Total of Payments section in the TILA Disclosure Statement above. If I am approved for a smaller RAL, I will be provided with a replacement TILA Disclosure Statement and I will be obligated to accept the smaller RAL if 1 accept the RAL proceeds check. My loan will begin, and HSBC will earn the finance charge, when I am approved for the RAL and the proceeds check is made available or a transfer is initiated to my bank account. 4 --------------------------------------------------------------------------------        (b) I may cancel my RAL transaction, or my obligation to accept a RAL, for up to 48 hours after I become obligated to accept the RAL. To do so, I must return to HSBC or the office where I received my RAL proceeds check any check I have received (or cash in the amount of the RAL proceeds check if I have cashed the check or received a transfer to my bank account), and comply with other requirements set by HSBC. I understand that, if I use my right to cancel, my finance charge will be refunded to me, HSBC will provide me with any tax refund only after HSBC receives the refund from the IRS, and I must still pay a Refund Account Fee. 2. Security Interest. If I receive a RAL, I grant HSBC a security interest in the property described in the TILA Disclosure Statement as collateral for my obligations to repay the RAL and perform my other obligations under the Application and this Agreement. 3. Deductions. My Prepaid Finance Charge, transmitter fees, Refund Account Fee, fees for the completion and electronic filing of my income tax return by my ERO, and fee for document preparation shall be deducted from the proceeds of my RAL. 4. Other Charges. (a) I agree to pay a returned check charge of $19 if any check or similar instrument I give HSBC is not honored, (b) I agree to pay a late charge as described in the TILA Disclosure Statement if I do not repay my loan when due. (c) In the event that I pay my account by telephone, I agree to pay up to a $10 fee for each such payment HSBC reserves the right to change such fee from time to time. I may call Customer Service for a current fee schedule, (d) I also agree to pay any attorney’s fees and collection agency costs incurred by HSBC or its affiliates to collect any delinquent RAL as permitted by law. 5. Instant RAL. If I receive an Instant RAL, and if the electronic filing of my return is rejected by the Internal Revenue Service (“IRS”), I authorize my ERO to insert my Refund Account number at HSBC, together with HSBC’s routing transit number, on my signed paper returns and mail them to the IRS. 6. Application of Payments. Each payment I make on the RAL will be applied in any order determined by HSBC. BY SIGNING BELOW, I AGREE TO THE TERMS OF THIS LOAN AGREEMENT, AND TO THE APPLICATION, WHICH INCLUDES AN ARBITRATION CLAUSE WHICH MAY SUBSTANTIALLY LIMIT MY RIGHTS IN THE EVENT OF A DISPUTE. I ALSO ACKNOWLEDGE RECEIVING A COMPLETED COPY OF THIS LOAN AGREEMENT AND DISCLOSURE STATEMENT. CAUTION: IT IS IMPORTANT THAT YOU THOROUGHLY READ THIS CONTRACT BEFORE YOU SIGN IT. NOTICE TO CUSTOMER (a)   DO NOT SIGN THIS IF IT CONTAINS ANY BLANK SPACES. (b)   YOU ARE ENTITLED TO’AN EXACT COPY OF ANY AGREEMENT YOU SIGN. (c)   YOU HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THIS AGREEMENT AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE.               Date:       (Seal)   (Seal)                       Signature of Applicant   Signature of Joint Applicant 5 --------------------------------------------------------------------------------   APPLICATION FOR AN ELECTRONIC REFUND ADVANCE LOAN AND TO OPEN A DEPOSIT ACCOUNT System Protected by U.S. Patent Nos. 4,890,228,5,193,057, and 5,963,921 This Application is submitted to HSBC Bank USA, National Association (“HSBC”) for an Electronic Refund Advance Loan (“ERA”) and a Refund Account. As used herein, “BFC” means Block Financial Corporation and its parents, subsidiaries and affiliates; “HSBC TFS” means HSBC Taxpayer Financial Services Inc.; “IRS” means the Internal Revenue Service; and “RAL” means a refund anticipation loan. 1.   INFORMATION       I understand and confirm that the name, home address, mailing address, social security/taxpayer identification number, and date of birth which I entered into the personal information and address sections of the online tax preparation product are true and correct and are incorporated in this Application by this reference as the name, home address, mailing address, social security/taxpayer identification number, and date of birth of each applicant.   2.   IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. TO HELP THE GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHAT THIS MEANS FOR ME: WHEN I OPEN AN ACCOUNT, YOU WILL ASK FOR MY NAME, ADDRESS, DATE OF BIRTH, AND OTHER INFORMATION THAT WILL ALLOW YOU TO IDENTIFY ME. YOU MAY ALSO SEEK TO VERIFY MY IDENTITY THROUGH NON-DOCUMENTARY METHODS.   3.   Payment Instructions   A.   If I receive an ERA, I understand I am to receive my ERA proceeds via direct deposit into the bank account that I will designate on the Direct Deposit screen of this online tax preparation product application during the Electronic Filing process, and I authorize HSBC to direct deposit my funds to that designated account.     B.   If my refund is greater than my ERA, I understand I am to receive my excess funds via direct deposit into the bank account that I previously designated on the Direct Deposit screen of this online tax preparation product application and I authorize HSBC to direct deposit my funds to that designated account. 4.   HSBC ERA DISCLOSURE STATEMENT:       The FINANCE CHARGE for my ERA is set forth on my Truth in Lending Disclosure. I know that even if my ERA is denied, I am responsible for my electronic filing, as applicable. I am also responsible for the repayment of my ERA whether or not my tax refund it paid to my account with HSBC in whole or in part. I understand that my income tax return can be filed etectronically without obtsining an ERA and, subject to IRS processing, the usual time within which I can expect to receive a refund check If I file electronically and without an ERA is within approximately three weeks from the date I file my return. The IRS normally mikes an electronic deposit to an average of about 12 days after an electronic filing. Alternatively, if I elect to obtain and am approved for an ERA, the loan proceeds usually will be made available to me within approximately 1-2 days of my loan application.       The usual duration of an ERA is approximately II days from the date of approval of the ERA. The following are examples of the estimated ANNUAL PERCENTAGE RATE (“APR”) and ERA FINANCE CHARGES on ERAs of varying amounts based on II-day maturity periods. Because the APR on an ERA may be high in certain cases relative to other sources of credit, 1 understand that it may cost less to use such sources; e.g., credit cards, equity lines, etc., instead of an ERA.                                     Example Loan Amount $ 500 $ 750 $ 1 ,000 $ 1,500 $ 2,000 $ 3,000 $ 4,000 $ 5,000   ERA Finance Charge * $ 18 $ 28 $ 28 $ 58 $ 58 $ 88 $ 98 $ 98   Estimated Annual Percentage Rate   124 %e 129 %e 96 %e 133 %e 99 %e 100 %e 8.3 %e 66 %e   *   I understand I will be given disclosures which will show the actual finance charge and other charges applicable to my ERA transaction. “e” = estimate   --------------------------------------------------------------------------------   5.   Applicable Law. This Application and all the other documents executed in connection with this Application or my ERA (collectively, “Documents”), shall be governed by and construed, interpreted, and enforced in accordance with federal law and, to the extent state law applies, the law of the state of Delaware (without reference to conflict of laws principles).   6.   Important Information About ERAs . I understand that: (a) I can file my federal income tax return electronically without obtaining an ERA; (b) the IRS will send me a refund check or electronically deposit my refund to my existing bank account; (c) the IRS normally makes en electronic deposit in an average of about 12 days after an electronic filing; (d) HSBC tries to initiate the direct deposit of proceeds of an ERA on the first business day after application; (e) HSBC cannot guarantee when any proceeds of an ERA will be available to me; and (f) a ERA may cost substantially more than another type of loan I might obtain.   7.   Deposit Authorization. (a) After I submit my Application, BFC will electronically transmit my tax return to the IRS and my Application to HSBC. I understand that 1 will authorize or agree to an IRS Transmittal Form 8453 or IRS e-file signature authorization (“Deposit Authorization”) as part of my Application and electronic tax filing, and that the Deposit Authorization and this Application provide an irrevocable agreement to have my tax refund disbursed to HSBC, and irrevocably transfers to HSBC all my rights, title, and interest in the proceeds of my tax refund for purposes of the ERA I have requested and other purposes authorized by this Application. (b) If my Application is denied or cancelled, and HSBC receives my tax refund, HSBC will forward to me promptly any proceeds of my refund after deducting amounts permitted by this Agreement. (c) If for any reason, any part of the anticipated tax refund is disallowed or offset by the IRS, or if I should receive a refund check in the mail, I will advise HSBC immediately and promptly pay HSBC any amounts owing with respect to my Application or an ERA, and pay BFC any fees owed to them involving my tax return.   8.   Refund Account. (a) I request that a deposit account be opened (“Refund Account”) at HSBC upon receipt of my tax refund for the purposes of ensuring the repayment of my ERA and other amounts described in the Documents. The Annual Percentage Yield and interest rate on the Refund Account will be 0%. This means I will not receive any interest on funds in the Refund Account. I understand that I cannot make withdrawals from the Refund Account and that the funds in the Refund Account will be disbursed only as expressly provided in the Documents. (b) HSBC may deduct any amounts I owe HSBC or BFC from my tax refund, any funds received in the Refund Account, and any proceeds of an ERA. I am required to pay all fees to BFC for services rendered by BFC when HSBC electronically transfers my proceeds to me. If an electronic transfer of proceeds is not made available to me because I do not receive a tax refund, then I am required to pay all fees to BFC for services rendered by BFC on demand. HSBC also may withdraw amounts deposited into the Refund Account from my tax refund to disburse money to me in accordance with my Application, (c) I will not receive a periodic statement for the Refund Account, but I will receive notice if funds in the Refund Account are not sufficient to repay my ERA or are used for any purpose other than repayment of my ERA or disbursement to me. HSBC may, immediately after disbursement of all funds in the Refund Account, close the account without further notice to or authorization from me.   9.   Refund Account Fee. I will pay HSBC a fee of $11.95 for the administration of the Refund Account and any disbursements to me from that account (“Refund Account Fee”). I am obligated to pay the Refund Account Fee after the Deposit Authorization is filed with the IRS and is imposed regardless of whether (a) I apply for an ERA or (b) my Application is approved or denied. The Refund Account Fee is not imposed directly or indirectly as an incident to or condition of any extension of credit. I can avoid the Refund Account Fee if I direct that my tax refund not be deposited to HSBC before filing my Deposit Authorization with the IRS.   10.   Collections. In consideration of the ease and convenience of the following method of paying any delinquent debt I owe or the other applicant owes to HSBC, HSBC TFS, my electronic return originator (“ERO”) for prior yean, BFC, or Bank One, River City Bank, First Security Bank, Republic Bank or Santa Barbara Bank & Trust (the “Other ERA or RAL Lenders”), and provided that such debt has not been discharged in bankruptcy, I authorize and direct the repayment of such debt, calculated as of the date of my Application, by means of (a) having such debt deducted from the proceeds of my ERA, or (b) having my request for an ERA denied or the amount for which I have applied reduced and having such debt repaid to those entitles by offset or otherwise from my lax refund directly transmitted into my Refund Account at HSBC. If I owe delinquent debt to more than one of the entities listed above, I authorize and direct HSBC to pay such debts in the following order: HSBC, HSBC TFS, Other ERA or RAL Lenders, ERO, and BFC, I also authorize and instruct HSBC and the Other ERA or RAL Lenders to disclose to each other Information about their respective credit experiences concerning my present and prior ERAs, refund anticipation loans (“RALs”), or similar financial services, and my prior tax returns. 2 --------------------------------------------------------------------------------   PLEASE NOTE: If I have delinquent debt, I understand that HSBC or HSBC TFS may be acting as a debt collector hereunder to collect a debt and that any information obtained will be used for that purpose. 11.   No Fiduciary/Agency Duty. I understand that BFC is not acting in a fiduciary, confidential, or agency capacity with respect to me in connection with this transaction and has no other duties to me beyond the transmission of my tax return information to HSBC, and the electronic filing of my tax return with the IRS and/or state taxing authority. I understand that BFC or an affiliate of BFC has the right to purchase an interest in my ERA issued by HSBC. I further understand that BFC or an affiliate of BFC may receive payments from HSBC or its affiliates in connection with ERAs. I also understand that HSBC is not acting in a fiduciary, confidential, or agency capacity with respect to me in connection with this transaction.   12.   Disclosure Information. (a) “Information” means my federal and state income tax returns for the tax year 2004, any information obtained in connection with my tax return (including information relating to a possible offset of my tax refund or the possibility that my tax return is incorrect), and any information relating to my Application for an BRA or similar financial service I have received or requested from HSBC. (b) “Authorized Parties” means HSBC, HSBC TFS, BFC, my Transmitter, and their respective affiliates and agents, and includes the Fraud Service Bureau) operated for HSBC. (c) The Authorized Parties may share Information to process my Application, to provide ERAs to me, to collect delinquent ERAs or BFC fees, to prevent fraud, and to otherwise administer or promote the program for ERAs. (d) The Authorized Parties may disclose Information to the IRS, state tax agencies and other financial institutions that provide ERAs or other financial services. (e) The Authorized Parties may call, or input my Information on any website of, the IRS or state tax agencies in connection with my Application to, among other things, determine the status of my fax return. The IRS and state tax agencies may disclose information about me and my tax returns to the Authorized Parties, (f) BFC may not use or disclose Information for any purpose, except as permitted under Treas, Reg. Sec. 301.7216-2 or as provided herein. (f) I consent to HSBC sharing information as provided in the Privacy Policy set forth in Section 18. (g) HSBC will be my creditor.   13.   Service Fees. (a) Reissued Check Fee: I agree to pay $10 each time that a check is reissued at my request for my reason. If I request that such a check be sent by overnight mail, I agree to pay the charges for sending it by overnight mail. (b) Document Fee: If I ask for a copy of my Application, loan agreement, billing statement or other document, I may be charged $ 10 per document.   14.   Arbitration Provision. Any claim, dispute or controversy between me and HSBC (at specifically defined below far purposes of this Arbitration Provision), whether in contract or tort (intentional or otherwise), whether pre-existing, present or future, and including constitutional, statutory, common law, regulatory, and equitable claims in any way relating to (a) any of these or any other Documents or any ERA that I have previously requested or received from HSBC, (b) advertisements, promotions, or oral or written statements related to this or any other Application for a RAL or any ERA that I have previously requested or received from HSBC, (c) the relationship of HSBC and me relating to any of these or any other Documents or any ERA that I have previously requested or received from HSBC; and (d) except as provided below, the validity, enforceability or scope of this Arbitration Provision or any part thereof, including, but not limited to, the issue whether any particular claim, dispute or controversy must be submitted to arbitration (collectively the “Claim”), shall be resolved, upon the election of either me or HSBC, by binding arbitration pursuant to this Arbitration Provision and the applicable rules of the American Arbitration Association (“AAA”) or the National Arbitration Forum (“NAF”) in effect at the time the Claim is filed. I shall have the right to select one of these arbitration administrators (the “Administrator”). The arbitrator must be a lawyer with more than ten (10) years of experience or a retired or former judge. In the event of a conflict between this Arbitration Provision and the rules of the Administrator, this Arbitration Provision shall govern. In the event of a conflict between this Arbitration Provision and the balance of this Application or any other Documents, this Arbitration Provision shall govern. Notwithstanding any language in this Arbitration Provision to the contrary, no arbitration may be administered, without the consent of all parties to the arbitration, by any organization that has in place a formal or informal policy that is inconsistent with and purports to override the terms of this Arbitration Provision, including the Class Action Waiver Provision defined below.       HSBC hereby agrees not to invoke its right to arbitrate an individual Claim I may bring in small claims court or an equivalent court, if any, so long as the Claim is pending only in that court. No class actions or private attorney general actions in court or in arbitration or joinder or consolidation of claims in court or in arbitration with other persons, are permitted without the consent of HSBC and me. The validity and effect of the preceding sentence (herein referred to as the “Class Action Waiver Provision”) shall be determined exclusively by a court and not by the Administrator or any arbitrator. Neither the Administrator nor any arbitrator shall have the power or authority to 3 --------------------------------------------------------------------------------         waive, modify or fail to enforce the Class Action Waiver Provision, and any attempt to do so, whether by role, policy, arbitration decision or otherwise, shall be invalid and unenforceable.         Any arbitration hearing that I attend will take place in a location that is reasonably convenient for me: On any Claim I file, I will pay the first $50.00 of the filing fee. At my request, HSBC will pay the remainder of the filing fee and any administrative or hearing fees charged by the Administrator, up to $1,500.00 on any Claim asserted by me in the arbitration. If I should be required to pay any additional fees to the Administrator, HSBC will consider a request by me to pay all or part of the additional fees; however, HSBC shall not be obligated to pay any additional fees unless the arbitrator grants me an award. If the arbitrator grants an award in my favor, HSBC will reimburse me for any additional fees paid or owed by me to the Administrator up to the amount of the fees that would have been charged if the original Claim had been for the amount of the actual award in my favor. If the arbitrator issues an award in HSBCs favor, I will not be required to reimburse HSBC for any fees HSBC has previously paid to the Administrator or for which HSBC is responsible.         This Arbitration Provision is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16 (the “FAA”), and not by any state law concerning arbitration. The arbitrator shall follow and apply applicable substantive law to the extent consistent with the FAA, statutes of limitation and claims of privilege and shall be authorized to award all remedies permitted by applicable substantive law, including, without limitation, compensatory, statutory and punitive damages, declaratory, injunctive and other equitable relief and attorneys’ fees and costs. The arbitrator will follow rules of procedure and evidence consistent with the FAA, this Arbitration Provision and, to the extent consistent with this Arbitration Provision, the Administrator’s rules. Upon request of either party, the arbitrator shall prepare a short reasoned written opinion supporting the arbitration award. Judgment upon the award may be entered in any court having jurisdiction. The arbitrator’s award will be final and binding except for: (a) any appeal right under the FAA; and (b) any appeal of Claims involving more than $100,000. For such Claims, any party may appeal the award to a three-arbitrator panel appointed by the Administrator, which will reconsider de novo (i.e., in its entirety) any aspect or all aspects of the initial award that is appealed. The panel’s decision will be final and binding, except for any appeal right under the FAA. Unless applicable law provides otherwise, the appealing party will pay the appeal’s costs (i.e., the amounts owed to the Administrator and the arbitrators), regardless of its outcome. However, HSBC will consider in good faith any reasonable request for HSBC to bear up to the full costs of the appeal. Nothing in this Arbitration Provision shall be construed to prevent HSBC’s use of offset or other contractual rights involving payment of my income tax refund or other amount on deposit with HSBC to pay off any ERA, RAL, or similar financial service, or BFC or other fees, now or thereafter owed by me to HSBC or any Other ERA or RAL Lender or BFC or third party pursuant to the Documents or similar prior documents.         I ACKNOWLEDGE THAT I HAVE A RIGHT TO LITIGATE CLAIMS IN COURT BEFORE A JUDGE OR JURY, BUT I PREFER TO RESOLVE ANY SUCH CLAIMS THROUGH ARBITRATION AND HEREBY KNOWINGLY AND VOLUNTARILY WAIVE MY RIGHTS TO LITIGATE SUCH CLAIMS IN COURT BEFORE A JUDGE OR JURY, UPON ELECTION OF ARBITRATION BY HSBC OR BY ME. I ACKNOWLEDGE THAT I WILL NOT HAVE THE RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OR CLAIMANTS OR AS A PRIVATE ATTORNEY GENERAL PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION. I UNDERSTAND THAT, IF I AM A MEMBER OF THE PUTATIVE CLASS IN CUMMINS, ET AL. V. H&R BLOCK, ET AL., CASE NO. 03-C-134 IN THE CIRCUIT COURT OF KANAWHA COUNTY, WV, THIS ARBITRATION CLAUSE MAY NOT ACT AS A WAIVER OF THE RIGHTS AND CLAIMS I MAY HAVE IN THAT ACTION.         This Arbitration Provision shall supersede any prior Arbitration Provisions contained in any previous ERA application or related agreement and shall survive repayment of any ERA and termination of my account; provided, however, that if I reject this Arbitration Provision as set forth below, all prior Arbitration Provisions shall remain in full force and effect. If any portion of this Arbitration Provision is deemed invalid or unenforceable, it will not invalidate the remaining portions of this Arbitration Provision. However, if a determination is made that the Class Action Waiver Provision is unenforceable, this Arbitration Provision (other than this sentence) and any prior Arbitration Provision shall be null and void.         To reject this Arbitration Provision, I must send HSBC, c/o HSBC Taxpayer Financial Services, Account Research, P.O. Box 18097, Jacksonville, FL 32229, a signed writing (“Rejection Notice”) that is received within thirty (30) days after the date I submit this Application. The Rejection Notice must identify the transaction involved and must include my name, address, and social security number and must be signed by all persons signing this Application as Applicant(s). I may send the Rejection Notice in any manner I see fit as long as it is received at the specified address within the specified time. No other methods can be used to reject the Arbitration Agreement. If the 4 --------------------------------------------------------------------------------       Rejection Notice is sent on my behalf by a third party, such third party must include evidence of his or her authority to submit the Rejection Notice on my behalf.       As used in this Arbitration Provision, the term “HSBC” shall mean HSBC Bank USA, N. A., HSBC TFS, and H&R Block, Inc., and each of their parents, wholly or majority-owned subsidiaries, affiliates, or predecessors, successors, assigns and the franchisees of any of them, and each of their officers, directors, agents, and employees.       Contacting the Administrator: If I have a question about the arbitration Administrator mentioned in this Arbitration Provision or if I would like to obtain a copy of its arbitration rules, I can contact the Administrator as follows: American Arbitration Association, 335 Madison Avenue, New York, NY 10017, www.adr.org; National Arbitration Forum, P.O. Box 50191, Minneapolis, MN 55405. www.arb-forum.com.   15.   Survival. The provisions of the Application shall survive the execution of any Loan Agreement and Disclosure Statement and the disbursement of funds.   16.   Miscellaneous. (a) References to “I” or “me” or “my” in the Documents shall refer to the individual submitting an income tax return through this online tax preparation product or, in the case of a joint income tax return, to each individual and to both individuals, and the obligations of such individuals under the Documents will be joint and several, and each shall be considered an applicant. In the case of joint applicants, the individual agreeing to the Documents and the consent to electronic disclosures represents that he or she also has the authority to agree to the Documents and consent on behalf of the other applicant. (b) If any provision of the Documents or part thereof is deemed invalid, such invalidity will not affect any other provision of the Documents or part thereof. (c) HSBC may obtain a consumer report on me, and other information from third parties, in connection with evaluating my Application, or collecting or reviewing my ERA or accounts. (d) Supervisory personnel of HSBC may listen to and record my telephone calls. (e) I agree that you may send any notices and billing statements to the address of the primary applicant and not to the address of the joint applicant if such address is different. (f) HSBC may transfer, sell, participate or assign all or a portion of its rights, duties and obligations to third parties, including HSBC TFS, BFC, or their affiliates, successors and assignees, without notice to me or my consent.   17.   State Notices. California residents: Married persons may apply for a separate account. Iowa Residents: NOTICE TO CONSUMER: 1. Do not sign this paper before you read it. 2. You are entitled to a copy of this paper. 30 You may prepay the unpaid balance at any time without penalty and may be entitled to receive a refund of unearned charges in accordance with the law. New York residents: Consumer reports may be requested in connection with this account or any updates, renewals, or extensions thereof. Upon my request, HSBC will inform me of the names and addresses of any consumer reporting agencies which have provided HSBC with such reports. Ohio residents: The Ohio law against discrimination requires that all creditors make credit equally available to all creditworthy customers, and that credit reporting agencies maintain separate credit histories on each individual upon request. The Ohio Civil Rights commission administers compliance with these laws. Pennsylvania residents: If this loan becomes in default, HSBC or its assignee intends to collect default charges. Utah residents: Any prepaid finance charge not exceeding 5% of the original amount of the loan shall be fully earned on the date the loan is extended, and shall be nonrefundable in the event the loan is repaid prior to the date it is due. Any additional prepaid finance charge is earned proportionally over the term of the loan, and, in the event of such prepayment, the unearned portion of such charge, calculated on a pro rata basis according to the remaining term of the loan, shall be refunded. Wisconsin residents: No provision of a marital property agreement, a unilateral statement under Wisconsin Stats. s. 766.59 or a court decree under Wisconsin Stats. s. 766.70 adversely affects the interest of the creditor unless the creditor, prior to the time the credit is granted, is furnished a copy of the agreement, statement or decree or has actual knowledge of the adverse provision when the obligation to the creditor is incurred. All obligations described herein are being incurred in the interest of my marriage or family. A married Wisconsin resident applicant must mail the name and address of his or her spouse, as well as the applicant’s name and social security number, to HSBC c/o HSBC Taxpayer Financial Services, 200 Somerset Corporate Blvd., Bridgewater, NJ 08807, within two days.   18.   Certification.       I certify that the following information is true with respect to the ERA I am requesting: (1) I do not owe any tax due and/or any tax liens from prior tax years, nor have I previously filed a 2004 federal income lax return. (2) I do not have any delinquent child support, alimony payments, student loans, V.A. loans or other federally sponsored loans. (3) Presently, I do not have a petition (whether voluntary or involuntary) filed nor do I anticipate filing a petition under federal bankruptcy laws. (4) I have not had a Refund Anticipation Loan (“RAL”) or ERA with any lender, from a prior year that has been discharged in bankruptcy. (5) I have not paid any estimated tax and/or did not have any amount of my 2003 refund applied to my 2004 tax return. (6) I am not presently making regular payments to the 5 --------------------------------------------------------------------------------         IRS for prior year unpaid taxes. (7) I do not have a Power of Attorney presently in effect or on file with the Internal Revenue Service (“IRS”) to direct my federal income tax refund to any third party. (8) I am not filing a 2004 federal income tax return using a substitute W-2, From 4852, or any other form of substitute wage and tax documentation, unless the source of the Form 4852 is a Military Leave and Earnings Statement. (9) I am not filing a Form 8862 (Earned Income Credit Eligibility) with my 2004 federal income tax return. (10) I am not currently incarcerated in a state or federal prison or have 2004 income earned while an inmate at a penal institution and claiming the Earned Income Credit. (11) No portion of the 2004 income I have reported is from Schedule C or C-BZ (Profit or Loss from Business). (12) If Schedule C is present, EIC claimed, and return is self prepared or other, I am a statutory employee and the W-2 indicates statutory employee in Box 15. (13) I am not filing Form 8379 (Injured Spouse Claim & Allocation) with my 2004 federal income tax return. (14) I am not filing Form 1310 (Statement of Person Claiming Refund Due Deceased Taxpayer) with the 2004 Federal Income Tax Return or filing a Federal Income Tax Return Form 1040 on behalf of deceased taxpayer (15) I do not have an amount paid with request for an extension to file on Line 68, Field 1190 of Form 1040. (16) I do not have Other Taxes on Schedule A of Form 1040.(17) Everything that I have stated in this Application is correct.       By clicking I AGREE, I am indicating that I fully understand that I am applying for a loan and that I have read, understand and agree to this Application, including: (a) Section 10 in which I agree that HSBC may use amounts received from my tax refund to pay delinquent debts I owe HSBC or others; and (b) Section 14 in which I agree, upon my or HSBC’s election, to arbitrate any Claims that I may have. I also acknowledge that I have 30 days from today’s date to reject the Arbitration Provision by following the procedure described in Section 14. If I receive an ERA, I promise to pay the amount set forth in the “Total of Payments” section on my Loan Agreement and Disclosure Statement or subsequent replacement TILA Disclosure Statement, if any, on demand or when the anticipated refund from the IRS is electronically deposited into my Refund Account, whichever comes first, and I agree to repay the ERA whether or not my tax refund is paid in whole or in part to HSBC. I AGREE       Toll-Free Customer Service Number 1-800-524-0628 6 --------------------------------------------------------------------------------   HSBC TAXPAYER FINANCIAL SERVICES DIVISION OF HSBC BANK USA, NATIONAL ASSOCIATION Privacy Statement Applicability This Privacy Statement only applies to customers’ accounts with the HSBC Taxpayer Financial Services division of HSBC Bank USA, National Association (“HSBC”). All other HSBC accounts are governed by the HSBC Bank USA National Association Personal Banking Policy. Introduction — Our Commitment to You HSBC is proud to be part of a financial services organization that has been providing superior products and services to its customers for many years. We greatly appreciate the trust that you and millions of customers have placed in us, and we will protect that trust by continuing to respect the privacy of all our applicants and customers even if our formal customer relationship ends. How We Handle Information we Obtain It is important for you to know that in order to ensure that our customers get the very best service and highest quality products, HSBC collects demographic information (like your name and address) and credit information (like information related to your accounts with us and others). This information comes either directly from you, for instance, from your application and transactions on your account; or, it may come from an outside source such as your credit bureau report. In addition, if you visit our Internet web site, we may collect certain information about your Internet usage. Because some of the information we gather is not publicly available, we take great care to ensure that this information is kept safe from unauthorized access, and we would never share the information in violation of any regulation or law. Because we respect your privacy and we value your trust, the only employees or companies who can access your private personal information are those who use it to service your account or provide services to you or to us. HSBC diligently maintains physical, electronic and procedural safeguards that comply with applicable federal standards to guard your private personal information and to assist us in preventing unauthorized access to that information. How We Share Information with Companies Affiliated with Us From time to time, for general business purposes such as fraud control, or when we think it may benefit you, we do share certain information with our affiliated companies, except as prohibited by applicable law. These affiliated companies all provide financial services, such as banking, consumer finance, insurance, mortgage, and brokerage services. Some examples include companies doing business under the names Household, Beneficial, or HSBC. We may also share certain information with non-financial service providers that become affiliated with us in the future (such as travel, auto, or shopping clubs), except as prohibited by applicable law. The information we share might come from your application, for instance your name, address, telephone number, social security number, and e-mail address. Also, the information we share could include your transactions with us or our affiliated companies (such as your account balance, payment history, and parties to the transaction), your Internet usage, or your credit card usage. Except for Vermont residents, the information we share could also include your assets, income, or credit reports. How We Share Information under a Joint Marketing Agreement We may also provide information to non-affiliated financial companies (such as a tax preparer, mortgage banker or insurance service provider) with whom we have a joint marketing agreement. The sharing of information with these types of companies is permitted by law. The information we may share also comes from the sources described above and might include your name, address, phone number, and account experience with us. How We Share Information with Other Third Parties Except for California or Vermont residents, we also may share information with non-affiliated companies that are able to extend special offers we feel might be of value to you. These companies may be financial services providers (such as mortgage bankers or insurance agents) or they may be non-financial companies (such as retailers, tax preparers, or marketing companies). These offers are typically for products and services that you might not otherwise hear about. The information we may provide them comes from the sources described above and might include your name, address and phone number. You may tell us not to share information with non-affiliated companies in this way by completing the form below. For California and Vermont residents, applicable law requires us to obtain your permission in order to share information about you in this way, and we have chosen not to share your information in this way. 7 --------------------------------------------------------------------------------   We may also provide information to non-affiliated companies that perform operational, collection, or fraud control services related to your account. The sharing of information with these types of companies is permitted by law. Such a company might include a financial company (such as an insurance service provider) or a non-financial company (such as a data processor or internet service provider) with whom we have an agreement. The information we may share also comes from the sources described above and might include your name, address, phone number; and account experience with us. Finally, we provide information about you to non-affiliated companies such as credit reporting agencies and companies which provide services related to your account. This information sharing is also permitted by law. We reserve the right to change our privacy practices at any time in accordance with applicable law. Notice of such changes will be provided if required by applicable law. How to Opt-Out (non-affiliated companies) (Applicable to residents of all states except California and Vermont) If you do not want us to share your private information with non-affiliated companies (unless we are permitted or required by law to do so), please let us know by simply calling 1-800-365-2641. If you have previously informed us of your preference, you do not need to do so again. We will be happy to comply with your “opt-out” request, which will only apply to the HSBC account you have designated on the form by account number. An opt-out request by any party on a joint account will apply to all parties on the joint account. Opt-out requests will not apply to information sharing that is permitted by law. Please allow sufficient time for us to process your request. How to Opt-Out (affiliated companies) (Applicable to residents of all states except Vermont) If you do not want us to share your credit information (such as your credit bureau information) with companies that are affiliated with us, please let us know by simply calling 1-800-365-2641. If you have previously informed us of your preference, you do not need to do so again. This request will not apply to information about your transactions or experience with HSBC (such as account information, account usage, or payment history), except as required by law, and will only apply to the HSBC account you have designated on the form by account number. An opt-out request by any party on a joint account will apply to all parties on die joint account.   Atenciòn clientes hispanoparlantes: Esta Declaraciòn Sobre la Privacidad proportions informaciòn sobre còmo manejamos informaciòn personòal no publica acerca de nuestors clientes, las circunstancias bajo las cuales podemos compartir tal informaciòn con otras personas, y còmo usted puede pedir que no compartamos esa informaciòn con terceros que no sean afiliados nuestros. Si quisiera que le proporcionemos una traducciòn al español de la Declaraciòn Sobre la Privacidad en su totalidad, sirvase comunicarse con nosotros liamàndonos gratis al 1-800-365- 2641. 8 --------------------------------------------------------------------------------   LOAN AGREEMENT AND DISCLOSURE STATEMENT In this Loan Agreement and Disclosure Statement (“Agreement”), “ERA” means on Electronic Refund) Advance Loan, “HSBC” means HSBC Bank USA, National Association, and “I”, “me” and “my” means each person who has applied to HSBC for an ERA. “H&R Block” means each of H&R Block, Inc., and each of its affiliates and subsidiaries (and franchisees thereof). Truth in Lending Act Disclosure Statement           1.   Amount Financed (the amount of credit provided to me or on my behalf)   $                                2.   FINANCE CHARGE (the dollar amount the credit win cost me)   $                                3.   Total of Payments (the amount I will have paid after I have made all payments as scheduled)   $                                4.   ANNUAL PERCENTAGE RATE (the cost of my credit as a yearly rate)                       %(e)   “e” = estimate   If line is left blank, amount is “0”           Creditor: My creditor is HSBC Bank USA, National Association, Demand Feature: My loan will be repayable on demand or when the anticipated tax refund is electronically deposited in my Refund Account with HSBC, whichever is earlier. Payment Schedule: HSBC estimates that the total loan amount will be due in a single payment approximately 12 days from the date of this Agreement Security Interest: I am providing HSBC with a security interest in my tax refund payment by the IRS, and, except for Virginia residents, in all funds deposited in the Refund Account and that Refund Account. Late Charge: A late charge equal to 1.5% of the unpaid Total of Payments may be imposed on the date 35 days after payment of ray loan is demanded, and on the same date of each succeeding month (or if there is no such date, the last date of the month). Prepayment: If I pay off early, I will not be entitled to a refund of part or all of the Finance Charge. Contract Reference: Refer to the Application and the Loan Agreement for additional information about nonpayment, default, any right to accelerate the maturity of the obligation, and any prepayment rebates or penalties. Required Deposit. The Annual Percentage Rate does not take into account my required deposit.   --------------------------------------------------------------------------------                 Itemization of Amount Financed                       1.   Amount paid directly to me   $                                        2.   Amount paid for my Refund Account Fee to HSBC       $                                   3.   Amount Financed (Items 1+ 2)   $                    (e)                   4.   Prepaid FINANCE CHARGE (ERA Fee to HSBC)       $                    (e)               5   Total ERA Amount (Items 3+4)   $                     (e)       “(e)” = estimate   If line is left blank, amount is “0”           Loan Agreement 1. Obligation on ERA.      (a) I am obligated, on the date I agree to this Agreement, to accept an ERA if HSBC approves my application. My loan will begin, and HSBC will earn the finance charge, when I am approved for the ERA and a transfer is initiated to my bank account.      (b) I may cancel my ERA transaction, or my obligation to accept an ERA, for up to 48 hours after I become obligated to accept the ERA. To do so, I must return to HSBC cash in the amount of the ERA proceeds and comply with other requirements set by HSBC. I must call the customer service number (1-800-524-0628) for further instructions on how to return the ERA proceeds to HSBC. I understand that, if I use my right to cancel, my finance charge will be refunded to me, HSBC will provide me with any tax refund only after HSBC receives the refund from the IRS, and I must still pay a Refund Account Fee. 2. Security Interest. If I receive a ERA, I grant HSBC a security interest in the property I described in the TILA Disclosure Statement as collateral for my obligations to repay the ERA and perform my other obligations under the Application and this Agreement. 3. Deductions. My Prepaid Finance Charge and Refund Account Fee shall be deducted from the proceeds of my ERA. 4. Other Charges. (a) I agree to pay a returned check charge of $19 if any check or similar instrument I give HSBC is not honored. (b) I agree to pay a late charge as described in the TILA Disclosure Statement if I do not repay my loan when due. (c) In the event that I pay my account by telephone, I agree to pay up to a $10 fee for each such payment. HSBC reserves the right to change this fee from time to time. I may call Customer Service for a current fee schedule. (d) I also agree to pay any attorney’s fees and collection agency costs incurred by HSBC or its affiliates to collect any delinquent ERA as permitted by law. 5. Application of Payments. Each payment I make on the ERA will be applied in any order determined by HSBC. BY CLICKING I AGREE BELOW, I AGREE TO THE TERMS OF THIS LOAN AGREEMENT. I ALSO ACKNOWLEDGE RECEIVING A COMPLETED COPY OF THIS LOAN AGREEMENT AND DISCLOSURE STATEMENT. 2 --------------------------------------------------------------------------------   CAUTION: IT IS IMPORTANT THAT YOU THOROUGHLY READ THIS CONTRACT BEFORE YOU SIGN IT. NOTICE TO CUSTOMER (a)   DO NOT SIGN THIS IF IT CONTAINS ANY BLANK SPACES.   (b)   YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN.   (c)   HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THIS AGREEMENT AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE. I AGREE 3 --------------------------------------------------------------------------------   References to “you” and “your” herein shall refer to the individual submitting an income tax return through this software or, in the case of a joint return, to each individual and to both individuals submitting the return. By consenting below to receive information electronically, you will receive the following information and disclosures electronically: Application for an Electronic Refund Advance and Loan Agreement and Disclosure Statement. To access and/or retain these disclosures, you will need a desktop or laptop personal computer and the following:       Windows   Macintosh 486 or faster PC   68030 or better (Power PC recommended) Windows 95, 98, 2000, ME, NT 4.0, or XP   MAC OS 7.5.3 or higher 16 MB RAM   5 MB free RAM 30 MB disk space   20 MB disk space 640x480, 256 color monitor or better   640x480, 256 color monitor or better Windows compatible printer   Macintosh compatible printer Does the computer you are using now satisfy these requirements? é Yes            No é By clicking the “Yes” button below, you (i) agree to receive the above-referenced documents electronically and confirm that you will download or print the disclosures for your records, (ii) acknowledge that you can access information that is provided electronically in this program, and (iii) acknowledge that you are providing your consent to receive electronic communications pursuant to the Electronic Signatures in Global and National Commerce Act and intend that this statute apply to the fullest extent possible. é Yes            No é You may withdraw your consent to receiving records electronically by clicking the appropriate “No” button above, but if you do so, you may not proceed with this transaction. You understand that the information you have elected to receive is confidential in nature. We are not responsible for unauthorized access by third parties to information and/or communications provided electronically nor for any damages, including direct, indirect, special, incidental or consequential damages, caused by unauthorized access. If you have any questions about these disclosures, you may contact us by telephone at 1 -800-524-0628. You have the option to receive any information provided electronically in paper form. To receive specific information in paper form, please contact us at 1-800-524-0628. Please specify the information you wish to be provided in paper form. Your request will only apply to those specific items of information designated by you.   --------------------------------------------------------------------------------   APPLICATION FOR AN ELECTRONIC REFUND ADVANCE LOAN AND OPEN A DEPOSIT ACCOUNT System Protected by U.S. Patent Nos. 4,890,228,5,193,057, and 5,963,921 This Application is submitted to HSBC Bank USA, National Association (“HSBC”) for an Electronic Refund Advance Loan (“ERA”) and a Refund Account. As used herein, “BFC” means Block Financial Corporation and its parents, subsidiaries and affiliates; “HSBC TFS” means HSBC Taxpayer Financial Services Inc.; “IRS” means the Internal Revenue Service; and “RAL” means a refund anticipation loan. 1.   INFORMATION.       I understand and confirm that the name, home address, mailing address, social security/taxpayer identification number, and date of birth which I entered into the personal information and address sections of the professional tax service product are true and correct and are incorporated in this Application by this reference as the name, home address, mailing address, social security/taxpayer identification number, and date of birth of each applicant.     2.   IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. TO HELP THE GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHAT THIS MEANS FOR ME: WHEN I OPEN AN ACCOUNT, YOU WILL ASK FOR MY NAME, ADDRESS, DATE OF BIRTH, AND OTHER INFORMATION THAT WILL ALLOW YOU TO IDENTIFY ME. YOU MAY ALSO SEEK TO VERIFY MY IDENTITY THROUGH NON-DOCUMENTARY METHODS.   3.   Payment Instructions.   A.   If I receive an ERA, I understand I am to receive my ERA proceeds via direct deposit into the bank account that I will designate on the direct deposit screen of this professional tax service product application during the Electronic Filing process, and I authorize HSBC to direct deposit my funds to that designated account.     B.   If my refund is greater than my ERA I understand I am to receive my excess proceeds via direct deposit into the bank account that I previously designated on the direct deposit screen and/or the express products screen of this professional tax service product application during the electronic filing process, and I authorize HSBC to direct deposit my funds to those designated accounts. 4.   HSBC ERA DISCLOSURE STATEMENT:       The FINANCE CHARGE for my ERA it set forth on my Truth in Lending Disclosure. I know that even if my ERA is denied, I am responsible for my electronic filing, as applicable. I am also responsible for the repayment of my ERA whether or not my tax refund is paid to my account with HSBC in whole or in part. I understand that my income tax return can be filed electronically without obtaining an ERA and, subject to IRS processing, the usual time within which I can expect to receive a refund check if I file electronically and without an ERA is within approximately three weeks from the date I file my return. The IRS normally makes an electronic deposit in an average of about 12 days after an electronic filing. Alternatively, if I elect to obtain and am approved for an ERA, the loan proceeds usually will be made available to me within approximately 1-2 days of my loan application.       The usual duration of an ERA is approximately 11 days from the date of approval of the ERA. The following are examples of the estimated ANNUAL PERCENTAGE RATE (“APR”) and ERA FINANCE CHARGES on ERAs of varying amounts based on 1l-day maturity periods. Because the APR on an ERA may be high in certain cases relative to other sources of credit, I understand that it may cost less to use such sources; e.g., credit cards, equity lines, etc., instead of an ERA.                                                                   Example Loan Amount   $ 500     $ 750     $ 1,000     $ 1,500     $ 2,000     $ 3,000     $ 4,000     $ 5,000   ERA Finance Charge*   $ 5     $ 15     $ 15     $ 45     $ 45     $ 75     $ 85     $ 85   Estimated Annual Percentage Rate     34 %e     68 %e     51 %e     103 %e     76 %e     85 %e     72 %e     57 %e   *   “I understand I will be given disclosures which will show the actual finance charge and other charges applicable to my ERA transaction. “e”= estimate   5.   Applicable Law. This Application and all the other documents executed in connection with this Application or my ERA (collectively, “Documents”), shall be governed by and construed, interpreted, and enforced in accordance with   --------------------------------------------------------------------------------       federal law and, to the extent state law applies, the law of the state of Delaware (without reference to conflict of laws principles).   6.   Important Information About ERAs. I understand that (a) I can file my federal income tax return electronically without obtaining an ERA; (b) the IRS will send me a refund check or electronically deposit my refund to my existing bank account; (c) the IRS normally makes an electronic deposit in an average of about 12 days after an electronic filing; (d) HSBC tries to initiate the direct deposit of proceeds of an ERA on the first business day after application; (e) HSBC cannot guarantee when any proceeds of an ERA will be available to me; and (f) a ERA may cost substantially more than another type of loan I might obtain.   7.   Deposit Authorization. (a) After I submit my Application, BFC will electronically transmit my tax return to the IRS and my Application to HSBC. I understand that I will authorize or agree to an IRS Transmittal Form 8453 or IRS e- file signature authorization (“Deposit Authorization”) as part of my Application and electronic tax filing, and that the Deposit Authorization and this Application provide an irrevocable agreement to have my tax refund disbursed to HSBC, and irrevocably transfers to HSBC all my rights, title, and interest in the proceeds of my tax refund for purposes of the ERA I have requested and other purposes authorized by this Application. (b) If my Application is denied or cancelled, and HSBC receives my tax refund, HSBC will forward to me promptly any proceeds of my refund after deducting amounts permitted by this Agreement. (c) If for any reason, any part of the anticipated tax refund is disallowed or offset by the IRS, or if] should receive a refund check in the mail, I will advise HSBC immediately and promptly pay HSBC any amounts owing with respect to my Application or an ERA, and pay BFC any fees owed to them involving my tax return.   8.   Refund Account. (a) I request that a deposit account be opened (“Refund Account”) at HSBC upon receipt of my tax refund for the purposes of ensuring the repayment of my ERA and other amounts described in the Documents. The Annual Percentage Yield and interest rate on the Refund Account will be 0%. This means I will not receive any interest on funds in the Refund Account. I understand that I cannot make withdrawals from the Refund Account and that the funds in the Refund Account will be disbursed only as expressly provided in the Documents. (b) HSBC may deduct any amounts I owe HSBC or BFC from my tax refund, any funds received in the Refund Account, and any proceeds of an ERA. I am required to pay all fees to BFC for services rendered by BFC when HSBC electronically transfers my proceeds to me. If an electronic transfer of proceeds is not made available to me because I do not receive a tax refund, then I am required to pay all fees to BFC for services rendered by BFC on demand. HSBC also may withdraw amounts deposited into the Refund Account from my tax refund to disburse money to me in accordance with my Application. (c) I will not receive a periodic statement for the Refund Account, but I will receive notice if funds in the Refund Account are not sufficient to repay my ERA or are used for any purpose other than repayment of my ERA or disbursement to me. HSBC may, immediately after disbursement of all funds in the Refund Account, close the account without further notice to or authorization from me.   9.   Refund Account Fee. I will pay HSBC a fee of $24.95 for the administration of the Refund Account and any disbursements to me from that account (“Refund Account Fee”). I am obligated to pay the Refund Account Fee after the Deposit Authorization is filed with the IRS and is imposed regardless of whether (a) I apply for an ERA or (b) my Application is approved or denied. The Refund Account Fee is not imposed directly or indirectly as an incident to or condition of any extension of credit. I can avoid the Refund Account Fee if I direct that my tax refund not be deposited to HSBC before filing my Deposit Authorization with the IRS.   10.   Collections. In consideration of the case and convenience of the following method of paying any delinquent debt I owe or the other applicant owes to HSBC, HSBC TFS, my electronic return originator (“ERO”) for prior years, BFC, or Bank One, River City Bank, First Security Bank, Republic Bank or Santa Barbara Bank & Trust (the “Other ERA or RAL Lenders”), and provided that such debt has not been discharged in bankruptcy, I authorize and direct the repayment of such debt, calculated as of the date of my Application, by means of (a) having such debt deducted from the proceeds of my ERA, or (b) having my request for an ERA denied or the amount for which I have applied reduced and having such debt repaid to those entities by offset or otherwise from my tax refund directly transmitted into my Refund Account at HSBC. If I owe delinquent debt to more than one of the entities listed above, I authorize and direct HSBC to pay such debts in the following order: HSBC, HSBC TFS, Other ERA or RAL Lenders, ERO, and BFC. I also authorize and instruct HSBC and the Other ERA or RAL Lenders to disclose to each other information about their respective credit experiences concerning my present and prior ERAs, refund anticipation loans (“RALs”), or similar financial services, and my prior tax returns.       PLEASE NOTE: If I have delinquent debt, I understand that HSBC or HSBC TFS may be acting as a debt collector hereunder to collect a debt and that any information obtained will be used for that purpose. 2 --------------------------------------------------------------------------------   11.   No Fiduciary/Agency Duty. I understand that BFC is not acting in a fiduciary, confidential, or agency capacity with respect to me in connection with this transaction and has no other duties to me beyond the transmission of my tax return information to HSBC, and the electronic filing of my tax return with the IRS and/or state taxing authority, I understand that BFC or an affiliate of BFC has the right to purchase an interest in my ERA issued by HSBC. I further understand that BFC or an affiliate of BFC may receive payments from HSBC or its affiliates in connection with ERAs. I also understand that HSBC is not acting in a fiduciary, confidential, or agency capacity with respect to me in connection with this transaction.   12.   Disclosure Information. (a) “Information” means my federal and state income tax returns for the tax year 2004, any information obtained in connection with my tax return (including information relating to a possible offset of my tax refund or the possibility that my tax return is incorrect), and any information relating to my Application for an ERA or similar financial service I have received or requested from HSBC. (b) “Authorized Parties” means HSBC, HSBC TFS, BFC, my Transmitter, and their respective affiliates and agents, and includes the Fraud Service Bureau operated for HSBC. (c) The Authorized Parties may share Information to process my Application, to provide ERAs to me, to collect delinquent ERAs or BFC fees, to prevent fraud, and to otherwise administer or promote the program for ERAs. (d) The Authorized Parties may disclose Information to the IRS, state tax agencies and other financial institutions that provide ERAs or other financial services. (e) The Authorized Parties may call, or input my Information on any website of, the IRS or state tax agencies in connection with my Application to, among other things, determine the status of my tax return. The IRS and state tax agencies may disclose information about me and my tax returns to the Authorized Parties. (f) BFC may not use or disclose Information for any purpose, except as permitted under Treas. Reg. Sec. 301.7216-2 or as provided herein, (f) I consent to HSBC sharing information as provided in the Privacy Statement. (g) HSBC will be my creditor.   13.   Service Fees. (a) Reissued Check Fee: I agree to pay $10 each time that a check is reissued at my request for any reason. If I request that such a check be sent by overnight mail. I agree to pay the charges for sending it by overnight mail. (b) Document Fee: If I ask for a copy of my Application, loan agreement, billing statement or other document, I may be charged $10 per document.   14.   Arbitration Provision. Any claim, dispute or controversy between me and HSBC (as specifically defined below for purposes of this Arbitration Provision), whether in contract or tort (intentional or otherwise), whether pre-existing, present or future, and including constitutional, statutory, common law, regulatory, and equitable claims in any way relating to (a) any of these or any other Documents or any ERA that I have previously requested or received from HSBC, (b) advertisements, promotions, or oral or written statements related to this or any other Application for a RAL or any ERA that I have previously requested or received from HSBC, (c) the relationship of HSBC and me relating to any of these or any other Documents or any ERA that I have previously requested or received from HSBC; and (d) except as provided below, the validity, enforceability or scope of this Arbitration Provision or any part thereof, including, but not limited to, the issue of whether any particular claim, dispute or controversy must be submitted to arbitration (collectively the “Claim”), shall be resolved, upon the election of either me or HSBC, by binding arbitration pursuant to this Arbitration Provision and the applicable rules of the American Arbitration Association (“AAA”) or the National Arbitration Forum (“NAF”) in effect at the time the Claim is filed. I shall have the right to select one of these arbitration administrators (the “Administrator”). The arbitrator must be a lawyer with more than ten (10) years of experience or a retired or former judge. In the event of a conflict between this Arbitration Provision and the rules of the Administrator, this Arbitration Provision shall govern. In the event of a conflict between this Arbitration Provision and the balance of this Application or any other Documents, this Arbitration Provision shall govern. Notwithstanding any language in this Arbitration Provision to the contrary, no arbitration may be administered, without the consent of all parties to the arbitration, by any organization that has in place a formal or informal policy that is inconsistent with and purports to override the terms of this Arbitration Provision, including the Class Action Waiver Provision defined below.       HSBC hereby agrees not to invoke its right to arbitrate an individual Claim I may bring in small claims court or an equivalent court, if any, so long as the Claim is pending only in that court. No class actions or private attorney general actions in court or in arbitration or joinder or consolidation of claims in court or in arbitration with other persons, are permitted without the consent of HSBC and me. The validity and effect of the preceding sentence (herein referred to as the “Class Action Waiver Provision”) shall be determined exclusively by a court and not by the Administrator or any arbitrator. Neither the Administrator nor any arbitrator shall have the power or authority to waive, modify or fail to enforce the Class Action Waiver Provision, and any attempt to do so, whether by rule, policy, arbitration decision or otherwise, shall be invalid and unenforceable. Any arbitration hearing that I attend will take place in a location that is reasonably convenient for me. On any Claim I file, I will pay the first $50.00 of the filing fee. At my request, HSBC will pay the remainder of the filing fee and any administrative or hearing fees charged by the Administrator, up to $1,500.00 on any Claim asserted by me in the arbitration. If I should be required to pay any additional fees to the Administrator, HSBC will consider a request by me to pay all or part of the additional fees; however, HSBC shall not be obligated to pay any additional fees unless the arbitrator grants me an award. If the arbitrator grants an award in my favor, HSBC will reimburse 3 --------------------------------------------------------------------------------       me for any additional fees paid or owed by me to the Administrator up to the amount of the fees that would have been charged if the original Claim had been for the amount of the actual award in my favor. If the arbitrator issues an award in HSBC’s favor, I will not be required to reimburse HSBC for any fees HSBC has previously paid to the Administrator or for which HSBC is responsible.       This Arbitration Provision is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16 (the “FAA”), and not by any state law concerning arbitration. The arbitrator shall follow and apply applicable substantive law to the extent consistent with the FAA, statutes of limitation and claims of privilege and shall be authorized to award all remedies permitted by applicable substantive law, including, without limitation, compensatory, statutory and punitive damages, declaratory, injunctive and other equitable relief and attorneys’ fees and costs. The arbitrator will follow rules of procedure and evidence consistent with the FAA, this Arbitration Provision and, to the extent consistent with this Arbitration Provision, the Administrator’s rules. Upon request of either party, the arbitrator shall prepare a short reasoned written opinion supporting the arbitration award. Judgment upon the award may be entered in any court having jurisdiction. The arbitrator’s award will be final and binding except for: (a) any appeal right under the FAA; and (b) any appeal of Claims involving more than $100,000. For such Claims, any party may appeal the award to a three-arbitrator panel appointed by the Administrator, which will reconsider de novo (i.e., in its entirety) any aspect or all aspects of the initial award that is appealed. The panel’s decision will be final and binding, except for any appeal right under the FAA. Unless applicable law provides otherwise, the appealing party will pay the appeal’s costs (i.e., the amounts owed to the Administrator and the arbitrators), regardless of its outcome. However, HSBC will consider in good faith any reasonable request for HSBC to bear up to the full costs of the appeal. Nothing in this Arbitration Provision shall be construed to prevent HSBC’s use of offset or other contractual rights involving payment of my income tax refund or other amount on deposit with HSBC to pay off any ERA, RAL, or similar financial service, or BFC or other fees, now or thereafter owed by me to HSBC or any Other ERA or RAL Lender or BFC or third party pursuant to the Documents or similar prior documents.       I ACKNOWLEDGE THAT I HAVE A RIGHT TO LITIGATE CLAIMS IN COURT BEFORE A JUDGE OR JURY, BUT I PREFER TO RESOLVE ANY SUCH CLAIMS THROUGH ARBITRATION AND HEREBY KNOWINGLY AND VOLUNTARILY WAIVE MY RIGHTS TO LITIGATE SUCH CLAIMS IN COURT BEFORE A JUDGE OR JURY, UPON ELECTION OF ARBITRATION BY HSBC OR BY ME. I ACKNOWLEDGE THAT I WILL NOT HAVE THE RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OR CLAIMANTS OR AS A PRIVATE ATTORNEY GENERAL PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION. I UNDERSTAND THAT, IF I AM A MEMBER OF THE PUTATIVE CLASS IN CUMMINS, ET AL., V. H&R BLOCK, ET AL., CASE NO. 03-C-134 IN THE CIRCUIT COURT OF KANAWHA COUNTY, WV, THIS ARBITRATION CLAUSE MAY NOT ACT AS A WAIVER OF THE RIGHTS AND CLAIMS I MAY HAVE IN THAT ACTION.       This Arbitration Provision shall supersede any prior Arbitration Provisions contained in any previous ERA application or related agreement and shall survive repayment of any ERA and termination of my account; provided, however, that if I reject this Arbitration Provision as set forth below, all prior Arbitration Provisions shall remain in full force and effect. If any portion of this Arbitration Provision is deemed invalid or unenforceable, it will not invalidate the remaining portions of this Arbitration Provision. However, if a determination is made that the Class Action Waiver Provision is unenforceable, this Arbitration Provision (other than this sentence) and any prior Arbitration Provision shall be null and void.       To reject this Arbitration Provision, I must send HSBC, c/o HSBC Taxpayer Financial Services, Account Research, P.O. Box 18097, Jacksonville, FL 32229, a signed writing (“Rejection Notice”) that is received within thirty (30) days after the date I submit this Application. The Rejection Notice must identify the transaction involved and must include my name, address, and social security number and must be signed by all persons signing this Application as Applicant(s). I may send the Rejection Notice in any manner I see fit as long as it is received at the specified address within the specified time. No other methods can be used to reject the Arbitration Agreement. If the Rejection Notice is sent on my behalf by a third party, such third party must include evidence of his or her authority to submit the Rejection Notice oh my behalf.       As used in this Arbitration Provision, the term “HSBC” shall mean HSBC Bank USA, N. A., HSBC TFS, and H&R Block, Inc., and each of their parents, wholly or majority-owned subsidiaries, affiliates, or predecessors, successors, assigns and the franchisees of any of them, and each of their officers, directors, agents, and employees.       Contacting the Administrator: If I have a question about the Administrator mentioned in this Arbitration Provision or if I would like to obtain a copy of its arbitration rules, I can contact the Administrator as follows: American Arbitration Association, 335 Madison Avenue, New York, NY 10017, www.adr.org; National Arbitration Forum, P.O. Box 50191, Minneapolis, MN 55405. www.arb-forum.com. 4 --------------------------------------------------------------------------------   15.   Survival. The provisions of the Application shall survive the execution of any Loan Agreement and Disclosure Statement and the disbursement of funds. 16.   Miscellaneous. (a) References to “I” or “me” or “my” in the Documents shall refer to the individual submitting an income tax return through this professional tax service product or, in the case of a joint income tax return, to each individual and to both individuals, and the obligations of such individuals under the Documents will be joint and several, and each shall be considered an applicant. In the case of joint applicants, the individual agreeing to the Documents and the consent to electronic disclosures represents that he or she also has the authority to agree to the Documents and consent on behalf of the other applicant. (b) If any provision of the Documents or part thereof is deemed invalid, such invalidity will not affect any other provision of the Documents or part thereof. (c) HSBC may obtain a consumer report on me, and other information from third parties, in connection with evaluating my Application, or collecting or reviewing my ERA or accounts. (d) Supervisory personnel of HSBC may listen to and record my telephone calls. (e) I agree that you may send any notices and billing statements to the address of the primary applicant and not to the address of the joint applicant if such address is different. (f) HSBC may transfer, sell, participate or assign all or a portion of its rights, duties and obligations to third parties, including HSBC TFS, BFC, or their affiliates, successors and assignees, without notice to me or my consent. 17.   State Notices. California residents: Married persons may apply for a separate account. Iowa Residents: NOTICE TO CONSUMER: 1. Do not sign this paper before you read it. 2. You are entitled to a copy of this paper. 3. You may prepay the unpaid balance at any time without penalty and may be entitled to receive a refund of unearned charges in accordance with the law. New York residents: Consumer reports may be requested in connection with this account or any updates, renewals, or extensions thereof. Upon my request, HSBC will inform me of me names and addresses of any consumer reporting agencies which have provided HSBC with such reports. Ohio residents: The Ohio law against discrimination requires that all creditors make credit equally available to all creditworthy customers, and that credit reporting agencies maintain separate credit histories on each individual upon request. The Ohio Civil Rights commission administers compliance with these laws. Pennsylvania residents: If this loan becomes in default, HSBC or its assignee intends to collect default charges. Utah residents: Any prepaid finance charge not exceeding 5% of the original amount of the loan shall be fully earned on the date the loan is extended, and shall be nonrefundable in the event the loan is repaid prior to the date it is due. Any additional prepaid finance charge is earned proportionally over the term of the loan, and, in the event of such prepayment, the unearned portion of such charge, calculated on a pro rata basis according to the remaining term of the loan, shall be refunded. Wisconsin residents: No provision of a marital property agreement, a unilateral statement under Wisconsin Stats. s. 766.59 or a court decree under Wisconsin Stats. s. 766.70 adversely affects the interest of the creditor unless the creditor, prior to the time the credit is granted, is furnished a copy of the agreement, statement or decree or has actual knowledge of the adverse provision when the obligation to the creditor is incurred. All obligations described herein are being incurred in the interest of my marriage or family. A married Wisconsin resident applicant must mail the name and address of his or her spouse, as well as the applicant’s name and social security number, to HSBC c/o HSBC Taxpayer Financial Services, 200 Somerset Corporate Blvd., Bridgewater, NJ 08807, within two days. 18.   Certification.       I certify that the following information is true with respect to the ERA I ant requesting: (1) I do not owe any tax due and/or any tax liens from prior tax years, nor have I previously filed a 2004 federal income tax return. (2) I do not have any delinquent child support, alimony payments, student loans, V.A. loans or other federally sponsored loans. (3) Presently, I do not have a petition (whether voluntary or involuntary) filed nor do I anticipate filing a petition under federal bankruptcy laws. (4) I have not had a Refund Anticipation Loan (“RAL”) or ERA with HSBC, or any other RAL lender, from a prior year that has been discharged in bankruptcy. (5) I have not paid any estimated tax and/or did not have any amount of my 2003 refund applied to my 2004 tax return. (6) I am not presently making regular payments to the IRS for prior year unpaid taxes. (7) I do not have a Power of Attorney presently in effect or on file with the Internal Revenue Service (“IRS”) to direct my federal income tax refund to any third patty. (8) I am not filing a 2004 federal income tax return using a substitute W-2, From 4852, or any other form of substitute wage and tax documentation, unless the source of the Form 4852 is a Military Leave and Earnings Statement. (9) I am not filing a Form 8862 (Earned Income Credit Eligibility) with my 2004 federal income tax return. (10) I am not currently incarcerated in a state or federal prison or have 2004 income earned while an inmate at a penal institution and claiming the Earned Income Credit. (11) The 2004 income I have reported is not solely from Schedule C or C-EZ (Profit or Loss from Business). (12) If Schedule C is present, E1C claimed, and return is self prepared or other, I am a statutory employee and the W-2 indicates statutory employee in Box I5. (13) I am not filing Form 8379 (Injured Spouse Claim & Allocation) with my 2004 federal income tax return. (14) I am not filing Form 1310 (Statement of Person Claiming Refund Due Deceased Taxpayer) with the 2004 Federal Income Tax Return or filing a Federal Income Tax Return Form 1040 on behalf of deceased taxpayer (15) I do not have an amount paid with request for an extension to file on Line 66, Field 1190 of Form 1040. (16) Everything that I have stated in this Application is correct. 5 --------------------------------------------------------------------------------   By clicking I AGREE below, I am indicating that I fully understand that I am applying for a loan and that I have read, understand and agree to this Application, including: (a) Section 10 in which I agree that HSBC may use amounts received from my tax refund to pay delinquent debts I owe HSBC or others; and (b) Section 14 in which I agree, upon my or HSBC’s election, to arbitrate any Claims that I may have. I also acknowledge that I have 30 days from today’s date to reject the Arbitration Provision by following the procedure described in Section 14. If I receive an ERA, I promise to pay the amount set forth in the “Total of Payments” section on my Loan Agreement and Disclosure Statement or subsequent replacement TILA Disclosure Statement; if any, on demand or when the anticipated refund from the IRS is electronically deposited into my Refund Account, whichever comes first, and I agree to repay the ERA whether or not my tax refund is paid in whole or in part to HSBC. I AGREE HSBC Taxpayer Financial Services Toll-Free Customer Service Number 1-800-524-0628 6 --------------------------------------------------------------------------------   HSBC TAXPAYER FINANCIAL SERVICES DIVISION OF HSBC BANK USA, NATIONAL ASSOCIATION Privacy Statement Applicability This Privacy Statement only applies to customers’ accounts with the HSBC Taxpayer Financial Services division of HSBC Bank USA, National Association (“HSBC”). All other HSBC accounts are governed by the HSBC Bank USA National Association Personal Banking Policy. Introduction — Our Commitment to You HSBC is proud to be part of a financial services organization that has been providing superior products and services to its customers for many years. We greatly appreciate the trust that you and millions of customers have placed in us, and we will protect that trust by continuing to respect the privacy of all our applicants and customers even if our formal customer relationship ends. How We Handle Information we Obtain It is important for you to know that in order to ensure that our customers get the very best service and the highest quality products, HSBC collects demographic information (like your name and address) and credit information (like information related to your accounts with us and others). This information comes either directly from you, for instance, from your application and transactions on your account; or, it may come from an outside source such as your credit bureau report. In addition, if you visit our Internet web site, we may collect certain information about your Internet usage. Because some of the information we gather is not publicly available, we take great care to ensure that this information is kept safe from unauthorized access, and we would never share the information in violation of any regulation or law. Because we respect your privacy and we value your trust, the only employees or companies who can access your private personal information are those who use it to service your account or provide services to you or to us. HSBC diligently maintains physical, electronic and procedural safeguards that comply with applicable federal standards to guard your private personal information and to assist us in preventing unauthorized access to that information. How We Share Information with Companies Affiliated with Us From time to time, for general business purposes such as fraud control, or when we think it may benefit you, we do share certain information with our affiliated companies, except as prohibited by applicable law. These affiliated companies all provide financial services, such as banking, consumer finance, insurance, mortgage, and brokerage services. Some examples include companies doing business under the names Household, Beneficial, or HSBC. We may also share certain information with non-financial service providers that become affiliated with us in the future (such as travel, auto, or shopping clubs), except as prohibited by applicable law. The information we share might come from your application, for instance your name, address, telephone number, social security number, and e-mail address. Also, the information we share could include your transactions with us or our affiliated companies (such as your account balance, payment history, and parties to the transaction), your Internet usage, or your credit card usage. Except for Vermont residents, the information we share could also include your assets, income, or credit reports. How We Share Information under a Joint Marketing Agreement We may also provide information to non-affiliated financial companies (such as a tax preparer, mortgage banker or insurance service provider) with whom we have a joint marketing agreement. The sharing of information with these types of companies is permitted by law. The information we may share also comes from the sources described above and might include your name, address, phone number, and account experience with us. How We Share Information with Other Third Parties Except for California or Vermont residents, we also may share information with non-affiliated companies that are able to extend special offers we feel might be of value to you. These companies may be financial services providers (such as mortgage bankers or insurance agents) or they may be non-financial companies (such as retailers, tax preparers, or marketing companies). These offers are typically for products and services that you might not otherwise hear about. The information we may provide them comes from the sources described above and might include your name, address and phone number. You may tell us not to share information with non-affiliated companies in this way by completing the form below. For California and Vermont residents, applicable law requires us to obtain your permission in order to share information about you in this way, and we have chosen not to share your information in this way. We may also provide information to non-affiliated companies that perform operational, collection, or fraud control services related to your account. The sharing of information with these types of companies is permitted by law. Such a company might include a financial company (such as an insurance service provider) or a non-financial company (such as a data processor or internet service provider) with whom we have an agreement. The information 7 --------------------------------------------------------------------------------   we may share also comes from the sources described above and might include your name, address, phone number, and account experience with us. Finally, we provide information about you to non-affiliated companies such as credit reporting agencies and companies which provide services related to your account. This information sharing is also permitted by law. We reserve the right to change our privacy practices at any time in accordance with applicable law. Notice of such changes will be provided if required by applicable law. How to Opt-Out (non-affiliated companies) (Applicable to residents of all states except California and Vermont) If you do not want us to share your private information with non-affiliated companies (unless we are permitted or required by law to do so), please let us know by simply calling 1-800-365-2641. If you have previously informed us of your preference, you do not need to do so again. We will be happy to comply with your “opt-out” request, which will only apply to the HSBC account you have designated on the form by account number. An opt-out request by any party on a joint account will apply to all parties on the joint account. Opt-out requests will not apply to information sharing that is permitted by law. Please allow sufficient time for us to process your request. How to Opt-Out (affiliated companies) (Applicable to residents of all states except Vermont) If you do not want us to share your credit information (such as your credit bureau information) with companies that are affiliated with us, please let us know by simply calling 1-800-365-2641. If you have previously informed us of your preference, you do not need to do to again. This request will not apply to information about your transactions or experience with HSBC (such as account information, account usage, or payment history), except as required by law, and will only apply to the HSBC account you have designated on the form by account number. An opt-out request by any party on a joint account will apply to all parties on the joint account.   Atenciòn clientes hispanoparlantes: Esta Declaratiòn Sobre la Privacidad proporciona informaciòn sobre còmo manejamos informaciòn personal no publica acerca de nuestors clientes, las circunstancias bajo las cuales podemos compartir tal informaciòn con otras personas, y còmo usted puede pedir que no compartamos esa informaciòn con terceros que no scan afiliados nuestros. Si quisiera que le proporcionemos una traducciòn al espatiol de la Declaraiòn Sobre la Privacidad en su totalidad, sirvase comunicarse con nosotros liamàndonos gratis al 1-800-365-2641. 8 --------------------------------------------------------------------------------   LOAN AGREEMENT AND DISCLOSURE STATEMENT In this Loan Agreement and Disclosure Statement (“Agreement”), “ERA” means an Electronic Refund Advance Loan, “HSBC” means HSBC Bank USA, National Association, and “I”, “me” and “my” means each person who has applied to HSBC for an ERA. “H&R Block” means each of H&R Block, Inc., and each of its affiliates and subsidiaries (and franchisees thereof). Truth in Lending Act Disclosure Statement           1.   Amount Financed (the amount of credit provided to me or on my behalf)   $                                2.   FINANCE CHARGE (the dollar amount the credit will cost me)   $                                3.   Total of Payments (the amount I will have paid after I have made all payments as scheduled)   $                                4.   ANNUAL PERCENTAGE RATE (the cost of my credit as a yearly rate)                       % (e)           “e” = estimate   If line is left blank, amount is “0” Creditor: My creditor is HSBC Bank USA, National Association. Demand Feature: My loan will be repayable on demand or when the anticipated tax refund is electronically deposited in my Refund Account with HSBC, whichever is earlier. Payment Schedule: HSBC estimates that the total loan amount will be due in a single payment approximately 12 days from the date of this Agreement. Security Interest: I am providing HSBC with a security interest in my tax refund payment by the IRS, and, except for Virginia residents, in all funds deposited in the Refund Account and that Refund Account. Late Charge: A late charge equal to 1.5% of the unpaid Total of Payments may be imposed on the date 35 days after payment of my loan is demanded, and on the same date of each succeeding month (or if there is no such date, the last date of the month). Prepayment: If I pay off early, I will not be entitled to a refund of part or all of the Finance Charge. Contract Reference: Refer to the Application and the Loan Agreement for additional information about nonpayment, default, any right to accelerate the maturity of the obligation, and any prepayment rebates or penalties. Required Deposit: The Annual Percentage Rate does not take into account my required deposit.   --------------------------------------------------------------------------------   Itemization of Amount Financed           1.   Amount paid directly to me   $                    (e)           2.   Amount paid for my Refund Account Fee to HSBC   $                               3.   Amount paid for Tax Prep to H&R Block   $                               4.   Amount paid for debt owed to H&R Block   $                               5.   Amount paid for System Administration Fee to H&R Block   $            6.   Amount paid for Peace of Mind to H&R Block   $                               7.   Amount paid for E Filing to H&R Block   $                               8.   Amount Financed (Items 1+2+3+4+5+6+7)   $                    (e)           9.   Prepaid FINANCE CHARGE (ERA Fee to HSBC)   $                    (e)           10.   Total ERA (Items 8+9)   $                    (e)           “(e)” = estimate   If line is left blank, amount is “0” Loan Agreement 1. Obligation on ERA.      (a) I am obligated, on the date I agree to this Agreement, to accept an ERA if HSBC approves my application, unless HSBC approves me for a smaller ERA than the amount set forth in the Total of Payments section in the TILA Disclosure Statement above. If I am approved for a smaller ERA, I will be provided with a replacement TILA Disclosure Statement and I will be obligated to accept the smaller ERA if I accept the ERA proceeds. My loan will begin, and HSBC will earn the finance charge, when I am approved for the ERA and a transfer is initiated to my bank account.      (b) I may cancel my ERA transaction, or my obligation to accept a ERA, for up to 48 hours after I become obligated to accept the ERA. To do so, I must return to HSBC cash in the amount of the ERA proceeds and comply with other requirements set by HSBC. I must call the customer service number (1-800-524-0628) for further instructions on how to return the ERA proceeds to HSBC. I understand that, if I use my right to cancel, my finance charge will be refunded to me, HSBC will provide me with any tax refund only after HSBC receives the refund from the IRS, and I must still pay a Refund Account Fee. 2. Security Interest. If I receive a ERA, I grant HSBC a security interest in the property described in the TILA Disclosure Statement as collateral for my obligations to repay the ERA and perform my other obligations under the Application and this Agreement. 3. Deductions. My Prepaid Finance Charge and Refund Account Fee shall be deducted from the proceeds of my ERA. 4. Other Charges. (a) I agree to pay a returned check charge of $ 19 if any check or similar instrument I give HSBC is not honored. (b) I agree to pay a late charge as described in the TILA Disclosure Statement if I do not repay my loan when due. (c) In the event that I pay my account by telephone, I agree to pay up to a $10 fee for each such payment HSBC reserves the right to change this fee from time to time. I may call Customer Service for a current 2 --------------------------------------------------------------------------------   fee schedule. (d) I also agree to pay any attorney’s fees and collection agency costs incurred by HSBC or its affiliates to collect any delinquent ERA as permitted by law. 5. Application of Payments. Each payment I make on the ERA will be applied in any order determined by HSBC. BY CLICKING I AGREE BELOW, I AGREE TO THE TERMS OF THIS LOAN AGREEMENT. I ALSO ACKNOWLEDGE RECEIVING A COMPLETED COPY OF THIS LOAN AGREEMENT AND DISCLOSURE STATEMENT. CAUTION: IT IS IMPORTANT THAT YOU THOROUGHLY READ THIS CONTRACT BEFORE YOU SIGN IT. NOTICE TO CUSTOMER (a)   DO NOT SIGN THIS IF IT CONTAINS ANY BLANK SPACES.   (b)   YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN.   (c)   HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THIS AGREEMENT AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE. I AGREE 3 --------------------------------------------------------------------------------   References to “you” and “your” herein shall refer to the individual submitting an income tax return through this software or, in the case of a joint return, to each individual and to both individuals submitting the return. By consenting below to receive information electronically, you will receive the following information and disclosures electronically: Application for an Electronic Refund Advance and Loan Agreement and Disclosure Statements. To access and/or retain these disclosures, you will need a desktop or laptop personal computer and the following:       Windows   Macintosh 486 or faster PC   68030 or better (Power PC recommended) Windows 95, 98, 2000, ME, NT 4.0, or XP   MAC OS 7.5.3 or higher 16 MB RAM   5 MB free RAM 30 MB disk space   20 MB disk space 640x480, 256 color monitor or better   640x480, 256 color monitor or better Windows compatible printer   Macintosh compatible printer Does the computer you are using now satisfy these requirements? é Yes                    é No By clicking the “Yes” button below, you (i) agree to receive the above-referenced documents electronically and confirm that you will download or print the disclosures for your records, (ii) acknowledge that you can access information that is provided electronically in this program, and (iii) acknowledge that you are providing your consent to receive electronic communications pursuant to the Electronic Signatures in Global and National Commerce Act and intend that this statute apply to the fullest extent possible. é Yes                    é No You may withdraw your consent to receiving records electronically by clicking the appropriate “No” button above, but if you do so, you may not proceed with this transaction. You understand that the information you have elected to receive is confidential in nature. We are not responsible for unauthorized access by third parties to information and/or communications provided electronically nor for any damages, including direct, indirect, special, incidental or consequential damages, caused by unauthorized access. If you have any questions about these disclosures, you may contact us by telephone at 1-800-524-0628. You have the option to receive any information provided electronically in paper form. To receive specific information in paper form, please contact us at 1-800-524-0628. Please specify the information you wish to be provided in paper form. Your request will only apply to those specific items of information designated by you. --------------------------------------------------------------------------------   APPLICATION FOR AN ELECTRONIC REFUND ADVANCE LOAN AND TO OPEN A DEPOSIT ACCOUNT System Protected by U.S. Patent Nos. 4,890,228,5,193,057, and 5,963,921 This Application is submitted to HSBC Bank USA, National Association (“HSBC”) for an Electronic Refund Advance Loan (“ERA”) and a Refund Account. As used herein, “BFC” means Block Financial Corporation and its parents, subsidiaries and affiliates; “HSBC TFS” means HSBC Taxpayer Financial Services Inc.; “IRS” means the Internal Revenue Service; and “RAL” means a refund anticipation loan. 1.   INFORMATION       Applicant’s Name   Joint Applicant — Spouse (if joint return)       (                  )                                                                                              (                   )                                      First          M.I.          Last          Maiden   First          M.I.          Last          Maiden             Home Address   Home Address             Mailing Address   Mailing Address       Social Security/Taxpayer Identification #                    -                     -                       Social Security/Taxpayer Identification #                     -                     -                       Date of Birth                      /                     /                       Date of Birth                     /                     /                     2.   IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. TO HELP THE GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHAT THIS MEANS FOR ME: WHEN I OPEN AN ACCOUNT, YOU WILL ASK FOR MY NAME, ADDRESS, DATE OF BIRTH, AND OTHER INFORMATION THAT WILL ALLOW YOU TO IDENTIFY ME. YOU MAY ALSO SEEK TO VERIFY MY IDENTITY THROUGH NON-DOCUMENTARY METHODS. 3.   Payment Instructions   A.   If I receive an ERA, I understand I am to receive my ERA proceeds via direct deposit into the bank account that I will designate on the Direct Deposit screen of this software application during the Electronic Filing process, and I authorize HSBC to direct deposit my funds to that designated account.     B.   If my refund is greater than my ERA, I understand I am to receive my excess funds via direct deposit into the bank account that I previously designated on the Direct Deposit screen of this software application and I authorize HSBC to direct deposit my funds to that designated account. 4.   HSBC ERA DISCLOSURE STATEMENT:       The FINANCE CHARGE for my ERA is set forth on my Truth In Lending Disclosure. I know that even if my ERA is denied, I am responsible for my electronic filing, as applicable. I am also responsible for the repayment of my ERA whether or not my tax refund is paid to my account with HSBC in whole or in part. I understand that my income tax return can be filed electronically without obtaining in ERA and, subject to IRS processing, the usual time within which I can expect to receive a refund check if I file electronically and without an ERA is within approximately three weeks from the date I file my return. The IRS normally makes an electronic deposit in an average of about 12 days after an electronic filing. Alternatively, if I elect to obtain and am approved for an ERA, the loan proceeds usually will be made available to me within approximately 1-2 days of my loan application.       The usual duration of an ERA is approximately 11 days from the date of approval of the ERA. The following are examples of the estimated ANNUAL PERCENTAGE RATE (“APR”) and ERA FINANCE CHARGES on ERAs of varying amounts based on 11-day maturity periods. Because the APR on an ERA may be high in certain cases relative to other sources of credit, I understand that it may cost less to use such sources; e.g., credit cards, equity lines, etc., instead of an ERA.                                                                   Example Loan Amount   $ 500     $ 750     $ 1,000     $ 1,500     $ 2,000     $ 3,000     $ 4,000     $ 5,000   ERA Finance Charge*   $ 18     $ 28     $ 28     $ 58     $ 58     $ 88       S98     $ 98   Estimated Annual Percentage Rate     124 %e     129 %e     96 %e     133 %e     99 %e     100 %e     83 %e     66 %e   *   I understand I will be given disclosures which will show the actual finance charge and other charges applicable to my ERA transaction.   “e”= estimate   --------------------------------------------------------------------------------   5.   Applicable Law. This Application and all the other documents executed in connection with this Application or my ERA (collectively, “Documents”), shall be governed by and construed, interpreted, and enforced in accordance with federal law and, to the extent state law applies, the law of the state of Delaware (without reference to conflict of laws principles).   6.   Important Information About ERAs. I understand that: (a) I can file my federal income tax return electronically I without obtaining an ERA; (b) the IRS will send me a refund check or electronically deposit my refund to my existing bank account; (c) the IRS normally makes an electronic deposit in an average of about 12 days after an electronic filing; (d) HSBC tries to initiate the direct deposit of proceeds of an ERA on the first business day after application; (e) HSBC cannot guarantee when any proceeds of an ERA will be available to me; and (f) a ERA may cost substantially more than another type of loan I might obtain.   7.   Deposit Authorization. (a) After I submit my Application, BFC will electronically transmit my tax return to the IRS and my Application to HSBC. I understand that I will authorize or agree to an IRS Transmittal Form 8453 or IRS e-file signature authorization (“Deposit Authorization”) as part of my Application and electronic tax filing, and that the Deposit Authorization and this Application provide an irrevocable agreement to have my tax refund disbursed to HSBC, and irrevocably transfers to HSBC all my rights, title, and interest in the proceeds of my tax refund for purposes of the ERA I have requested and other purposes authorized by this Application. (b) If my Application is denied or cancelled, and HSBC receives my tax refund, HSBC will forward to me promptly my proceeds of my refund after deducting amounts permitted by this Agreement. (c) If for any reason, any part of the anticipated tax refund is disallowed or offset by the IRS, or if I should receive a refund check in the mail, I will advise HSBC immediately and promptly pay HSBC any amounts owing with respect to my Application or an ERA, and pay BFC any fees owed to them involving my tax return.   8.   Refund Account. (a) I request that a deposit account be opened (“Refund Account”) at HSBC upon receipt of my tax refund for the purposes of ensuring the repayment of my ERA and other amounts described in the Documents. The Annual Percentage Yield and interest rate on the Refund Account will be 0%. This means I will not receive any interest on funds in the Refund Account. 1 understand that I cannot make withdrawals from the Refund Account and that the funds in the Refund Account will be disbursed only as expressly provided in the Documents. (b) HSBC may deduct any amounts I owe HSBC or BFC from my tax refund, any funds received in the Refund Account, and any proceeds of an ERA. I am required to pay all fees to BFC for services rendered by BFC when HSBC electronically transfers my proceeds to me. If an electronic transfer of proceeds is not made available to me because I do not receive a tax refund, then I am required to pay all fees to BFC for services rendered by BFC on demand. HSBC also may withdraw amounts deposited into the Refund Account from my tax refund to disburse money to me in accordance with my Application. (c) I will not receive a periodic statement for the Refund Account, but I will receive notice if funds in the Refund Account are not sufficient to repay my ERA or are used for any purpose other than repayment of my ERA or disbursement to me. HSBC may, immediately after disbursement of all funds in the Refund Account, close the account without further notice to or authorization from me.   9.   Refund Account Fee. I will pay HSBC a fee of $11.95 for the administration of the Refund Account and any disbursements to me from that account (“Refund Account Fee”). I am obligated to pay the Refund Account Fee after the Deposit Authorization is filed with the IRS and is imposed regardless of whether (a) I apply for an ERA or (b) my Application is approved or denied. The Refund Account Fee is not imposed directly or indirectly as an incident to or condition of any extension of credit. I can avoid the Refund Account Fee if I direct that my tax refund not be deposited to HSBC before filing my Deposit Authorization with the IRS.   10.   Collections. In consideration of the ease and convenience of the following method of paying any delinquent debt I owe or the other applicant owes to HSBC, HSBC TFS, my electronic return originator (“ERO”) for prior years, BFC, or Bank One, River City Bank, First Security Bank, Republic Bank or Santa Barbara Bank & Trust (the “Other ERA or RAL Lenders”), and provided that such debt has not been discharged in bankruptcy, I authorize and direct the repayment of such debt, calculated as of the date of my Application, by means of (a) having such debt deducted from the proceeds of my ERA, or (b) having my request for an ERA denied or the amount for which I have applied reduced and having such debt repaid to those entities by offset or otherwise from my tax refund directly transmitted into my Refund Account at HSBC. If I owe delinquent debt to more than one of the entities listed above, I authorize and direct HSBC to pay such debts in the following order: HSBC, HSBC TFS, Other ERA or RAL Lenders, ERO, and BFC. 1 also authorize and instruct HSBC and the Other ERA or RAL Lenders to disclose to each other information about their 2 --------------------------------------------------------------------------------       respective credit experiences concerning my present and prior ERAs, refund anticipation loans (“RALs”), or similar financial services, and my prior tax returns.       PLEASE NOTE: If I have delinquent debt, I understand that HSBC or HSBC TFS may be acting as a debt collector hereunder to collect a debt and that any information obtained will be used for that purpose. 11.   No Fiduciary/Agency Duty. I understand that BFC is not acting in a fiduciary, confidential, or agency capacity with respect to me in connection with this transaction and has no other duties to me beyond the transmission of ray tax return information to HSBC, and the electronic filing of my tax return with the IRS and/or state taxing authority. I understand that BFC or an affiliate of BFC may has the right to purchase an interest in my ERA issued by HSBC. I further understand that BFC or an affiliate of BFC may receive payments from HSBC or its affiliates in connection with ERAs. I also understand that HSBC is not acting in a fiduciary, confidential, or agency capacity with respect to me in connection with this transaction. 12.   Disclosure Information. (a) “Information” means my federal and state income tax returns for the tax year 2004, any information obtained in connection with my tax return (including information relating to a possible offset of my tax refund or the possibility that my tax return is incorrect), and any information relating to my Application for an ERA or similar financial service I have received or requested from HSBC. (b) “Authorized Parties” means HSBC, HSBC TFS, BFC, my Transmitter, and their respective affiliates and agents, and includes the Fraud Service Bureau operated for HSBC. (c) The Authorized Parties may share Information to process my Application, to provide ERAs to me, to collect delinquent ERAs or BFC fees, to prevent fraud, and to otherwise administer or promote the program for ERAs. (d) The Authorized Parties may disclose Information to the IRS, state tax agencies and other financial institutions that provide ERAs or other financial services, (e) The Authorized Parties may call, or input my Information on any website of, the IRS or state tax agencies in connection with my Application to, among other things, determine the status of my tax return. The IRS and state tax agencies may disclose information about me and my tax returns to the Authorized Parties. (f) BFC may not use or disclose Information for any purpose, except as permitted under Treas. Reg. See. 301.7216-2 or as provided herein. (f) I consent to HSBC sharing information as provided in the Privacy Policy set forth in Section 18. 13.   Service Fees. (a) Reissued Check Fee: I agree to pay $10 each time that a check is reissued at my request for any reason. If I request that such a check be sent by overnight mail, I agree to pay the charges for sending it by overnight mail, (b) Document Fee: If I ask for a copy of my Application, loan agreement, billing statement or other document, I may be charged $10 per document. 14.   Arbitration Provision. Any claim, dispute or controversy between me and HSBC (as specifically defined below for purposes of this Arbitration Provision), whether in contract or tort (intentional or otherwise), whether pre-existing, present or future, and including constitutional, statutory, common law, regulatory, and equitable claims in any way relating to (a) any of these or any other Documents or any ERA that I have previously requested or received from HSBC, (b) advertisements, promotions, or oral or written statements related to this or any other Application for a RAL or any ERA that I have previously requested or received from HSBC, (c) the relationship of HSBC and me relating to any of these or any other Documents or any ERA that I have previously requested or received from HSBC; and (d) except as provided below, the validity, enforceability or scope of this Arbitration Provision or any part thereof, including, but not limited to, the issue whether any particular claim, dispute or controversy must be submitted to arbitration (collectively the “Claim”), shall be resolved, upon the election of either me or HSBC, by binding arbitration pursuant to this Arbitration Provision and the applicable rules of the American Arbitration Association (“AAA”) or the National Arbitration Forum (“NAF”) in effect at the time the Claim is filed. I shall have the right to select one of these arbitration administrators (the “Administrator”). The arbitrator must be a lawyer with more than ten (10) years of experience or a retired or former judge. In the event of a conflict between this Arbitration Provision and the rules of the Administrator, this Arbitration Provision shall govern. In the event of a conflict between this Arbitration Provision and the balance of this Application or any other Documents, this Arbitration Provision shall govern. Notwithstanding any language in this Arbitration Provision to the contrary, no arbitration may be administered, without the consent of all parties to the arbitration, by any organization that has in place a formal or informal policy that is inconsistent with and purports to override the terms of this Arbitration Provision, including the Class Action Waiver Provision defined below.       HSBC hereby agrees not to invoke its right to arbitrate an individual Claim I may bring in small claims court or an equivalent court, if any, so long as the Claim is pending only in that court. No class actions or private attorney general actions in court or in arbitration or joinder or consolidation of claims in court or in arbitration with other 3 --------------------------------------------------------------------------------       persons, are permitted without the consent of HSBC and me. The validity and effect of the preceding sentence (herein referred to as the “Class Action Waiver Provision”) shall be determined exclusively by a court and not by the Administrator or any arbitrator. Neither the Administrator nor any arbitrator shall have the power or authority to waive, modify or fail to enforce the Class Action Waiver Provision, and any attempt to do so, whether by rule, policy, arbitration decision or otherwise, shall be invalid and unenforceable.       Any arbitration bearing that I attend will take place in a location that is reasonably convenient for me. On any Claim I file, 1 will pay the first $50.00 of the filing fee. At my request, HSBC will pay the remainder of the filing fee and any administrative or hearing fees charged by the Administrator, up to $ 1,500.00 on any Claim asserted by me in the arbitration. If I should be required to pay any additional fees to the Administrator, HSBC will consider a request by me to pay all or part of the additional fees; however, HSBC shall not be obligated to pay any additional fees unless the arbitrator grants me an award. If the arbitrator grants an award in my favor, HSBC will reimburse me for any additional fees paid or owed by me to the Administrator up to the amount of the fees that would have been charged if the original Claim had been for the amount of the actual award in my favor. If the arbitrator issues an award in HSBC’s favor, I will not be required to reimburse HSBC for any fees HSBC has previously paid to the Administrator or for which HSBC is responsible.       This Arbitration Provision is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16 (the “FAA”), and not by any state law concerning arbitration. The arbitrator shall follow and apply applicable substantive law to the extent consistent with the FAA, statutes of limitation and claims of privilege and shall be authorized to award all remedies permitted by applicable substantive law, including, without limitation, compensatory, statutory and punitive damages, declaratory, injunctive and other equitable relief and attorneys’ fees and costs. The arbitrator will follow rules of procedure and evidence consistent with the FAA, this Arbitration Provision and, to the extent consistent with this Arbitration Provision, the Administrator’s rules. Upon request of either party, the arbitrator shall prepare a short reasoned written opinion supporting the arbitration award. Judgment upon the award may be entered in any court having jurisdiction. The arbitrator’s award will be final and binding except for: (a) any appeal right under the FAA; and (b) any appeal of Claims involving more than $100,000. For such Claims, any party may appeal the award to a three-arbitrator panel appointed by the Administrator, which will reconsider de novo (i.e., in its entirety) any aspect or all aspects of the initial award that is appealed. The panel’s decision will be final and binding, except for any appeal right under the FAA. Unless applicable law provides otherwise, the appealing party will pay the appeal’s costs (i.e., the amounts owed to the Administrator and the arbitrators), regardless of its outcome. However, HSBC will consider in good faith any reasonable request for HSBC to bear up to the full costs of the appeal. Nothing in this Arbitration Provision shall be construed to prevent HSBC’s use of offset or other contractual rights involving payment of my income tax refund or other amount on deposit with HSBC to pay off any ERA, RAL, or similar financial service, or BFC or other fees, now or thereafter owed by me to HSBC or any Other ERA or RAL Lender or BFC or third party pursuant to the Documents or similar prior documents.       I ACKNOWLEDGE THAT I HAVE A RIGHT TO LITIGATE CLAIMS IN COURT BEFORE A JUDGE OR JURY, BUT I PREFER TO RESOLVE ANY SUCH CLAIMS THROUGH ARBITRATION AND HEREBY KNOWINGLY AND VOLUNTARILY WAIVE MY RIGHTS TO LITIGATE SUCH CLAIMS IN COURT BEFORE A JUDGE OR JURY, UPON ELECTION OF ARBITRATION BY HSBC OR BY ME. I ACKNOWLEDGE THAT I WILL NOT HAVE THE RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OR CLAIMANTS OR AS A PRIVATE ATTORNEY GENERAL PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION. I UNDERSTAND THAT, IF I AM A MEMBER OF THE PUTATIVE CLASS IN CUMMINS, ET AL. V. H&R BLOCK, ET AL., CASE NO. 03-C-134 IN THE CIRCUIT COURT OF KANAWHA COUNTY, WV, THIS ARBITRATION CLAUSE MAY NOT ACT AS A WAIVER OF THE RIGHTS AND CLAIMS I MAY HAVE IN THAT ACTION.       This Arbitration Provision shall supersede any prior Arbitration Provisions contained in any previous ERA application or related agreement and shall survive repayment of any ERA and termination of my account; provided, however, that if I reject this Arbitration Provision as set forth below, all prior Arbitration Provisions shall remain in full force and effect, If any portion of this Arbitration Provision is deemed invalid or unenforceable, it will not invalidate the remaining portions of this Arbitration Provision. However, if a determination is made that the Class Action Waiver Provision is unenforceable, this Arbitration Provision (other than this sentence) and any prior Arbitration Provision shall be null and void.       To reject this Arbitration Provision, I must send HSBC, c/o HSBC Taxpayer Financial Services, Account Research, P.O. Box 18097, Jacksonville, FL 32229, a signed writing (“Rejection Notice”) that is received within thirty (30) days after the date I submit this Application. The Rejection Notice must identify the transaction involved and must include my name, address, and social security number and must be signed by all persons signing this Application as 4 --------------------------------------------------------------------------------       Applicant(s). I may send the Rejection Notice in any manner I see fit as long as it is received at the specified address within the specified time. No other methods can be used to reject the Arbitration Agreement. If the Rejection Notice is sent on my behalf by a third party, such third party must include evidence of his or her authority to submit the Rejection Notice on my behalf.       As used in this Arbitration Provision, the term “HSBC” shall mean HSBC Bank USA, N. A., HSBC TFS, and H&R Block, Inc., and each of their parents, wholly or majority-owned subsidiaries, affiliates, or predecessors, successors, assigns and the franchisees of any of them, and each of their officers, directors, agents, and employees.       Contacting the Administrator: If I have a question about the Administrator mentioned in this Arbitration Provision or if I would like to obtain a copy of its arbitration rules, I can contact the Administrator as follows: American Arbitration Association, 335 Madison Avenue, New York, NY 10017, www.adr.org: National Arbitration Forum, P.O. Box 50191, Minneapolis, MN 55405. www.arb-fotum.com. 15.   Survival. The provisions of the Application shall survive the execution of any Loan Agreement and Disclosure Statement and the disbursement of funds. 16.   Miscellaneous. (a) References to “I” or “me” or “my” in the Documents shall refer to the individual submitting an income tax return through this software or, in the case of a joint income tax return, to each individual and to both individuals, and the obligations of such individuals under the Documents will be joint and several, and each shall be considered an applicant. In the case of joint applicants, the individual agreeing to the Documents and the consent to electronic disclosures represents that he or she also has the authority to agree to the Documents and consent on behalf of the other applicant. (b) If any provision of the Documents or part thereof is deemed invalid, such invalidity will not affect any other provision of the Documents or part thereof, (c) HSBC may obtain a consumer report on me, and other information from third parties, in connection with evaluating my Application, or collecting or reviewing my ERA or accounts. (d) Supervisory personnel of HSBC may listen to and record my telephone calls. (e) I agree that you may send any notices and billing statements to the address of the primary applicant and not to the address of the joint applicant if such address is different. (f) HSBC may transfer, sell, participate or assign all or a portion of its rights, duties and obligations to third parties, including HSBC TFS, BFC, or their affiliates, successors and assignees, without notice to me or my consent. 17.   State Notices. California residents: Married persons may apply for a separate account. Iowa Residents: NOTICE TO CONSUMER: 1. Do not sign this paper before you read it. 2. You are entitled to a copy of this paper. 3. You may prepay the unpaid balance at any time without penalty and may be entitled to receive a refund of unearned charges in accordance with the law. New York residents: Consumer reports may be requested in connection with this account or any updates, renewals, or extensions thereof. Upon my request, HSBC will inform me of the names and addresses of any consumer reporting agencies which have provided HSBC with such reports. Ohio residents: The Ohio law against discrimination requires that all creditors make credit equally available to all creditworthy customers, and that credit reporting agencies maintain separate credit histories on each individual upon request. The Ohio Civil Rights commission administers compliance with these laws. Pennsylvania residents: If this loan becomes in default, HSBC or its assignee intends to collect default charges. Utah residents: Any prepaid finance charge not exceeding 5% of the original amount of me loan shall be fully earned on the date the loan is extended, and shall be nonrefundable in the event the loan is repaid prior to the date it is due. Any additional prepaid finance charge is earned proportionally over the term of the loan, and, in the event of such prepayment, the unearned portion of such charge, calculated on a pro rata basis according to the remaining term of the loan, shall be refunded. Wisconsin residents: No provision of a marital property agreement, a unilateral statement under Wisconsin State, s. 766.59 or a court decree under Wisconsin Stats. s. 766.70 adversely affects the interest of the creditor unless the creditor, prior to the time the credit is granted, is furnished a copy of the agreement, statement or decree or has actual knowledge of the adverse provision when the obligation to the creditor is incurred. All obligations described herein are being incurred in the interest of my marriage or family. A married Wisconsin resident applicant must mail the name and address of his or her spouse, as well as the applicant’s name and social security number, to HSBC c/o HSBC Taxpayer Financial Services, 20D Somerset Corporate Blvd., Bridgewater, NJ 08807, within two days.   18.   Certification.       I certify that the following information is true with respect to the ERA I am requesting: (1) I do not owe any tax due and/or any tax liens from prior tax years, nor have I previously filed a 2004 federal income tax return. (2) I do not have any delinquent child support, alimony payments, student loans, V.A. loans or other federally sponsored loans. (3) Presently, I do not have a petition (whether voluntary or involuntary) filed nor do I anticipate filing a petition under federal bankruptcy laws. (4) I have not had a Refund Anticipation Loan (“RAL”) or ERA with any lender, 5 --------------------------------------------------------------------------------       from a prior year that has been discharged in bankruptcy. (5) I have not paid any estimated tax and/or did not have any amount of my 2003 refund applied to my 2004 tax return. (6) I am not presently making regular payments to the IRS for prior year unpaid taxes. (7) I do not have a Power of Attorney presently in effect or on file with the Internal Revenue Service (“IRS”) to direct my federal income tax refund to any third party. (8) I am not filing a 2004 federal income tax return using a substitute W-2, From 4852, or any other form of substitute wage and tax documentation, unless the source of the Form 4852 is a Military Leave and Earnings Statement. (9) I am not filing a Form 8862 (Earned Income Credit Eligibility) with my 2004 federal income tax return. (10) I am not currently incarcerated in a state or federal prison or have 2004 income earned while an inmate at a penal institution and claiming the Earned Income Credit. (11) No portion of the 2004 income I have reported is from Schedule C or C-EZ (Profit or Loss from Business). (12) If Schedule C is present, EIC claimed, and return is self prepared or other, I am a statutory employee and the W-2 indicates statutory employee in Box 15. (13) I am not filing Form 8379 (Injured Spouse Claim & Allocation) with my 2004 federal income tax return. (14) I am not filing Form 1310 (Statement of Person Claiming Refund Due Deceased Taxpayer) with the 2004 Federal Income Tax Return or filing a Federal Income Tax Return Form 1040 on behalf of deceased taxpayer (15) I do not have an amount paid with request for an extension to file on Line 68, Field 1190 of Form 1040. (16) I do not have Other Taxes on Schedule A of Form 1040. (17) Everything that I have stated in this Application is correct           By clicking I AGREE, I am indicating that I fully understand that I am applying for a loan and that I have read, understand and agree to this Application, including: (a) Section 10 in which I agree that HSBC may use amounts received from my tax refund to pay delinquent debts I owe HSBC or others; and (b) Section 14 in which I agree, upon my or HSBC’s election, to arbitrate any Claims that I may have. I also acknowledge that I have 30 days from today’s date to reject the Arbitration Provision by following the procedure described in Section 14. If I receive an ERA, I promise to pay the amount set forth in the “Total of Payments” section on my Loan Agreement and Disclosure Statement or subsequent replacement TILA Disclosure Statement, if any, on demand or when the anticipated refund from the IRS is electronically deposited into my Refund Account, whichever comes first, and I agree to repay the ERA whether or not my tax refund is paid in whole or in part to HSBC. I AGREE     HSBC Taxpayer Financial Services Toll-Free Customer Service Number 1-800-524-0628 6 --------------------------------------------------------------------------------   HSBC TAXPAYER FINANCIAL SERVICES DIVISION OF HSBC BANK USA, NATIONAL ASSOCIATION Privacy Statement Applicability This Privacy Statement only applies to customers’ accounts with the HSBC Taxpayer Financial Services division of HSBC Bank USA, National Association (“HSBC”). All other HSBC accounts are governed by the HSBC Bank USA National Association Personal Banking Policy. Introduction — Our Commitment to You HSBC is proud to be part of a financial services organization that has been providing superior products and services to its customers for many years. We greatly appreciate the trust that you and millions of customers have placed in us, and we will protect that trust by continuing to respect the privacy of all our applicants and customers even if our formal customer relationship ends. How We Handle Information we Obtain It is important for you to know that in order to ensure that our customers get the very best service and the highest quality products, HSBC collects demographic information (like your name and address) and credit information (like information related to your accounts with us and others). This information comes either directly from you, for instance, from your application and transactions on your account; or, it may come from an outside source such as your credit bureau report. In addition, if you visit our Internet web site, we may collect certain information about your Internet usage. Because some of the information we gather is not publicly available, we take great care to ensure that this information is kept safe from unauthorized access, and we would never share the information in violation of any regulation or law. Because we respect your privacy and we value your trust, the only employees or companies who can access your private personal information are those who use it to service your account or provide services to you or to us. HSBC diligently maintains physical, electronic and procedural safeguards that comply with applicable federal standards to guard your private personal information and to assist us in preventing unauthorized access to that information. How We Share Information with Companies Affiliated with Us From time to time, for general business purposes such as fraud control, or when we think it may benefit you, we do share certain information with our affiliated companies, except as prohibited by applicable law. These affiliated companies all provide financial services, such as banking, consumer finance, insurance, mortgage, and brokerage services. Some examples include companies doing business under the names Household, Beneficial, or HSBC. We may also share certain information with non-financial service providers that become affiliated with us in the future (such as travel, auto, or shopping clubs), except as prohibited by applicable law. The information we share might come from your application, for instance your name, address, telephone number, social security number, and e-mail address. Also, the information we share could include your transactions with us or our affiliated companies (such as your account balance, payment history, and parties to the transaction), your Internet usage, or your credit card usage. Except for Vermont residents, the information we share could also include your assets, income, or credit reports. How We Share Information under a Joint Marketing Agreement We may also provide information to non-affiliated financial companies (such as a tax preparer, mortgage banker or insurance service provider) with whom we have a joint marketing agreement. The sharing of information with these types of companies is permitted by law. The information we may share also comes from the sources described above and might include your name, address, phone number, and account experience with us. How We Share Information with Other Third Parties Except for California or Vermont residents, we also may share information with non-affiliated companies that are able to extend special offers we feel might be of value to you. These companies may be financial services providers (such as mortgage bankers or insurance agents) or they may be non-financial companies (such as retailers, tax preparers, or marketing companies). These offers are typically for products and services that you might not otherwise hear about. The information we may provide them comes from the sources described above and might include your name, address and phone number. You may tell us not to share information with non-affiliated companies in this way by completing the form below. For California and Vermont residents, applicable law requires us to obtain your permission in order to share information about you in this way, and we have chosen not to share your information in this way. 7 --------------------------------------------------------------------------------   We may also provide information to non-affiliated companies that perform operational, collection, or fraud control services related to your account. The sharing of information with these types of companies is permitted by law. Such a company might include a financial company (such as an insurance service provider) or a non-financial company (such as a data processor or internet service provider) with whom we have an agreement. The information we may share also comes from the sources described above and might include your name, address, phone number, and account experience with us. Finally, we provide information about you to non-affiliated companies such as credit reporting agencies and companies which provide services related to your account. This information sharing is also permitted by law. We reserve the right to change our privacy practices at any time in accordance with applicable law. Notice of such changes will be provided if required by applicable law. How to Opt-Out (non-affiliated companies) (Applicable to residents of all states except California and Vermont) If you do not want us to share your private information with non-affiliated companies (unless we are permitted or required by law to do so), please let us know by simply calling 1-800-365-2641. If you have previously informed us of your preference, you do not need to do so again. We will be happy to comply with your “opt-out” request, which will only apply to the HSBC account you have designated on the form by account number. An opt-out request by any party on a joint account will apply to all parties on the joint account. Opt-out requests win not apply to information sharing that is permitted by law. Please allow sufficient time for us to process your request. How to Opt-Out (affiliated companies) (Applicable to residents of all states except Vermont) If you do not want us to share your credit information (such as your credit bureau information) with companies that are affiliated with us, please let us know by simply calling 1-800-365-2641. If you have previously informed us of your preference, you do not need to do so again. This request will not apply to information about your transactions or experience with HSBC (such as account information, account usage, or payment history), except as required by law, and will only apply to the HSBC account you have designated on the form by account number. An opt-out request by any party on a joint account will apply to all parties on the joint account.   Atenciòn clientes hispanoparlantes: Esta Declaraciòn Sobre la Privacidad proporciona informaciòn sobre còmo manejamos informaciòn personal no publica acerca de nuestors clientes, las circunstancias bajo las cuales podemos compartir tal informaciòn con otras personas, y còmo usted puede pedir que no compartamos esa informaciòn con teiceros que no scan afiliados nuestros. Si quisiera que le proporcionemos una traducciòn al español de la Declaraciòn Sobre la Privacidad en su totalidad, sirvase comunicarse con nosotros llamàndonos gratis al 1-800-365-261. 8 --------------------------------------------------------------------------------   LOAN AGREEMENT AND DISCLOSURE STATEMENT     In this Loan Agreement and Disclosure Statement (“Agreement”), “ERA” means an Electronic Refund Advance Loan, “HSBC” means HSBC Bank USA, National Association, and “I”, “me” and “my” means each person who has applied to HSBC for an ERA. “H&R Block” means each of H&R Block, Inc., and each of its affiliates and subsidiaries (and franchisees thereof). Truth in Lending Act Disclosure Statement           1. Amount Financed (the amount of credit provided to me or on my behalf)   $                         2. FINANCE CHARGE (the dollar amount the credit will cost me)   $                         3. Total of Payments (the amount I will have paid after I have made all payments as scheduled)   $                         4. ANNUAL PERCENTAGE RATE (the cost of my credit as a yearly rate)       %(e)             “e”= estimate   If line is left blank, amount is“0” Creditor: My creditor is HSBC Bank USA, National Association. Demand Feature: My loan will be repayable on demand or when the anticipated tax refund is electronically deposited in my Refund Account with HSBC, whichever is earlier. Payment Schedule: HSBC estimates that the total loan amount will be due in a single payment approximately 12 days from the date of this Agreement. Security Interest: I am providing HSBC with a security interest in my tax refund payment by the IRS, and, except for Virginia residents, in all funds deposited in the Refund Account and that Refund Account. Late Charge: A late charge equal to 1.5% of the unpaid Total of Payments may be imposed on the date 35 days after payment of my loan is demanded, and on the same date of each succeeding month (or if there is no such date, the last date of the month). Prepayment: If I pay off early, I will not be entitled to a refund of part or all of the Finance Charge. Contract Reference: Refer to the Application and the accompanying Loan Agreement for additional information about nonpayment, default, any right to accelerate the maturity of the obligation, and any prepayment rebates or penalties. Required Deposit: The Annual Percentage Rate does not take into account my required deposit.   --------------------------------------------------------------------------------   Itemization of Amount Financed           1. Amount paid directly to me   $                         2. Amount paid for my Refund Account Fee to HSBC   $                         3. Amount Financed (Items 1 +2)   $   (e)                     4. Prepaid FINANCE CHARGE (ERA Fee)   $   (e)                     5. Total ERA Amount (Items 3+4)   $   (e)             “(e)” = estimate   If line is left blank, amount to “0” Loan Agreement 1. Obligation on ERA.      (a) I am obligated, on the date I agree to this Agreement, to accept an ERA if HSBC approves my application. My loan will begin, and HSBC will earn the finance charge, when I am approved for the ERA and a transfer is initiated to my bank account.      (b) I may cancel my ERA transaction, or my obligation to accept an ERA, for up to 48 hours after I become obligated to accept the ERA. To do so, I must return to HSBC cash in the amount of the ERA proceeds and comply with other requirements set by HSBC. I must call the customer service number (l-800-524-0628) for further instructions on how to return the ERA proceeds to HSBC. I understand that, if I use my right to cancel, my finance charge will be refunded to me, HSBC will provide me with any tax refund only after HSBC receives the refund from the IRS, and I must still pay a Refund Account Fee. 2. Security Interest. If I receive a ERA, I grant HSBC a security interest in the property described in the TILA Disclosure Statement as collateral for my obligations to repay the ERA and perform my other obligations under the Application and this Agreement. 3. Deductions. My Prepaid Finance Charge and Refund Account Fee shall be deducted from the proceeds of my ERA. 4. Other Charges. I agree to pay a returned check charge of $19 if any check or similar instrument I give HSBC is not honored. (b) I agree to pay a late charge as described in the TILA Disclosure Statement if I do not repay my loan when due. (c) In the event that I pay my account by telephone, I agree to pay up to a $10 fee for each such payment. HSBC reserves the right to change this fee from time to time. I may call Customer Service for a current fee schedule. (d) I also agree to pay any attorney’s fees and collection agency costs incurred by HSBC or its affiliates to collect any delinquent ERA as permitted by law. 5. Application of Payments. Each payment I make on the ERA will be applied in any order determined by HSBC. BY CLICKING I AGREE ABOVE, I AGREE TO THE TERMS OF THIS LOAN AGREEMENT. I ALSO ACKNOWLEDGE RECEIVING A COMPLETED COPY OF THIS LOAN AGREEMENT AND DISCLOSURE STATEMENT. 2 --------------------------------------------------------------------------------   CAUTION: IT IS IMPORTANT THAT YOU THOROUGHLY READ THIS CONTRACT BEFORE YOU SIGN IT, NOTICE TO CUSTOMER (a)   DO NOT SIGN THIS IF IT CONTAINS ANY BLANK SPACES.   (b)   YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN.   (c)   HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THIS AGREEMENT AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE. I AGREE 3 --------------------------------------------------------------------------------   References to “you” and “your” herein shall refer to the individual submitting an income tax return through this software or, in the case of a joint return, to each individual and to both individuals submitting the return. By consenting below to receive information electronically, you will receive the following information and disclosures electronically: Application for an Electronic Refund Advance Loan Agreement and Disclosure Statements. To access and/or retain these disclosures, you will need a desktop or laptop personal computer and the following:       Windows   Macintosh 486 or faster PC   68030 or better (Power PC recommended) Windows 95, 98, 2000, ME, NT 4.0, or XP   MAC OS 7.5.3 or higher 16 MB RAM   5 MB free RAM 30 MB disk space   20 MB disk space 640x480, 256 color monitor or better   640x480, 256 color monitor or better Windows compatible printer   Macintosh compatible printer Does the computer you are using now satisfy these requirements? é Yes            No é By clicking the “Yes” button above, you (i) agree to receive the above-referenced documents electronically and confirm that you will download or print the disclosures for your records, (ii) acknowledge that you can access information that is provided electronically in this program, and (iii) acknowledge that you are providing your consent to receive electronic communications pursuant to the Electronic Signatures in Global and National Commerce Act and intend that this statute apply to the fullest extent possible. é Yes            No é You may withdraw your consent to receiving records electronically by clicking the appropriate “No” button above, but if you do so, you may not proceed with this transaction. You understand that the information you have elected to receive is confidential in nature. We are not responsible for unauthorized access by third parties to information and/or communications provided electronically nor for any damages, including direct, indirect, special, incidental or consequential damages, caused by unauthorized access. If you have any questions about these disclosures, you may contact us by telephone at 1-800-524-0628. You have the option to receive any information provided electronically in paper form. To receive specific information in paper form, please contact us at 1-800-524-0628. Please specify the information you wish to be provided in paper form. Your request will only apply to those specific items of information designated by you.  

  Exhibit 10.1 MEMORANDUM OF UNDERSTANDING      The present Memorandum of Understanding (the “MOU”) is concluded in New York, USA, this 2nd day of March 2006 by and between:- (A)   The Ministry of Energy   •   The Ministry of Energy of Georgia (“the Ministry”) with its offices at 10, Lermontov Street, Tbilisi, Georgia, represented by the Minister, Nika Gilauri (B)   CanArgo (Nazvrevi) Ltd   •   CanArgo (Nazvrevi) Ltd a company incorporated and existing under the laws of Guernsey, with its registered office at PO 291 St. Peter Port, Guernsey, GY1 3RR (“CanArgo”), represented by its Managing Director, Dr David Robson The Ministry and CanArgo may collectively be referred to as the “Parties” and individually as a “Party”. WHEREAS: A   The Ministry wishes to promote the increased domestic production of all gaseous hydrocarbons produced from gas wells, including wet gas, dry gas and residue gas remaining after the extractions of liquid hydrocarbons from wet gas and all associated natural gas produced in association with crude oil (“Natural Gas”) within Georgia so that Georgia can become less dependant on imported Natural Gas;   B   CanArgo is prepared to invest in the drilling of appraisal and development wells (the “Wells”) in Georgia in order to asses the potential for extraction of Natural Gas provided only that the Ministry agrees to purchase or procure the purchase of any such Natural Gas on the terms provided in Section II below. NOW THEREFORE, it is hereby agreed as follows:- SECTION I GAS EXTRACTION/SALES 1.1   Following the Effective Date of this MOU CanArgo shall proceed with its appraisal and development programmes on the Kumisi Cretaceous gas prospect located within the Production Sharing Contract dated 20th February 1998 covering the Nazvrevi and Blocks XId and XIII licence (the “Licence Area”) in Georgia and will undertake to spud a well in the Licence Area as soon as is practicable, but certainly between May and December 2006.   1.2   The Ministry agrees and accepts that increased domestic Natural Gas production is beneficial for Georgia and the people of Georgia and accordingly the Ministry agrees: 1 --------------------------------------------------------------------------------   1.2.1   that it shall use its best efforts to find a purchaser for the Natural Gas on the terms set out in Section II and in such circumstances shall procure the provision of a bank guarantee (in terms acceptable to CanArgo) for such sales of Natural Gas;   1.2.2   subject to CanArgo giving a guarantee in terms of clause 1.3 below and in the event that no such third party purchaser is found then the Ministry shall itself or through another State body enter into a contract on the same terms as set out in Section II below and provide a bank guarantee acceptable to CanArgo for such sales of Natural Gas.   1.3   CanArgo will guarantee to the Ministry to provide a minimum quantity of Natural gas once CanArgo has established, in its sole discretion, that it is technically and commercially possible to give such a guarantee and a gas sales contract is entered into largely on the terms included in Section II herein. SECTION II KEY COMMERCIAL TERMS OF GAS SALES CONTRACT Note: in this section references to CanArgo are to CanArgo (Nazvrevi) Ltd and references to the Ministry are to the Ministry or other purchaser selected by the Ministry. 2   Agreement for Sale and Purchase of Natural Gas   2.1   CanArgo will sell a quantity of Natural Gas (above a prescribed minimum quantity) to the Ministry and Ministry shall purchase such Natural Gas from a start date agreed to between the parties with neither party causing any unreasonable delays to such start date (“Start Date”) at prices to be determined in accordance with this MOU.   3   Delivery Point   3.1   CanArgo shall deliver Natural Gas to a tie-in point to the existing gas transmission system in Georgia at a point located suitably close to the Licence Area to be agreed with the transmission system owners JSC Georgian International Gas Corporation (GIGC) (the “Gas Delivery Point”) at which title to and risk or loss or damage to the Natural Gas sold will transfer to the Ministry. The Ministry shall be responsible for the costs of transport from the Gas Delivery Point onwards and CanArgo shall be responsible for the costs of delivery to the Gas Delivery Point.   4   Gas Quality, Delivery Pressure and Dispatch   4.1   Natural Gas made available at the Gas Delivery Point will be in accordance with the specification for gas delivery in Georgia, these are minimum quality specifications. If technical matters cannot be agreed between the parties within 30 days then an expert shall be appointed to resolve the matter (the costs of such expert to be borne equally between the parties).   4.2   The Ministry within its competence will assist CanArgo with gaining access to existing pipelines and infrastructure and obtaining and maintaining all licences, consents, permits, permissions authorisations, rights and/or approvals necessary for the construction of 2 --------------------------------------------------------------------------------       pipelines and delivery equipment and the operation and maintenance of such pipelines and equipment so as to enable CanArgo to deliver Natural Gas to the Gas Delivery Point.   5   Measurement   5.1   CanArgo and the Ministry shall ensure that measuring equipment is installed at the Gas Delivery Point and shall have access to such measuring equipment.   5.2   CanArgo and the Ministry shall be entitled to inspect such equipment to ensure it is compliant with industry standards and with the gas measurement principles generally accepted in Georgia.   5.3   The volume of Natural Gas delivered from CanArgo to the Ministry and accepted by the Ministry should be confirmed by a delivery acceptance act (“Acceptance Act”) signed by the parties and stamped by the parties not later than the fifth day of the month following the relevant gas delivery.   6   Quantities of Natural Gas   6.1   CanArgo agrees to provide and the Ministry agrees to order and take on a “take or pay basis” daily delivery of Natural Gas of an amount not materially different from the daily quantity required to make up the agreed relevant minimum monthly contract quantities for the month concerned (“Minimum Monthly Contract Quantities”).   6.2   The Minimum Monthly Contract Quantities will be notified by CanArgo to the Ministry 30 days prior to the commencement of each calendar quarter for each month in the relevant quarter. For the avoidance of doubt the quarters shall commence on 1st January, 1st April, 1st July and 1st October in each calendar year. For the first month in which the Start Date occurs, the Minimum Monthly Contract Quantities for that month shall be adjusted so as to take into account the remaining number of delivery days in that month.   6.3   Other than for the first contract year, not later than 15th October in a contract year prior to the contract year in which the deliveries are to take place, CanArgo shall provide the Ministry with a forecast of the Minimal Monthly Contract Quantity for each Month in the relevant contract year (“Forecast Quantity”).   6.4   The Forecast Quantity provided pursuant to Clause 6.2 above shall be provided in good faith by CanArgo but is for information purposes only and is non-binding nor shall it constitute a firm offer or commitment on the part of CanArgo to deliver such quantities.   6.5   The Ministry and CanArgo shall meet and the Ministry shall supply estimates of gas requirements on a regular basis which shall not be less than the Minimum Monthly Contract Quantities.   6.6   If in any month CanArgo fails to deliver 80% of the Minimum Monthly Contract Quantities, with the exception of the month in which the Start Date occurs the Ministry has the right to demand from CanArgo to pay the penalty for nondelivery of Natural Gas at the rate of the Contract Price (as defined in Clause 8.2 below) per thousand cubic metres and the Ministry “take or pay” obligation shall be reduced accordingly. If CanArgo does not deliver the Minimum Monthly Contract Quantities, the Ministry will pay for the Natural Gas which is actually delivered according to the Contract Price; 3 --------------------------------------------------------------------------------   6.7   If in any month the Ministry does not take all the gas subject to the take or pay provisions it shall pay for such Natural Gas in accordance with the Contract Price.   7   Guarantee   7.1   The Ministry shall deliver to CanArgo an irrevocable and unconditional bank guarantee issued by a first class international bank or the Bank of Georgia (if CanArgo deems the Bank of Georgia to be still acceptable to it at the time of execution of a gas sales contract) (in a form reasonably acceptable to CanArgo) in respect of the obligations of the Ministry (or the obligations of the third party purchaser selected by the Ministry as appropriate) to make payment. Such guarantee shall be a continuing guarantee and shall remain in full force and effect and shall be binding on the Ministry or any successor thereto until all amounts payable by the Ministry have been validly, finally and irrevocably paid in full.   8   Price   8.1   During the first contract year the contract price shall be US$ 55.00 (fifty five US Dollars) per thousand cubic metres of Natural Gas (hereinafter the “Base Price”).   8.2   After the first contract year in the period during which the gas sales contract entered into (largely on the terms of this MOU) is in full force and effect (“Contract Period”) the contract price shall be increased in accordance with the following escalators:       Years 2 and 3 + 2% per annum       Year 4 +3% per annum       Years 5,6,7,8 and 9 + 5% per annum       Year 10 + 6% per annum       to give the following applicable prices in US$  per thousand cubic metres of Natural Gas (“Contract Price”)                           Contract Year   Contract Price (US$)   Contract Year   Contract Price (US$) 1     55.00       8       71.64   2     56.10       9       75.22   3     57.22       10       79.74   4     58.54                   5     61.89                   6     64.98                   7     68.23                       For the Years following Year 10, the parties will agree an annual escalation factor based on the annual change in the price of heavy fuel oil in the European Union, as quoted by Platt’s 4 --------------------------------------------------------------------------------   or such other internationally recognized journal as is mutually agreed, with the Contract Price not being less than US $80 per thousand cubic metres. The escalation will be based on the following formula:     Contract Price in Year X = Contract Price in Year X-1 multiplied by the “Escalator”       The Escalator shall be equal to the (Price per metric tonne of heavy fuel oil in Year X) divided by (Price per metric tonne of heavy fuel oil in year X-1) with a mutually agreed multiplier in accordance with international norms       But the Contract Price shall be no less than US$ 80 per thousand cubic metres.       After Year 10, if CanArgo can sell its Natural Gas to a Third Party on an arms-length basis at a price in excess of the Contract Price plus 10% CanArgo would be free to do this without restriction if technically feasible.       Unless otherwise stated, all payments are deemed to be exclusive of Value Added Tax (“VAT”) and any other duty or tax payable in respect of the supply of Natural Gas. Where it is determined that VAT should be levied on the supplies of Natural Gas, VAT will be levied at the effective rate current in the territory of Georgia at the time of supply and shall be payable by the buyer to the seller in accordance with the tax legislation of Georgia.   9   Payment Terms   9.1   The Payment shall be established in accordance with the provisions of Clause 9.3 below and the Ministry shall pay or cause the Payment to be paid into CanArgo’s nominated bank account in funds having full value on that day without withhold, offset, counterclaim or deduction whatsoever.   9.2   In relation to Natural Gas sold CanArgo shall on or before the tenth business day of each month during the Contract Period and on or before the tenth business day following the termination date of this MOU, render an invoice for the Natural Gas delivered during the preceding month or, as the case may be, in the period from the conclusion of the preceding month up to the termination date.   9.3   Each monthly invoice shall include the following items hereunder in respect of the month to which it relates:   (a)   the quantity of Natural Gas delivered on each day as set out in the Acceptance Act;     (b)   the price payable per thousand cubic metres of Natural Gas calculated as noted in Clause 8 above;     (c)   the total combined price payable in US$ for Natural Gas delivered in the relevant month (“Payment”);     The Payment will be due by the 21st of the month in which the invoice was issued (the “Due Date”).   9.4   Where CanArgo accepts that any invoice contains a manifest error, it shall withdraw that invoice and issue a corrected invoice in substitution. Where any sum (or part thereof) due under this MOU is the subject of a bona-fide dispute, then such sum shall be paid in full in accordance with the provisions set out above, notwithstanding such dispute. The Party 5 --------------------------------------------------------------------------------       disputing the payment shall give written notice to the other Party of the dispute and provide reasons for disputing the amount owed.   9.5   Within ten (10) Days of settlement of the dispute, the amount of any under-payment or over-payment as appropriate shall be paid by the Ministry or CanArgo, as appropriate together with interest at the rate of LIBOR plus 5 (five) percent per annum, in the case of an overpayment, from the date of its receipt to the date of repayment and, in the case of an underpayment, from the due date for payment to the actual date of payment.   9.6   If sums invoiced under this MOU, or any portion thereof, are not received by the party to whom they are owed (the “Receiving Party”) on or before the due date and or Settlement Date, then the Receiving Party shall, as soon as reasonably possible after such due date and or settlement date, notify the party owing such amount (the “Owing Party”) in writing that sums due, or any portion thereof, have not been so received (a “Notice of Non-Payment”).   9.7   Where payments, which are not the subject of such a notice or which are the subject of such a notice but are subsequently adjudicated not to have been the subject of a bona fide dispute, are not made on the settlement date, interest shall be payable from the Settlement Date until the date such payment is made, at LIBOR plus 3 (three) percent per annum.   9.8   Each party shall have reasonable access to the others books and records to verify the accuracy of any statement, charge or computation made pursuant to this MOU provided the other party gives consent, such consent not to be unreasonably withheld or delayed.   9.9   Neither party may challenge the terms of an invoice submitted by CanArgo in accordance with the provisions of this MOU following the expiry of a twelve (12) month period commencing on the date that such invoice is received by the Ministry.   9.10   All sums payable under this MOU shall be paid free and clear of any deductions, withholdings, set-offs or counterclaims, save only as may be required by law or expressly provided for herein.   10   Force Majeure   10.1   Under this MOU, force majeure shall mean a circumstance which is irresistible or beyond the reasonable control of any Party or any other hindrance to any Party’s performance not due to its fault or negligence (“Force Majeure”).   10.2   The Parties shall be entitled, except where otherwise specified in this MOU and subject to the provisions below, to claim relief by reason of Force Majeure under this MOU in respect of any failure to perform their obligations hereunder to the extent that such failure was caused by Force Majeure.   10.3   Without prejudice to any other provision of this MOU limiting or restricting the liability of any Party and subject as specifically provided elsewhere in the gas sales agreement this MOU, a Party failing to fulfill all or any of its obligations hereunder by reason of any circumstance or event of Force Majeure shall, provided that such Party acts in accordance with the following provisions of this Clause be relieved of liability to the other Party in respect of such failure whilst and to the extent that such circumstances or event continues and shall forthwith upon, or as soon as reasonably practicable after, the cessation of such circumstance or event resume performance of each and all such obligations. For the avoidance of doubt a Party shall not be relieved of an obligation to pay by reason of any circumstance or event of Force Majeure. 6 --------------------------------------------------------------------------------   10.4   Force Majeure relief shall be available only to the extent that the Party seeking to rely on Force Majeure has taken and continues to take all reasonable steps which may be taken at reasonable cost to rectify the problem concerned as soon as reasonably possible. A Party affected by Force Majeure will resume full performance of its obligations hereunder as soon as reasonably possible.   11   Dispute Resolution   (a)   Any dispute, controversy or claim arising out of or in connection with this MOU, including any question regarding its existence, validity, interpretation, breach or termination, shall be finally resolved by arbitration under the Rules of the London Court of International Arbitration (“LCIA”), which Rules are deemed to be incorporated by reference into this clause.     (b)   The tribunal shall consist of a sole Arbitrator.     (c)   The seat and venue of the arbitration shall be London, England.     (d)   The language of the arbitration shall be English. 11.2   The parties hereby agree to waive any right of appeal to any court of law or other judicial authority insofar as such waiver may be validly made.   12   Consequential Loss   12.1   Neither party shall be liable for any consequential loss caused to the other.   13   Termination   13.1   Unless terminated earlier, this MOU will terminate on the earlier of 1) the termination of the relevant licence applying to the Licence Area of Natural Gas; or 2) CanArgo determining, following the appraisal and development process as defined in clause 1.1, that it is not technically or commercially possible to deliver gas on the terms set out in this MOU.   13.2   If any sum due including interest determined is not paid within 5 (five) days of the receipt by the Owing Party of a Notice of Non-Payment then the Receiving Party may cease to make available or suspend the receipt of Natural Gas under this MOU on giving a further 5 (five) Days written notice. Provided always that if prior to the expiry of such notice period the sums in question including interest determined hereunder have been paid by the Owing Party, the aforementioned notice shall be deemed withdrawn and the full performance of the terms of this MOU by all Parties shall resume forthwith on the date of such payment.   13.3   Each Party shall be entitled to terminate this MOU forthwith upon the giving of notice to the other Party, in the event of an act of insolvency in respect of the other Party.   13.4   CanArgo shall be entitled to terminate this MOU forthwith following the expiry of 30 (thirty) Days written notice to the Ministry, which notice CanArgo may give if the Ministry has failed to pay any amount properly due from the Ministry to CanArgo under this MOU and such amount has remained unpaid for 7 (seven) banking days following its due date for payment, provided that such notice shall be deemed withdrawn and ineffective if, prior to its 7 --------------------------------------------------------------------------------       expiry, such amount together with interest due thereon is paid in full to CanArgo by the Ministry. SECTION III MISCELLANEOUS 14.1   Binding Effect. The provisions of this MOU shall create a binding legal obligation on the Parties. Besides, it is considered that the agreements between the Parties to this MOU are reached on the major principles the performance of which shall be provided by the respective Parties in accordance with the requirements of the Georgian legislation (including Oil & Gas Law).   14.2   Reference to the Parties. Unless otherwise defined herein, the reference to the Parties covers the reference to the Party and/or Parties that in accordance with the Oil & Gas Law, other laws and applicable acts shall perform their obligations.   14.3   Meeting the Terms. All of the appropriate Parties shall ensure and exert all the necessary measures, and execute all such agreements, amendments, waivers, consents and other necessary documents, that are necessary or desirable to complete the transactions set forth in Sections I and II.       In order to ensure the prompt and uninterrupted completion of the above mentioned transactions, the respective Parties agree that they will, to the utmost extent permitted under the applicable laws, waive any notification, filing and other similar requirements set forth in the Oil & Gas Law.   14.4   This MOU shall become effective (the “Effective Date”) when CanArgo receives written confirmation, or other such documentation, from the State Agency for Oil and Gas Regulation in Georgia, or such other competent body (addressed to CanArgo and to CanArgo’s satisfaction), confirming to CanArgo that CanArgo’s rights under the Production Sharing Contract dated 20th February 1998 covering the Nazvrevi and Blocks XId and XIII (“PSC”) remain in full force and effect and that on drilling a well on the Kumisi structure in the Licence Area CanArgo will have satisfied all requirements of the Preliminary Work Programme attached as Annex D to the PSC.   14.5   Governing Law. This MOU shall be governed by and construed in accordance with Georgian Law.   14.6   Severability. If any part of this MOU is held to be invalid or unenforceable, the remaining parts of this MOU shall not thereby be affected and shall be given full effect without regard to the invalid portions. It is further agreed that the Parties shall make all reasonable endeavours to agree as far as possible that invalid terms shall be amended or replaced by valid terms with similar effect in order to maintain the purpose and continuity of the MOU.   14.7   Entire Agreement. This MOU constitutes the entire agreement and understanding between the Parties hereto; the provisions of the MOU supersede any and all prior negotiations, undertakings or agreements relating to the same subject matter. 8 --------------------------------------------------------------------------------   14.8   Successors and Assigns. This MOU shall be binding upon, and inure to the benefit of, the Parties and their respective successors and permitted assigns; provided that no Party may assign any of its respective rights or obligations under this MOU without the other Parties’ prior written consent.   14.9   Amendments; Modifications. This MOU may not be amended, modified or supplemented and no waivers or consents to departures from the provisions hereof may be given, unless consented to in writing by all of the Parties hereto.   14.10   Counterparts. This MOU is executed in counterparts, with the Ministry and CanArgo executing separately and each of which shall be deemed an original but all of which shall constitute one and the same MOU.   14.11   Language. This MOU is executed in English and Georgian languages both having equal effect. 9 --------------------------------------------------------------------------------   In witness whereof, the Parties have signed the present Memorandum of Understanding in New York, USA this 2nd day of March 2006. SIGNATURES:           For the MINISTRY OF ENERGY               by:                             Name: Nika Gilauri     Position: Minister               For CANARGO (NAZVREVI) LTD               by:                             Name: Dr David Robson     Position: Managing Director     10

  Exhibit 10.1 AGREEMENT           This Agreement is entered into by and between SafeNet, Inc. (“SafeNet”) and Anthony Caputo (“Mr. Caputo”), the Chairman and Chief Executive Officer of SafeNet.           In consideration of the covenants undertaken and contained herein, the adequacy of which is herein acknowledged, the parties agree as follows:           1. In accordance with Section 8 of the Employment Agreement between Mr. Caputo and SafeNet, dated December 12, 2001, as amended by agreement dated as of September 1, 2004 (“Employment Agreement”), Mr. Caputo hereby gives notice of the resignation of his employment under the Employment Agreement, with such resignation to become effective on December 31, 2006 (the “Separation Date”). In addition, Mr. Caputo hereby resigns effective October 17, 2006 from any and all positions he holds with SafeNet, including his position as Chief Executive Officer and a member of the Board of Directors of SafeNet and his positions as an officer, employee or Board member of any SafeNet subsidiary.           2. Mr. Caputo will remain as an employee of SafeNet for the purpose of working with SafeNet on the management transition and other significant issues during the period referred to in Section 1. In consideration for the services rendered under the Employment Agreement and this Agreement, through the Separation Date SafeNet will pay to Mr. Caputo his base salary (including the ten percent increase in such salary due starting as of July 1, 2006), certain existing benefits provided to executive officers of the Company (i.e., family medical, dental, disability and life insurance, participation in pension and retirement plans, and use of his automobile, cell phone, Blackberry, office space and secretarial support) and accrued vacation, and shall continue to fund the variable life insurance policy provided for in Section 5 of the Employment Agreement through the Separation Date. Except as otherwise provided herein or in the Employment Agreement, as of the Separation Date Mr. Caputo will be eligible to receive the benefits provided to former employees of SafeNet under SafeNet’s employee benefit plans, in accordance with the terms and conditions of each such plan.           3. Both Mr. Caputo and SafeNet reserve all rights under the Employment Agreement. For the avoidance of doubt, Mr. Caputo retains the right to contest any position taken or determination made by the Personnel Committee, the Special Committee, or the Board pursuant to the Employment Agreement or this Agreement, including but not limited to Paragraph 5, 6, and 10 of this Agreement.           4. SafeNet will not consider Mr. Caputo’s resignation to be a resignation within the meaning of Section 9(b) of the Employment Agreement or, except as expressly provided herein, for any other purpose relating to the Employment Agreement.   --------------------------------------------------------------------------------             5. The Personnel Committee of the SafeNet Board of Directors will advise Mr. Caputo by March 29, 2007 (“Decision Date”) whether it has determined that Mr. Caputo should be treated as having been terminated for Cause under the Employment Agreement, or whether the Committee agrees with Mr. Caputo’s position that he has resigned his employment for a Good Reason. None of the periods of time set forth in the Employment Agreement within which events must occur or actions must be taken shall begin to run until the Personnel Committee determines whether Mr. Caputo should be considered to have been terminated for Cause, or whether Mr. Caputo has resigned his employment for a Good Reason (provided that any required six-month waiting period under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), shall begin to run as of the Separation Date). SafeNet and Mr. Caputo agree that no statutes of limitations on any claims Mr. Caputo or SafeNet may have under the Employment Agreement shall begin to run until the Decision Date or such earlier date as the Personnel Committee determines whether Mr. Caputo should be considered to have been terminated for Cause or whether Mr. Caputo has resigned his employment for a Good Reason. Subject to the foregoing sentences of this Section 5, if the Personnel Committee determines that Mr. Caputo should be considered to have been terminated for Cause or whether Mr. Caputo has resigned his employment for a Good Reason, that determination will have the same effect under the Employment Agreement as if the termination or resignation was effective as of the date of this Agreement. If the Personnel Committee fails to make a decision by the Decision Date, Mr. Caputo will be deemed to have resigned his employment for Good Reason as of the date of this Agreement with entitlement to all the rights the benefits provided for in the Employment Agreement. Notwithstanding anything in this paragraph, none of the payments or benefits conferred to Mr. Caputo under Paragraphs 2, 7 or 9 of this Agreement may be revoked by the Company as a result of the decision of the Personnel Committee described herein.           6. Any payments or benefits to which Mr. Caputo may be due under Sections 5 and 9 (other than the health benefits described in paragraph 7 of this Agreement) of the Employment Agreement shall not become due until ten days after the Personnel Committee determines whether Mr. Caputo should be considered to have been terminated for Cause or whether Mr. Caputo resigned his employment for a Good Reason, and shall be made at that time in accordance with the terms of the Employment Agreement; provided, however, that the foregoing shall not cause Mr. Caputo to forfeit or waive any claim for benefits he may have under a plan, policy or arrangement that is an “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended. If the Personnel Committee fails to make a decision by the Decision Date, Mr. Caputo will receive the payments and benefits he is entitled to by April 8, 2007. The Company agrees to provide Mr. Caputo with written notice within three business days of the release of its restated financial statements for fiscal years 2000 through 2005 and first quarter 2006 specifying which options, if any, he received where the Company has changed the measurement date such that there is an accounting charge. With regard to any such options for which the Company has changed the measurement date such that there is an accounting charge, Mr. Caputo agrees that he will not exercise such options for SafeNet stock until the Decision Date or such earlier date on which the Personnel Committee reaches its decision under Paragraph 5 of this Agreement. With regard to any options for which the Company has not changed the measurement date such that there is an accounting charge, Mr. Caputo may exercise his   --------------------------------------------------------------------------------   rights under those options and may participate in a Change of Control or other sale of business transaction in the same manner as other option holders. SafeNet further agrees that the foregoing restrictions on exercise of Mr. Caputo’s stock options shall not apply to those options granted on January 1, 2000 and shall not restrict in any way Mr. Caputo’s ability to purchase, sell, tender or exchange his SafeNet stock. In addition to any amount that may become payable to Mr. Caputo under Sections 5 and 9 of his Employment Agreement, as soon as practicable following the Separation Date (subject to any required six-month waiting period under Section 409A of the Code), the Company shall make a lump sum payment to Mr. Caputo equal to $27,000.00.           7. Mr. Caputo and his family shall continue to receive the medical benefits SafeNet currently provides him until December 31, 2006 at no cost to them (other than normal co-payment amounts). Thereafter, following Mr. Caputo’s termination of employment on December 31, 2006, Mr. Caputo and his family shall be entitled to receive COBRA benefits for the maximum continuation period (as applicable to Mr. Caputo (for a period of eighteen months) and each covered member of his family (for a period of thirty-three months)) permitted under COBRA under the medical plans maintained by the Company. With regard to the Company’s fully-insured plans (Execucare and dental), all premiums for such COBRA coverage shall be paid by the Company. With regard to the Company’s self-insured plan (Blue Cross/Blue Shield), all premiums for such COBRA coverage shall be paid by Mr. Caputo.           8. Mr. Caputo and SafeNet waive their right to notice of any termination for Cause under Section 8(a) of the Employment Agreement.           9. Mr. Caputo’s resignation under this Agreement will not affect any advancement of fees or indemnification to which he otherwise would be entitled under applicable state law, under the Articles of Incorporation and Bylaws of SafeNet, or under the Employment Agreement. SafeNet also agrees that all such rights to indemnification shall apply to any claims relating to or arising from his employment from the date of this Agreement through the Separation Date.           10. Mr. Caputo and the Special Committee of the SafeNet Board of Directors and the Personnel Committee will attempt to reach agreement on any amount to be paid or repaid to SafeNet by Mr. Caputo, and any amount to be paid by SafeNet to Mr. Caputo, in connection with the Employment Agreement and with respect to any actual or potential claims arising out of the process of granting stock options at SafeNet (and the accounting for and disclosure of such stock option grants) or any other claims asserted against Mr. Caputo in stockholder derivative actions, and any actual or potential claims Mr. Caputo may assert against SafeNet. Nothing in this Agreement shall preclude Mr. Caputo from asserting any claim for benefits or compensation under his Employment Agreement, including any claim for incentive compensation or stock options under Section 5 of his Employment Agreement. To the extent that any agreement between the parties under this paragraph contains a release of claims asserted against Mr. Caputo in pending stockholder derivative actions, the parties agree that such a release shall be subject to approval by the appropriate courts in which any stockholder derivative actions are then pending.   --------------------------------------------------------------------------------             11. SafeNet and Mr. Caputo agree that Mr. Caputo shall be provided a reasonable opportunity to review and comment on SafeNet’s proposed public statement relating to this Agreement and his separation from SafeNet, and that SafeNet will consider, in good faith, any comments made by Mr. Caputo; provided that SafeNet shall not be obligated to make any changes to such public statement based on any comments received from Mr. Caputo.           12. Nothing contained in this Agreement shall be deemed as an admission by any party.           13. This Agreement shall not be deemed to constitute a waiver of any rights, claims or defenses of any of the parties to this Agreement or the Employment Agreement, all of which are expressly preserved. Preserved rights and claims include, but are not limited to, SafeNet’s ability to assert termination for Cause and Mr. Caputo’s ability to assert termination without Cause or resignation for Good Reason; provided, however, that Mr. Caputo agrees that any assertion of termination without Cause or resignation for Good Reason shall be effective as of the date of this Agreement, and that such assertion shall not be made before the Decision Date. This Agreement does not constitute a release of any claims that either party may have against the other.           14. This Agreement can be modified only in writing signed by the parties. The Agreement shall constitute the entire understanding between the parties concerning the subject matter of this Agreement and supersedes and replaces all prior negotiations, proposed agreements, and agreements, written or oral, relating to this subject.           15. Both parties agree to cooperate with the other in taking the actions required under the terms of this Agreement, including without limitation those described in paragraphs 1 and 10 hereof.           16. Mr. Caputo and SafeNet shall cooperate in good faith to amend this Agreement and the Employment Agreement, in each case, in the least restrictive manner necessary in order for the payments and benefits to which Mr. Caputo is entitled to comply with Section 409A the Code. Any such amendments shall be designed so as to preserve the economic benefits intended to be provided to Mr. Caputo.           17. Both parties have cooperated in the drafting and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against any party on the basis that the party was the drafter.           18. This Agreement may be executed in one or more counterparts, each of which shall constitute an original, and all of which shall constitute one instrument.           19. In entering this Agreement, the parties represent that they have relied upon the advice of their attorneys, who are attorneys of their own choice, and that the terms of this Agreement have been completely read and explained to them by their attorneys, and that those terms are fully understood and voluntarily accepted by them.   --------------------------------------------------------------------------------             20. To the fullest extent allowed by law, any controversy or claim arising out of or relating to this Agreement shall be settled by binding and non-appealable arbitration conducted in Wilmington, Delaware, or such other place as the parties hereto agree, by a three-member arbitration tribunal acting in accordance with the Commercial Arbitration rules of the American Arbitration Association. To the extent anything in this Agreement conflicts with any arbitration procedures required by applicable law, the arbitration procedures required by applicable law shall govern. The proceedings before the tribunal shall be maintained in the strictest confidence by the parties and the tribunal, subject only to legal requirements of disclosure. The arbitration tribunal shall issue a written award that sets forth the essential findings and conclusions on which the award is based. The tribunal shall have the authority to award any relief authorized by law in connection with the asserted claims or disputes. The arbitration award shall be enforceable before any court of competent jurisdiction, and shall be subject to correction, confirmation or vacatur only on the grounds provided by applicable law, including the Federal Arbitration Act. Nothing in this paragraph shall be construed to apply to or affect pending stockholder derivative actions brought on behalf of the Company.           21. SafeNet and Mr. Caputo will share equally the arbitrator’s fees and any other expense of conducting the arbitration, except that if the arbitrators determine that Mr. Caputo had a “good faith basis to bring the arbitration,” then SafeNet will pay the first $25,000 of tribunal’s fees and any other expense of conducting the arbitration. Each party will pay its own attorney’s fees and costs. Any final decision of the arbitrator so chosen may be enforced by a court of competent jurisdiction.           Each of the undersigned have read the foregoing Agreement, and accepts and agrees to the provisions it contains and hereby executes it voluntarily with full understanding of its consequences. SafeNet, Inc.           By:   /s/  Walter Straub     Title:     Personnel Committee Chairman               Dated:                   By:   /s/  Andrew E. Clark     Title:     Special Committee Chairman               Dated:   October 17, 2006               Anthony Caputo               By:   /s/  Anthony Caputo                         Dated:   October 17, 2006      

  EXHIBIT 10.1 FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT      This Amendment, dated as of July 10, 2006, is made by and between Kitty Hawk, Inc., a Delaware corporation (the “Borrower”), and Wells Fargo Bank, National Association, acting through its Wells Fargo Business Credit operating division, successor by merger to Wells Fargo Business Credit, Inc., a Minnesota corporation (the “Lender”). Recitals      The Borrower and the Lender are parties to a Credit and Security Agreement dated as of March 22, 2004, a First Amendment to Credit and Security Agreement dated as of January 31, 2005, a Second Amendment to Credit and Security Agreement dated as of November 10, 2005, and a Third Amendment to Credit and Security Agreement dated as of March 15, 2006 (as amended, the “Credit Agreement”). Capitalized terms used in this Amendment that are defined in the Credit Agreement shall have the same meanings as defined therein, unless otherwise defined herein.      The Borrower has requested that certain amendments be made to the Credit Agreement, which the Lender is willing to make pursuant to the terms and conditions set forth herein.      NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, it is agreed as follows:      1. Financial Covenants.   (a) Section 6.2(a) of the Credit Agreement is amended and restated in its entirety to read as follows:      (a) Minimum Year-to-Date Net Income. The Borrower will achieve as at the end of each period described below, Pre-Tax Net Income of not less than the amount set forth below:      (i) From January 1, through the fiscal quarter ending March 31, 2006, Pre-Tax Net Income of not less than a loss of $9,000,000 (i.e., the Borrower may not lose more than $9,000,000 as at the end of such period); and      (ii) From January 1, through the fiscal quarter ending June 30, 2006, Pre-Tax Net Income of not less than a loss of $17,500,000 (i.e., the Borrower may not lose more than $17,500,000 as at the end of such period); and      (iii) From January 1, through the fiscal quarter ending September 30, 2006, Pre-Tax Net Income of not less than a loss of $14,500,000 (i.e., the Borrower may not lose more than $14,500,000 as at the end of such period); and      (iv) From January 1, through the fiscal quarter ending December 31, 2006, Pre-Tax Net Income of not less than a loss of $6,500,000 (i.e., the Borrower may not lose more than $6,500,000 as at the end of such period).   --------------------------------------------------------------------------------           2. Reporting Requirements. Section 6.1(s) of the Credit Agreement is amended by amending the last sentence at the end thereof to read as follows: “Borrower will deliver to the Lender sales credits and collections reports no less than weekly.”         3. No Other Changes. Except as explicitly amended by this Amendment, all of the terms and conditions of the Credit Agreement shall remain in full force and effect and shall apply to any advance or letter of credit thereunder.         4. Amendment Fee. The Borrower shall pay to the Lender a fully earned, non-refundable fee in the amount of $5,000 in consideration of the Lender’s execution and delivery of this Amendment. The Lender is authorized to make an Advance to pay the Amendment Fee.         5. Conditions Precedent. This Amendment shall be effective when the Lender shall have received an executed original hereof, together with each of the following, each in substance and form acceptable to the Lender in its sole discretion:      (a) The Acknowledgment and Agreement of Guarantors set forth at the end of this Amendment, duly executed by each Guarantor.      (b) A Certificate of Authority of the Borrower certifying as to such matters as the Lender may reasonably request.         6. Representations and Warranties. The Borrower hereby represents and warrants to the Lender as follows:      (a) The Borrower has all requisite power and authority to execute this Amendment and to perform all of its obligations hereunder, and this Amendment has been duly executed and delivered by the Borrower and constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms.      (b) The execution, delivery and performance by the Borrower of this Amendment have been duly authorized by all necessary corporate action and do not (i) require any authorization, consent or approval by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any provision of any law, rule or regulation or of any order, writ, injunction or decree presently in effect, having applicability to the Borrower, or the articles of incorporation or by-laws of the Borrower, or (iii) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which the Borrower is a party or by which it or its properties may be bound or affected.      (c) All of the representations and warranties contained in Article V of the Credit Agreement are correct on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date.         7. References. All references in the Credit Agreement to “this Agreement” shall be deemed to refer to the Credit Agreement as amended hereby; and any and all references in the Security Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as amended hereby. - 2 - --------------------------------------------------------------------------------        8. No Waiver. The execution of this Amendment and acceptance of any documents related hereto shall not be deemed to be a waiver of any Default or Event of Default under the Credit Agreement or breach, default or event of default under any Security Document or other document held by the Lender, whether or not known to the Lender and whether or not existing on the date of this Amendment.      9. Release. The Borrower, and each Guarantor by signing the Acknowledgment and Agreement of Guarantors set forth below, each hereby absolutely and unconditionally releases and forever discharges the Lender, and any and all participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents and employees of any of the foregoing (each individually, an “Indemnitee” and collectively, “Indemnitees”), from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which the Borrower or such Guarantor has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown, excluding, however, any actions taken by an Indemnitee in bad faith, any willful misconduct by an Indemnitee and gross negligence of Indemnitees.      10. Costs and Expenses. The Borrower hereby reaffirms its agreement under the Credit Agreement to pay or reimburse the Lender on demand for all costs and expenses incurred by the Lender in connection with the Loan Documents, including without limitation all reasonable fees and disbursements of legal counsel. Without limiting the generality of the foregoing, the Borrower specifically agrees to pay all fees and disbursements of counsel to the Lender for the services performed by such counsel in connection with the preparation of this Amendment and the documents and instruments incidental hereto. The Borrower hereby agrees that the Lender may, at any time or from time to time in its sole discretion and without further authorization by the Borrower, make a loan to the Borrower under the Credit Agreement, or apply the proceeds of any loan, for the purpose of paying any such fees, disbursements, costs and expenses and the fee required under Paragraph 3 hereof.      11. Miscellaneous. This Amendment and the Acknowledgment and Agreement of Guarantors may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and all of which counterparts, taken together, shall constitute one and the same instrument. - 3 - --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.                       WELLS FARGO BANK, NATIONAL       KITTY HAWK, INC.     ASSOCIATION, acting through its Wells                 Fargo Business Credit operating division,                 successor by merger to Wells Fargo Business                 Credit, Inc.                                       By   /s/ Joseph M. Sammons       By   /s/ James R. Kupferschmid                               Joseph M. Sammons           Name: James R. Kupferschmid         Its Vice President           Title: VP and CFO     - 4 - --------------------------------------------------------------------------------   ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS      The undersigned, each a guarantor of the indebtedness of Kitty Hawk, Inc. (the “Borrower”) to Wells Fargo Business Credit, Inc. (the “Lender”) pursuant to a separate Guaranty each dated as of March 22, 2004 (each, a “Guaranty”), hereby (i) acknowledges receipt of the foregoing Amendment; (ii) consents to the terms (including without limitation the release set forth in Paragraph 9 of the Amendment) and execution thereof; (iii) reaffirms its obligations to the Lender pursuant to the terms of its Guaranty; and (iv) acknowledges that the Lender may amend, restate, extend, renew or otherwise modify the Credit Agreement and any indebtedness or agreement of the Borrower, or enter into any agreement or extend additional or other credit accommodations, without notifying or obtaining the consent of the undersigned and without impairing the liability of the undersigned under its Guaranty for all of the Borrower’s present and future indebtedness to the Lender.                   KITTY HAWK AIRCARGO, INC.                       By   /s/ James R. Kupferschmid                           Name: James R. Kupferschmid             Title: CFO & Treasurer                       KITTY HAWK CARGO, INC.                       By   /s/ James R. Kupferschmid                           Name: James R. Kupferschmid             Title: CFO & Treasurer     - 5 -

   Exhibit 10.7   EXHIBIT A   THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE “RESTRICTED SECURITIES” AS THAT TERM IS DEFINED IN RULE 144 UNDER THE SECURITIES ACT. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE REASONABLE SATISFACTION OF COUNSEL TO THE ISSUER.   $__________________, 2006   CONVERTIBLE SECURED PROMISSORY NOTE   1.  Obligation. For value received, VENDINGDATA CORPORATION, a Nevada corporation (“Maker”), promises to pay to __________________ ("Holder"), the Principal Amount and Interest (both as defined below) in the manner and upon the terms and conditions set forth herein.   2.  Principal Amount and Interest. The principal amount (“Principal Amount”) of this Note is [RATABLE PORTION OF $1,500,000] __________ Dollars ($_______). This Note shall bear interest on the unpaid Principal Amount at the rate of eight percent (8%) per annum (“Interest”). The accrued and unpaid Interest shall be paid in semi-annual installments, commencing on June 1, 2006 and continuing thereafter on each June 1st and December 1st until all amounts owing under this Note are converted as described in Section 3 below. Payments of the Interest shall be made in lawful money of the United States of America, at _______________________ or at such other place as Holder may designate in writing.   3.  Conversion of Principal Amount. On the earlier of (i) the date that Maker receives approval from its stockholders for such conversion, or (ii) August 31, 2006 (the first such to occur being the “Conversion Date”), the Principal Amount shall be converted into a total of _______________ shares of the Maker’s common stock, par value $0.001 per share (“Common Stock”), valued at $_________ per share. Conversion will occur immediately on the Conversion Date without any need for further action on the part of Holder. Certificates representing the shares of Common Stock issued pursuant to this Section 3 will be subject to the terms and conditions set forth in that certain Amended and Restated Put Agreement dated of even date herewith by and between Maker and Holder (the “Put Agreement”), except that the six month lock-up period on such shares shall start on May 2, 2006 and not on the date of issuance.   4.  Security Agreement. This Note is being delivered pursuant to that certain Letter Agreement dated May 2, 2006 between Maker and Holder. Maker’s obligations under this Note are subject to a security interest in the assets of Maker, pursuant to that certain Security Agreement (“Security Agreement”) dated May 1, 2006 entered into between Maker and Holder. 1 --------------------------------------------------------------------------------   5.  Events of Default. The following shall each constitute an “Event of Default” under this Note: (i) default in the payment when due of any amount required hereunder, (ii) default in Maker’s performance of any other obligation hereunder or under the Security Agreement, the Put Agreement, or the Registration Rights Agreement that remains uncured ten days after receipt of written notice of default, or (iii) any of the following events of bankruptcy or insolvency: (A) the Maker shall file a voluntary bankruptcy or reorganization petition under the provisions of the Federal Bankruptcy Act, any other bankruptcy or insolvency law or any other similar statute applicable to the Maker (“Bankruptcy Laws”), (B) the Maker shall consent to the filing of any bankruptcy or reorganization petition against it under any Bankruptcy Law, (C) the Maker shall make an assignment for the benefit of his creditors, (D) the Maker shall admit in writing its inability to pay its debts generally as they become due, (E) the Maker shall consent to the appointment of a receiver, trustee, or by the order of a court of competent jurisdiction, a receiver, liquidator or trustee of the Maker or of any substantial part of its property shall not have been discharged within a period of sixty (60) days, (F) by decree of such a court, the Maker shall be adjudicated bankrupt or insolvent or any substantial part of the property of the Maker shall have been sequestered and such degree shall have continued undischarged and unstayed for a period of sixty (60) days after the entry thereof, or (G) an involuntary bankruptcy reorganization petition pursuant to any Bankruptcy Law shall be filed against the Maker (and, in the case of any such petition filed pursuant to any provision of a statute which requires the approval of such petition by a court, shall be approved by such a court) and shall not be dismissed within sixty (60) days after such filing.   6.  Acceleration Upon Event of Default or Change of Control. Upon the occurrence of an Event of Default specified in Section 5 above or a Change in Control (as defined below), the entire Principal Amount and all Interest shall, at the option of Holder evidenced by a written notice to Maker, become immediately due and payable, without further presentment, notice or demand for payment. For purposes of this Note, a “Change in Control” shall mean the occurrence of any of the following events: (i) a sale of all or substantially all of the assets of the Maker; (ii) a liquidation or dissolution of the Maker; (iii) a merger or consolidation in which the Maker is not the surviving corporation, unless the stockholders of the Maker immediately prior to such consolidation, merger or reorganization, own more than 50% of the Maker’s voting power immediately after such; (iv) a reverse merger in which the Maker is the surviving corporation but the shares of Common Stock and securities convertible into Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; (v) any consolidation or merger of the Maker, or any other corporate reorganization, in which the stockholders of the Maker immediately prior to such consolidation, merger or reorganization, own less than 50% of the Maker’s voting power immediately after such consolidation, merger or reorganization; or (vi) any Person other than James Crabbe becomes the owner, directly or indirectly, of securities of the Maker representing more than 50% of the combined voting power of the Maker’s then outstanding securities; provided, however, that a “Change in Control” shall not include any transaction the sole purpose of which is to change the state of the Maker’s incorporation.    7.  Expenses of Enforcement. Maker agrees to pay all reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees, as a court of competent jurisdiction shall award, which Holder shall incur in connection with any legal action or legal proceeding commenced for the collection of this Note or the exercise, preservation or enforcement of Holder’s rights and remedies thereunder. 2 --------------------------------------------------------------------------------   8.  Cumulative Rights and Remedies. All rights and remedies of Holder under this Note shall be cumulative and not alternative and shall be in addition to all rights and remedies available to Holder under applicable law.   9.  Governing Law. This Note shall be governed by and interpreted and construed in accordance with the laws of the State of Nevada.   10.  Notices and Demands. Any notice or demand which by any provision of this Note is required or provided to be given shall be in writing and shall be deemed to have been given or served sufficiently for all purposes if sent as provided in the Put Agreement or through a nationally-recognized overnight courier and simultaneously transmitted by facsimile to the following respective addresses and facsimile telephone numbers:                  Maker: VendingData Corporation.   6830 Spencer Street   Las Vegas, NV 89119   Attention: Mark R. Newburg,   President and Chief Executive Officer   Facsimile: (702) 733-7197   or at any other address designated by Maker to Holder in writing.   Holder:           Attention:   Facsimile:   or at any other address designated by Holder to Maker in writing, and if to an assignee of Holder, to its address as designated to Maker in writing.   IN WITNESS WHEREOF, Maker has caused this Note to be executed and delivered at Las Vegas, Nevada effective as of the day and year first above written.   VENDINGDATA CORPORATION By:    ____________________________      Mark R. Newburg, President and Chief Executive Officer 3 --------------------------------------------------------------------------------

ASSET PURCHASE AGREEMENT BY AND AMONG ODIMO INCORPORATED WORLDOFWATCHES.COM, INC. AND ILS HOLDINGS, LLC 1 Dated as of December 1, 2006 TABLE OF CONTENTS Page       Article 1. THE TRANSACTION       1.1 1.2 1.3 1.4 1.5   Purchased Assets Excluded Assets Assumed Liabilities Retained Liabilities Non-Assignable Assets       Article 2. CONSIDERATION FOR TRANSFER       2.1 2.2   Purchase Price and Payment, Allocation of Purchase Price       Article 3. CLOSING AND CLOSING DELIVERIES       3.1 3.2 3.3   Closing; Time and Place Deliveries by Seller Deliveries by Purchaser and Seller       Article 4. REPRESENTATIONS AND WARRANTIES OF SELLER       4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20 4.21 4.22 4.23 4.24 4.25 4.26 4.27 4.28 4.29 4.30 4.31 4.32   Organization, Good Standing, Qualification Authority; Binding Nature of Agreements No Conflicts; Required Consents Subsidiaries Financial Statements Absence of Undisclosed Liabilities Absence of Changes Transactions with Affiliates Material Contracts Insurance Title; Sufficiency; Condition of Assets Reserved Intellectual Property Suppliers and Affiliates Seller Products and Product Warranty Reserved Employees Compliance with Laws SEC Documents, Financial Statements Governmental Approvals Proceedings and Orders Reserved Taxes Customers and Privacy Brokers Solvency Board Approval Third Party Consents No Other Agreement Product Liability Promotions Full Disclosure       Article 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER       5.1 5.2 5.3 5.4   Organization and Good Standing Authority; Binding Nature of Agreements No Conflicts; Required Consents Brokers       Article 6. post closing COVENANTS       6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 6.14   WOW Intellectual Property. Cooperation Limited Power of Attorney Return of Purchased Assets Records and Documents Insurance and Warranty Claims Director and Officer Insurance Dissolution; Restricted Payments Bulk Sales Indemnification Payment of Seller Supplier Accounts Payable Publicity Cooperation on Tax Matters. Transition Assistance Ice.com Covenants       Article 7. INDEMNIFICATION       7.1 7.2 7.3 7.4 7.5 7.6   Survival of Representations and Warranties Indemnification by Seller Procedures for Indemnification Remedies Cumulative Maximum Amounts Liability of Purchaser       Article 8. MISCELLANEOUS PROVISIONS       8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10 8.11 8.12   Expenses Notices Interpretation Counterparts; Facsimile Delivery Entire Agreement; Nonassignability; Parties in Interest Severability Governing Law; Jurisdiction and Venue; Waiver of Jury Trial Rules of Construction Incorporation of Appendices, Exhibits and Schedules Assignment Attorneys’ Fees Further Assurances APPENDICES, EXHIBITS AND SCHEDULES       Appendix 1   Certain Definitions       Exhibits             Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E   Persons to Enter into Confidentiality and Non-Competition Agreements Form of Bill of Sale for Purchased Assets Form of Assignment and Assumption Agreement Form of Intellectual Property Assignment Form of Support Agreement       Schedules   Description 1.1(a) 1.1(b) 1.1(c) 1.1(d) 1.1(e) 2.2 4.1 4.3 4.4 4.5(c) 4.7 4.9 4.10 4.11 4.14(a) 4.14(b) 4.14(f) 4.15 4.18 4.21 4.23 4.24 4.28 4.31 6.3   Machinery and Equipment Intellectual Property/Telephone Numbers Transferred Contracts Governmental Approvals Books and Records Allocation of Purchase Price. Organization, Good Standing, Qualification No Conflicts; Required Consents Subsidiaries Financial Statements Absence of Changes Material Contracts Insurance Title; Sufficiency; Condition of Assets Suppliers Contract Affiliates Supplier Accounts Payable Seller Products and Product Warranty Compliance with Laws Proceedings and Orders Taxes Customers and Privacy Third Party Consents Promotions Limited Power of Attorney – Proceedings 2 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the “Agreement”) is made and entered into this 1st day of December, 2006, by and between ILS Holdings, LLC, a Florida limited liability company (the “Purchaser”) and Odimo Incorporated, a Delaware corporation (“Odimo”), and Worldofwatches.com, Inc., a Delaware corporation (collectively referred to herein together with Odimo, as “Seller”). Certain capitalized terms used in this Agreement are defined on Appendix A hereto. RECITALS WHEREAS, Seller owns the website www.worldofwatches.com (the “WOW Website” together with certain data, software, furniture and equipment used in connection with the operation of the WOW Website and on the WOW Website is engaged in the online retail sale of watches (the “WOW Business”); WHEREAS, Purchaser desires to purchase from Seller and Seller desires to sell to Purchaser certain of the assets of, or related to, the WOW Business on the terms and conditions set forth herein; and WHEREAS, concurrent with and as a condition to the execution of this Agreement, the individuals listed on Exhibit A will enter into confidentiality and non-competition agreements in favor of Purchaser. NOW, THEREFORE, in consideration of the foregoing recitals and the mutual representations, warranties, covenants and promises contained herein, the adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: AGREEMENT ARTICLE 1. THE TRANSACTION 1.1 Purchased Assets. Subject to the terms and conditions of this Agreement, at the Closing, Seller hereby sells, transfers, conveys, assigns and delivers to Purchaser, and Purchaser hereby purchases from Seller, all of Seller’s right, title and interest in, to and under the following assets, properties, goodwill and rights of Seller used in the conduct of the WOW Business, free and clear of any Encumbrances (collectively, the “Purchased Assets”): (a) Machinery and Equipment. The machinery and equipment listed on Schedule 1.1(a) (the “Machinery and Equipment”); (b) Intellectual Property/Telephone Numbers. The WOW Intellectual Property and internet domain names, databases, telephone numbers and directory listings used by Seller primarily in the conduct of the WOW Business, as listed on Schedule 1.1(b); (c) Transferred Contracts. All rights of Seller under Contracts listed on Schedule 1.1(c) (the “Transferred Contracts”); (d) Governmental Approvals. All Governmental Approvals (and pending applications therefor), including the Governmental Approvals listed on Schedule 1.1(d); (e) Books and Records. True and correct copies of all books, files, papers, agreements, correspondence, databases, information systems, programs, documents, records and documentation thereof reasonably requested by Purchaser including without limitation, customer information and historical sale records stored as computer data bases, customer lists, price lists, files, sales correspondence and other records, marketing information and other records, sales literature and similar information related to the WOW Business, any of the Purchased Assets, or used in the conduct of the WOW Business, on whatever medium (the “Books and Records”), including but not limited to the information described on Schedule 1.1(e), which shall be provided in forms or formats as agreed to by Seller and Purchaser; (f) Goodwill. All goodwill related to the WOW Business including customer and supplier lists and the goodwill associated with the WOW Intellectual Property; it being understood that any goodwill of the business operated on the www.ashford.com website (the “Ashford Business”) shall remain the property of Seller, it being further understood that by way of example, to the extent both the WOW Business and the Ashford Business use the same supplier lists, then both Purchaser and Seller shall have the respective right to use such lists (which for the avoidance of doubt shall have both Purchaser’s and Seller’s respective right to sell or otherwise transfer such lists). (g) Accounts Receivable. Accounts receivable associated with sales and transactions entered into on the WOW Website after the Transfer Time; (h) Deposits and Advances. All performance and other bonds, security and other deposits, advances, advance payments, prepaid credits and deferred charges (the “Deposits and Advances”) associated with transactions entered into or orders placed on the WOW Website after the Transfer Time; (i) Rebates and Credits. All rights in, to and under claims for refunds, rebates or other discounts due from suppliers or vendors and rights to offset in respect thereof (the “Rebates and Credits”) associated with transactions entered into or orders placed with respect to the WOW Business after the Transfer Time; and (j) Corporate Packaging Materials. All stocks of shipping and packaging materials used or held for use in connection with the WOW Business (the “Corporate Packaging”), including all items of packaging, bags, boxes, wrapper and other material used in the WOW Business. 1.2 Excluded Assets. Other than as provided in Section 1.1, all other assets of Seller (the “Excluded Assets”) shall not be included in the Purchased Assets. The Excluded Assets shall include: (a) Cash. Cash, cash equivalents, merchant deposits in transit, deposits with credit card companies and marketable securities; (b) Accounts Receivable. Accounts receivable associated with sales and transactions entered into prior to the Transfer Time; (c) All Debt. Any intercompany or intracompany receivable cash balances between Seller and any of its Affiliates or between any of its Affiliates; (d) Inventory. All Inventory of Seller Products; (e) Corporate Documents. Corporate seals, certificates of incorporation, minute books, stock transfer records, or other records related to the corporate organization of Seller; (f) Insurance Policies. All insurance policies; (g) Deposits and Advances. Deposits and Advances associated with transactions entered into or orders placed prior to the Transfer Time; (h) Rebates and Credits. All rights in, to and under Rebates and Credits associated with transactions entered into or orders placed prior to the Transfer Time; (i) Claims. All claims, choses-in-action, rights in action, rights to tender claims or demands to Seller’s insurance companies, rights to any insurance proceeds, and other similar claims (the “Seller Claims”); and (j) Rights Under Certain Agreements. All rights under any Transaction Agreement. 1.3 Assumed Liabilities. Purchaser assumes no Liabilities of Seller, except at the Closing, Purchaser shall assume and agree to pay, discharge or perform, as appropriate, only to the extent and as provided in this Section 1.3, the following (collectively, the “Assumed Liabilities”): (a) the liabilities and obligations of Seller in respect of the Transferred Contracts only with respect to those Liabilities that arise thereunder from and after the Closing Date, with no Liabilities assumed for accrued or contingent obligations as of the Closing Date; and (b) the obligations of Seller to honor the discount coupons and promotions listed on Schedule 4.31 in accordance with their terms. For clarity, Purchaser shall not assume Liability for liabilities or obligations arising out of any breach (or alleged breach) by Seller of any provision of any agreement, Contract, commitment or lease, including, but not limited to, liabilities or obligations arising out of Seller’s failure (or alleged failure) to perform any agreement, Contract, commitment or lease in accordance with its terms prior to the Closing. 1.4 Retained Liabilities. Other than the Assumed Liabilities, Purchaser shall assume no liabilities and shall not be liable or responsible for any Liability of Seller, any direct or indirect subsidiary of Seller (each, a “Subsidiary”) or any Affiliate of Seller (collectively, the “Retained Liabilities”). Without limiting the foregoing, the Retained Liabilities shall include, and Purchaser shall not be obligated to assume, and does not assume, and hereby disclaims any of the following Liabilities of Seller, its Subsidiaries or its Affiliates: (a) Any Liability attributable to any assets, properties or Contracts that are not included in the Purchased Assets, except Liabilities attributable to Non-Assignable Assets, for which Seller and Purchaser have reached a mutually acceptable arrangement pursuant to Section 1.5(b); (b) Any Liability for breaches of any Transferred Contract on or prior to the Closing Date and for breaches of any other Transferred Contract or any Liability for payments or amounts due under any Contract on or prior to the Closing Date and for payments or amounts due under any other contract; (c) Any Liability to GSI Commerce, Inc. under the Asset Purchase Agreement by and between Seller and Ashford.com dated December 6, 2002 or any Liability to Ice.com, Inc. or Ice Diamond, LLC or their respective successors or assigns, under the Asset Purchase Agreement by and among Seller, Ice.com, Inc. and Ice Diamond, LLC, dated May 11, 2006 (the “Ice Agreement”), or any of the agreements entered into in connection therewith; (d) Any Liability for Taxes attributable to or imposed upon Seller or its Affiliates for any period, or attributable to or imposed upon the Purchased Assets on or prior to the Closing Date, including any Transfer Taxes; (e) Any Liability for or with respect to any loan, other indebtedness, or account payable, including any such Liabilities owed to Affiliates of Seller; (f) Any Liability arising from accidents, occurrences, misconduct, negligence, breach of fiduciary duty or statements made or omitted to be made (including libelous or defamatory statements) on or prior to the Closing Date, whether or not covered by workers’ compensation or other forms of insurance; (g) Any Liability arising as a result of any legal or equitable action or judicial or administrative proceeding initiated at any time, to the extent related to any action or omission on or prior to the Closing Date, including any Liability for (i) infringement or misappropriation of any Intellectual Property Rights or any other rights of any Person (including any right of privacy or publicity); (ii) breach of product warranties; (iii) injury, death, property damage or other losses arising with respect to or caused by Seller Products or the manufacturer or design thereof; or (iv) violations of any Legal Requirements (including federal and state securities laws); (h) Any Liability incurred in connection with the making or performance of this Agreement and the Transaction; (i) Any Liability incurred in connection with a violation of or arising under any environmental laws; (j) Any Liability for expenses and fees incurred by Seller incidental to the preparation of the Transaction Agreements, preparation or delivery of materials or information requested by Purchaser, and the consummation of the Transaction, including all broker, counsel and accounting fees and Transfer Taxes; (k) Any Liability arising out of transactions, commitments, infringements, acts or omissions not in the ordinary course of business; (l) Any Liability arising out of any Seller Benefit Plan or contract of insurance for employee group medical, dental or life insurance plans; (m) Any Liability for making payments of any kind to employees (including as a result of the Transaction, the termination of an employee by Seller, or other claims arising out of the terms of employment with Seller) or with respect to payroll taxes; (n) Any Legal Requirement applicable to Seller, the Purchased Assets or the Retained Liabilities on or prior to the Closing Date or any Liability for a violation of such a Legal Requirement; (o) Any Liability to any stockholders of Seller; (p) Any Liability for credit balances, credit memos and all other amounts due to dealers, distributors and customers; (q) Any Liability related to or arising from the acquisition of the WOW Business by Seller; (r) Any Liability associated with the Federal CAN-SPAM Act or violations of Seller’s privacy policies associated with collection, retention, use, transfer or sale of customer information; (s) Any costs or expenses associated with the contracts with MSN or NextJump set forth on Schedule 4.31 of the Seller Disclosure Schedule; (t) Any Liability arising out of or in connection with the sale of any decoded inventory by Seller; or (u) Any costs or expenses incurred in connection with shutting down, deinstalling and removing equipment not purchased by Purchaser and any costs or expenses associated with any Contracts not assumed by Purchaser hereunder. 1.5 Non-Assignable Assets. (a) Notwithstanding the foregoing, if any of the Transferred Contracts or other Purchased Assets are not assignable or transferable (each, a “Non-Assignable Asset”) without the consent of, or waiver by, a third party (each, an “Assignment Consent”), either as a result of the provisions thereof or applicable Legal Requirements, and any of such Assignment Consents have not been obtained by Seller on or prior to the date hereof, Purchaser may elect to either: (i) have Seller permanently retain the Non-Assignable Asset and all Liabilities relating thereto at the Closing; or (ii) have Seller continue its best efforts to obtain the Assignment Consents after Closing, and, in either case, this Agreement and the related instruments of transfer shall not constitute an assignment or transfer of such Non-Assignable Assets, and Purchaser shall not assume Seller’s rights or obligations under such Non-Assignable Asset (and such Non-Assignable Asset shall not be included in the Purchased Assets). If Purchaser elects item (ii) above, without limiting Seller’s obligations under Section 3.2(r), Seller shall use its best efforts to obtain all such Assignment Consents as soon as reasonably practicable after the Closing Date and thereafter assign to Purchaser such Non-Assignable Assets. Following any such assignment, such assets shall be deemed Purchased Assets for purposes of this Agreement. (b) After the Closing, Seller shall cooperate with Purchaser in any reasonable arrangement designed to provide Purchaser with all of the benefits of the Non-Assignable Assets as if the appropriate Assignment Consents had been obtained, including by establishing arrangements whereby Purchaser shall undertake the work necessary to perform under Transferred Contracts. ARTICLE 2. CONSIDERATION FOR TRANSFER 2.1 Purchase Price and Payment, (a) Purchased Asset Purchase Price. Subject to the terms of this Agreement, as full consideration for the sale, assignment, transfer and delivery of the Purchased Assets and the execution and delivery of the Transaction Agreements by Seller to Purchaser, Purchaser shall pay to Seller, at the Closing, a purchase price of $410,000 (the “Purchased Assets Purchase Price”) in exchange for the Purchased Assets, payable in immediately available funds by wire transfer. (b) Purchase Price Adjustments. If Purchaser makes any repairs, accepts any returns or grants any allowances from and after the Closing Date, in compliance with the return or warranty policy of Seller published by Seller on or prior to the Closing Date, relating to any product produced or sold by Seller on or prior to the Closing Date, Purchaser shall do so as agent of Seller without any liability to Seller or anyone else by so acting, and the costs associated with such returns, repairs or allowances shall be promptly reimbursed by Seller on the Purchase Price Adjustment Date. With respect to any return, the costs associated with such return to be credited to Purchaser shall be equal to the excess of (I) the sum of (a) the retail price to be credited to the customer plus (b) any merchant costs associated with crediting the customer, plus (c) any return shipping costs covered or reimbursed (together with (a) and (b) the “Full Retail Cost”) over (II) the Net Inventory Cost for the returned item. For purposes hereof, “Net Inventory Cost” for any returned item shall equal the “cost of goods sold” for that item. The costs of repairs shall be the actual out of pocket costs incurred by Purchaser in making such repair. In the event that Purchaser shall reasonably determine that any items returned are broken, damaged or unable to be sold as new (such items “Damaged Goods”), Seller shall indemnify Purchaser for the Full Retail Cost of such items and upon return of any Damaged Goods to Purchaser, Purchaser shall deliver the Damaged Goods to Seller at Seller’s expense. Notwithstanding anything contained herein or in any Transaction Agreement to the contrary, Seller shall be permitted through the date which is the 30th day following the Purchase Price Adjustment Date (as herein defined) to liquidate the Damaged Goods on Odimo’s Ebay clearance site, provided, that Seller shall not reference Purchaser, www.worldofwatches.com, or the WOW Business in connection with the liquidation of such Damaged Goods. Purchaser and Seller shall use their respective commercially reasonable best efforts to work together on repairs, returns and allowances for all items returned for credit, exchange or repairs. On or before the last day of each month following the Closing Date (or, if such date is not a Business Day, the first Business Day thereafter) (each such date, a “Purchase Price Adjustment Date”) continuing until 180 days following the Closing Date, Purchaser shall present Seller with a schedule of all returns, repairs and allowances that have been transacted by Purchaser hereunder during the immediately preceding month (the “Return and Repair Schedule”) and Seller shall reimburse Purchaser for any amount amounts owed to Purchaser under this Section 2.1(b). Notwithstanding the foregoing, Seller shall not be required to reimburse Purchaser for any amounts related to returns or warranty repairs of SWI watches. 2.2 Allocation of Purchase Price. The purchase price for the Purchased Assets shall be allocated as set forth in Schedule 2.2 attached hereto and made a part hereof, subject to the Purchase Price adjustment as described in Section 2.1(b) above. The parties hereto agree to follow such allocations for federal and state income tax purposes. ARTICLE 3. CLOSING AND CLOSING DELIVERIES 3.1 Closing; Time and Place. The closing of the purchase and sale provided for in this Agreement (the “Closing”) shall occur at the offices of Greenberg Traurig, P.A., 401 East Las Olas Boulevard, Suite 2000, Fort Lauderdale, Florida 33301 (or such other place as the parties may designate in writing) on the date of execution of this Agreement (the “Closing Date”). 3.2 Deliveries by Seller. On the Closing Date, Seller will take all reasonable steps necessary to place Purchaser in actual possession and operating control of the Purchased Assets and deliver the following items, duly executed by Seller as applicable, all of which shall be in a form and substance reasonably acceptable to Purchaser and Purchaser’s counsel: (a) Bill of Sale. Bill of Sale covering all of the applicable Purchased Assets, substantially in the form attached hereto as Exhibit B; (b) Assignment and Assumption Agreement. Assignment and Assumption Agreement covering the Transferred Contracts, substantially in the form attached hereto as Exhibit C. (c) Intellectual Property Assignment. Any and all documents necessary to properly record the assignment to Purchaser of all of Seller’s right, title and interest in and to the WOW Intellectual Property, including the intellectual property assignment, substantially in the form of Exhibit D attached hereto; (d) Other Conveyance Instruments. Such other specific instruments of sale, transfer, conveyance and assignment as Purchaser may request; (e) Reserved. (f) Support Agreements. Support Agreements covering at least 50% of the outstanding shares of capital stock of Seller, in substantially the form attached as Exhibit E. (g) Notice Letter to State of Delaware/Certificate of Amendment. Certificate of Amendments of Certificates of Incorporation of WORLDOFWATCHES.COM, Inc. as filed with the Delaware Secretary of State changing the name of WORLDOFWATCHES.COM, Inc. to Odimo Two Subsidiary, Inc. and a letter to the Secretary of State of the State of Delaware consenting to the use of the name WORLDOFWATCHES.COM by Purchaser or any of its Affiliates; (h) Transferred Contracts. Originals of all Transferred Contracts; (i) Request for Reconveyance of Deed of Trust; Payoff and Release Letters. Payoff and release letters from creditors of Seller together with UCC-3 termination statements with respect to any financing statements filed against any of the Purchased Assets, terminating all Encumbrances (including Tax liens) on any of the Purchased Assets; (j) Books and Records. The Books and Records, provided that Purchaser and Seller hereby agree that the customer records associated with the WOW Business shall continue to be made available to Purchaser for inspection on or prior to the Closing Date and provided further that an electronic copy of all customer records shall be provided to Purchaser in ASCII electronic format on a mobile hard drive on or prior to the date which is 30 days from the Closing Date; (k) Officer’s Certificate. A Certificate executed on behalf of Seller by its Chief Executive Officer, certifying that (i) all of the representations and warranties of Seller in this Agreement are true and correct in all material respects (considered collectively and individually) as of the date of this Agreement (or, to the extent such representations and warranties speak as of an earlier date, they shall be true and correct in all material respects as of such earlier date) and (ii) all of the representations and warranties of Seller in this Agreement that contain an express materiality qualification shall have been true and correct in all respects (considered collectively and individually) as of the date of this Agreement; (l) Secretary’s Certificate. A certificate of the Secretary of the Seller setting forth a copy of the resolutions adopted by the Board of Directors of Seller authorizing and approving the execution and delivery of the Agreement and the consummation of the transactions contemplated hereby; (m) Opinion of Seller’s Counsel. Opinion in form and substance acceptable to Purchaser. (n) Delaware Law Opinion. Opinion from Delaware counsel, in form and substance acceptable to Purchaser, confirming that Seller is not required under Delaware law to seek the approval of its shareholders in order to complete the Transaction; (o) Valuation. Copy of valuation from Capitalink, L.C. confirming the market value of the Purchased Assets. (p) Fairness Opinion. Copy of opinion from Capitalink, L.C. to Seller which confirms Capitalink’s view that as of the date of the opinion, the consideration to be received by Seller in connection with the sale of the Purchased Assets is fair, from a financial point of view, to the shareholders of Seller; (q) Certificates of Good Standing. A certificate from the Secretary of State of each of Delaware, Florida and each other jurisdiction where the WOW Business is conducted as to Seller’s good standing and payment of all applicable taxes; (r) Consents. All Assignment Consents and other Consents required (i) for the transfer of the WOW Business and the Purchased Assets; (ii) for the consummation of the Transaction; or (iii) to prevent a breach or termination of any Contract; (s) Non-Competition Agreements. Non-competition agreements in form and substance acceptable to Purchaser and its counsel with each of the persons listed on Exhibit B. (t) Termination of Licenses. To the extent there are any licenses, Contracts or rights that grant any subsidiary of the Seller the right to use the WOW Intellectual Property, such licenses, contracts and rights shall be terminated as of the Closing Date and Seller shall provide Purchaser executed copied of all termination agreements effecting such terminations. 3.3 Deliveries by Purchaser and Seller. At the Closing, Purchaser and Seller shall deliver such other certificates, instruments or documents required pursuant to the provisions of this Agreement or otherwise necessary or appropriate to transfer the Purchased Assets in accordance with the terms hereof and consummate the Transaction, and to vest in Purchaser and its successors and assigns full, complete, absolute, legal and equitable title to the Purchased Assets, free and clear of all Encumbrances, including such certificates, instruments and documents to be executed or delivered by Seller pursuant to Article 3 hereof. ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER Except as specifically set forth on Schedule 4 (the “Seller Disclosure Schedule”) attached to this Agreement (the parts of which are numbered to correspond to the individual Section numbers of this Article 4), Seller hereby represents and warrants (without limiting any other representations or warranties made by Seller in this Agreement or any other Transaction Agreement) to Purchaser as follows: 4.1 Organization, Good Standing, Qualification. Schedule 4.1 sets forth Seller’s jurisdiction of organization and each state or other jurisdiction in which Seller is qualified to do business. Seller (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (ii) is duly qualified to conduct business and is in corporate and tax good standing under the laws of each jurisdiction in which the nature of its business (including the WOW Business), the operation of its assets (including the Purchased Assets) or the ownership or leasing of its properties (including the Personal Property) requires such qualification; and (iii) has full power and authority required to own, lease and operate its assets and to carry on its business (including the WOW Business) as now being conducted and as presently proposed to be conducted. 4.2 Authority; Binding Nature of Agreements. Seller has all requisite power and authority to execute and deliver this Agreement and all other Transaction Agreements to which it is a party and to carry out the provisions of this Agreement and the other Transaction Agreements. The execution, delivery and performance by Seller of this Agreement and the other Transaction Agreements have been approved by all requisite action on the part of Seller. This Agreement has been duly and validly executed and delivered by Seller. Each of this Agreement and the other Transaction Agreements constitutes, or upon execution and delivery, will constitute, the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms. 4.3 No Conflicts; Required Consents. Except as set forth on Schedule 4.3, the execution, delivery and performance of this Agreement or any other Transaction Agreement by Seller does not and will not (with or without notice or lapse of time): (a) conflict with, violate or result in any breach of (i) any of the provisions of Seller’s Certificate of Incorporation or bylaws; (ii) any resolutions adopted by the Board of Directors or stockholders of Seller; (iii) any of the terms or requirements of any Governmental Approval held by Seller or any of its employees or that otherwise relates to the WOW Business or any of the Purchased Assets; or (iv) any provision of any Material Contract; (b) give any Governmental Authority or other Person the right to (i) challenge the Transaction; (ii) exercise any remedy or obtain any relief under any Legal Requirement or any Order to which Seller, or any of the Purchased Assets, is subject; (iii) declare a default of, exercise any remedy under, accelerate the performance of, cancel, terminate, modify or receive any payment under any Material Contract; or (iv) revoke, suspend or modify any Governmental Approval; (c) cause Seller or Purchaser to become subject to, or to become liable for the payment of, any Tax, or cause any of the Purchased Assets to be reassessed or revalued by any Tax Authority or other Governmental Authority; (d) result in the imposition or creation of any Encumbrance upon or with respect to any of the Purchased Assets; or (e) require any Seller to obtain any Consent or make or deliver any filing or notice to any Person or to a Governmental Authority. 4.4 Subsidiaries. To the extent the Purchased Assets are owned by any subsidiary of Odimo or any other Entity, or any portion of the WOW Business is conducted by any subsidiary of Odimo or any other Entity, such Purchased Assets are set forth on Schedule 4.4 next to the subsidiary that is the owner thereof. 4.5 Financial Statements. (a) Seller has previously delivered to Purchaser the following financial statements (collectively, the “Financial Statements”): (i) the audited consolidated balance sheets, and the related statements of operations, changes in stockholders’ equity, and cash flows, of Seller as of and for the fiscal years ended December 31, 2005, 2004 and 2003, together with the notes thereto; and (ii) the unaudited consolidated balance sheets, and the related unaudited statements of operations, changes in stockholder’s equity, and cash flows, of Odimo Incorporated (the “Interim Balance Sheet”) as of and for the period ended September 30, 2006 (the “Interim Balance Sheet Date”). (b) All of the Financial Statements (i) are true, accurate and complete in all respects; (ii) are consistent with the Books and Records of Seller; (iii) present fairly and accurately the financial condition of Seller as of the respective dates thereof and the results of operations, changes in stockholder’s equity and cash flows of Seller for the periods covered thereby; and (iv) have been prepared in accordance with GAAP, applied on a consistent basis throughout the periods covered; provided, however, that the Interim Balance Sheet is subject to year-end adjustments consistent with past practice (which will not be material individually or in the aggregate) and do not contain all of the footnotes required by GAAP. All reserves established by Seller and set forth in the Interim Balance Sheet are adequate for the purposes for which they were established. (c) Schedule 4.5(c) sets forth an accurate, correct and complete breakdown and aging of each of Seller’s accounts payable (including to all of its suppliers) as of the Interim Balance Sheet Date. 4.6 Absence of Undisclosed Liabilities. Neither Seller nor the WOW Business has any Liabilities other than (i) those set forth in the Interim Balance Sheet; (ii) those incurred in the ordinary course of business and not required to be set forth in the Interim Balance Sheet under GAAP; (iii) those incurred in the ordinary course of business since the date of the Interim Balance Sheet; and (iv) those incurred in connection with the execution of any of the Transaction Agreements. 4.7 Absence of Changes. Except as set forth on Schedule 4.7, Since the Interim Balance Sheet Date, (i) Seller has conducted the WOW Business in the ordinary course of business and (ii) no event or circumstance has occurred that could reasonably have a Material Adverse Effect on Seller or the WOW Business. 4.8 Transactions with Affiliates. Except as set forth in the Financial Statements, no Affiliate (a) has any direct or indirect interest in any asset (including the Purchased Assets), property or other right used in the conduct of or otherwise related to the WOW Business; or (b) is a party to any Material Contract or has had any direct or indirect interest in, any Material Contract, transaction or business dealing of any nature involving Seller. 4.9 Material Contracts. (a) Schedule 4.9 sets forth an accurate, correct and complete list of all Contracts associated with the WOW Business or the Purchased Assets to which any of the descriptions set forth below may apply (the “Material Contracts”): (i) Personal Property Leases, Insurance, Contracts affecting any WOW Intellectual Property or Seller’s information systems or software, Contracts with employees or contractors, Seller Benefit Plans and Governmental Approvals; (ii) Any Contract for capital expenditures or for the purchase of goods or services in excess of $5,000; (iii) Any Contract obligating Seller to sell or deliver any product or service by or through the WOW Business at a price which does not cover the cost (including labor, materials and production overhead) plus the customary profit margin associated with such product or service; (iv) Any Contract involving financing or borrowing of money, or evidencing indebtedness, any liability for borrowed money, any obligation for the deferred purchase price of property in excess of $5,000 or guaranteeing in any way any Contract in connection with any Person; (v) Any joint venture, partnership, cooperative arrangement or any other Contract involving a sharing of profits; (vi) Any advertising or marketing Contract not terminable without payment or penalty on five days notice; (vii) Any Contract with respect to the discharge, storage or removal of effluent, waste or pollutants; (viii) Any Contract affecting any right, title or interest in or to real property; (ix) Any Contract relating to any license or royalty arrangement; (x) Any power of attorney, proxy or similar instrument; (xi) The Charter, Bylaws and other organizational or constitutive documents of Seller and any Contract among stockholders of Seller; (xii) Any Contract for the manufacture, service or maintenance of any product of the WOW Business; (xiii) Any Contract for the purchase or sale of any assets other than in the ordinary course of business or for the option or preferential rights to purchase or sell any assets; (xiv) Any requirement or output Contract; (xv) Any Contract to indemnify any Person or to share in or contribute to the liability of any Person; (xvi) Any Contract for the purchase or sale of foreign currency or otherwise involving foreign exchange transactions; (xvii) Any Contract containing covenants not to compete in any line of business or with any Person in any geographical area; (xviii) Any Contract related to the acquisition of a business or the equity of any other Entity; (xix) Any other Contract which (i) provides for payment or performance by either party thereto having an aggregate value of $5,000 or more; (ii) is not terminable without payment or penalty on five (5) days (or less) notice; or (iii) is between, inter alia, an Affiliate and Seller; (xx) Any other Contract that involves future payments, performance of services or delivery of goods or materials to or by Seller of an aggregate amount or value in excess of $5,000, on an annual basis, or that otherwise is material to the WOW Business or prospects of Seller (xxi) Any Contract which is material to the WOW Business; and (xxii) Any proposed arrangement of a type that, if entered into, would be a Contract described in any of (i) through (xxi) above. (b) Seller has delivered to Purchaser accurate, correct and complete copies of all Material Contracts (or written summaries of the material terms thereof, if not in writing), including all amendments, supplements, modifications and waivers thereof. All nonmaterial contracts of Seller do not, in the aggregate, represent a material portion of the Liabilities of Seller. (c) Each Material Contract is currently valid and in full force and effect, and is enforceable by Seller in accordance with its terms. (d) Seller is not in default, and no party has notified Seller that it is in default, under any Contract. No event has occurred, and no circumstance or condition exists, that might (with or without notice or lapse of time) (a) result in a violation or breach of any of the provisions of any Material Contract; (b) give any Person the right to declare a default or exercise any remedy under any Material Contract; (c) give any Person the right to accelerate the maturity or performance of any Material Contract or to cancel, terminate or modify any Material Contract; or (d) otherwise have a Material Adverse Effect on Seller in connection with any Material Contract; and (e) Seller has not waived any of its rights under any Material Contract. (f) Each Person against which Seller has or may acquire any rights under any Material Contract is (i) Solvent and (ii) able to satisfy such Person’s material obligations and liabilities to Seller. (g) The performance of the Transferred Contracts will not result in any violation of or failure by Seller to comply with any Legal Requirement. (h) The Material Contracts constitute all of the Contracts necessary to enable Seller to conduct the WOW Business in the manner in which such WOW Business is currently being conducted and in the manner in which such WOW Business is proposed to be conducted. 4.10 Insurance. The Schedule 4.10 sets forth an accurate and complete list of all insurance policies, self-insurance arrangements and fidelity bonds, currently in effect, that insure the WOW Business and/or the Purchased Assets (collectively, the “Insurance Policies”). Seller has delivered to Purchaser true, correct and complete copies of all Insurance Policies. Each Insurance Policy is valid, binding, and in full force and effect. Seller is not in breach of any Insurance Policy, and no event has occurred which, with notice or the lapse of time, would constitute such a breach, or permit termination, modification, or acceleration, of any Insurance Policy. Seller has not received any notice of cancellation or non-renewal of any Insurance Policy. The consummation of the Transaction will not cause a breach, termination, modification, or acceleration of any Insurance Policy. There is no claim under any Insurance Policy that has been improperly filed or as to which any insurer has questioned, disputed or denied liability. Seller has not received any notice of, nor does Seller have any Knowledge of any facts that might result in, a material increase in the premium for any Insurance Policy. All sales of products by the WOW Business prior to the closing date are covered under the Insurance Policies. 4.11 Title; Sufficiency; Condition of Assets. (a) Seller has good and marketable title to, is the exclusive legal and equitable owner of, and has the unrestricted power and right to sell, assign and deliver the Purchased Assets. The Purchased Assets are free and clear of all Encumbrances of any kind or nature, except (a) restrictions imposed in any Governmental Approval and (b) Encumbrances disclosed on Schedule 4.11 which are being removed and released concurrently with the Closing on the date thereof. Upon Closing, Purchaser will acquire exclusive, good and marketable title or license to (as the case may be) the Purchased Assets and no restrictions will exist on Purchaser’s right to resell, license or sublicense any of the Purchased Assets or engage in the WOW Business. (b) Except for such inventory as may be necessary to operate the WOW Business, the Purchased Assets include all the assets necessary to permit Purchaser to conduct the WOW Business after the Closing in a manner substantially equivalent to the manner as it is being conducted on the date of this Agreement in compliance with all Legal Requirements. (c) All Purchased Assets are (i) in good operating condition and repair, ordinary wear and tear excepted; (ii) suitable and adequate for continued use in the manner in which they are presently being used; (iii) adequate to meet all present and reasonably anticipated future requirements of the WOW Business; and (iv) free of defects (latent and patent). 4.12 Reserved. 4.13 Intellectual Property. (a) Schedule 1.1(b) lists all WOW Intellectual Property, specifying in each case whether such WOW Intellectual Property is owned or controlled by or for, licensed to, or otherwise held by or for the benefit of Seller, including all Registered Intellectual Property Rights owned by, filed in the name of or applied for by Seller and used in the WOW Business (the “WOW Registered Intellectual Property Rights”). (b) Each item of WOW Intellectual Property (i) is valid, subsisting and in full force and effect, (ii) has not been abandoned or passed into the public domain and (iii) is free and clear of any Encumbrances. (c) The WOW Intellectual Property constitutes all the Intellectual Property Rights used in and/or necessary to the conduct of the WOW Business as it is currently conducted, and as it is currently planned or contemplated to be conducted by Seller prior to the Closing and by Purchaser following the Closing, including the design, development, manufacture, use, import and sale of the Seller Products (including those currently under development). (d) Each item of WOW Intellectual Property either (i) is exclusively owned by Seller and was written and created solely by employees of Seller acting within the scope of their employment or by third parties, all of which employees and third parties have validly and irrevocably assigned all of their rights, including Intellectual Property Rights therein, to Seller, and no third party owns or has any rights to any such WOW Intellectual Property, or (ii) is duly and validly licensed to Seller for use in the manner currently used by Seller in the conduct of the WOW Business and, as it is currently planned or contemplated to be used by Seller in the conduct of the WOW Business prior to the Closing and by Purchaser following the Closing. (e) In each case in which Seller has acquired any Intellectual Property Rights from any Person, Seller has obtained a valid and enforceable assignment sufficient to irrevocably transfer all rights in such Intellectual Property Rights (including the right to seek past and future damages with respect thereto) to Seller. No Person who has licensed Intellectual Property Rights to Seller has ownership rights or license rights to improvements made by Seller in such Intellectual Property Rights. Seller has not transferred ownership of, or granted any exclusive license of or right to use, or authorized the retention of any exclusive rights to use or joint ownership of, any Intellectual Property Rights that is or was WOW Intellectual Property to any Person. (f) There are no facts, circumstances or information that (i) would render any WOW Intellectual Property invalid or unenforceable, (ii) would adversely affect any pending application for any WOW Registered Intellectual Property Right, or (iii) would adversely affect or impede the ability of Seller to use any WOW Intellectual Property in the conduct of the WOW Business as it is currently conducted or as it is currently planned or contemplated to be conducted by Seller prior to Closing or by Purchaser following the Closing. Seller has not misrepresented, or failed to disclose, and has no Knowledge of any misrepresentation or failure to disclose, any fact or circumstances in any application for any WOW Registered Intellectual Property Right that would constitute fraud or a misrepresentation with respect to such application or that would otherwise affect the validity or enforceability of any WOW Registered Intellectual Property Right. (g) All necessary registration, maintenance and renewal fees in connection with each item of WOW Registered Intellectual Property Rights have been paid and all necessary documents and certificates in connection with such WOW Registered Intellectual Property Rights have been filed with the relevant patent, copyright, trademark, domain name registries or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such WOW Registered Intellectual Property Rights. There are no actions that must be taken by Seller within one hundred twenty (120) days following the Closing Date, including the payment of any registration, maintenance or renewal fees or the filing of any responses to office actions, documents, applications or certificates for the purposes of obtaining, maintaining, perfecting, preserving or renewing any WOW Registered Intellectual Property Rights. To the maximum extent provided for by, and in accordance with, applicable laws and regulations or registration requirements, Seller has recorded in a timely manner each such assignment of a WOW Registered Intellectual Property Right assigned to Seller with the relevant governmental authority and domain name registries, including without limitation the United States Patent and Trademark Office (the “PTO”), the U.S. Copyright Office or their respective counterparts in any relevant foreign jurisdiction, as the case may be. (h) Seller has taken all necessary action to maintain and protect (i) the WOW Intellectual Property, and (ii) the secrecy, confidentiality, value and Seller’s rights in the Confidential Information and Trade Secrets of Seller and those provided by any Person to Seller, including by having and enforcing a policy requiring all current and former employees, consultants and contractors of Seller to execute appropriate confidentiality and assignment agreements. All copies thereof shall be delivered to Purchaser at Closing. Seller has no Knowledge of any violation or unauthorized disclosure of any Trade Secret or Confidential Information related to the WOW Business, the Purchased Assets, or obligations of confidentiality with respect to such. Only the individuals named in the Seller Disclosure Schedule, which describes their relationship with Seller, have had access to such Trade Secrets and Confidential Information, and each such individual has signed a confidentiality agreement with respect thereto. (i) The operation of the WOW Business as it is currently conducted, or as it is currently planned or contemplated to be conducted by Seller prior to the Closing, including but not limited to the design, development, use, import, branding, advertising, promotion, marketing, manufacture and sale of the Seller Products (including any currently under development), does not and will not, and will not when operated by Purchaser substantially in the same manner following the Closing, infringe or misappropriate any Intellectual Property Rights of any Person, violate any right of any Person (including any right to privacy or publicity), defame or libel any Person or constitute unfair competition or trade practices under the laws of any jurisdiction, and Seller has not received notice from any Person claiming that such operation or any Seller Product (including any currently under development) infringes or misappropriates any Intellectual Property Rights of any Person (including any right of privacy or publicity), or defames or libels any Person or constitutes unfair competition or trade practices under the laws of any jurisdiction (nor does Seller have Knowledge of any basis therefor). (j) To Seller’s Knowledge, no Person is violating, infringing or misappropriating any WOW Intellectual Property Right. (k) There are no Proceedings before any Governmental Authority (including before the PTO) anywhere in the world related to any of the WOW Intellectual Property, including any WOW Registered Intellectual Property Rights. (l) No WOW Intellectual Property or Seller Product is subject to any Proceeding or any outstanding decree, order, judgment, office action or settlement agreement or stipulation that restricts in any manner the use, transfer or licensing thereof by Seller or that may affect the validity, use or enforceability of such WOW Intellectual Property or Seller Product. (m) Schedule 1.1(c) lists all Transferred Contracts affecting any WOW Intellectual Property Rights. Seller is not in breach of, nor has Seller failed to perform under, any such Transferred Contracts and, to Seller’s Knowledge, no other party to any such Transferred Contracts, is in breach thereof or has failed to perform thereunder. (n) To the extent not listed on Schedule 1.1(c), the Seller Disclosure Schedule lists all Transferred Contracts under which Seller has agreed to, or assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any obligation or liability, or provide a right of rescission, with respect to the infringement or misappropriation by Seller or such other person of the WOW Intellectual Property Rights of any Person other than Seller. (o) There is no Material Contract affecting any WOW Intellectual Property under which there is any dispute regarding the scope of such Material Contract, or performance under such Material Contract, including with respect to any payments to be made or received by Seller thereunder. (p) All WOW Intellectual Property will be fully transferable, alienable or licensable by Purchaser without restriction and without payment of any kind to any third party. The consummation of the Transaction as contemplated hereby will not result in any loss of, or the diminishment in value of, any WOW Intellectual Property or the right to use any WOW Intellectual Property. (q) Neither this Agreement nor the Transaction, including the assignment to Purchaser, by operation of law or otherwise, of any Transferred Contracts will result in (i) Purchaser granting to any third party any right to, or with respect to, any WOW Intellectual Property Right owned by, or licensed to, Purchaser; (ii) Purchaser being bound by, or subject to, any non-compete or other restriction on the operation or scope of its businesses, including the WOW Business; or (iii) Purchaser being obligated to pay any royalties or other amounts to any third party. (r) There are no licenses, Contracts or rights that grant any subsidiary of the Seller the right to use any WOW Intellectual Property. 4.14 Suppliers and Affiliates. (a) Suppliers. All Contracts with suppliers of the WOW Business were entered into by or on behalf of Seller and were entered into in the ordinary course of business for usual quantities and at normal prices. Schedule 4.14(a) sets forth an accurate, correct and complete: (i) list of all suppliers of the WOW Business since the WOW Business was acquired by Seller, including the list of all Suppliers of the WOW Business at the time of such acquisition; (ii) breakdown of the amounts paid to each supplier of the WOW Business that received more than $100,000 from Seller (on an annualized basis) for each of the fiscal year ended December 31, 2005, and the nine month period ended September 30, 2006; and (iii) list of all sole source suppliers of the WOW Business. (b) Contract Affiliates. Schedule 4.14(b) sets forth a true, accurate and complete list of all Contract Affiliates of the WOW Business. (c) Seller has not entered into any Contract under which Seller is restricted from selling, licensing or otherwise distributing any Seller Products to any class of customers, in any geographic area, during any period of time or in any segment of the market. There is no purchase commitment which provides that any supplier will be the exclusive supplier of Seller or distributor. There is no purchase commitment requiring Seller to purchase the entire output of a supplier. (d) Seller has not received any notice or other communication, has not received any other information indicating, and otherwise has no Knowledge, that any current customer, supplier or distributor identified in the Seller Disclosure Schedule may cease dealing with Seller, may otherwise materially reduce the volume of business transacted by such Person with Seller or otherwise is materially dissatisfied with the service Seller provides such Person. Seller has no reason to believe that any such Person will cease to do business with Purchaser after, or as a result of, consummation of the Transaction, or that such Person is threatened with bankruptcy or insolvency. Seller has no Knowledge of any fact, condition or event which may, by itself or in the aggregate, adversely affect its relationship with any such Person. Since January 1, 2006, there has been no cancellation of backlogged orders regarding the WOW Business in excess of the average rate of cancellation prior to such date. (e) Neither Seller nor any of its officers or employees has directly or indirectly given or agreed to give any rebate, gift or similar benefit to any customer, supplier, distributor, broker, governmental employee or other Person, who was, is or may be in a position to help or hinder the WOW Business (or assist in connection with any actual or proposed transaction) which could subject Seller (or Purchaser after consummation of the Transaction) to any damage or penalty in any civil, criminal or governmental litigation or proceeding or which would have a Material Adverse Effect on Seller (or Purchaser after consummation of the Transaction). (f) Schedule 4.14(f) sets for a complete list of all amounts owed to suppliers of the WOW Business as of the Closing Date and the terms of payment with respect to all amounts owed. Seller has reviewed and verified as correct all amounts owed on Schedule 4.14(f) (the “Supplier Accounts Payable”). 4.15 Seller Products and Product Warranty. All products manufactured, processed, distributed, shipped or sold by Seller in the context of operation of the WOW Business and any services rendered by Seller in the context of operation of the WOW Business have been in conformity with all applicable contractual commitments and all expressed or implied warranties. To Seller’s knowledge, no liability exists or will arise for repair, replacement or damage in connection with such sales or deliveries, in excess of the reserve therefor on the Interim Balance Sheet. Schedule 4.15 sets forth an accurate, correct and complete statement of all written warranties, warranty policies, service and maintenance agreements of the WOW Business. No products heretofore manufactured, processed, distributed, sold, delivered or leased by Seller in the context of operation of the WOW Business are now subject to any guarantee, written warranty, claim for product liability, or patent or other indemnity. All warranties are in conformity with the labeling and other requirements of the Magnuson-Moss Warranty Act and other applicable laws. The Seller Disclosure Schedule sets forth an accurate, correct and complete list and summary description of all service or maintenance agreements under which Seller is currently obligated, indicating the terms of such agreement and any amounts paid or payable thereunder. The product warranty and return experience for the year ended December 31, 2005 and the nine months ended September 30, 2006 is set forth in the Seller Disclosure Schedule. The product warranty reserves on Seller’s Financial Statements and the Interim Balance Sheet were prepared in accordance with GAAP and are adequate in light of the circumstances of which Seller is aware. 4.16 Reserved. 4.17 Employees. Nothing contained in any of the Seller’s employee benefit plans or agreements will obligate Purchaser to provide any benefits to employees, former employees or beneficiaries of employees or former employees, or to make any contributions to any plans from and after the Closing. Seller has not represented to any of its employees than any of such employees will be offered employment by Purchaser. 4.18 Compliance with Laws. (a) Except as set forth on Schedule 4.18, Seller is, and at all times since January 1, 2003 has been, in compliance in all material respects, with each Legal Requirement that is applicable to Seller or any of Seller’s properties, assets (including the Purchased Assets), operations or businesses (including the WOW Business), and no event has occurred, and no condition or circumstance exists, that might (with or without notice or lapse of time) constitute, or result directly or indirectly in, a default under, a breach or violation of, or a failure comply with, any such Legal Requirement. Seller has not received any notice from any third party regarding any actual, alleged or potential violation of any Legal Requirement. Seller has provided to Purchaser true and correct copies of all legal opinions received by Seller related to the sale of decoded inventory. (b) To Seller’s knowledge, no Governmental Authority has proposed or is considering any Legal Requirement that may affect Seller, Seller’s properties, assets (including the Purchased Assets), operations or businesses (including the WOW Business), or Seller’s rights thereto. 4.19 SEC Documents, Financial Statements. (a) Seller has provided to Purchaser a true and complete copy of each statement, report, registration statement (with the prospectus in the form filed pursuant to Rule 424(b) of the Securities Act of 1933, as amended (the “Securities Act”)), definitive proxy statement, and other filings filed with the SEC by Seller since February 16, 2005 (collectively, the “Seller SEC Documents”). In addition, Seller has provided to Purchaser complete copies of all exhibits to the Seller SEC Documents filed prior to the date hereof. All documents required to be filed as exhibits to the Seller SEC Documents have been so filed. As of their respective filing dates, the Seller SEC Documents complied as to form in all material respects with the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Securities Act and each of the Seller SEC Documents was timely filed and did not contain any untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, except to the extent corrected, supplemented or superseded by a subsequently filed Seller SEC Document. To the Seller’s knowledge, as of the date hereof, none of the Seller SEC Documents is subject to ongoing SEC review or outstanding SEC comment. (b) The financial statements of Seller, including the notes thereto, included in the Seller SEC Documents (the “Seller Financial Statements”) and the audited balance sheet of Seller, dated as of December 31, 2005 (the “Seller Balance Sheet Date”) (i) were complete and correct as of their respective dates, (ii) complied as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto as of their respective dates; (iii) have been prepared in accordance with GAAP applied on a basis consistent throughout the periods indicated and consistent with each other (except as may be indicated in the notes thereto or, in the case of unaudited statements, included in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q of the SEC); and (iv) fairly present the consolidated financial condition and results of operations of Seller as of the respective dates and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal, recurring year-end adjustments). There has been no change in Seller accounting policies except as described in the notes to the Seller Financial Statements. The Seller does not intend to correct or restate, and there is not any basis to restate, any of the Seller Financial Statements. 4.20 Governmental Approvals. (a) Seller has all Governmental Approvals that are necessary or appropriate in connection with Seller’s ownership and use of its properties or assets (including the Purchased Assets) or Seller’s operation of its businesses (including the WOW Business). Seller has made all filings with, and given all notifications to, all Governmental Authorities as required by all applicable Legal Requirements. Schedule 1.1(d) contains an accurate, correct and complete list and summary description of each such Governmental Approval, filing or notification. Each such Governmental Approval, filing and notification is valid and in full force and effect, and there is not pending or threatened any Proceeding which could result in the suspension, termination, revocation, cancellation, limitation or impairment of any such Governmental Approval, filing or notification. No violations have been recorded in respect of any Governmental Approvals, and Seller knows of no meritorious basis therefor. No fines or penalties are due and payable in respect of any Governmental Approval or any violation thereof. (b) Seller has delivered to Purchaser accurate and complete copies of all of the Governmental Approvals, filings and notifications identified in Schedule 1.1(d), including all renewals thereof and all amendments thereto. All Governmental Approvals are freely assignable to Purchaser. 4.21 Proceedings and Orders. (a) Except as set forth on Schedule 4.21, there is no Proceeding pending or, or to Seller’s Knowledge, threatened against or affecting Seller, any of Seller’s properties, assets (including the Purchased Assets), operations or businesses (including the WOW Business), or Seller’s rights relating thereto. Seller’s Knowledge, no event has occurred, and no condition or circumstance exists, that might directly or indirectly give rise to or serve as a basis for the commencement of any such Proceeding. Seller has delivered to Purchaser true, accurate and complete copies of all pleadings, correspondence and other documents relating to any such Proceeding. No insurance company has asserted in writing that any such Proceeding is not covered by the applicable policy related thereto. (b) Neither Seller, officers, directors, agents or employees, nor any of Seller’s properties, assets (including the Purchased Assets), operations or businesses (including the WOW Business), nor Seller’s rights relating to any of the foregoing, is subject to any Order or any proposed Order. 4.22 Reserved. 4.23 Taxes. (a) Seller and each of subsidiaries has timely filed all Tax Returns (as defined below) that it was required to file, and such Tax Returns are true, correct and complete. All Taxes (as defined below) shown to be payable on such Tax Returns or on subsequent assessments with respect thereto have been paid in full on a timely basis, and no other Taxes are payable by Seller or any subsidiary with respect to any period ending prior to the date of this Agreement, whether or not shown due or reportable on such Tax Returns, other than Taxes for which adequate accruals have been provided in the Seller Financial Statements or amounts payable with respect to periods or portions of periods after the Seller Balance Sheet Date in accordance with past practice. No claim has been made by a Tax Authority in a jurisdiction where Tax Returns are not filed by or on behalf of the Seller or any of its subsidiaries that the Seller or any such subsidiary is or may be subject to taxation by that jurisdiction. Seller and each of subsidiaries has withheld and paid over all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto. Neither Seller nor any subsidiary has any liability for unpaid Taxes accruing after the date of its latest Financial Statements except for Taxes incurred in the ordinary course of business. Except as disclosed in the Seller SEC Documents, there are no liens for Taxes on the properties of Seller or any of its subsidiaries, other than liens for Taxes not yet due and payable. (b) Except as disclosed in the Seller SEC Documents, no Tax Returns of Seller or any of its subsidiaries have been audited and no audit or other administrative proceeding is pending or threatened. No judicial proceeding is pending or threatened that involves any Tax or Tax Return filed or paid by or on behalf of the Seller or any of its subsidiaries. Neither the Seller nor any of its subsidiaries is delinquent in the payment of any Tax or has requested an extension of time to file a Tax Return and not yet filed such return. Seller has delivered to Purchaser correct and complete copies of all Tax Returns filed, examination reports, and statements of deficiencies assessed or agreed to by Seller or any of its subsidiaries for the last five (5) years. Except as disclosed in the Seller SEC Documents, neither Seller nor any of subsidiaries is delinquent in the payment of any tax, has waived any statute of limitations in respect of any Tax or agreed to an extension of time with respect to any Tax assessment or deficiency. (c) Neither the Seller nor any subsidiary of Seller has been a member of an affiliated, consolidated, combined or unitary group except as disclosed in the Seller SEC Documents. Neither Seller nor any of its subsidiaries is a party to or bound by any tax indemnity agreement, tax sharing agreement, tax shelter vehicle or similar contract. Neither Seller nor any of its subsidiaries is a party to any joint venture, partnership, or other arrangement or contract which could be treated as a partnership or “disregarded entity” for United States federal income tax purposes. (d) Neither Seller nor any of its subsidiaries is obligated under any agreement, contract or arrangement that may result in the payment of any amount that would not be deductible by reason of Sections 162(m) or 280G of the Code. (e) Neither Seller nor any of its subsidiaries has been or, to its knowledge, will be required to include any adjustment in Taxable income for any Tax period (or portion thereof) pursuant to Section 481 or 263A of the Code or any comparable provision under state or foreign Tax laws as a result of transactions, events or accounting methods employed prior to the Transaction other than any such adjustments required as a result of the Transaction. Neither Seller nor any of its subsidiaries has filed any disclosures under Section 6662 of the Code or comparable provisions of state, local or foreign law to prevent the imposition of penalties with respect to any Tax reporting position taken on any Tax Return. Neither Seller nor any of its subsidiaries has engaged in a “reportable transaction” within the meaning of the Treasury Regulations under Section 6011 of the Code. Neither the Seller nor any of its subsidiaries has received a Tax opinion with respect to any transaction relating to the Seller or any of its subsidiaries other than a transaction in the ordinary course of business. Neither Seller nor any of its subsidiaries is currently or has been a United States real property holding corporation (within the meaning of Section 897(c)(2) of the Code) during the applicable periods specified in Section 897(c)(1)(A)(ii) of the Code. (f) Neither Seller nor any of its subsidiaries has been the “distributing corporation” (within the meaning of Section 355(c)(2) of the Code) with respect to a transaction described in Section 355 of the Code within the five (5) year period ending as of the date of this Agreement. No Tax Asset of the Seller or any of its subsidiaries is currently subject to a limitation under Sections 382 or 383 of the Code or similar provisions of state, local or foreign law. (g) Seller has treated itself as owner of each of the Purchased Assets for Tax purposes. None of the Purchased Assets is the subject of a “safe-harbor lease” within the provisions of former Section 168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982. None of the Purchased Assets directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code. None of the Purchased Assets is “tax-exempt use property” within the meaning of Section 168(h) of the Code or limited use property under Revenue Procedure 2001-28. None of the Purchased Assets are U.S. real property interests as described in Section 897 of the Code. (h) The Seller is a “United States person” within the meaning of Section 7701(a)(30) of the Code. 4.24 Customers and Privacy. The Seller and its subsidiaries (i) have fully complied with all federal, state and local laws relating to privacy and data security and (ii) have complied with all aspects of collecting and processing customer information and have fully complied with the CAN-Spam Act when sending commercial emails to customers. The Seller and subsidiaries have fully complied with the terms of their privacy policies, and have not used information collected in a manner inconsistent in any way with such laws or privacy policies. The Seller’s use, license, sublicense and sale of any data collected from users at any website operated by the Seller or subsidiaries and any co-branded websites which the Seller manages have complied in all material respects with the Seller’s applicable published privacy policy at the time such data was collected. The sale of the Purchased Assets (i) will not violate any federal, state and local laws relating to privacy and data security and (ii) will fully comply with Seller’s privacy policies. 4.25 Brokers. 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 Purchaser could become liable or obligated. 4.26 Solvency. Seller is not entering into the Transaction with the intent to hinder, delay or defraud any Person to which it is, or may become, indebted. The Purchased Assets Purchase Price is not less than the reasonably equivalent value of the Purchased Assets. Seller’s assets, at a fair valuation, exceed its liabilities, and Seller will be able after the Closing of the Transaction, to meet its debts as they mature and will not become insolvent as a result of the Transaction. After the Closing of the Transaction, Seller will have sufficient capital and property remaining to conduct the business in which it will thereafter be engaged. 4.27 Board Approval. The Board of Directors of Seller has (i) approved and declared advisable this Agreement and the Transaction and (ii) determined that the Transaction is in the best interests of the stockholders of Seller and is on terms that are fair to such stockholders. 4.28 Third Party Consents. Schedule 4.28 lists all contracts that require a novation or consent to the Transaction, prior to the Closing Date so that such contracts may remain in full force and effect after the Closing. 4.29 No Other Agreement. Neither Seller, nor any of its Representatives, has entered into any Contract with respect to the sale or other disposition of any assets (including the Purchased Assets) or capital stock of Seller except as set forth in this Agreement. 4.30 Product Liability. (a) The WOW Business is not subject to any Liabilities or Damages arising from any injury to person or property or as a result of ownership, possession or use of any Seller Product manufactured, processed, distributed, shipped or sold prior to the Closing Date. All such Liabilities and Damages are fully covered by product liability insurance or otherwise provided for, and Seller shall properly satisfy and discharge all such Liabilities and Damages. There have been no recalls of any Seller Products sold on the WOW Website, and to the Knowledge of Seller, none are threatened or pending, and no report has been filed or is required to have been filed with respect to any Seller Products sold on the WOW Website under the Consumer Products Safety Act, as amended, or under any other law, rule or regulation. No circumstances exist involving the safety aspects of any Seller Products that would cause any obligation to report to any Governmental Authority. There are no, and within the last twelve (12) months there have not been any, actions, claims or threats thereof related to product liability against or involving the WOW Business or any Seller Products sold on the WOW Website and no such actions, claims or threats have been settled, adjudicated or otherwise disposed of within the last twelve (12) months. (b) There are no citations, decisions, adjudications or written statements by any Governmental Authority or consent decrees between any Governmental Authority and Seller stating that any Seller Product sold on the WOW Website is (i) defective or unsafe or (ii) fails to meet any standards promulgated by any such standards. There is no (A) fact or condition related to any Seller Product sold on the WOW Website that would impose upon Seller a duty to recall any Seller Product sold on the WOW Website or (B) material liability for returns or other product liability claims with respect to any Seller Product sold on the WOW Website not adequately reserved on the Financial Statements or Interim Balance Sheet in accordance with GAAP. 4.31 Promotions. Schedule 4.31 sets forth a complete lists of all promotions, coupons, vouchers, rebates, sweepstakes, programs or other offers made available to customers of the WOW Business since January 1, 2006 and such other promotions, coupons, vouchers, rebates, sweepstakes, programs that are in effect as of the Closing Date, along with copies of all related data, forms, specimen coupons, vouchers rules, verification protocols, terms and conditions and expiration dates. 4.32 Full Disclosure. (a) Neither this Agreement nor any of the other Transaction Agreements, (i) contains or will contain as of the Closing Date any untrue statement of fact or (ii) omits or will omit to state any material fact necessary to make any of the representations, warranties or other statements or information contained herein or therein (in light of the circumstances under which they were made) not misleading. (b) Other than as set forth herein or in Seller’s filings with the SEC, there is no fact (other than publicly known facts related exclusively to political or economic matters of general applicability that will adversely affect all Entities comparable to Seller) that may have a Material Adverse Effect on Seller. (c) All of the information set forth in the Seller Disclosure Schedule, and all other information regarding Seller or Seller’s properties, assets (including the Purchased Assets), operations, businesses (including the WOW Business), Liabilities, financial performance, net income and prospects that has been furnished to Purchaser or any of its Representatives by or on behalf of Seller or any of Seller’s Representatives, is accurate, correct and complete in all material respects. (d) Each representation and warranty set forth in this Article 4 is not qualified in any way whatsoever except as explicitly provided therein, will not merge on Closing or by reason of the execution and delivery of any Contract at the Closing, will remain in force on and immediately after the Closing Date subject to the terms and conditions of this Agreement, is given with the intention that liability is not limited to breaches discovered before Closing, is separate and independent and is not limited by reference to any other representation or warranty or any other provision of this Agreement, and is made and given with the intention of inducing Purchaser to enter into this Agreement. ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants as of the date hereof to Seller as follows: 5.1 Organization and Good Standing. Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. 5.2 Authority; Binding Nature of Agreements. Purchaser has all requisite power and authority to execute and deliver this Agreement and all other Transaction Agreements to which it is a party and to carry out the provisions of this Agreement and the other Transaction Agreements. The execution, delivery and performance by Purchaser of this Agreement and the other Transaction Agreements have been approved by all requisite action on the part of Purchaser. This Agreement has been duly and validly executed and delivered by Purchaser. Each of this Agreement and the other Transaction Agreements constitutes, or upon execution and delivery, will constitute, the legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws and equitable principles related to or limiting creditors’ rights generally and by general principles of equity. 5.3 No Conflicts; Required Consents. The execution, delivery and performance of this Agreement or any other Transaction Agreement by Purchaser do not and will not (with or without notice or lapse of time) conflict with, violate or result in any breach of (i) any of the provisions of Purchaser’s Certificate of Formation; (ii) any resolutions adopted by Purchaser’s members or its board of directors or committees thereof; (iii) any of the terms or requirements of any Governmental Approval held by Purchaser or any of its employees or that otherwise relates to Purchaser’s business; or (iv) any provision of a Contract to which Purchaser is a party. 5.4 Brokers. The Purchaser 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. ARTICLE 6. POST CLOSING COVENANTS 6.1 WOW Intellectual Property. (a) Seller agrees that, from and after the date hereof, it shall not, and it shall cause its Representatives not to, use any of the WOW Intellectual Property. If Seller or any assignee of Seller owns or has any right or interest in any WOW Intellectual Property that cannot be, or for any reason is not, assigned to Purchaser at the Closing, Seller shall grant or cause to be granted to Purchaser, at the Closing, a worldwide, royalty-free, fully paid up, perpetual, irrevocable, transferable, sublicensable, and exclusive license to Exercise All Rights in and to such WOW Intellectual Property. (b) If Purchaser is unable to enforce its Intellectual Property Rights against a third party as a result of any Legal Requirement that prohibits enforcement of such rights by a transferee of such rights, Seller agrees to assign to Purchaser such rights as may be required by Purchaser to enforce its Intellectual Property Rights in its own name. If such assignment still does not permit Purchaser to enforce its Intellectual Property Rights against the third party, Seller agrees to initiate proceedings against such third party in Seller’s name; provided, however, that Purchaser shall be entitled to participate in such proceedings and provided further that Purchaser shall be responsible for the costs and expenses of such proceedings. 6.2 Cooperation. After the Closing, upon the request of Purchaser, Seller shall (i) execute and deliver any and all further materials, documents and instruments of conveyance, transfer or assignment as may reasonably be requested by Purchaser to effect, record or verify the transfer to, and vesting in Purchaser, of Seller’s right, title and interest in and to the Purchased Assets, free and clear of all Encumbrances, in accordance with the terms of this Agreement; and (ii) cooperate with Purchaser, at Purchaser’s expense, to enforce the terms of any Transferred Contracts, including terms relating to confidentiality and Intellectual Property Rights, and to contest or defend against any Proceeding relating to the Transaction or to the operation of the WOW Business before the Closing Date. After the Closing, Seller shall (a) reasonably cooperate with Purchaser in its efforts to continue and maintain for the benefit of Purchaser those business relationships of Seller existing prior to the Closing and relating to the business to be operated by Purchaser after the Closing; (b) satisfy the Retained Liabilities in a manner that is not detrimental to any of such relationships; (c) refer to Purchaser all inquiries relating to such business; and (d) promptly deliver to Purchaser (i) any mail, packages and other communications addressed to Seller relating to the WOW Business and (ii) any cash or other property that Seller receives and that properly belongs to Purchaser. Neither Seller nor any of its officers, employees, agents or stockholders shall take any action that would tend to diminish the value of the Purchased Assets after the Closing or that would interfere with the business of Purchaser to be engaged in after the Closing, including disparaging the name or business of Purchaser. 6.3 Limited Power of Attorney. Effective upon the date hereof, Seller hereby irrevocably appoints Purchaser and its successors, agents and assigns as its true and lawful attorney, in its name, place and stead, with power of substitution, to take any action and to execute any instrument which Purchaser may deem necessary or advisable to fulfill Seller’s obligations or rights under, or to accomplish the purposes of, this Agreement, including, (i) to demand and receive any and all Purchased Assets and to make endorsements and give receipts and releases for and in respect of the same; (ii) to institute, prosecute, defend, compromise and/or settle any and all Proceedings with respect to the Purchased Assets except those Proceedings listed on Schedule 6.3; (iii) to make any filings required to transfer any WOW Intellectual Property or any other Purchased Assets; and (iv) to receive and open all mail, packages and other communications addressed to Seller and relating to the WOW Business. The foregoing power of attorney is a special power of attorney coupled with an interest and is irrevocable. 6.4 Return of Purchased Assets. If, for any reason after the Closing, any of the Purchased Assets are ultimately determined to be Excluded Assets or Retained Liabilities, respectively, (i) Purchaser shall transfer and convey (without further consideration) to Seller, and Seller shall accept, such assets; (ii) Seller shall assume, and agree to pay, perform, fulfill and discharge (without further consideration) such liabilities; and (iii) Purchaser and Seller shall execute such documents or instruments of conveyance or assumption and take such further acts which are reasonably necessary or desirable to effect the transfer of such assets back to Seller and the re-assumption of such liabilities by Seller. 6.5 Records and Documents. For a period of three years after the Closing, at Purchaser’s request, Seller shall provide Purchaser and its representatives with access to and the right to make copies of those records and documents related to the WOW Business, including but not limited to the Books and Records, possession of which is retained by Seller, as may be necessary or useful in connection with Purchaser’s conduct of the WOW Business after the Closing. If during such period Seller elects to dispose of such records and documents, Seller shall give Purchaser sixty (60) days’ prior written notice, during which period Purchaser shall have the right to take such records and documents without further consideration. 6.6 Insurance and Warranty Claims. Until June 30, 2007, Seller shall maintain in full force and effect product liability insurance on all Seller Products sold on the WOW Website prior to the Closing Date, in a form and with such limits as currently maintained by Seller. Such policy shall name Purchaser as an additional named insured and provide that it may not be cancelled without prior notice to Purchaser. Seller shall provide, at Purchaser’s request, reasonably satisfactory evidence that such insurance policy continues to be in effect and that all premiums have been paid. 6.7 Director and Officer Insurance. Until March 1, 2007 Seller shall maintain in full force and effect director and officer insurance as currently in effect. Seller shall provide, at Purchaser’s request, reasonably satisfactory evidence that such insurance policy continues to be in effect and that all premiums have been paid. 6.8 Dissolution; Restricted Payments. Seller shall not, and shall not permit any of its subsidiaries to, with the intent to hinder, delay or defraud any Person to which it is, or may become, indebted, dissolve or liquidate or declare or make any dividend payment or other distribution on any shares of its capital stock, or purchase, redeem or otherwise acquire for value any shares of its capital stock or any options, warrants or other rights to acquire such shares now or hereafter outstanding. 6.9 Bulk Sales Indemnification. Subject to Section 7.2, Purchaser hereby waives compliance by Seller with any applicable bulk sales Legal Requirements in connection with the Transaction. 6.10 Payment of Seller Supplier Accounts Payable. Within four (4) Business Days following the Closing Date, Seller shall cause all suppliers to the WOW Business to be paid in full, including but not limited all amounts set forth on Schedule 4.14(f) hereto, without regard to any payment arrangements, grace periods, rights of set off or other term or condition which would permit or entitle Seller to pay such suppliers at any later date. Seller shall promptly provide to Purchaser reasonable evidence of such payment. (a) Nonsolicitation of Employees. Seller agrees that for a period of five (5) years following the Closing Date, Seller and any Affiliate Entity will not directly or indirectly, without the prior written approval of Purchaser, solicit for hire or hire, any employees or consultants of Seller or its Affiliates who are or become employees or consultants of Purchaser or its Affiliates (each, a “Restricted Employee”), or directly or indirectly, solicit for hire, or hire on behalf of any third party, any Restricted Employee; provided, however, that nothing in this Section 6.10 shall be deemed breached by any general advertisement for potential employees that is not specifically directed at the Restricted Employees, provided, that in the event a Restricted Employee responds to a general advertisement for potential employees, (without Seller soliciting such person in violation of the restriction contained in this Section 6.10), the hiring of such Restricted Employee shall not be deemed a violation of this Section 6.10. (b) Nonsolicitation of Customers. Seller agrees that it will not, directly or indirectly, without the prior written approval of Purchaser, solicit or contact any customer of the WOW Business or Purchaser, or any potential customer with whom the WOW Business or Purchaser has had any contact, or from which it has received or to which it has submitted a proposal for products or services, for the purpose of (i) any commercial pursuit which is in competition with the WOW Business or the businesses engaged in by Purchaser as of the date hereof, (ii) providing such customer or potential customer products or services that are the same as or substantially similar to those provided or offered to be provided by the WOW Business or Purchaser as of the date hereof, or (iii) taking away or interfering or attempting to interfere with any customer, trade, business or patronage of the WOW Business or Purchaser. (c) Nondisclosure. (i) Seller acknowledges that, in connection with the operation of Seller and the WOW Business prior to the Closing Date, Seller, either directly or indirectly or through its representatives, has had access to confidential information relating to the Seller and the WOW Business, including technical, financial or marketing information, lists of vendors, suppliers and customers, ideas, methods, developments, inventions, improvements, business plans, trade secrets, scientific or statistical data, diagrams, drawings, specifications, or other proprietary information relating thereto, including analyses, compilations, studies or other documents, record or data prepared by Seller or its representatives which contain or otherwise reflect or are generated from such information (“Confidential Information”) a portion of which is being sold as part of the Purchased Assets (the “Purchased Confidential Information”). Seller agrees that it will treat all Purchased Confidential Information as confidential, preserve the confidentiality thereof and not use or disclose any Confidential Information for any purpose or reason whatsoever, except to authorized representatives of Purchaser. If, however, Confidential Information is disclosed, Seller will immediately notify Purchaser in writing and will take all reasonable steps required to prevent further disclosure. Notwithstanding the foregoing, to the extent any Confidential Information is used by Seller both in connection with the Ashford Business and the WOW Business, then both Seller and Purchaser shall have the respective right to use such Confidential Information (which for the avoidance of doubt shall include both Purchaser’s and Seller’s respective right to sell or otherwise transfer such Confidential Information) following the Closing. 6.11 Publicity. Neither Seller nor Purchaser shall issue any press release or public announcement concerning this Agreement or the transactions contemplated hereby without obtaining the prior written approval of the other party hereto, which approval will not be unreasonably withheld or delayed, unless, in the sole judgment of Purchaser or Seller, disclosure is otherwise required by applicable Law or by the applicable rules of any stock exchange on which Purchaser or Seller lists securities, provided that, to the extent required by applicable law, the party intending to make such release shall use its best efforts consistent with such applicable law to consult with the other party with respect to the text thereof. 6.12 Cooperation on Tax Matters. (a) Seller and Purchaser shall cooperate with each other and promptly prepare and file notifications with, and request Tax clearances from, Tax Authorities in jurisdictions in which a portion of the Purchase Price may be required to be withheld or in which Purchaser would be liable for any Tax liabilities of Seller in the absence of such a Tax clearance. (b) Purchaser and Seller agree to furnish or cause to be furnished to each other, and each at their own expense, as promptly as practical, such information (including access to books and records) and assistance, including making employees available on a mutually convenient basis to provide additional information and explanations of material provided, relating to the purchased assets as is reasonably necessary for the filing of any Tax Returns, for the preparation of any audit, and for the prosecution or defense of any claim, suit or proceeding relating to any adjustment or proposed adjustment with respect to Taxes. 6.13 Transition Assistance. Both following the date of this Agreement and following the Closing Date, Seller agrees to cooperate with Purchaser in good faith to provide such transition assistance, at no cost to Seller, as may be reasonably required by Purchaser in connection with Purchaser’s operation of the WOW Business. 6.14 Ice.com Covenants. Purchaser acknowledges and agrees to be bound by the restrictions contained in Sections 6.11(h) and 7.6 (the “Subject Provisions”) of the Asset Purchase Agreement dated May 11, 2006 by and among Ice.com, Inc., Ice Diamond, LLC (the “Ice Parties”) and Odimo Incorporated solely as such provisions apply to Purchaser with respect to the Purchased Assets, provided that in the event Purchaser procures a release from the Ice Parties in respect of the application of the Subject Provisions to the transactions contemplated under this Agreement, then Purchaser shall have no continuing obligation under this paragraph. ARTICLE 7. INDEMNIFICATION 7.1 Survival of Representations and Warranties. All representations, warranties, covenants, conditions and agreements contained herein or in any other instrument or other document delivered pursuant to this Agreement or in connection with the Transaction shall survive the execution and delivery of this Agreement, the consummation of the Transaction and any investigation or audit made by any party hereto provided, however, that (a) all representations and warranties relating to Taxes shall survive until six months after the expiration of the statute of limitation applicable to such Taxes has expired (including all waivers and extensions thereof), (b) all representations and warranties of Seller contained in Sections 4.1, 4.2, 4.11(a) and 4.13, shall survive indefinitely; (c) all representations and warranties other than those referred to in clauses (a) or (b) above shall survive for a period of 12 months from the Closing Date. Any claim for indemnification based upon a breach of any such representation or warranty and asserted prior to end of the applicable survival period by written notice in accordance with Section 8.2 shall survive until final resolution of such claim. The representations and warranties contained in this Agreement (and any right to indemnification for breach thereof) shall not be affected by any investigation, verification or examination by any party hereto or by any Representative of any such party or by any such party’s Knowledge of any facts with respect to the accuracy or inaccuracy of any such representation or warranty. 7.2 Indemnification by Seller. Subject to the limitations set forth in this Article 7, Seller shall indemnify, defend and hold harmless Purchaser, its Affiliates and its Representatives (each a “Purchaser Indemnitee”) from and against any and all Damages, whether or not involving a third-party claim, including attorneys’ fees and related defense costs and expenses (collectively, “Purchaser Damages”), arising out of, relating to or resulting from (a) any breach of a representation or warranty of Seller contained in this Agreement or in any other Transaction Agreement; (b) any breach of a covenant of Seller contained in this Agreement or in any other Transaction Agreement; (c) Excluded Assets or Retained Liabilities; or (d) any noncompliance with applicable bulk sales or fraudulent transfer Legal Requirements in connection with the Transaction. 7.3 Procedures for Indemnification. Promptly after receipt by a Purchaser Indemnitee of written notice of the assertion or the commencement of any Proceeding by a third-party with respect to any matter referred to in Section 7.2, the Indemnitee shall give written notice thereof to the Seller, and thereafter shall keep the Seller reasonably informed with respect thereto; provided, however, that failure of the Indemnitee to give the Seller notice as provided herein shall not relieve the Seller of its obligations hereunder except to the extent that the Seller is prejudiced thereby. The Seller shall have the right to join in the defense of said claim, action or proceeding at Seller’s own cost and expense and, if the Seller agrees in writing to be bound by and to promptly pay the full amount of any final judgment from which no further appeal may be taken and if the Indemnitee is reasonably assured of the Seller’s ability to satisfy such agreement, then at the option of the Seller, the Seller may take over the defense of such claim, action or proceeding, except that, in such case, the Indemnitee shall have the right to join in the defense of said claim, action or proceeding at its own cost and expense and provided that whether or not the Seller takes over defense of a claim, the Seller shall not admit any liability with respect to, or settle, compromise or discharge, such claim without the Indemnitees’s prior written consent (which consent shall not be unreasonably withheld); provided further that the Seller shall not agree, without the Indemnitee’s consent, to the entry of any Judgment or settlement, compromise or decree that provides for injunctive or other nonmonetary relief affecting the Indemnitee. 7.4 Remedies Cumulative. The remedies provided in this Agreement shall be cumulative and shall not preclude any party from asserting any other right, or seeking any other remedies, against the other party. 7.5 Maximum Amounts. The aggregate liability of the Seller to indemnify Purchaser Indemnitees entitled to indemnification for Damages under clauses (a) or (b) of Section 7.2 (except for Damages arising from a breach of any of the representations and warranties in Sections 4.1, 4.2, 4.11(a) or 4.13 or any breach of this Article 7) shall in no event exceed $500,000. Notwithstanding the foregoing, no maximum dollar limitation shall apply to Damages (i) arising from any breach of the representations and warranties of Seller contained in Sections 4.1, 4.2, 4.11(a) or 4.13 this Article 7 or (ii) under clauses (c) or (d) of Section 7.2. Notwithstanding anything to the contrary contained in this Agreement nothing herein shall foreclose, limit or prevent Purchaser from seeking and obtaining, as and to the extent permitted under applicable law, specific performance by Seller of any of its obligations under this Agreement or injunctive relief against the Seller against Seller’s activities in breach of this Agreement (including, without limitation, the obligations provided for under Article 7). 7.6 Liability of Purchaser. The fact that Purchaser is not obligated to indemnify Seller hereunder shall not be construed so as to limit the rights or remedies that Seller may otherwise have against Purchaser, whether under this Agreement or applicable law, in the event of (a) any breach or inaccuracy of a representation or warranty of Purchaser contained in this Agreement or (b) any failure by Purchaser to perform or comply with any covenant given by Purchaser contained in this Agreement. ARTICLE 8. MISCELLANEOUS PROVISIONS 8.1 Expenses. Each party shall pay it own costs and expenses in connection with this Agreement and the Transaction (including the fees and expenses of its advisers, accountants and legal counsel). 8.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or mailed by registered or certified mail (return receipt requested) or sent via facsimile (with confirmation of receipt) 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 Purchaser, to:   ILS Holdings LLC 101 South State Road 7, Suite 201 Hollywood, Florida 33023 Attn: Izac Ben-Shmuel Facsimile No.: (954) 985-1828 Telephone No.: (954) 985-3827   with a copy to: Greenberg Traurig, P.A. 401 East Las Olas Boulevard, Suite 2000 Fort Lauderdale, Florida 33301 Attention: Stanley G. Jacobs, Jr. Facsimile No.: (954) 765-1477 Telephone No.: (954) 765-0500 (b) if to Seller, to:   Jeff Kornblum Chief Operating Officer Odimo Incorporated 14051 N.W. 14th Street Sunrise, Florida 33323 Facsimile No.: Telephone No.: (954) 835-2233   with a copy to: Berman Rennert Vogel & Mandler, P.A. Bank of America Tower at International Place, 29th Floor 100 S.E. Second Street Miami, Florida 33131 Attention: Charles Rennert Facsimile No.: (305) 347-6463 Telephone No.: (305) 577-4171 8.3 Interpretation. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed, as the context indicates, to be followed by the words “but (is/are) not limited to.” 8.4 Counterparts; Facsimile Delivery. This Agreement may be executed in one or more counterparts and delivered by facsimile, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 8.5 Entire Agreement; Nonassignability; Parties in Interest. This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including the Appendices, Exhibits and the Seller Disclosure Schedule, (a) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, (b) are not intended to confer upon any other Person any rights or remedies hereunder and (c) shall not be assigned by operation of law or otherwise except as otherwise specifically provided. 8.6 Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 8.7 Governing Law; Jurisdiction and Venue; Waiver of Jury Trial. This Agreement shall be governed by and construed in accordance with the laws of Delaware without reference to such state’s principles of conflicts of law. Each of the parties hereto irrevocably consents to the jurisdiction of any state court located within the State of Florida in connection with any matter based upon or arising out of this Agreement or the matters contemplated herein, agrees that process may be served upon them in any manner authorized by the laws of the State of Florida for such persons and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction and such process. THE PARTIES HERETO IRREVOCABLY WAIVE THE RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY ACTIONS, SUITS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE MERGER OR THE TRANSACTIONS CONTEMPLATED HEREBY. 8.8 Rules of Construction. The parties hereto agree that they have been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 8.9 Incorporation of Appendices, Exhibits and Schedules. The Appendices, Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. 8.10 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto, in whole or in part (whether by operation of law or otherwise), without the prior written consent of the other party, and any attempt to make any such assignment without such consent shall be null and void; provided, that Purchaser shall be free to assign this Agreement and/or any of the rights of Purchaser under this Agreement to an Affiliate of Purchaser. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 8.11 Attorneys’ Fees. In any action at law or suit in equity to enforce this Agreement or the rights of any of the parties hereunder, the prevailing party in such action or suit shall be entitled to receive a sum for its attorneys’ fees and all other costs and expenses incurred in such action or suit. 8.12 Further Assurances. Each party agrees (a) to furnish upon request to each other party such further information, (b) to execute and deliver to each other party such other documents, and (c) to do such other acts and things, all as another party may reasonably request for the purpose of carrying out the intent of this Agreement and the Transaction. [Signatures Follow On a Separate Page] 3 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by their respective officers thereunto duly authorized all as of the date first written above.       “PURCHASER” ILS HOLDINGS LLC,         a Florida limited liability company       By:    /s/ Shlomi Ben-Shmuel           Name: Shlomi Ben-Shmuel Title: Secretary-Member “SELLER” ODIMO INCORPORATED, a Delaware corporation By: /s/ Jeff Kornblum Name: Jeff Kornblum Title: President WORLDOFWATCHES.COM, INC., a Delaware corporation By: /s/Jeff Kornblum Name: Jeff Kornblum Title: President 4 APPENDIX 1 CERTAIN DEFINITIONS “Affiliate” shall mean any member of the immediate family (including spouse, brother, sister, descendant, ancestor or in-law) of any officer, director or stockholder of Seller or any corporation, partnership, trust or other entity in which Seller or any such family member has a five percent (5%) or greater interest or is a director, officer, partner or trustee. The term Affiliate shall also include any entity which controls, or is controlled by, or is under common control with any of the individuals or entities described in the preceding sentence. “Agreement” shall mean the Asset Purchase Agreement to which this Appendix 1 is attached (including the Seller Disclosure Schedule and all other appendices, schedules and exhibits attached hereto), as it may be amended from time to time. “Books and Records” shall have the meaning specified in Section 1.1(e). “Business Day” shall mean any day of the year on which national banking institutions in Miami, Florida are open to the public for conducting business and are not required or authorized to close. “Closing” shall have the meaning specified in Section 3.1 “Closing Date” shall have the meaning specified in Section 3.1. “Code” shall mean the Internal Revenue Code of 1986, as amended. “Confidential Information” shall have the meaning specified in “Confidential Information” shall mean all Trade Secrets and other confidential and/or proprietary information of a Person, including information derived from reports, investigations, research, work in progress, codes, marketing and sales programs, financial projections, cost summaries, pricing formula, contract analyses, financial information, projections, confidential filings with any state or federal agency, and all other confidential concepts, methods of doing business, ideas, materials or information prepared or performed for, by or on behalf of such Person by its employees, officers, directors, agents, representatives, or consultants. Information shall not be deemed Confidential Information hereunder if (i) such information becomes available to or known by the public generally through no fault of Seller or (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, however, that prior to disclosing any information pursuant to this clause (ii), Seller shall, if possible, give prior written notice thereof to Purchaser and, at Purchaser’s election, either provide Purchaser with the opportunity to contest such disclosure or seek to obtain a protective order narrowing the scope of such disclosure and/or use of the Confidential Information; or (iii) Seller reasonably believes that such disclosure is required in connection with the defense of a lawsuit against Seller. Nothing herein shall be construed as prohibiting Purchaser from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. “Consent” shall mean any approval, consent, ratification, permission, waiver or authorization (including any Governmental Approval). “Contract” shall mean any agreement, contract, consensual obligation, promise, understanding, arrangement, commitment or undertaking of any nature (whether written or oral and whether express or implied), whether or not legally binding. “Contract Affiliates” shall mean Entities which are parties to Affiliate Agreements whereby such entities are compensated for sales resulting from the directions of customers to websites maintained by the WOW Business. “Copyrights” shall mean all copyrights, including in and to works of authorship and all other rights corresponding thereto throughout the world, whether published or unpublished, including rights to prepare, reproduce, perform, display and distribute copyrighted works and copies, compilations and derivative works thereof. “Damaged Goods” shall have the meaning set forth in Section 2.1(b). “Damages” shall mean and include any loss, damage, injury, decline in value, lost opportunity, Liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including any legal fee, accounting fee, expert fee or advisory fee), charge, cost (including any cost of investigation) or expense of any nature. “Deposits and Advances” shall have the meaning specified in 1.1(h). “Encumbrance” shall mean any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, equity, trust, equitable interest, claim, preference, right of possession, lease, tenancy, license, encroachment, covenant, infringement, interference, Order, proxy, option, right of first refusal, preemptive right, community property interest, legend, defect, impediment, exception, reservation, limitation, impairment, imperfection of title, condition or restriction of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset). “Entity” shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust or company (including any limited liability company or joint stock company). “Exchange Act” shall have the meaning specified in Section 4.19(a). “Excluded Assets” shall have the meaning specified in Section 1.2. “Exercise All Rights” shall mean to exercise or practice any and all rights now or hereafter provided by law (by treaty, statute, common law or otherwise) anywhere in the world to inventors, authors, creators and/or owners of intellectual or intangible property; including the right to make, use, disclose, sell, offer to sell, distribute, import, rent, lease, lend, reproduce, prepare derivative works of and otherwise modify, perform and display (whether publicly or otherwise), broadcast, transmit, use and/or otherwise exploit such intellectual or intangible property and/or any product, component or service embodying, related to or subject to such intellectual or intangible property; and the right to assign, transfer, license and/or sublicense (with the right to sublicense further) any of the foregoing, and the right to have and/or authorize others to do any of the foregoing. “Financial Statements” shall have the meaning specified in Section 4.5(a). “Full Retail Cost” shall have the meaning set forth in Section 2.1(b). “GAAP” means U.S. generally accepted accounting principles in effect on the date on which they are to be applied pursuant to this Agreement, applied consistently throughout the relevant periods. “Governmental Approval” shall mean any: (a) permit, license, certificate, concession, approval, consent, ratification, permission, clearance, confirmation, exemption, waiver, franchise, certification, designation, rating, registration, variance, qualification, accreditation or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Legal Requirement; or (b) right under any Contract with any Governmental Authority. “Governmental Authority” shall mean any: (a) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or Entity and any court or other tribunal); (d) multinational organization or body; or (e) individual, Entity or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature. “Indebtedness” of any Person means, without duplication, (i) the principal of and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable and other accrued current liabilities arising in the ordinary course of business); (iii) all obligations of such Person under leases required to be capitalized in accordance with GAAP; (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction; (v) all obligations of the type referred to in clauses (i) through (iv) of any Persons for the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including guarantees of such obligations; and (vi) all obligations of the type referred to in clauses (i) through (v) of other Persons secured by any Encumbrance on any property or asset of such Person (whether or not such obligation is assumed by such Person) “Indemnitee” shall have the meaning specified in Section 7.3. “Insurance Policies” shall have the meaning specified in Section 4.10. “Intellectual Property Rights” shall mean any or all rights in and to intellectual property and intangible industrial property rights, including, without limitation, (i) Patents, Trade Secrets, Copyrights, Mask Works, Trademarks and (ii) any rights similar, corresponding or equivalent to any of the foregoing anywhere in the world. “Interim Balance Sheet” shall have the meaning specified in Section 4.5(a). “Interim Balance Sheet Date” shall have the meaning specified in Section 4.5(a). “IRS” means the Internal Revenue Service. “Knowledge” An individual shall be deemed to have “Knowledge” of a particular fact or other matter if: (i) such individual is actually aware of such fact or other matter or (ii) a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably comprehensive investigation concerning the truth or existence of such fact or other matter. Seller and Purchaser shall be deemed to have “Knowledge” of a particular fact or other matter if any of their respective directors, officers or employees with the authority to establish policy for the company has actual knowledge of such fact or other matter after due and diligent inquiry. “Legal Requirement” shall mean any federal, state, local, municipal, foreign or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, Order, edict, decree, proclamation, treaty, convention, rule, regulation, permit, ruling, directive, pronouncement, requirement (licensing or otherwise), specification, determination, decision, opinion or interpretation that is, has been or may in the future be issued, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by or under the authority of any Governmental Authority. “Liability” shall mean any debt, obligation, duty or liability of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability), regardless of whether such debt, obligation, duty or liability would be required to be disclosed on a balance sheet prepared in accordance with generally accepted accounting principles and regardless of whether such debt, obligation, duty or liability is immediately due and payable. “Machinery and Equipment” shall have the meaning specified in Section 1.1(a). “Mask Work” a set of images or templates used in the manufacture of semiconductor chips. “Material Adverse Effect” means (i) with respect to Purchaser, any event, change or effect that, when taken individually or together with all other adverse events, changes and effects, is or is reasonably likely (a) to be materially adverse to the condition (financial or otherwise), properties, assets, liabilities, business, operations, results of operations or prospects of Purchaser or its subsidiaries, taken as a whole or (b) to prevent or materially delay consummation of the Transaction or otherwise to prevent Purchaser or its subsidiaries from performing their obligations under this Agreement and (ii) with respect to Seller or the WOW Business, any event, change or effect that, when taken individually or together with all other adverse events, changes and effects, is or is reasonably likely (a) to be materially adverse to the condition (financial or otherwise), properties, assets (including Purchased Assets), liabilities, business, operations, results of operations or prospects of Seller, its Subsidiaries, or the WOW Business or (b) to prevent or materially delay consummation of the Transaction or otherwise to prevent Seller or its Subsidiaries from performing their obligations under this Agreement. “Material Contracts” shall have the meaning specified in Section 4.9. “Net Inventory Cost” shall have the meaning set forth in Section 2.1(b). “Non-Assignable Asset” shall have the meaning specified in Section 1.5(a). “Order” shall mean any: (a) temporary, preliminary or permanent order, judgment, injunction, edict, decree, ruling, pronouncement, determination, decision, opinion, verdict, sentence, stipulation, subpoena, writ or award that is or has been issued, made, entered, rendered or otherwise put into effect by or under the authority of any court, administrative agency or other Governmental Authority or any arbitrator or arbitration panel; or (b) Contract with any Governmental Authority that is or has been entered into in connection with any Proceeding. “Patents” shall mean all United States and foreign patents and utility models and applications therefor and all reissues, divisions, re-examinations, renewals, extensions, provisionals, continuations and continuations-in-part thereof, and equivalent or similar rights anywhere in the world in inventions and discoveries, including invention disclosures related to the WOW Business or any Purchased Assets. “Person” shall mean any individual, Entity or Governmental Authority. “Personal Property” shall mean all personal property, office furnishings and furniture, display racks, shelves, decorations, supplies and other tangible personal property used in the WOW Business or in connection with the Purchased Assets. “Personal Property Leases” shall mean all rights in, to and under leases of personal property to which Seller is a party. “Proceeding” shall mean any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination or investigation that is, has been or may in the future be commenced, brought, conducted or heard at law or in equity or before any Governmental Authority or any arbitrator or arbitration panel. “PTO” shall have the meaning specified in Section 4.13(g). “Purchase Price Adjustment Date” shall have the meaning specified in Section 2.1(b). “Purchased Assets Purchase Price” shall have the meaning specified in Section 2.1(a). “Purchased Assets” shall have the meaning specified in Section 1.1. “Purchaser Damages” shall have the meaning specified in Section 7.2. “Purchaser Disclosure Schedule” shall have the meaning specified in Article 5. “Real Property” shall mean land, buildings, structures, easements, appurtenances, improvements and fixtures located thereon. “Rebates and Credits” shall have the meaning specified in Section 1.1(i). “Registered Intellectual Property Rights” shall mean all United States, international and foreign: (i) Patents, including applications therefor; (ii) registered Trademarks, applications to register Trademarks, including intent-to-use applications, or other registrations or applications related to Trademarks; (iii) Copyright registrations and applications to register Copyrights; (iv) Mask Work registrations and applications to register Mask Works; and (v) any other Intellectual Property Rights that is the subject of an application, certificate, filing, registration or other document issued by, filed with, or recorded by, any state, government or other public legal authority at any time. “Representatives” shall mean officers, directors, employees, attorneys, accountants, advisors, agents, distributors, licensees, shareholders, subsidiaries and lenders of a party. In addition, all Affiliates of Seller shall be deemed to be “Representatives” of Seller. “Retained Liabilities” shall have the meaning specified in Section 1.4. “Securities Act” shall mean the Securities Act of 1933, as amended. “Seller Balance Sheet Date” shall have the meaning specified in Section 4.19(b). “Seller Disclosure Schedule” shall have the meaning specified in Article 4. “Seller Financial Statements” shall have the meaning specified in Section 4.19(b). “Seller Products” shall mean all products and services manufactured, made, designed, maintained, supported, developed, sold, licensed, marketed, or otherwise distributed or provided (or planned or envisioned to be manufactured, made, designed, maintained, supported, developed, sold, licensed, marketed, or otherwise distributed or provided) by or for Seller (including all versions and releases thereof, whether already distributed or provided, under development, planned or conceived, or otherwise), together with any related materials, information or data, including, without limitation, the names, numbers (e.g., part numbers) and packaging associated with such products and services. “Seller SEC Documents” shall have the meaning specified in Section 4.19(a). “Solvent” shall mean, as to any Person at any time, that (a) the fair value of the property of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code; (b) the present fair saleable value of the property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital. “Subsidiary” shall have the meaning specified in Section 1.4. “Survival Date” shall have the meaning specified in Section 7.1. “Supplier Accounts Payable” shall have the meaning specified in Section 4.14. “Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount and any interest on such penalty, addition to tax or additional amount, imposed by any Tax Authority. “Tax Authority” means Governmental Authority responsible for the imposition, assessment or collection of any Tax (domestic or foreign). “Tax Return” shall mean any return, statement, declaration, notice, certificate or other document that is or has been filed with or submitted to, or required to be filed with or submitted to, any Governmental Authority in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement related to any Tax. “Trade Secrets” shall mean all trade secrets under applicable law and other rights in know-how and confidential or proprietary information, processing, manufacturing or marketing information, including new developments, inventions, processes, ideas or other proprietary information that provide Seller with advantages over competitors who do not know or use it and documentation thereof (including related papers, blueprints, drawings, chemical compositions, formulae, diaries, notebooks, specifications, designs, methods of manufacture and data processing software, compilations of information) and all claims and rights related thereto. “Trademarks” shall mean any and all trademarks, service marks, logos, trade names, corporate names, universal resource locator (“url”), Internet domain names and addresses and general-use e-mail addresses, and all goodwill associated therewith throughout the world. “Transaction” shall mean, collectively, the transactions contemplated by this Agreement. “Transaction Agreements” shall mean this Agreement and all other agreements, certificates, instruments, documents and writings delivered by Purchaser and/or Seller in connection with the Transaction. “Transfer Taxes” shall mean all federal, state, local or foreign sales, use, transfer, real property transfer, mortgage recording, stamp duty, value-added or similar Taxes that may be imposed in connection with the transfer of Purchased Assets, together with any interest, additions to Tax or penalties with respect thereto and any interest in respect of such additions to Tax or penalties. “Transfer Time.” shall mean 11:59 p.m. (Miami time) on the Closing Date. “Transferred Contracts” shall have the meaning specified in Section 1.1(c). “WOW Business” shall have the meaning set forth in the first Recital. “WOW Intellectual Property” shall mean all Intellectual Property Rights related to the WOW Business, the Purchased Assets and held by Seller, whether owned or controlled, licensed, owned or controlled by or for, licensed to, or otherwise held by or for the benefit of Seller including the WOW Registered Intellectual Property Rights and including the WOW Intellectual Property listed on Schedule 1.1(b). “WOW Registered Intellectual Property Rights” shall have the meaning specified in Section 4.13(a). 5

Exhibit 10.1 SEPARATION AGREEMENT RELEASE AND WAIVER OF CLAIMS This Separation Agreement, Release and Waiver of Claims ("Agreement"), effective as of the date shown on the signature page hereto, by and between Bert C. Tobin (hereafter "you" or "your") and MapInfo Corporation, a Delaware corporation with principal offices at One Global View, Troy, New York 12180-8399 (hereafter "MapInfo"), is made to evidence the following: This Agreement will evidence your acceptance of the following terms and conditions in final settlement of all matters of any kind, and set forth the obligations of both MapInfo and you. You and MapInfo are sometimes collectively referred to herein as the "Parties". 1. CESSATION OF EMPLOYMENT - Your employment with MapInfo will end effective April 21, 2006. April 21, 2006 is your last day of employment for purposes of determining the period in which you may exercise your vested stock options in accordance with stock option agreements entered into when your options were awarded. If you are in possession of material, non-public information concerning MapInfo, as of this date you will still be subject to the SEC and other applicable insider trading rules and thus should not trade any shares, including those in connection with a cashless exercise. 2. FINAL COMPENSATION AND BENEFITS - Subject to your agreement to, and ongoing compliance with, the express terms and conditions of this Agreement, MapInfo will pay (or provide) to you: 2.1  A lump sum amount equivalent to six months of your regular monthly base salary, which we record and agree to pay is One hundred four thousand and five hundred dollars $104,500.00. This payment will be subject to withholding and will be paid in the payroll due on May 1, 2006. 2.2  You will also receive payment through Q2 of fiscal 2006, based on the MapInfo's performance as it relates to your incentive compensation plan. You will be paid for all cumulatively calculated Q1 & Q2 2006 incentive awards due through fiscal 2006 Q2 only, with no further consideration for Q3 & Q4 of fiscal 2006. Your calculated incentive award will not be subject to the 60% payment stipulation, if such award is in excess of targeted performance under the plan. The amount calculated will be subject to withholding, and will be paid at the same time as MapInfo pays fiscal 2006 Q2 incentive awards to other executives in accordance with the schedule of payment determined for this period. 2.3  The monthly premiums of your medical and/or dental benefits under the current group plan for a period of twelve (12) months after your last day of employment provided you do not revoke this Agreement.   2.4  After the expiration of the period stated in paragraph 2.3 above, your healthcare insurance coverage will be continued, provided you had or would have completed a minimum of ten (10) years of service with MapInfo during the term of this Agreement and you elect to do so within sixty (60) continuous days of the date your employment terminates. Your cost for coverage will be equal to the lesser of (i) 30% of the applicable COBRA premium charged for similar coverage or (ii) 110% of the cost charged to active employees for similar coverage; provided however, in no event will your cost for such coverage be greater than 50% of the total employer/employee cost for such coverage. In the event that your participation in any such plan, program, or arrangement of MapInfo or successor company is prohibited, MapInfo or successor company will arrange to provide you with benefits substantially similar to those which you would have been entitled to receive under such plan, program, or arrangement, for the same period that MapInfo or the successor company provides healthcare insurance benefits to active employees. 2.5  You agree that but for this Agreement, you would not have had any claim or entitlement to the above payments and benefits. 3. RETURN OF WORK PAPERS; CONFIDENTIALITY AND NON-COMPETITION; NON-DISPARAGEMENT 3.1  During the course of your employment, it is agreed that you learned or became aware of trade secrets and other confidential information concerning MapInfo's business. For purposes of this Agreement, "Confidential Information" shall include: trade secrets, including but not limited to information about sales, financial reports, customers and customer lists, prices, accounting and reporting matters, sales and marketing plans, promotions and ideas; and opinions and background information about directors, executives, and other MapInfo personnel. 3.2  Non-Disparagement: You covenant and agree not to make or publish in any format written or oral statements/remarks (including, without limitation, the repetition or distribution of derogatory rumors, allegations, negative reports or comments) in any forum, including Internet chat rooms, on the radio, in a meeting, which are disparaging, deleterious or damaging to the integrity, reputation or good will of MapInfo, including of its management, of any individual executive, director, manager or associate thereof. 3.3  In consideration of the compensation you will receive pursuant to Section 2 of this Agreement (hereafter the "Compensation") you will execute the most current MapInfo Corporation Employee Intellectual Property, Confidential Information And Non-Competition Agreement ("Confidential Information and Non-Competition Agreement") a copy of which is attached hereto. The attached Confidential Information and Non-Competition Agreement supercedes any prior similar agreement you may have executed, and you shall keep confidential the Confidential Information, and not disclose any Confidential Information to anyone or use any of it at any time. 3.4  In further consideration of the Compensation, you shall not, for a period of one year, directly or indirectly, solicit for employment with either yourself or any other business or third party, any MapInfo employee employed by MapInfo as of April 21, 2006. 3.5  You represent and warrant that you will, immediately upon termination of employment, deliver to MapInfo all documents, equipment, keys, identification badge, financial reports, financial analyses, programs, processes, items and data of any nature pertaining to your work with the MapInfo, and any other materials or documents that may constitute MapInfo's property including its Confidential Information. You further agree to forward to MapInfo thereafter any additional MapInfo property and/or Confidential Information that is identified by you and in your control and possession. 4. RELEASE AND FULL SATISFACTION OF CLAIMS 4.1  You knowingly and voluntarily release and forever discharge MapInfo, and any and all of its subsidiaries, as well as its directors, officers, agents, employees and their successors and assigns (collectively "MapInfo"), of and from any and all claims, known and unknown, which you (including, but not limited to any legal representative or other with legal right to pursue your claims) have or may have against MapInfo as of the date of execution of this Agreement, including, but not limited to, any alleged violation of: Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; Sections 1981 through 1988 of Title 42 of the United States Code; the Employee Retirement Income Security Act of 1974; the Americans with Disabilities Act of 1990; the Age Discrimination in Employment Act of 1967; the Family and Medical Leave Act of 1993; the New York State Human Rights Law, and any other local, county or municipal human rights or employment discrimination law, tort (whether intentional, negligent, or otherwise), or any claim for damages, costs, fees, or other expenses, including attorneys' fees, incurred in these matters. This release does not cover any claims relating to the enforcement by you of the conditions and terms contained in this Agreement. Nothing in this paragraph is intended to deprive you from filing an unemployment claim. 4.2  You agree to accept this Agreement in full and complete satisfaction of all compensation (incentive, severance, vacation, sick pay, etc.), and all claims and other causes of action of any kind whatsoever against MapInfo (as defined in 4.1) arising up to and including the termination of your employment, except those relating to or based upon MapInfo's performance under this Agreement. Further, you agree that you shall indemnify, defend and hold MapInfo harmless from and against any and all claims, damages and expenses (including attorneys' fees) for any breach by you or anyone acting at your direction, of this Section 4 or any other of your obligations under this Agreement.   YOU UNDERSTAND THAT THIS IS A TOTAL AND COMPLETE WAIVER AND RELEASE OF ALL CLAIMS (NOT RELATED TO MAPINFO'S BREACH OF THIS AGREEMENT) THAT YOU HAVE OR MAY HAVE AGAINST MAPINFO. 4.3  MapInfo hereby agrees to waive, and not to sue or otherwise pursue in any court or other forum, any and all alleged causes of action, claims or rights, administrative action or proceeding of any kind against you, including any claims arising out of your employment or the termination of your employment, except those based upon or relating to the enforcement of your performance of the terms and conditions contained in this Agreement and the Confidential and Non-Competition Agreement and except any claims of theft of company property, fraud, embezzlement or any act of dishonesty in reporting any matter to MapInfo which MapInfo discovers after execution of this Agreement. However, this shall not apply to any matter of which MapInfo has no present knowledge. 4.4  MapInfo may withhold or suspend payments due hereunder if MapInfo in good faith believes that you are in breach of the terms, covenants or conditions contained in this Agreement and have notified you in writing of such good faith suspicion. Any dispute that arises while any payment is still due and outstanding to you as to whether you indeed breached the agreement or committed any of the conduct described in the exclusion provisions of paragraph 4.3 above will be submitted to arbitration as described in paragraph 4.5 below. The suspension of payment will become effective upon MapInfo's mailing or sending you via facsimile or e-mail the notice of good faith suspicion and will remain suspended until the arbitrator has made his determination. You understand and agree that the withholding or suspension of payments under such circumstances will not in any manner affect your obligations under this Agreement. 4.5  The Parties agree to select an arbitrator pursuant to the American Arbitration Association's ("AAA") National Rules for the Resolution of Employment Disputes. The Parties will share the fees of the arbitrator and any fees charged by the AAA. The arbitration shall be held in Troy, New York. The arbitrator shall have the power to fully and finally decide disputes regarding the alleged breach of this Agreement and whether you committed any of the conduct stated in the exclusion provisions of paragraph 4.3, and make an award the arbitrator deems just and equitable in the circumstances. If the arbitrator finds that MapInfo in bad faith alleged a breach of the Agreement or in bad faith alleged that you committed the conduct stated in the exclusion provisions of paragraph 4.3 with the aim of merely suspending or delaying a payment due to you, the arbitrator may award you interest on the unpaid settlement amount and reasonable attorneys fees. The arbitrator shall not award reasonable attorneys fees to any party in any other circumstances. If the arbitrator determines that you had breached the Agreement or committed the alleged conduct stated in the exclusion provisions of paragraph 4.3, the arbitrator will determine that you forfeit any and all payments due and outstanding under this Agreement and order such additional damages as MapInfo may prove. The arbitrator's award will be binding on the Parties.   5. OTHER PROVISIONS 5.1  Unless you direct otherwise, in response to any reference inquiries MapInfo will only release dates of employment and positions held, and such references are to be directed to MapInfo's President and Chief Executive Officer (Mark Cattini) or MapInfo's Chairman of the Board (John Cavalier). If you do request in writing that we provide a written reference or recommendation beyond the information mentioned above, be advised that it is MapInfo's policy that this would need to be approved by the MapInfo's President and Chief Executive Officer prior to being released to anyone. 5.2  Due to circumstances unique to your separation of employment and your relationship with management, you agree not to seek employment with MapInfo at any time in the future unless MapInfo and you mutually agree that it would be mutually beneficial. 5.3  This Agreement shall be binding upon and inure to the benefit of MapInfo (including its directors, officers and employees) and you as applicable, its and your heirs, executors, assigns and administrators. 5.4  This Agreement shall be governed by and construed in accordance with the laws of the State of New York. It is hereby agreed that except for disputes referred to arbitration as stated in Section 4 above, the Supreme Court Rensselaer or Albany Country, or Federal District Court Northern District of New York, shall be the proper and sole jurisdictions for resolution of any disagreements regarding any of the terms and conditions contained herein. 5.5  The waiver of either party of a breach of any provisions of this Agreement shall not operate as or be construed as a waiver of any subsequent breach. 5.6  This document contains the entire agreement by MapInfo and you regarding your termination of employment, and constitutes the sole and complete understanding and obligations of MapInfo to you. This Agreement further replaces any and all previously executed employment agreements between you and MapInfo, such agreements will become null and void on the effective date of this Agreement. 5.7  Any notices to be provided to you under this Agreement shall be sent to your residential address on file with MapInfo. You agree to notify MapInfo in writing in the event your residential address changes. 6. YOUR RIGHTS 6.1  Time to Consider. YOU HAVE 21 DAYS FROM YOUR RECEIPT OF THIS AGREEMENT TO CONSIDER THIS OFFER. THE PARTIES AGREE THAT ANY CHANGES TO THIS OFFERED AGREEMENT WILL NOT RESTART THE 21-DAY PERIOD. 6.2  Right to Revoke. AFTER SIGNING THIS AGREEMENT, YOU MAY REVOKE IT WITHIN 10 DAYS OF THE DATE YOU EXECUTED, SUCH REVOCATION TO BE IN WRITING VIA CERTIFIED MAIL ADDRESSED TO BERT C. TOBIN AT THE ABOVE ADDRESS. 6.3  Advice of Counsel. MAPINFO HAS ADVISED YOU OF YOUR RIGHT TO OBTAIN THE ADVICE OF LEGAL COUNSEL BEFORE SIGNING THIS AGREEMENT, AND YOU REPRESENT TO MAPINFO THAT YOU HAVE EITHER OBTAINED SUCH ADVICE OR WILLINGLY DECIDED AGAINST ENGAGING COUNSEL. IN WITNESS OF the foregoing, the undersigned have executed this Agreement in duplicate originals effective as of the date first set forth above. THIS IS AN AGREEMENT FOR RELEASE AND WAIVER OF CLAIMS.      MAPINFO CORPORATION By:   /s/ Mark Cattini                         Mark Cattini     President and Chief Executive Officer     Dated:  3/10/06                          /s/ Bert C. Tobin                       Bert C. Tobin Dated:  3/10/06                              WITNESSED BY:   /s/ Jason W. Joseph                     WITNESSED BY:   /s/ Sally A. Rice                         DATED:  3/10/06                         NAME PRINTED:   Jason W. Joseph    DATED:   3/10/06                        PRINTED NAME:   Sally A. Rice       

  Exhibit 10.30 AMENDMENT NO. 1 LAFARGE NORTH AMERICA INC. EMPLOYEE STOCK PURCHASE PLAN (As Amended and Restated Effective June 1, 2005)      Pursuant to the provisions of Section 10.2 thereof, the Lafarge North America Inc. Employee Stock Purchase Plan (As Amended and Restated Effective June 1, 2005) (the “Plan”) is hereby amended in the following respects only:      FIRST: Effective June 1, 2005, Section 5.3(a) of the Plan is hereby amended by restatement in its entirety to read as follows:      (a) Authorization. Each Participant’s Enrollment Agreement will authorize payroll deductions each payday in the manner determined by the Administrative Committee, which deductions will be equal to a whole dollar amount and/or percentage of the Participant’s Compensation, but not more than the amount required to pay the Purchase Price under the right to purchase Common Stock granted under Section 5.2. Payroll deductions will begin as soon as administratively feasible following the Offering Date and will continue until the Participant’s termination of employment unless (i) the Participant ceases payroll deductions as provided in Section 5.3(b) or (ii) participation is earlier withdrawn or suspended by the Participant as provided in Section 7.1.      SECOND: Effective June 1, 2005, Section 6.9 of the Plan is hereby amended by restatement in its entirety to read as follows:      6.9 Dividends. With regard to dividends declared and paid on shares of Common Stock held in a Participant’s Share Account at the record date for such dividends, such dividends will be reinvested in additional shares of Common Stock unless the Participant elects, at the time and in the manner prescribed by the Administrative Committee, to receive such dividends in cash. Such dividend reinvestment purchases shall be made from Lafarge or in the open market on such terms and conditions as may be approved by the Administrative Committee, but in no event will any discount in the purchase price of shares of Common Stock provided for under the Plan for regular Plan purchases apply to dividend reinvestment purchases.   --------------------------------------------------------------------------------               IN WITNESS WHEREOF, this Amendment has been executed to be effective as of the 1st day of June, 2005.             LAFARGE NORTH AMERICA INC.       By   /s/ James Nealis         James Nealis, Executive Vice President —        Human Resources       

AMENDMENT NO. 2 TO FIRST AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT                     THIS AMENDMENT NO. 2 TO FIRST AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made as of October 31, 2006 (this “Amendment”) by and among Fifth Third Bank, an Ohio banking corporation (together with its successors and assigns, the “Lender”), and Zanett, Inc., a Delaware corporation (“Parent”), and each of Parent’s direct and indirect Subsidiaries identified on the signature pages hereof (such Subsidiaries, together with Parent, are referred to hereinafter each individually as a “Borrower”, and individually and collectively, jointly and severally, as the “Borrowers”), with respect to the First Amended and Restated Loan and Security Agreement entered into as of December 30, 2005 by the Lender and the Borrowers, as amended, supplemented, restated, or otherwise modified from time to time (the “Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement. R E C I T A L S                     WHEREAS, the Borrowers and the Lender have entered into the Agreement; and                     WHEREAS, the Lender has made Advances to the Borrowers pursuant to the terms of the Agreement; and                     WHEREAS, the Borrowers have requested that the Lender agree to certain amendments to the Agreement, and the Lender is willing to agree to the amendments requested by the Borrowers on the terms and conditions hereinafter set forth;                     NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:                     Section 1. Amendments to the Agreement.                                 (a) Section 2.1(a) of the Agreement is hereby deleted and the following inserted in its place:                 (a) Subject to the terms and conditions of this Agreement, and until November 30, 2006 (the “Revolving Credit Maturity Date”), the Lender agrees to make revolving credit Advances (the “Revolving Credit Advances”) to the Borrowers in an amount at any one time outstanding not to exceed an amount equal to the lesser of (i) the Maximum Revolver Amount, or (ii) the Borrowing Base. For purposes of this Agreement, “Borrowing Base,” as of any date of determination, shall mean the result of:                 (x) 75% of the amount of Eligible Accounts, plus --------------------------------------------------------------------------------                 (y) 90% of the amount of collected cash balances in the Concentration Account, minus                 (z) the aggregate amount reserves, if any, established by the Lender under Section 2.1(b).                 Notwithstanding anything to the contrary in this Agreement or in any of the other Loan Documents, no Revolving Credit Advances shall hereafter be made, and no funds or other assets shall hereafter be advanced by any of the other Borrowers, to Delta Communications Group, Inc., a Delaware corporation, without the prior specific written consent of the Lender, which the Lender may grant or withhold in its sole discretion.                                 (b) Section 2.9 of the Agreement is hereby deleted and the following inserted in its place:                 2.9 Fees. The Borrowers shall pay to the Lender the following fees and charges, which fees and charges shall be non-refundable when paid (irrespective of whether this Agreement is terminated thereafter):           (a) Audit Charges. For the account of the Lender, audit fees and charges as follows, (i) a fee of $750.00 per day, per auditor, plus out-of-pocket expenses for each financial audit of any or all of the Borrowers performed by personnel employed by the Lender and (ii) the actual charges paid or incurred by the Lender if it elects to employ the services of one or more third Persons to perform financial audits of any or all of the Borrowers. As long as no Default or Event of Default has occurred, the Lender will not conduct more than 2 financial audits of the Borrowers per calendar year and, assuming that each Borrower forwards to the executive offices of the Administrative Borrower all information requested by or on behalf of the Lender for the conduct of such audits, such audits will be conducted at the Administrative Borrower’s executive offices.           (b) Amendment Fee. An amendment fee in the aggregate amount of $10,000.                     Section 2. Representations and Warranties. The Borrowers hereby represent and warrant to the Lender that:                                 (a) no Default or Event of Default has occurred and is continuing on and as of the date hereof; 2 --------------------------------------------------------------------------------                                 (b) the representations and warranties of each of the Borrowers contained in the Agreement and the other Loan Documents are true and correct on and as of the date hereof as if made on and as of the date hereof, except to the extent that such representations and warranties expressly relate to a different date; and                                 (c) the execution and delivery by the Borrowers of this Amendment and the performance by the Borrowers of all of their respective agreements and obligations under this Amendment, the Agreement as amended hereby, and the other Loan Documents, respectively, are within the power and authority of the Borrowers and have been duly authorized by all necessary action on the part of the Borrowers, and the execution and delivery by the Borrowers of this Amendment, and the performance by them of the transactions contemplated hereby, do not and will not contravene any term or condition set forth in any agreement or instrument to which any Borrower is a party or by which any Borrower is bound.                     Section 3. Effectiveness and Conditions Precedent. This Amendment shall become effective upon the Lender’s receipt of: (a) counterparts of this Amendment executed and delivered by the Borrowers; (b) a Third Amended and Restated Revolving Note in form and substance satisfactory to the Lender that has been duly executed and delivered by the Borrowers; (c) certificates of officers of the Borrowers (in form and substance satisfactory to the Lender in its sole discretion) certifying to the incumbency of the officers executing this Amendment and related instruments and to the resolutions of the Boards of Directors of the Borrowers authorizing the execution of this Amendment and related instruments and consummation of the transactions contemplated hereby; and (d) the amendment fee referenced at Section 2.9(b) of the Agreement that has been paid by the Borrowers.                     Section 4. Status of Loan Documents; Additional Representations and Warranties.                                 (a) This Amendment is limited solely for the purposes and to the extent expressly set forth herein, and the terms, provisions, and conditions of the Loan Documents and the Liens granted under the Loan Documents, shall continue in full force and effect and are hereby ratified and confirmed in all respects. The Borrowers expressly reaffirm all of the Loan Documents and the debts and other obligations thereunder, the Borrowersagree that nothing contained herein shall operate to release any of the Borrowersor any other Person from liability to keep and perform the provisions, conditions, obligations, and agreements contained in the Loan Documents, except as may be herein modified, and the Borrowershereby reaffirm that each and every provision, condition, obligation, and agreement in such documents shall continue in full force and effect, except as may be herein modified. The validity, priority, and perfection of all security interests and other liens granted or created by the Loan Documents are hereby acknowledged and confirmed by the Borrowers, and the Borrowers agree that such documents shall continue to secure the Advances and the other Obligations, as the same may be amended by this Amendment, without any change, loss, or impairment of the priority of such security interests or other liens 3 --------------------------------------------------------------------------------                                 (b) No waiver or amendment of any terms or provisions of the Agreement made hereunder shall relieve any Borrower from complying with any other term or provision of the Agreement or any of the other Loan Documents.                                 (c) No action taken by the Lender prior to, on, or after the date hereof shall constitute a waiver of or modification of any term or condition of any of the Loan Documents, except as specifically set forth herein, or prejudice any rights which the Lender may now have as of the date hereof or may have in the future under or in connection with the Loan Documents, including, without limitation, all rights and remedies in connection with Defaults, Events of Default, and failures of conditions precedent to the making of Advances that have occurred and are continuing, all of which rights and remedies the Lender hereby expressly reserves.                                 (d) The Borrowers hereby represent and warrant to the Lender that except as heretofore disclosed in writing by the Borrower to the Lender, as of the date hereof there is no pending or, to the knowledge of any Borrower, threatened action, suit, proceeding, governmental investigation, or arbitration against or affecting any Borrower or any property of any Borrower.                     Section 5. Miscellaneous.                                 (a) No Waiver, Cumulative Remedies. No failure or delay or course of dealing on the part of the Lender in exercising any right, power, or privilege hereunder shall operate as an express or implied waiver thereof, nor shall any single or partial exercise of any such right, power, or privilege preclude any other or further exercise thereof or the exercise of any other right, power, or privilege hereunder. The rights, powers, and remedies herein expressly provided are cumulative and not exclusive of any rights, powers, or remedies which the Lender would otherwise have. No notice to or demand on any Borrower in any case shall entitle any Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Lender to any other or further action in any circumstances without notice or demand.                                 (b) Ratification, Etc. Except as expressly provided for herein, the Agreement and all documents, instruments, and agreements related thereto, including, but not limited to, the other Loan Documents, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The Agreement and this Amendment shall be read and construed as a single agreement. This Amendment shall constitute one of the Loan Documents and the obligations of the Borrowersunder this Amendment shall constitute Obligations for all purposes of the Loan Documents. All references in the Agreement, the Loan Documents, or any related agreement or instrument to the Agreement shall hereafter refer to the Agreement as amended hereby.                                 (c) Expenses. The Borrowers agree to pay and reimburse the Lender for all of its costs and expenses (including, without limitation, costs and expenses of legal counsel) in connection with this Amendment. 4 --------------------------------------------------------------------------------                                 (d) Bankruptcy; Insolvency. The Borrowers hereby represent and warrant that, on and as of the date hereof: no proceeding has been filed or commenced by or against anyBorrower for dissolution, termination, or liquidation; nor does there exist insolvency of anyBorrower, nor does anyBorrower fail to pay its debts as they become due in the ordinary course of business; nor has a creditor’s committee been appointed for the business of anyBorrower; nor has anyBorrower made an assignment for the benefit of creditors, or filed a petition in bankruptcy or for reorganization or to effect a plan of arrangement with creditors; nor has anyBorrower applied for or permitted the appointment of a receiver or trustee for any or all of its property, assets, or rights; nor is anyBorrower aware of any such receiver or trustee being appointed for any or all of its property, assets, or rights.                                 (e) Headings Descriptive. The headings of the several Sections and subsections of this Amendment are inserted for convenience only and shall not in any way affect the meaning or construction of any provision.                                 (f) Severability. In case any provision in or obligation under this Amendment shall be invalid, illegal, or unenforceable in any jurisdiction, the validity, legality, and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.                                 (g) Counterparts; Execution. This Amendment may be executed and delivered in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. The exchange of copies of this Amendment and of signature pages by facsimile or electronic mail transmission shall constitute effective execution and delivery of this Amendment as to the parties and may be used in lieu of the original Amendment for all purposes. Signatures of the parties transmitted by facsimile or electronic mail shall be deemed to be their original signatures for all purposes.                                 (h) Release. Each Borrower hereby acknowledges and confirms that: (i) it does not have any grounds, and hereby agrees not to challenge (or to allege or to pursue any matter, cause, or claim arising under or with respect to), in any case based upon acts or omissions of the Lender occurring prior to the date hereof or facts otherwise known to it as of the date hereof, the effectiveness, genuineness, validity, collectability, or enforceability of the Agreement or any of the other Loan Documents, the Obligations, the Liens securing such Obligations, or any of the terms or conditions of any Loan Document; and (ii) it does not possess (and hereby forever waives, remises, releases, discharges, and holds harmless the Lender and its affiliates, stockholders, directors, officers, employees, attorneys, agents, and representatives and each of their respective heirs, executors, administrators, successors, and assigns (collectively, the “Indemnified Parties”) from and against, and agrees not to allege or pursue) any action, cause of action, suit, debt, claim, counterclaim, cross-claim, demand, defense, offset, opposition, demand, and/or other right of action whatsoever, whether in law, equity, or otherwise (which it, all those claiming by, through, or under it, or its successors or assigns, have or may have) against the Indemnified Parties, or any of them, by reason of, any matter, cause, or thing whatsoever, with respect to events or omissions occurring or arising on or prior to the date hereof and relating to the Agreement or any of the other Loan Documents (including, without limitation, with 5 -------------------------------------------------------------------------------- respect to the payment, performance, validity, or enforceability of the Obligations, the Liens securing the Obligations, or any or all of the terms or conditions of any Loan Document) or any transaction relating thereto.                                 (i) Modification. No amendment or waiver of any provision of this Amendment shall be effective unless the same shall be in writing and signed by the Lender and the Borrowers, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.                     Section 7. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF ANY OTHER LAW. [Signature page to follow.] 6 --------------------------------------------------------------------------------                     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the date first written above.               ZANETT, INC., as the Administrative Borrower and a Borrower           By:             --------------------------------------------------------------------------------     Name:         --------------------------------------------------------------------------------     Title:         --------------------------------------------------------------------------------           ZANETT COMMERCIAL SOLUTIONS, INC., as a Borrower           By:           --------------------------------------------------------------------------------     Name:         --------------------------------------------------------------------------------     Title:         --------------------------------------------------------------------------------           PARAGON DYNAMICS, INC., as a Borrower           By:           --------------------------------------------------------------------------------     Name:         --------------------------------------------------------------------------------     Title:         --------------------------------------------------------------------------------             FIFTH THIRD BANK, as the Lender           By:         --------------------------------------------------------------------------------     Name: David Fuller     Title: Vice President   7 --------------------------------------------------------------------------------

EXHIBIT 10.59 INDEMNIFICATION AGREEMENT THIS AGREEMENT, made and entered into this __th day of _________, ____ by and between CPI Corp., a Delaware corporation (the “ Company”) and ______________ (the “ Indemnitee”). WHEREAS, it is essential to the Company to retain and attract as directors and officers the most capable persons available; WHEREAS, Indemnitee is a director of the Company; WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies in today’s environment; WHEREAS, in recognition of Indemnitee’s need for substantial protection against personal liability and to enhance Indemnitee’s continued service to the Company in an effective manner and in part to provide Indemnitee with specific contractual assurance that the indemnification protection will be available to Indemnitee (regardless of, among other things, any changes in the composition of the Company’s Board of Directors), and to induce Indemnitee to continue to provide services to the Company as a director, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the full extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies; NOW, THEREFORE, in consideration of the premises and of Indemnitee’s continuing to serve the Company directly or, at its request, another enterprise, and intending to be legally bound hereby, the parties hereto agree as follows: 1.   Certain Definitions. As used herein the following terms shall have the following meanings:              (a) Board of Directors: the Board of Directors of the Company.              (b) Change of Control: a change of control of a nature that would be required to be reported in response to Item 1(a) of the Current Report of Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) or would have been required to be so reported but for the fact that such event had been “previously reported” as that term is defined in Rule 12b-2 of Regulation 12B of the Exchange Act unless the transactions that give rise to the change of control are approved or ratified by a majority of the individuals who constitute the Board of Directors on the date hereof (the “Incumbent Board”) who are not employees of the Corporation; provided that, without limitation, notwithstanding anything herein to the contrary, such a change of control shall be deemed to have occurred if, (i) any Person is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 40% or more of the combined Voting Securities, (ii) individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this clause (ii), considered as though such person were a member of the Incumbent Board, or (iii) approval by the stockholders of the Company of a reorganization, merger or consolidation, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own, directly or indirectly, more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities, or a liquidation or dissolution of the Company or the sale of all or substantially all of the assets of the Company. (c)  Claim: any threatened, pending or completed action, suit, proceeding, arbitration or alternate dispute resolution proceeding, whether civil, criminal, administrative, investigative, or other, or any inquiry hearing or investigation (whether conducted by the Company or any other party or authority) that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding, arbitration or alternate dispute resolution proceeding. (d)  Expenses: include attorneys’ fees, expenses and charges and all other costs, travel expenses, fees of experts, transcript costs, filing fees, witness fees, telephone charges, postage, delivery service fees, expenses and obligations of any nature whatsoever paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event.   (e)  Indemnifiable Event: any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity. (f)  Independent Legal Counsel: Independent Legal Counsel shall refer to an attorney, selected by the Indemnitee and approved by the Board of Directors (which approval shall not be unreasonably withheld), who shall not have otherwise performed services for the Company or Indemnitee within the last five years. Independent Legal Counsel shall be a member of or of counsel to a firm having no fewer than fifty attorneys as of the date such Independent Legal Counsel is designated by the Indemnitee. Independent Legal Counsel shall not be counsel to the Indemnitee in any Claims arising in whole or in part from any Indemnifible Event and shall not be Indemnitee’s counsel in any proceeding to determine Indemnitee’s rights hereunder. Independent Legal Counsel shall also not be any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement, nor shall Independent Legal Counsel be any person who has been sanctioned or censured for ethical violations of applicable standards of professional conduct. In the event an Independent Legal Counsel resigns, becomes disabled, dies, or is otherwise unable in such counsel’s opinion to serve as Independent Legal Counsel, Indemnitee shall select, subject to the approval of the Board of Directors (which approval shall not be unreasonably withheld) a successor Independent Legal Counsel.         (g)  Person: any individual, corporation, partnership, group, association or other “person,” as such term is used in Section 14(d) of the Exchange Act, other than the Company or any corporation (or other business entity) controlling, controlled by or under common control with the Company or any employee benefit plan(s) sponsored or maintained by the Company or any corporation (or other business entity) controlling, controlled by or under common control with the Company. (h)  Voting Securities: all outstanding shares of capital stock of all classes and series of the Company entitled to vote generally in the election of directors of the Company, in each case hereunder voting together as a single class. 2.  Basic Indemnification Arrangement   (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in whole or in part out of) an Indemnifiable Event, subject to Sections 2(b), 2(c), and 2(d) hereof the Company shall indemnify Indemnitee to the fullest extent permitted by law as soon as practicable but in any event no later than thirty days after the Indemnitee presents written demand to the Company, against any and all reasonable Expenses and all judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement. The Indemnitee’s written demand shall also specify the Independent Legal Counsel selected by Indemnitee pursuant to the terms of this Agreement.                 If so requested by Indemnitee in writing, the Company shall advance (within ten business days of such request) any and all reasonable Expenses to Indemnitee or to the Indemnitee’s counsel (an “Expense Advance”). Such written request shall also specify the Independent Legal Counsel selected by Indemnitee if the Indemnitee has not previously specified such Independent Legal Counsel.                  Notwithstanding anything in this Agreement to the contrary and except as provided in  Section 3, prior to a Change of control, Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Claim.           (b) Notwithstanding the foregoing, (i) the obligations of the Company under Section 2(a) hereof shall be subject to the condition that within sixty (60) days of the Indemnitee’s written demand for an indemnification payment Independent Legal Counsel shall not have determined in a written opinion that Indemnitee would not be permitted to be indemnified under applicable law, and the Indemnitee hereby agrees to repay to the Company all indemnification amounts paid to Indemnitee by the Company under Section 2(a) hereof when and to the extent that Independent Legal Counsel so determines that such payments were not to be permitted under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 2(a) shall be subject to the condition that, within sixty days of the Indemnitee’s written request for an Expense Advance Independent Legal Counsel shall not have determined in a written opinion that Indemnitee would not be permitted to receive such Expense Advance under applicable law, and the Indemnitee hereby agrees to repay to the Company all Expense Advances paid to the Indemnitee by the Company under Section 2(a) hereof when and to the extent Independent Legal Counsel so determines that such Expense Advance was not permitted under applicable law; provided, however, that if in the case of any indemnification payment or Expense Advance under Section 2(a) hereof Indemnitee commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law (whether or not commenced prior to or following the determination of such Independent Legal Counsel) then (i) any determination made by Independent Legal Counsel that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding upon Indemnitee, (ii) the Company shall be obligated to make such indemnification payments and Expense Advances as would otherwise be required by Section 2(a) unless and until a final judicial determination is made establishing that Indemnitee is not entitled to indemnification or Expense Advances under applicable law, and (iii) Indemnitee shall not be required to reimburse the Company for any such payment or Expense Advance until a final judicial determination is made requiring the Indemnitee to make such repayment. (A final judicial determination, as used in this and other Sections of this Agreement, is a determination with respect to which all rights of appeal therefrom have been exhausted or lapsed.) The Indemnitee hereby further agrees to repay to the Company all indemnification payments and Expense Advances made to Indemnitee under Section 2(a) hereof when and to the extent any such final judicial determination determines that such payments or Expenses were not permitted under applicable law. The lndemnitee’s obligation to reimburse the Company for indemnification payments and Expense Advances shall be unsecured and no interest shall be charged or payable thereon. If Independent Legal Counsel determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part or to receive an Expense Advance under applicable law, Indemnitee shall have the right to commence litigation in any court sitting in the City or County of St. Louis, Missouri, or the State of Delaware having subject matter jurisdiction thereof and in which venue is properly seeking an initial determination by the court or challenging any such determination by the Independent Legal Counsel or any aspect thereof, or the legal or factual bases therefore, and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by Independent Legal Counsel otherwise and made within the sixty day period provided under this Section 2(b) shall be conclusive and binding on the Company and Indemnitee. (c)  The Company shall not make any payments to the Indemnitee pursuant to Section 2 hereof on account of any Claim for recovery of profits from the purchase or sale by the Indemnitee of securities of the Company that is based upon 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. (d)  The Indemnitee hereby agrees to repay to the Company on demand all indemnification payments and Expense Advances made to Indemnitee under Section 2 hereof that are determined in a final judicial determination (as hereinbefore defined) to have been made with respect to the Indemnitee’s act or conduct that was knowingly fraudulent or deliberately dishonest or to have constituted willful misconduct.   3.   Indemnification for Additional Expenses. The Company shall indemnify Indemnitee against any and all expenses (including attorneys’ fees) and, if requested by Indetmnitee, shall (within ten business days of such request) advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any claim asserted against or in connection with any action brought by Indemnitee for (i) indemnification or advance payment of reasonable Expenses by the Company under this Agreement or any other agreement, the Company’s Certificate of Incorporation, or the Bylaws of the Company now or hereafter in effect relating to Claims for Indemnifiable Events, and/or (ii) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be. 4.   Partial Indemnity. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith. In connection with any determination by Independent Legal Counsel or otherwise as to whether Indemnitee is entitled to be indemnified hereunder the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. 5.   Independent Legal Counsel Fees. The Company agrees to pay from time to time the reasonable fees of the Independent Legal Counsel and to indemnify fully such Independent Legal Counsel against any and all expenses (including attorneys’ fees), claims, causes of action, liabilities, damages, judgments, penalties and fines arising out of or relating to this Agreement or the engagement of such Independent Legal Counsel pursuant hereto. 6.   No Presumption. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. 7.   Non-exclusivity. The rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under any other agreement, the Company’s Certificate of Incorporation, the Bylaws of the Company, the Delaware General Corporation Law, or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would by afforded currently under the Company’s Certificate of Incorporation, the Bylaws of the Company and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. 8.   No Construction as Employment Agreement. Nothing contained herein shall be construed as providing the Indemnitee any right to be retained in the employ of the Company or any of its subsidiaries or to continue to serve as a director of the Company or any of its subsidiaries. 9.   Liability Insurance. 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 (which shall, if available at reasonable cost to the Company, provide coverage to the Indemnitee for at least six (6) years after the Indemnitee has ceased to be a director of the Company), in accordance with its or their terms, to the maximum extent of the coverage reasonably available for any Company director or officer. 10.   Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company or any affiliate of the Company against Indemnitee, Indemnitee’s spouse, heirs, executors, administrators or personal or legal representatives after the expiration of three years from the date of accrual of such cause of action, and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such three-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern. 11.   Amendments and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 12.   Subrogation. In the event of payment to the Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents, agreements, and instruments 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. 13.   No Duplication of Payment. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any other agreement, any insurance policy, the Company’s Certificate of Incorporation, the Bylaws of the Company or otherwise) of the amounts otherwise indemnifiable hereunder. 14.   Miscellaneous. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, beneficiaries, and personal and legal representatives. The Company shall require and cause any successor or assign (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly 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 if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director of the Company or of any other enterprise at the Company’s request. Section headings are included herein solely for convenience of reference and shall not be used in the construction and application of this Agreement. 15.   Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single Section or a paragraph or sentence thereof) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by applicable law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 16.   Governing Law. This Agreement and all amendments, modifications and supplements hereof shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.     IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the date first above written.       CPI CORP.   By:   /s/ J. David Pierson      J. David Pierson        Title:   Chairman of the Board and Chief Executive Officer           /s/     Indemnitee        

Exhibit 10.25   First South Farm Credit    713 South Pear Orchard Road, Suite 102 • Ridgeland, MS 39157 P.O. Box 1709 • Ridgeland, MS 39158-1709 (601) 977-8353 • fax (601) 977-8358 • www.firstsouthfarmcredit.com September 19, 2006 VIA E-MAIL Mr. Darrell Dubroc, CEO Vanguard Synfuels, LLC P.O. Box 399 Pollock, LA 71467   Re: Vanguard Synfuels, LLC (Vanguard’) Loans with First South Farm Credit, ACA (“First South”) Gentlemen: First South Farm Credit, ACA (“First South”) has considered the request to release the existing six individual guarantors (the “Guarantor”) for Vanguards loans, and accept a guarantee of Diametrics Medical, Inc. (“DMED”). This is to advise that First South agrees to release the (six individual) Guarantors provided all of the following conditions are met, satisfied, and delivered to First South, on or before 4:00 p.m. CDT, Friday, September 29, 2006. (1) DMED acquires 100% of the membership/ownership interest in Vanguard Synfuels, LLC, and satisfactory evidence thereof is furnished to First South; (2) First South is furnished with a copy of the Articles and By-Laws of DMED, as amended, to date, along with a certificate of good standing from the State of its incorporation; (3) Furnish evidence satisfactory to First South, in its sole discretion, of the cash investment of $7,000,000.00 in equity in DMED; (4) Furnish a certified resolution of the board of directors of DMED acknowledging that Vanguard is a 100% owned subsidiary of DMED and that it serves a legitimate business purpose for DMED to unconditionally and in solido (jointly and severally) with Vanguard, guarantee the timely payment and performance of all indebtedness and obligations of Vanguard to First South, which resolution would also authorize a duly designated (named) officer to execute the continuing guaranty agreement in the form of Exhibit “A” hereto (the “Guaranty”) for any and all of the present and/or future indebtedness and obligations of Vanguard to First South. First South would also need to be furnished with Vanguard’s Board of Managers/Directors consent resolution authorizing a named official to enter into the amendment to the loan agreement, under such terms and conditions as said official deems appropriate. (5) DMED would execute and deliver the Guaranty to First South. (6) Vanguard and First South would execute and deliver a First Amendment to Loan Agreement in the form of Exhibit ‘B’ attached hereto. -------------------------------------------------------------------------------- (7) Upon timely satisfaction of the above conditions, First South will promptly (within 2 business days) deliver to an agent for Vanguard, DMED and each of the Guarantors (“Agent”), as set forth in the First Amendment to Loan Agreement, the original of each of the existing Guarantors guaranty agreements, each marked “Cancelled and Released.” The delivery of the original guaranty agreements will be made by sending each of the six original guaranty agreements by U.S Certified Mail addressed to Agent as set forth in the First Amendment to Loan Agreement. ***************************************************************************** First South’s agreement to release the existing Guarantors is further conditioned upon all of the documents, documentation and supporting evidence required above to be satisfactory in form and substance to First South, in its sole discretion, and Vanguard shall promptly (on or before September 29, 2006) pay all costs and expenses related to the negotiation of this agreement and finalizing the proposed transaction, including paying First South’s attorney fees of $3,000.00. Failure to timely pay said sums shall be an Event of Default under the Loan Agreement. Finally, this proposal will expire and terminate unless Vanguard and DMED both accept this proposal in writing and return their signed acceptance to First South or on before 4:00 p.m. CDT Wednesday, September 20, 2006. Fax or electronic signatures will be deemed acceptable as originals, and the acceptance may be executed in multiple counterparts.   Very truly yours, FIRST SOUTH FARM CREDIT, ACA /s/ Timothy C. Dupuy Timothy C. Dupuy, Division Vice President   cc: John Hurt, via email: [email protected]    Cecil Corbello, via email: ccorbello@,firstsouthfarmcredit.com    A. Michael Dufilho, attorney, via email: [email protected]   AGREED TO AND ACCEPTED: VANGUARD SYNFUELS, LLC     AGREED TO AND ACCEPTED: DIAMETRICS MEDICAL, INC. By:   /s/ Darrell Dubroc     By:   /s/ W. Bruce Comer III Name:     Darrell Dubroc     Name:     W. Bruce Comer III   Duly Authorized       Duly Authorized Date:       Date:   -------------------------------------------------------------------------------- EXHIBIT “A” CONTINUING GUARANTY   Debtor:   Vanguard Svnfuels, LLC   Pollock. Louisiana In consideration of FIRST SOUTH FARM CREDIT, ACA (“Creditor”) making loans or advances or otherwise giving credit to the above named debtor (“Debtor”), as Creditor and Debtor may from time to time agree upon, the undersigned guarantor (“Guarantor”), does hereby unconditionally and in solido with Debtor, guarantee to Creditor, its successors and assigns, and all future holder or holders of this Continuing Guaranty, which is hereby declared to be transferable, the prompt payment of all debts, obligations, and liabilities, whether direct, indirect, absolute, contingent, secured, or unsecured, (hereinafter collectively referred to some times as “Obligations”) which Debtor may now or at any time, or times, hereafter owe, or be liable to pay to Creditor, and Guarantor agrees to pay the same promptly when due and at all times thereafter, without notice or demand. Should Debtor be or become insolvent, then Guarantor agrees to pay all Obligations forthwith whether then due or not due. Creditor may sell, pledge, assign, discount, rediscount, surrender, compound, release, renew, extend, forebear, alter, exchange, or otherwise deal with and/or dispose of any and all property, securities, collateral, endorsements and guaranties now or hereafter held by said Creditor as security, indemnity, or otherwise, upon such terms and conditions as Creditor in its sole discretion may deem advisable, and Creditor may, from time to time, make such changes in, renewals and extensions of time, mode and terms of payment of said Obligations of Debtor, and of the time, mode and terms of payment of all or any endorsements and guaranties of said Obligations made by others, as Creditor in its sole discretion may deem advisable; all without in any way affecting, limiting, or prejudicing the Creditor’s rights or the Guarantor’s liability under this Continuing Guaranty. Creditor is hereby irrevocably authorized and empowered at any and all times to impute or apply, as it may see fit, any payment or payments which may be made by Debtor or by others on Debtor’s Obligations. This guaranty shall be a continuing guaranty, and shall remain in full force and effect until terminated by the Creditor’s receipt of 30 days prior written notice of its termination; but such termination shall not affect or impair said Guarantor’s liability hereunder as to any Obligations of the Debtor existing on the effective date of such termination, or as to any subsequent modifications, renewals, extensions or changes in the form or evidence of said existing Obligations, whether such Obligations are matured or not upon the effective date of termination. Such termination shall not affect Creditor’s right to release, modify or otherwise change the security or collateral Creditor may hold, or to release or modify the liability of any of the undersigned signor(s) or of any other surety or guarantor of Debtor’s Obligations it being agreed that Creditor may take such action in regard to such security or collateral or sureties or guarantors as Creditor in its sole discretion may deem advisable. It is further agreed that upon receipt of notice of termination, Creditor is under no obligation to take any steps to enforce or collect Debtor’s Obligations and Creditor’s failure to take any steps to enforce or collect Debtor’s Obligations shall not affect Guarantor’s liability herein for all Obligations of Debtor to Creditor as of the effective date of the termination or as to any renewals, extensions or modifications or changes in the form of evidence of those Obligations. It is further agreed that the Guarantor’s liability under this Continuing Guaranty shall not be affected or impaired by any failure of Creditor to realize for any reason, upon any property, securities, collateral, endorsements or guaranties, nor by any alteration of any contract express or implied, nor by any change in Debtor, by death, dissolution, withdrawal, or otherwise, but Guarantor agrees to pay in any event the entire ultimate balance of Debtor’s Obligations (including principal, interest, attorney fees and costs of collection), now or hereafter due or owing by Debtor to Creditor. Creditor shall, at no time, and under no circumstances, be bound to resort to any collateral, securities, endorsements or guaranties now -------------------------------------------------------------------------------- or hereafter held by Creditor as security, indemnity, or otherwise, the undersigned Guarantor being bound to pay by this continuing Guaranty to the same extent as and in solido with Debtor, and said Guarantor specifically waives the right and the benefits of demanding division and discussion. Guarantor hereby waives any formal acceptance and waives notice of the acceptance of this Continuing Guaranty by Creditor, and Guarantor also waives notice of any loans, advances, discounts, or credits that may be made to Debtor, it being the intention of Guarantor that Creditor shall have the right to make loans, advances, and discounts, and to give credit to the Debtor on the faith hereof without notice to Guarantor. Guarantor hereby also waives notice of all defaults by said Debtor or others, and of all things now existing, or hereafter occurring in any dealings between or among Creditor, Debtor and others. The liability of Guarantor for payment shall be in solido with Debtor, and as to each undersigned Guarantor, if there be more than one, each shall be and shall, remain obligated to Creditor in the full amount set forth herein. Creditor may obtain other guarantees for Debtor in whole or in part, and may release the guarantors or any of them in whole or in part without affecting the liability of any Guarantor under this Continuing Guaranty. Each of the undersigned signers waives and renounces as to each other and any other guarantors and/or sureties of Debtor’s Obligations, the right of demanding, and the benefits of, division and discussion. This agreement, regardless where actually signed, shall be construed under and governed by the laws of the State of Louisiana and Guarantor consents to the personal jurisdiction of any federal or state court in Louisiana, if suit is filed to enforce this guaranty agreement. In the event this Continuing Guaranty is referred to an attorney at law for collection by suit, or otherwise, Guarantor will also owe and pay reasonable attorney fees relating to such collection efforts. THUS DONE, READ AND SIGNED in Los Angeles, California, on the 20th day of September, 2006.   PAYMENT GUARANTEED GUARANTOR: Diametrics Medical, Inc. /s/ W. Bruce Comer III W. Bruce Comer III CEO, Duly Authorized   WITNESSES: /s/ Tiffanie Baker Tiffanie Baker /s/ Heng Chuk Heng Chuk -------------------------------------------------------------------------------- EXHIBIT “B” FIRST AMENDMENT TO LOAN AGREEMENT WHEREAS, Vanguard Synfuels, LLC (“Vanguard”) entered into a Loan Agreement with First South Farm Credit, ACA (“First South”) dated January 12, 2006, (the “Original Agreement”) and in which the six individual existing guarantors of the liabilities and obligations of Vanguard to First South intervened; WHEREAS, as part of the sale of 100% membership interest in Vanguard to Diametrics Medical, Inc. (“DMED”), Vanguard has requested that First South release the original guarantors and accept DMED as a successor guarantor; WHEREAS, First South has agreed to that release conditioned upon certain terms and conditions, including the execution of this First Amendment to Loan Agreement (the “Amended Agreement”); NOW, THEREFORE, IT IS HEREBY AGREED as follows:   1. Paragraph V, Special Conditions, of the original agreement is hereby amended to read in its entirety as follows:   V. Special Conditions In the event of any conflict between the terms of this Loan Agreement and any of the other Loan Documents, the terms of such other Loan Documents shall control. Borrower and Lender agree that this Loan Agreement shall be governed by the laws of the jurisdiction listed in the address of Lender as shown on the first page of this Loan Agreement. The Loan is further subject to the following terms, covenants and special conditions. Conditions Precedent: The following shall be conditions precedent to any obligation of Lender to make the Loan to Borrower:     1. Lender shall have a first priority perfected lien and security interest in all Collateral at the time of Closing.     2. Execution and delivery of all Loan Documents, and the same shall be in full force and effect.     3. Borrower shall have obtained and furnished to Lender environmental audit(s) covering all Collateral, the results of which shall be satisfactory to Lender in its sole discretion. Lender shall also have received, to its satisfaction, evidence of Borrower’s compliance with all applicable environmental laws, regulations, policies, orders, and permitting and licensing requirements to which Borrower, its operations and the Collateral may be subject. Borrower shall provide Lender an Environmental Hazards Assessment (Form ENV-1) covering the Real Property.     4. Lender shall be provided mortgage title insurance covering the Real Property in the amount of the Loan containing no exceptions from coverage except those which are acceptable to Lender and issued by a title insurance company acceptable to Lender.     5. Lender shall be provided such information and documentation relating to the Real Property and its acquisition as Lender, in its discretion, may require. --------------------------------------------------------------------------------   6. Lender shall receive an opinion of legal counsel for Borrower certifying the good standing of Borrower and its authority and capacity to enter into the transaction contemplated herein, and such other matters as Lender may require, all in form and content satisfactory to Lender.     7. A FEMA Standard Flood Hazard Determination is to be completed. If real estate is determined to be in a flood zone, Borrower will provide evidence of flood insurance. Additional Covenants     •   Existing and future indebtedness and advances (“Obligations”) to Vanguard by its member, Diametrics Medical, Inc. (“DMED”) will be subordinate to First South’s debt, with no payments allowed on these Obligations without the prior written consent of First South;     •   The interest paid on the notes to the members will not be greater than the rate of interest paid by Vanguard on the First South debt;     •   Provide written notice, providing details of transaction, prior to pledging assets to or borrowing money from another lender;     •   Provide evidence of insurance, with First South named as mortgage/loss payee on the appropriate policies.     •   Advances on the proposed revolving line of credit will not exceed $500,000 from the closing date through February 28, 2006, with additional advances to be at the discretion of First South. Financial Covenants: The Borrower warrants and covenants to the following:     •   Achieve by FYE 12/31/06 and maintain thereafter a minimum working capital position of $750,000;     •   Achieve by FYE 12/31/06 and maintain thereafter an excess of total assets over total liabilities of not less than $1,500,000;     •   Maintain the Cash Flow Coverage Ratio (defined as the ratio of net profit after taxes plus depreciation minus capital expenditures minus salary distributions to key employees minus distributions to stockholders on their equity investment to the current portion of long-term debt) to be no less than 1.25 to 1.00, to be measured at each fiscal year end. New Covenants     1. Vanguard shall furnish, and/or cause DMED to furnish, quarterly internal, consolidated and consolidating financial statements of DMED and Vanguard, certified by the chief financial officer (CFO) of DMED and of Vanguard, on or before 30 days after each calendar quarter, which would show the separate financial status for each entity as well as the consolidated status and which financial statements would include a balance sheet, a statement of contingent liabilities and statement of income and expense for the prior quarter and year to date. Vanguard shall furnish or cause DMED to furnish directly to First South any reports, etc. filed by DMED with the SEC and furnish or cause DMED to furnish directly to First South any and all notices, reports sent to shareholders of DMED, each of said notices, reports, etc. to be furnished contemporaneously with the filing of such matters and/or sending such notices. Vanguard shall furnish, or cause DMED to furnish, DMED’s annual audited financial statements within 120 days of each fiscal year end; --------------------------------------------------------------------------------   2. Vanguard agrees and shall cause DMED to agree that First South directly or through its agents, may inspect the business, assets, books and records concerning DMED and/or Vanguard upon furnishing two business days prior written notice to DMED and/or Vanguard, as applicable, and Vanguard furnish, or cause DMED to furnish, as applicable, an officer to cooperate and work with First South and/or its agency reviewing any such books and records and/or the business and/or assets of Vanguard and/or DMED. All such reviews will be conducted during normal business hours.     3. Vanguard will cause DMED to execute an unconditional, in solido continuing guaranty agreement of all of the debts and obligations of Vanguard, whether present or future, to First South.     4. It is further agreed that in addition to any other events of default as contained in the original Loan Agreement, (i) if there is a default by Vanguard, complying with the terms and conditions of this Amended Agreement, or causing DMED to fully and timely comply with the terms and conditions of this Amended Agreement, this shall constitute an additional event of default.     5. It is hereby agreed that the original six individual existing guarantors will be released and their original guaranty agreements will be marked “cancelled” and promptly sent by U.S Certified Mail to Darrell Dubroc, as agent for the original six guarantors, addressed as follows: Darrel Dubroc, P.O. Box 399, Pollock, LA 71467.     6. Vanguard further agrees that if, and when, DMED changes its state of incorporation and/or amends its name, Vanguard shall furnish or cause DMED to promptly (within three (3) business days thereof), furnish copies of DMED’s revised organizational documents as filed with the Secretary of State of the state of its then incorporation and if DMED’s name is amended in, under the amended name DMED shall ratify and confirm under its amended name DMED’s obligation under the then existing continuing guaranty agreement previously executed by DMED. VI. No Novation. It is expressly agreed that this First Amendment does not constitute a novation of Vanguard’s existing obligations and/or any collateral and security for those obligations, except for the release of the original individual guarantors. Except as expressly and specifically modified herein, all of the terms and provisions of the Original Agreement remain in full force and effect. VII. This agreement may be executed in multiple originals and fax and/or electronic signatures shall be deemed effective as originals.   VANGUARD SYNFUELS, L.L.C. By:   /s/ Darrell J. Dubroc Name:   Darrell J. Dubroc Date:   September 20, 2006 FIRST SOUTH FARM CREDIT, ACA By:      Name:      Date:     

MORTGAGE LOAN PURCHASE AGREEMENT   THIS MORTGAGE LOAN PURCHASE AGREEMENT dated as of September 29, 2006 by and between FIRST HORIZON HOME LOAN CORPORATION, a Kansas corporation (the “Seller”), and FIRST HORIZON ASSET SECURITIES INC. (the “Purchaser”).   WHEREAS, the Seller owns certain Mortgage Loans (as hereinafter defined) which Mortgage Loans are more particularly listed and described in Schedule A attached hereto and made a part hereof.   WHEREAS, the Seller and the Purchaser wish to set forth the terms pursuant to which the Mortgage Loans, excluding the servicing rights thereto, are to be sold by the Seller to the Purchaser.   WHEREAS, the Seller will simultaneously transfer the servicing rights for the Mortgage Loans to First Tennessee Mortgage Services, Inc. (“FTMSI”) pursuant to the Servicing Rights Transfer and Subservicing Agreement (as hereinafter defined).   WHEREAS, the Purchaser will engage FTMSI to service the Mortgage Loans pursuant to the Servicing Agreement (as hereinafter defined).   NOW, THEREFORE, in consideration of the foregoing, other good and valuable consideration, and the mutual terms and covenants contained herein, the parties hereto agree as follows:     ARTICLE I Definitions   Agreement: This Mortgage Loan Purchase Agreement, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.   Alternative Title Product: Any one of the following: (i) Lien Protection Insurance issued by Integrated Loan Services or ATM Corporation of America, (ii) a Mortgage Lien Report issued by EPN Solutions/ACRAnet, (iii) a Property Plus Report issued by Rapid Refinance Service through SharperLending.com, or (iv) such other alternative title insurance product that the Seller utilizes in connection with its then current underwriting criteria. Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a day on which banking institutions in the City of Dallas, or the State of Texas or New York City is located are authorized or obligated by law or executive order to be closed.   Closing Date: September 29, 2006   Code: The Internal Revenue Code of 1986, including any successor or amendatory provisions.   Cooperative Corporation: The entity that holds title (fee or an acceptable leasehold estate) to the real property and improvements constituting the Cooperative Property and which governs the Cooperative Property, which Cooperative Corporation must qualify as a Cooperative Housing Corporation under Section 216 of the Code.       --------------------------------------------------------------------------------   Coop Shares: Shares issued by a Cooperative Corporation.   Cooperative Loan: Any Mortgage Loan secured by Coop Shares and a Proprietary Lease.   Cooperative Property: The real property and improvements owned by the Cooperative Corporation, including the allocation of individual dwelling units to the holders of the Coop Shares of the Cooperative Corporation.   Cooperative Unit: A single family dwelling located in a Cooperative Property.   Custodian: First Tennessee Bank National Association, and its successors and assigns, as custodian under the Custodial Agreement dated as of September 29, 2006 by and among The Bank of New York, as trustee, First Horizon Home Loan Corporation, as master servicer, and the Custodian.   Cut-Off Date: September 1, 2006.   Cut-off Date Principal Balance: As to any Mortgage Loan, the Stated Principal Balance thereof as of the close of business on the Cut-off Date.   Debt Service Reduction: With respect to any Mortgage Loan, a reduction by a court of competent jurisdiction in a proceeding under the Bankruptcy Code in the Scheduled Payment for such Mortgage Loan which became final and non-appealable, except such a reduction resulting from a Deficient Valuation or any reduction that results in a permanent forgiveness of principal.   Deficient Valuation: With respect to any Mortgage Loan, a valuation by a court of competent jurisdiction of the Mortgaged Property in an amount less than the then-outstanding indebtedness under the Mortgage Loan, or any reduction in the amount of principal to be paid in connection with any Scheduled Payment that results in a permanent forgiveness of principal, which valuation or reduction results from an order of such court which is final and non-appealable in a proceeding under the United States Bankruptcy Reform Act of 1978, as amended.   Delay Delivery Mortgage Loans: The Mortgage Loans for which all or a portion of a related Mortgage File is not delivered to the Trustee or to the Custodian on its behalf on the Closing Date. The number of Delay Delivery Mortgage Loans shall not exceed 25% of the aggregate number of Mortgage Loans as of the Closing Date.   Deleted Mortgage Loan: As defined in Section 4.1(c) hereof.   Determination Date: The earlier of (i) the third Business Day after the 15th day of each month, and (ii) the second Business Day prior to the 25th day of each month, or if such 25th day is not a Business Day, the next succeeding Business Day.   GAAP: Generally accepted accounting principles as in effect from time to time in the United States of America.     2 --------------------------------------------------------------------------------   Insurance Proceeds: Proceeds paid by an insurer pursuant to any insurance policy, including all riders and endorsements thereto in effect, including any replacement policy or policies, in each case other than any amount included in such Insurance Proceeds in respect of expenses covered by such insurance policy.   Liquidation Proceeds: Amounts, including Insurance Proceeds, received in connection with the partial or complete liquidation of defaulted Mortgage Loans, whether through trustee’s sale, foreclosure sale or otherwise or amounts received in connection with any condemnation or partial release of a Mortgaged Property.   MERS: Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.   MERS Mortgage Loan: Any Mortgage Loan registered with MERS on the MERS System.   MERS® System: The system of recording transfers of mortgages electronically maintained by MERS.   MIN: The Mortgage Identification Number for any MERS Mortgage Loan.   MOM Loan: Any Mortgage Loan as to which MERS is acting as mortgagee, solely as nominee for the originator of such Mortgage Loan and its successors and assigns.   Mortgage: The mortgage, deed of trust or other instrument creating a first lien on the property securing a Mortgage Note.   Mortgage File: The mortgage documents listed in Section 3.1 pertaining to a particular Mortgage Loan and any additional documents required to be added to the Mortgage File pursuant to this Agreement.   Mortgage Loans: The mortgage loans transferred, sold and conveyed by the Seller to the Purchaser, pursuant to this Agreement.   Mortgage Loan Purchase Price: With respect to any Mortgage Loan required to be purchased by the Seller pursuant to Section 4.1(c) hereof, an amount equal to the sum of (i) 100% of the unpaid principal balance of the Mortgage Loan on the date of such purchase, and (ii) accrued interest thereon at the applicable Mortgage Rate from the date through which interest was last paid by the Mortgagor to the first day in the month in which the Mortgage Loan Purchase Price is to be distributed to the Purchaser or its designees.   Mortgage Note: The original executed note or other evidence of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.   Mortgage Rate: The annual rate of interest borne by a Mortgage Note from time to time, net of any insurance premium charged by the mortgagee to obtain or maintain any primary insurance policy.     3 --------------------------------------------------------------------------------   Mortgaged Property: The underlying property securing a Mortgage Loan, which, with respect to a Cooperative Loan, is the related Coop Shares and Proprietary Lease.   Mortgagor: The obligor(s) on a Mortgage Note.   Principal Prepayment: Any payment of principal by a Mortgagor on a Mortgage Loan that is received in advance of its scheduled Due Date and is not accompanied by an amount representing scheduled interest due on any date or dates in any month or months subsequent to the month of prepayment.   Proprietary Lease: With respect to any Cooperative Unit, a lease or occupancy agreement between a Cooperative Corporation and a holder of related Coop Shares.   Purchase Price: $415,178,343.58   Purchaser: First Horizon Asset Securities, Inc., in its capacity as purchaser of the Mortgage Loans from the Seller pursuant to this Agreement.   Recognition Agreement: With respect to any Cooperative Loan, an agreement between the Cooperative Corporation and the originator of such Mortgage Loan which establishes the rights of such originator in the Cooperative Property.   Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due on the first day of the month allocable to principal and/or interest on such Mortgage Loan which, unless otherwise specified herein, shall give effect to any related Debt Service Reduction and any Deficient Valuation that affects the amount of the monthly payment due on such Mortgage Loan.   Security Agreement: The security agreement with respect to a Cooperative Loan.   Seller: First Horizon Home Loan Corporation, a Kansas corporation, and its successors and assigns, in its capacity as seller of the Mortgage Loans.   Servicing Agreement: The servicing agreement, dated as of November 26, 2002 by and between First Horizon Asset Securities, Inc., and its assigns, as owner, and First Tennessee Mortgage Services, Inc., as servicer.   Servicing Rights Transfer and Subservicing Agreement: The servicing rights transfer and subservicing agreement, dated as of November 26, 2002 by and between First Horizon Home Loan Corporation, as transferor and subservicer, and First Tennessee Mortgage Services, Inc., as transferee and servicer.   Stated Principal Balance: As to any Mortgage Loan, the unpaid principal balance of such Mortgage Loan as specified in the amortization schedule at the time relating thereto (before any adjustment to such amortization schedule by reason of any moratorium or similar waiver or grace period) after giving effect to any previous partial Principal Prepayments and Liquidation Proceeds allocable to principal (other than with respect to any Liquidated Mortgage Loan) and to the payment of principal due on such date and irrespective of any delinquency in payment by the related Mortgagor.     4 --------------------------------------------------------------------------------   Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for a Deleted Mortgage Loan which must, on the date of such substitution, (i) have a Stated Principal Balance, after deduction of the principal portion of the Scheduled Payment due in the month of substitution, not in excess of, and not more than 10% less than the Stated Principal Balance of the Deleted Mortgage Loan; (ii) have a Mortgage Rate not lower than the Mortgage Rate of the Deleted Mortgage Loan; (iii) have a maximum mortgage rate not more than 1% per annum higher or lower than the maximum mortgage rate of the Deleted Mortgage Loan; (iv) have a minimum mortgage rate specified in its related Mortgage Note not more than 1% per annum higher or lower than the minimum mortgage rate of the Deleted Mortgage Loan; (v) have the same mortgage index, reset period and periodic rate as the Deleted Mortgage Loan and a gross margin not more than 1% per annum higher or lower than that of the Deleted Mortgage Loan (vi) be accruing interest at a rate no lower than and not more than 1% per annum higher than, that of the Deleted Mortgage Loan; (vii) have a loan-to-value ratio no higher than that of the Deleted Mortgage Loan; (viii) have a remaining term to maturity no greater than (and not more than one year less than that of) the Deleted Mortgage Loan; (ix) not be a Cooperative Loan unless the Deleted Mortgage Loan was a Cooperative Loan and (x) comply with each representation and warranty set forth in Schedule B hereto.   Trustee: The Bank of New York and its successors and, if a successor trustee is appointed hereunder, such successor.     ARTICLE II Purchase and Sale   Section 2.1 Purchase Price. In consideration for the payment to it of the Purchase Price on the Closing Date, pursuant to written instructions delivered by the Seller to the Purchaser on the Closing Date, the Seller does hereby transfer, sell and convey to the Purchaser on the Closing Date, but with effect from the Cut-off Date, (i) all right, title and interest of the Seller in the Mortgage Loans, excluding the servicing rights thereto, and all property securing such Mortgage Loans, including all interest and principal received or receivable by the Seller with respect to the Mortgage Loans on or after the Cut-off Date and all interest and principal payments on the Mortgage Loans received on or prior to the Cut-off Date in respect of installments of interest and principal due thereafter, but not including payments of principal and interest due and payable on the Mortgage Loans on or before the Cut-off Date, and (ii) all proceeds from the foregoing. Items (i) and (ii) in the preceding sentence are herein referred to collectively as “Mortgage Assets.”   Section 2.2 Timing. The sale of the Mortgage Assets hereunder shall take place on the Closing Date.     ARTICLE III Conveyance and Delivery   Section 3.1 Delivery of Mortgage Files. In connection with the transfer and assignment set forth in Section 2.1 above, the Seller has delivered or caused to be delivered to the Trustee or to the Custodian on its behalf (or, in the case of the Delay Delivery Mortgage Loans, will deliver or cause to be delivered to the Trustee or to the Custodian on its behalf within thirty (30) days following the Closing Date) the following documents or instruments with respect to each Mortgage Loan so assigned (collectively, the “Mortgage Files”):     5 --------------------------------------------------------------------------------                (a)   (1) the original Mortgage Note endorsed by manual or facsimile signature in blank in the following form: “Pay to the order of ________________, without recourse,” with all intervening endorsements showing a complete chain of endorsement from the originator to the Person endorsing the Mortgage Note (each such endorsement being sufficient to transfer all right, title and interest of the party so endorsing, as noteholder or assignee thereof, in and to that Mortgage Note); or            (2) with respect to any Lost Mortgage Note, a lost note affidavit from the Seller stating that the original Mortgage Note was lost or destroyed, together with a copy of such Mortgage Note;          (b) except as provided below and for each Mortgage Loan that is not a MERS Mortgage Loan, the original recorded Mortgage or a copy of such Mortgage certified by the Seller as being a true and complete copy of the Mortgage, and in the case of each MERS Mortgage Loan, the original Mortgage, noting the presence of the MIN of the Mortgage Loans and either language indicating that the Mortgage Loan is a MOM Loan if the Mortgage Loan is a MOM Loan or if the Mortgage Loan was not a MOM Loan at origination, the original Mortgage and the assignment thereof to MERS, with evidence of recording indicated thereon, or a copy of the Mortgage certified by the public recording office in which such Mortgage has been recorded;     (c) a duly executed assignment of the Mortgage in blank (which may be included in a blanket assignment or assignments), together with, except as provided below, all interim recorded assignments of such mortgage (each such assignment, when duly and validly completed, to be in recordable form and sufficient to effect the assignment of and transfer to the assignee thereof, under the Mortgage to which the assignment relates); provided that, if the related Mortgage has not been returned from the applicable public recording office, such assignment of the Mortgage may exclude the information to be provided by the recording office;     (d) the original or copies of each assumption, modification, written assurance or substitution agreement, if any;     (e) either the original or duplicate original title policy (including all riders thereto) with respect to the related Mortgaged Property, if available, provided that the title policy (including all riders thereto) will be delivered as soon as it becomes available, and if the title policy is not available, and to the extent required pursuant to the second paragraph below or otherwise in connection with the rating of the Certificates, a written commitment or interim binder or preliminary report of the title issued by the title insurance or escrow company with respect to the Mortgaged Property, or, in lieu thereof, an Alternative Title Product; and     6 --------------------------------------------------------------------------------     (f) in the case of a Cooperative Loan, the originals of the following documents or instruments:   (1) The Coop Shares, together with a stock power in blank;   (2) The executed Security Agreement;   (3) The executed Proprietary Lease;   (4) The executed Recognition Agreement;   (5) The executed UCC-1 financing statement with evidence of recording thereon which have been filed in all places required to perfect the Seller’s interest in the Coop Shares and the Proprietary Lease; and   (6) Executed UCC-3 financing statements or other appropriate UCC financing statements required by state law, evidencing a complete and unbroken line from the mortgagee to the Trustee with evidence of recording thereon (or in a form suitable for recordation).   In the event that in connection with any Mortgage Loan that is not a MERS Mortgage Loan the Seller cannot deliver (i) the original recorded Mortgage or (ii) all interim recorded assignments satisfying the requirements of clause (b) or (c) above, respectively, concurrently with the execution and delivery hereof because such document or documents have not been returned from the applicable public recording office, the Seller shall promptly deliver or cause to be delivered to the Trustee or the Custodian on its behalf such original Mortgage or such interim assignment, as the case may be, with evidence of recording indicated thereon upon receipt thereof from the public recording office, or a copy thereof, certified, if appropriate, by the relevant recording office, but in no event shall any such delivery of the original Mortgage and each such interim assignment or a copy thereof, certified, if appropriate, by the relevant recording office, be made later than one year following the Closing Date; provided, however, in the event the Seller is unable to deliver or cause to be delivered by such date each Mortgage and each such interim assignment by reason of the fact that any such documents have not been returned by the appropriate recording office, or, in the case of each such interim assignment, because the related Mortgage has not been returned by the appropriate recording office, the Seller shall deliver or cause to be delivered such documents to the Trustee or the Custodian on its behalf as promptly as possible upon receipt thereof and, in any event, within 720 days following the Closing Date; provided, further, however, that the Seller shall not be required to provide an original or duplicate lender’s title policy (together with all riders thereto) if the Seller delivers an Alternative Title Product in lieu thereof. The Seller shall forward or cause to be forwarded to the Trustee or the Custodian on its behalf (i) from time to time additional original documents evidencing an assumption or modification of a Mortgage Loan and (ii) any other documents required to be delivered by the Seller to the Trustee. In the event that the original Mortgage is not delivered and in connection with the payment in full of the related Mortgage Loan and the public recording office requires the presentation of a “lost instruments affidavit and indemnity” or any equivalent document, because only a copy of the Mortgage can be delivered with the instrument of satisfaction or reconveyance, the Seller shall execute and deliver or cause to be executed and delivered such a document to the public recording office. In the case where a public recording office retains the original recorded Mortgage or in the case where a Mortgage is lost after recordation in a public recording office, the Seller shall deliver or cause to be delivered to the Trustee or the Custodian on its behalf a copy of such Mortgage certified by such public recording office to be a true and complete copy of the original recorded Mortgage.     7 --------------------------------------------------------------------------------   In addition, in the event that in connection with any Mortgage Loan the Seller cannot deliver or cause to be delivered the original or duplicate original lender’s title policy (together with all riders thereto), satisfying the requirements of clause (v) above, concurrently with the execution and delivery hereof because the related Mortgage has not been returned from the applicable public recording office, the Seller shall promptly deliver or cause to be delivered to the Trustee or the Custodian on its behalf such original or duplicate original lender’s title policy (together with all riders thereto) upon receipt thereof from the applicable title insurer, but in no event shall any such delivery of the original or duplicate original lender’s title policy be made later than one year following the Closing Date; provided, however, in the event the Seller is unable to deliver or cause to be delivered by such date the original or duplicate original lender’s title policy (together with all riders thereto) because the related Mortgage has not been returned by the appropriate recording office, the Seller shall deliver or cause to be delivered such documents to the Trustee or the Custodian on its behalf as promptly as possible upon receipt thereof and, in any event, within 720 days following the Closing Date.   Notwithstanding anything to the contrary in this Agreement, within thirty days after the Closing Date, the Seller shall either (i) deliver or cause to be delivered to the Trustee or the Custodian on its behalf the Mortgage File as required pursuant to this Section 3.1 for each Delay Delivery Mortgage Loan or (ii) (A) substitute or cause to be substituted a Substitute Mortgage Loan for the Delay Delivery Mortgage Loan or (B) repurchase or cause to be repurchased the Delay Delivery Mortgage Loan, which substitution or repurchase shall be accomplished in the manner and subject to the conditions set forth in Section 4.1 (treating each Delay Delivery Mortgage Loan as a Deleted Mortgage Loan for purposes of such Section 4.1), provided, however, that if the Seller fails to deliver a Mortgage File for any Delay Delivery Mortgage Loan within the thirty-day period provided in the prior sentence, the Seller shall use its best reasonable efforts to effect or cause to be effected a substitution, rather than a repurchase of, such Deleted Mortgage Loan and provided further that the cure period provided for in Section 4.1 hereof shall not apply to the initial delivery of the Mortgage File for such Delay Delivery Mortgage Loan, but rather the Seller shall have five (5) Business Days to cure or cause to be cured such failure to deliver.     ARTICLE IV Representations and Warranties   Section 4.1 Representations and Warranties of the Seller. (a) The Seller hereby represents and warrants to the Purchaser, as of the date of execution and delivery hereof, that:   (1) The Seller is duly organized as a Kansas corporation and is validly existing and in good standing under the laws of the State of Kansas and is duly authorized and qualified to transact any and all business contemplated by this Agreement to be conducted by the Seller in any state in which a Mortgaged Property is located or is otherwise not required under applicable law to effect such qualification and, in any event, is in compliance with the doing business laws of any such state, to the extent necessary to ensure its ability to enforce each Mortgage Loan and to perform any of its other obligations under this Agreement in accordance with the terms thereof.     8 --------------------------------------------------------------------------------   (2) The Seller has the full corporate power and authority to sell each Mortgage Loan, and to execute, deliver and perform, and to enter into and consummate the transactions contemplated by this Agreement and has duly authorized by all necessary corporate action on the part of the Seller the execution, delivery and performance of this Agreement; and this Agreement, assuming the due authorization, execution and delivery thereof by the other parties thereto, constitutes a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except that (a) the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, receivership and other similar laws relating to creditors’ rights generally and (b) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.   (3) The execution and delivery of this Agreement by the Seller, the sale of the Mortgage Loans by the Seller under this Agreement, the consummation of any other of the transactions contemplated by this Agreement, and the fulfillment of or compliance with the terms thereof are in the ordinary course of business of the Seller and will not (a) result in a material breach of any term or provision of the charter or by-laws of the Seller or (b) materially conflict with, result in a material breach, violation or acceleration of, or result in a material default under, the terms of any other material agreement or instrument to which the Seller is a party or by which it may be bound, or (c) constitute a material violation of any statute, order or regulation applicable to the Seller of any court, regulatory body, administrative agency or governmental body having jurisdiction over the Seller; and the Seller is not in breach or violation of any material indenture or other material agreement or instrument, or in violation of any statute, order or regulation of any court, regulatory body, administrative agency or governmental body having jurisdiction over it which breach or violation may materially impair the Seller’s ability to perform or meet any of its obligations under this Agreement.   (4) No litigation is pending or, to the best of the Seller’s knowledge, threatened against the Seller that would prohibit the execution or delivery of, or performance under, this Agreement by the Seller.   (5) The Seller is a member of MERS in good standing, and will comply in all material respects with the rules and procedures of MERS in connection with the servicing of the MERS Mortgage Loans for as long as such Mortgage Loans are registered with MERS.     9 --------------------------------------------------------------------------------     (b) The Seller hereby makes the representations and warranties set forth in Schedule B hereto to the Purchaser, as of the Closing Date, or if so specified therein, as of the Cut-off Date.         (c)  Upon discovery by either of the parties hereto of a breach of a representation or warranty made pursuant to Schedule B hereto that materially and adversely affects the interests of the Purchaser in any Mortgage Loan, the party discovering such breach shall give prompt notice thereof to the other party. The Seller hereby covenants that within 90 days of the earlier of its discovery or its receipt of written notice from the Purchaser of a breach of any representation or warranty made pursuant to Schedule B hereto which materially and adversely affects the interests of the Purchaser in any Mortgage Loan, it shall cure such breach in all material respects, and if such breach is not so cured, shall, (i) if such 90-day period expires prior to the second anniversary of the Closing Date, remove such Mortgage Loan (a “Deleted Mortgage Loan”) from the pools of mortgages listed on Schedule B hereto and substitute in its place a Substitute Mortgage Loan, in the manner and subject to the conditions set forth in this Section; or (ii) repurchase the affected Mortgage Loan or Mortgage Loans from the Purchaser at the Mortgage Loan Purchase Price in the manner set forth below. With respect to the representations and warranties described in this Section which are made to the best of the Seller’s knowledge, if it is discovered by either the Seller or the Purchaser that the substance of such representation and warranty is inaccurate and such inaccuracy materially and adversely affects the value of the related Mortgage Loan or the interests of the Purchaser therein, notwithstanding the Seller’s lack of knowledge with respect to the substance of such representation or warranty, such inaccuracy shall be deemed a breach of the applicable representation or warranty.   With respect to any Substitute Mortgage Loan or Loans, the Seller shall deliver to the Trustee or to the Custodian on its behalf the Mortgage Note, the Mortgage, the related assignment of the Mortgage, and such other documents and agreements as are required by Section 3.1, with the Mortgage Note endorsed and the Mortgage assigned as required by Section 3.1. No substitution is permitted to be made in any calendar month after the Determination Date for such month. Scheduled Payments due with respect to Substitute Mortgage Loans in the month of substitution will be retained by the Seller. Upon such substitution, the Substitute Mortgage Loan or Loans shall be subject to the terms of this Agreement in all respects, and the Seller shall be deemed to have made with respect to such Substitute Mortgage Loan or Loans, as of the date of substitution, the representations and warranties made pursuant to Schedule B hereto with respect to such Mortgage Loan.   It is understood and agreed that the obligation under this Agreement of the Seller to cure, repurchase or replace any Mortgage Loan as to which a breach has occurred and is continuing shall constitute the sole remedy against the Seller respecting such breach available to the Purchaser on its behalf.   The representations and warranties contained in this Agreement shall not be construed as a warranty or guaranty by the Seller as to the future payments by any Mortgagor.     10 --------------------------------------------------------------------------------   It is understood and agreed that the representations and warranties set forth in this Section 4.1 shall survive the sale of the Mortgage Loans to the Purchaser hereunder.     ARTICLE V Miscellaneous   Section 5.1 Transfer Intended as Sale. It is the express intent of the parties hereto that the conveyance of the Mortgage Loans by the Seller to the Purchaser be, and be construed as, an absolute sale thereof in accordance with GAAP and for regulatory purposes. It is, further, not the intention of the parties that such conveyances be deemed a pledge thereof by the Seller to the Purchaser. However, in the event that, notwithstanding the intent of the parties, the Mortgage Loans are held to be the property of the Seller or the Purchaser, respectively, or if for any other reason this Agreement is held or deemed to create a security interest in such assets, then (i) this Agreement shall be deemed to be a security agreement within the meaning of the Uniform Commercial Code of the State of Texas and (ii) the conveyance of the Mortgage Loans provided for in this Agreement shall be deemed to be an assignment and a grant by the Seller to the Purchaser of a security interest in all of the Mortgage Loans, whether now owned or hereafter acquired.   The Seller and the Purchaser shall, to the extent consistent with this Agreement, take such actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of the Agreement. The Seller and the Purchaser shall arrange for filing any Uniform Commercial Code continuation statements in connection with any security interest granted hereby.   Section 5.2 Seller’s Consent to Assignment. The Seller hereby acknowledges the Purchaser’s right to assign, transfer and convey all of the Purchaser’s rights under this Agreement to a third party and that the representations and warranties made by the Seller to the Purchaser pursuant to this Agreement will, in the case of such assignment, transfer and conveyance, be for the benefit of such third party. The Seller hereby consents to such assignment, transfer and conveyance.   Section 5.3 Specific Performance. Either party or its assignees may enforce specific performance of this Agreement.   Section 5.4 Notices. All notices, demands and requests that may be given or that are required to be given hereunder shall be sent by United States certified mail, postage prepaid, return receipt requested, to the parties at their respective addresses as follows:   If to the Purchaser:   4000 Horizon Way      Irving, Texas 75063      Attn: Larry P. Cole If to the Seller:   4000 Horizon Way      Irving, Texas 75063      Attn: Larry P. Cole Section 5.5 Choice of Law. This Agreement shall be construed in accordance with and governed by the substantive laws of the State of Texas applicable to agreements made and to be performed in the State of Texas and the obligations, rights and remedies of the parties hereto shall be determined in accordance with such laws.   [remainder of page intentionally left blank]     11 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the Purchaser and the Seller have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the 29th day of September, 2006.           FIRST HORIZON HOME LOAN CORPORATION, as Seller               By:       -------------------------------------------------------------------------------- Terry McCoy   Executive Vice President         FIRST HORIZON ASSET SECURITIES INC., as Purchaser               By:       -------------------------------------------------------------------------------- Alfred Chang   Vice President   Mortgage Loan Purchase Agreement - 2006-AA6 Signature Page   12 --------------------------------------------------------------------------------   SCHEDULE A   [Available Upon Request From Trustee]       A - 1 --------------------------------------------------------------------------------   SCHEDULE B   Representations and Warranties as to the Mortgage Loans   First Horizon Home Loan Corporation (the “Seller”) hereby makes the representations and warranties set forth in this Schedule B on which First Horizon Asset Securities Inc. (the “Purchaser”) relies in accepting the Mortgage Loans. Such representations and warranties speak as of the execution and delivery of the Mortgage Loan Purchase Agreement, dated as of September 29, 2006 (the “MLPA”), between First Horizon Home Loan Corporation, as seller, and the Purchaser and as of the Closing Date, or if so specified herein, as of the Cut-off Date or date of origination of the Mortgage Loans, but shall survive the sale, transfer, and assignment of the Mortgage Loans to the Purchaser and any subsequent sale, transfer and assignment by the Purchaser to a third party. Capitalized terms used but not otherwise defined in this Schedule B shall have the meanings ascribed thereto in the MLPA or the Pooling and Servicing Agreement, dated as of September 1, 2006, between First Horizon Asset Securities Inc., as depositor, First Horizon Home Loan Corporation, as master servicer, and The Bank of New York, as trustee.     (1) The information set forth on Schedule A to the MLPA, with respect to each Mortgage Loan is true and correct in all material respects as of the Closing Date.     (2) Each Mortgage is a valid and enforceable first lien on the Mortgaged Property subject only to (a) the lien of nondelinquent current real property taxes and assessments and liens or interests arising under or as a result of any federal, state or local law, regulation or ordinance relating to hazardous wastes or hazardous substances and, if the related Mortgaged Property is a unit in a condominium project or Planned Unit Development, any lien for common charges permitted by statute or homeowner association fees, (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of such Mortgage, such exceptions appearing of record being generally acceptable to mortgage lending institutions in the area wherein the related Mortgaged Property is located or specifically reflected in the appraisal made in connection with the origination of the related Mortgage Loan, and (c) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by such Mortgage.     (3) Immediately prior to the assignment of the Mortgage Loans to the Purchaser, the Seller had good title to, and was the sole owner of, each Mortgage Loan free and clear of any pledge, lien, encumbrance or security interest and had full right and authority, subject to no interest or participation of, or agreement with, any other party, to sell and assign the same pursuant to this Agreement.     (4) As of the date of origination of each Mortgage Loan, there was no delinquent tax or assessment lien against the related Mortgaged Property.     B - 1 --------------------------------------------------------------------------------     (5) There is no valid offset, defense or counterclaim to any Mortgage Note or Mortgage, including the obligation of the Mortgagor to pay the unpaid principal of or interest on such Mortgage Note.     (6) There are no mechanics’ liens or claims for work, labor or material affecting any Mortgaged Property which are or may be a lien prior to, or equal with, the lien of such Mortgage, except those which are insured against by the title insurance policy referred to in item (11) below.     (7) To the best of the Seller’s knowledge, no Mortgaged Property has been materially damaged by water, fire, earthquake, windstorm, flood, tornado or similar casualty (excluding casualty from the presence of hazardous wastes or hazardous substances, as to which the Seller makes no representation) so as to affect adversely the value of the related Mortgaged Property as security for such Mortgage Loan. With respect to the representations and warranties contained within this item (7) that are made to the knowledge or the best knowledge of the Seller or as to which the Seller has no knowledge, if it is discovered that the substance of any such representation and warranty is inaccurate and the inaccuracy materially and adversely affects the value of the related Mortgage Loan, or the interest therein of the Purchaser, then notwithstanding the Seller’s lack of knowledge with respect to the substance of such representation and warranty being inaccurate at the time the representation and warranty was made, such inaccuracy shall be deemed a breach of the applicable representation and warranty and the Seller shall take such action described in Section 4.1(c) of this Agreement in respect of such Mortgage Loan.     (8) Each Mortgage Loan at origination complied in all material respects with applicable local, state and federal laws, including, without limitation, usury, equal credit opportunity, real estate settlement procedures, truth-in-lending and disclosure laws and specifically applicable predatory and abusive lending laws.     (9) No Mortgage Loan is a “high cost loan” as defined by the specific applicable predatory and abusive lending laws.     (10) Except as reflected in a written document contained in the related Mortgage File, the Seller has not modified the Mortgage in any material respect; satisfied, cancelled or subordinated such Mortgage in whole or in part; released the related Mortgaged Property in whole or in part from the lien of such Mortgage; or executed any instrument of release, cancellation, modification or satisfaction with respect thereto.     (11) A lender’s policy of title insurance together with a condominium endorsement and extended coverage endorsement, if applicable, in an amount at least equal to the Cut-off Date Principal Balance of each such Mortgage Loan or a commitment (binder) to issue the same was effective on the date of the origination of each Mortgage Loan, each such policy is valid and remains in full force and effect, or, in lieu thereof, an Alternative Title Product.     B - 2 --------------------------------------------------------------------------------     (12) To the best of the Seller’s knowledge, all of the improvements which were included for the purpose of determining the appraised value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of such property, and no improvements on adjoining properties encroach upon the Mortgaged Property, unless such failure to be wholly within such boundaries and restriction lines or such encroachment, as the case may be, does not have a material effect on the value of such Mortgaged Property.     (13) To the best of the Seller’s knowledge, as of the date of origination of each Mortgage Loan, no improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning law or regulation unless such violation would not have a material adverse effect on the value of the related Mortgaged Property. To the best of the Seller’s knowledge, all inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities, unless the lack thereof would not have a material adverse effect on the value of such Mortgaged Property.     (14) The Mortgage Note and the related Mortgage are genuine, and each is the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms and under applicable law.     (15) The proceeds of the Mortgage Loans have been fully disbursed and there is no requirement for future advances thereunder.     (16) The related Mortgage contains customary and enforceable provisions which render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security, including, (i) in the case of a Mortgage designated as a deed of trust, by trustee’s sale, and (ii) otherwise by judicial foreclosure.     (17) With respect to each Mortgage constituting a deed of trust, a trustee, duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in such Mortgage, and no fees or expenses are or will become payable by the holder of the Mortgage to the trustee under the deed of trust, except in connection with a trustee’s sale after default by the Mortgagor.     (18) As of the Closing Date, the improvements upon each Mortgaged Property are covered by a valid and existing hazard insurance policy with a generally acceptable carrier that provides for fire and extended coverage and coverage for such other hazards as are customarily required by institutional single family mortgage lenders in the area where the Mortgaged Property is located, and the Seller has received no notice that any premiums due and payable thereon have not been paid; the Mortgage obligates the Mortgagor thereunder to maintain all such insurance including flood insurance at the Mortgagor’s cost and expense. Anything to the contrary in this item (18) notwithstanding, no breach of this item (18) shall be deemed to give rise to any obligation of the Seller to repurchase or substitute for such affected Mortgage Loan or Loans so long as the Seller maintains a blanket policy.     B - 3 --------------------------------------------------------------------------------     (19) If at the time of origination of each Mortgage Loan, the related Mortgaged Property was in an area then identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, a flood insurance policy in a form meeting the then-current requirements of the Flood Insurance Administration is in effect with respect to such Mortgaged Property with a generally acceptable carrier.     (20) To the best of the Seller’s knowledge, there is no proceeding pending or threatened for the total or partial condemnation of any Mortgaged Property, nor is such a proceeding currently occurring.     (21) To best of the Seller’s knowledge, there is no material event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material non-monetary default, breach, violation or event of acceleration under the Mortgage or the related Mortgage Note; and the Seller has not waived any material non-monetary default, breach, violation or event of acceleration.     (22) Any leasehold estate securing a Mortgage Loan has a stated term at least as long as the term of the related Mortgage Loan.     (23) Each Mortgage Loan was selected from among the outstanding adjustable-rate one- to four-family mortgage loans in the Seller’s portfolio at the Closing Date as to which the representations and warranties made with respect to the Mortgage Loans set forth in this Schedule B can be made. No such selection was made in a manner intended to adversely affect the interests of the Certificateholders.     (24) The Mortgage Loans provide for the full amortization of the amount financed over a series of monthly payments.     (25) At origination, substantially all of the Mortgage Loans in Pool I, Pool II and Pool III had stated terms to maturity of 30 years, 20 to 30 years, and 30 years, respectively.     (26) Scheduled monthly payments made by the Mortgagors on the Mortgage Loans either earlier or later than their Due Dates will not affect the amortization schedule or the relative application of the payments to principal and interest.     (27) The Mortgagors may prepay all of the Mortgage Loans at any time without penalty.     (28) Approximately 64.34% of the Mortgage Loans in Mortgage Pool I, 25.85% of the Mortgage Loans in Mortgage Pool II and 29.51% of the Mortgage Loans in Mortgage Pool III are jumbo mortgage loans that have Stated Principal Balances at origination that exceed the then applicable limitations for purchase by Fannie Mae and Freddie Mac.     B - 4 --------------------------------------------------------------------------------     (29) Each Mortgage Loan in Mortgage Pool I was originated on or after May 24, 2006. Each Mortgage Loan in Mortgage Pool II was originated on or after January 25, 2005. Each Mortgage Loan in Mortgage Pool III was originated on or after April 11, 2006.     (30) The latest stated maturity date of any Mortgage Loan in Mortgage Pool I is September 1, 2036, and the earliest is June 1, 2036. The latest stated maturity date of any Mortgage Loan in Mortgage Pool II is October 1, 2036, and the earliest is August 1, 2026. The latest stated maturity date of any Mortgage Loan in Mortgage Pool III is September 1, 2036, and the earliest is May 1, 2036.     (31) No Mortgage Loan was delinquent more than 30 days as of the Cut-off Date.     (32) No Mortgage Loan had a Loan-to-Value Ratio at origination of more than 95%. Generally, each Mortgage Loan with a Loan-to-Value Ratio at origination of greater than 80% is covered by a Primary Insurance Policy issued by a mortgage insurance company that is acceptable to Fannie Mae or Freddie Mac.     (33) Each Mortgage Loan constitutes a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code.     (34) No Mortgage Loan is a “high cost loan” as defined by the specific applicable local, state or federal predatory and abusive lending laws. In addition, no Mortgage Loan is a “High Cost Loan” or a “Covered Loan”, as applicable (as such terms are defined in the then current Standard & Poor’s LEVELSâ Glossary which is now Version 5.7 Revised, Appendix E) and no Mortgage Loan originated on or after October 1, 2002 through March 6, 2003 is governed by the Georgia Fair Lending Act.     (35) Appraisal form 1004 or form 2055 with an interior inspection for first lien mortgage loans has been obtained for all related mortgaged properties, other than condominiums, investment properties, two to four unit properties and exempt properties, for which appraisal form 1004 or form 2055 has not been obtained.   Appraisal form 704, 2065 or 2055 with an exterior only inspection for junior lien mortgages combined with first lien mortgages (including home equity lines of credit) has been obtained for all related mortgaged properties, other than condominiums, investment properties, two to four unit properties and exempt properties, for which appraisal form 1004 or form 2055 has not been obtained. Appraisal form 704, 2065 or 2055 with an exterior only inspection for all other junior lien mortgages has been obtained for all related mortgaged properties, other than those related mortgaged properties that qualify for an Automated Valuation Model.     B - 5 --------------------------------------------------------------------------------  

Exhibit 10.1 SECURED CONVERTIBLE PROMISSORY NOTE $10,000,000 March 30, 2006 The undersigned, HyperFeed Technologies, Inc., a Delaware corporation (“Borrower”), hereby promises to pay to PICO Holdings, Inc., a California corporation, (“Lender”), the principal sum or so much of the principal sum of Ten Million Dollars ($10,000,000) as may from time to time have been advanced and be outstanding, together with accrued interest as provided herein. Borrower and Lender acknowledge that PICO Holdings, Inc. loaned the principal sum of $4,160,000 to HyperFeed Technologies, Inc. on March 15, 2006 by means of a Promisorry Note. The parties agree that the unpaid principal and accrued interest under said March 15, 2006 Promissory Note shall be included in the $10,000,000 principal sum of this Secured Convertible Promissory Note (“Note”), and that accordingly $4,160,000 principal and accrued interest has been advanced under the terms of this Note. The parties also agree that said March 15, 2006 Promissory Note is hereby cancelled. Section L of this Note contains certain defined terms used in this Note. A. Principal. 1. Advances. Borrower may from time to time request advances from Lender (individually an “Advance” and collectively the “Advances”) by giving written notice to Lender in accordance with the terms hereof, which notice shall indicate the amount of the Advance requested and the proposed use of the Advance proceeds. Provided that no Event of Default is in existence and that the requested Advance would not cause an Event of Default to occur, Lender shall make the Advance to Borrower within five (5) days of receipt of Borrower’s notice. Lender shall not be obligated to make an Advance to the extent that such Advance when aggregated with all Advances would exceed Ten Million Dollars ($10,000,000) in the aggregate. Borrower shall not have the right to re-borrow any Advance to the extent that it has been repaid. 2. Use of Proceeds. The proceeds of Advances shall be used exclusively for working capital of the Borrower, and not for acquisitions of business or technology. B. Interest. Interest on the unpaid principal balance of this Note shall accrue at the prime rate plus two and three-quarters percent (2.75%) per annum compounded monthly commencing on the date Lender first makes an Advance to Borrower, and shall be payable in a single installment at maturity as set forth below. C. Payment. 1. Scheduled Payment. Subject to the provisions of Section C.4. below, the entire unpaid balance of principal (subject to conversion of such principal as provided below) and all accrued and unpaid interest shall be due and payable (i) on the day prior to the second anniversary of the date hereof, or (ii) in Lender’s sole discretion, any date after and including the second anniversary date as Lender may declare by providing written notice to Borrower; (the “Maturity Date”). If Lender elects the Maturity Date provided in (ii) above, and not exercise its Conversion Rights (as defined herein), Borrower shall have ten (10) business days in which to make payment of principal and interest hereunder. Payment of principal and interest hereunder shall be made by check delivered to the Lender at the address furnished to the Borrower for that purpose. 2. Prepayment. Subject to the provisions of Section C.4. below, Borrower shall have the right at any time and from time to time to prepay, in whole or in part, the principal of this Note, without payment of any premium or penalty. Any principal prepayment shall be accompanied by a payment of all interest accrued on the amount prepaid through the date of such prepayment. 3. Form of Payment. Principal and interest and all other amounts due hereunder are to be paid in lawful money of the United States of America in federal or other immediately available funds. 4. Notice Prior to Repayment. Borrower shall provide Lender with ten (10) business days prior written notice of its intention to make repayment of this Note, whether before or after the Maturity Date, so that Lender may elect, in its sole discretion, to exercise its Conversion Rights. D. Conditions of Advances. 1 . Conditions Precedent to Initial Advance. The obligation of Lender to make the initial Advance is subject to the condition precedent that Lender shall have received, in form and substance satisfactory to Lender, the following:   (a)   this Note; (b) a certificate of the Secretary of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Note;   (c)   UCC National Form Financing Statement; (d) to provide evidence of insurance which satisfies the requirements of Section G.6. hereof; (e) a warrant, attached as Exhibit 1, issued by the Borrower to purchase 125,000 shares of common stock of the Borrower; and (f) such other documents, and completion of such other matters, as Lender may reasonably deem necessary or appropriate. 2. Conditions Precedent to all Advances. The obligation of Lender to make any Advance is further subject to the following conditions: (a) the representations and warranties contained herein shall be true and correct in all material respects on and as of the date of such request for Advance and on the effective date of each Advance as though made at and as of each such date, and no Event of Default shall have occurred and be continuing, or would exist after giving effect to such Advance (provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of such date). The making of each Advance shall be deemed to be a representation and warranty by Borrower on the date of such Advance as to the accuracy of the facts referred to in this Section. (b) Borrower’s tangible net worth, as determined in accordance with U.S. generally accepted accounting principals, at the end of the calendar month prior such Advance is at least $3,000,000. (c) Borrower’s ratio of EBITDA (earnings before interest, taxes, depreciation and amortization) to debt service at the end of the calendar month prior to such Advance is at least 3.00 to 1.00. Notwithstanding the foregoing, Lender may waive the requirements of Section D.2.(b) and Section D.2.(c) by providing writing of such waiver to Borrower. E.   Security Interest. Grant of Security Interest. Borrower grants and pledges to Lender a continuing security interest in all presently existing and hereafter acquired or arising Collateral in order to secure prompt repayment of any and all Secured Obligations and in order to secure prompt performance by Borrower of each of its covenants and duties under the Loan Documents. Such security interest constitutes a valid, perfected security interest in the presently existing Collateral, and will constitute a valid, perfected security interest in Collateral acquired after the date hereof, in each case, subject to any Lien permitted hereunder and Permitted Liens. F. Representations and Warranties. Borrower represents and warrants to Lender that: 1. Collateral. Borrower is the true and lawful owner of the Collateral, having good and marketable title thereto, free and clear of any and all Liens other than Liens and security interests granted to Lender hereunder and the Permitted Liens set forth on the Schedule. Borrower shall not create or assume or permit to exist any such Lien on or against any of the Collateral except as created or permitted by the Loan Documents and Permitted Liens, and Borrower shall promptly notify Lender of any such other Lien against the Collateral and shall defend the Collateral against, and take all such action as may be necessary to remove or discharge, any such Lien. 2. Due Authorization; No Conflict. The execution, delivery, and performance of the Loan Documents are within Borrower’s powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in Borrower’s Certificate of Incorporation or Bylaws, nor will they constitute an event of default under any material agreement to which Borrower is a party or by which Borrower is bound. Borrower is not in default under any material agreement to which it is a party or by which it is bound. 3. Intellectual Property Collateral. Borrower is the sole owner of the Intellectual Property Collateral, except for non-exclusive licenses granted by Borrower to its customers in the ordinary course of business. No part of the Intellectual Property Collateral has been judged invalid or unenforceable, in whole or in part, and no claim, to the knowledge of Borrower, has been made that any part of the Intellectual Property Collateral violates the rights of any third party. Except as set forth in the Schedule of Exceptions, Borrower is not a party to, or bound by, any agreement that restricts the grant by Borrower of a security interest in Borrower’s rights under such agreement. 4. Name; Location of Chief Executive Office. Except as set forth in this Section 4, Borrower has not done business under any name other than that specified on the signature page hereof and under the names of PCQuote.com and PCQuote, Inc. (through June 30, 2003) and under the name of HYPRWare, Inc. since June 30, 2003. The chief executive office of Borrower is located at the address listed in Section L.3. hereof. All Borrower’s inventory and equipment are located at the address located in Section L.3 and the addresses in New York (50 Broadway, Suite 2900, New York, NY 10004), California (388 Market St, Suite 1050, San Francisco, CA 94111), Aurora (600 N. Commons Drive, Suite 100, Aurora, IL 60504), Savvis Data Center (587 McDonnell Blvd, Savvis Hazelwood Data Center, Hazelwood, MO 63042) and 700 District Drive, Itasca, IL 60143. 5. Litigation. There are no actions or proceedings pending by or against Borrower before any court or administrative agency in which an adverse decision could have a material adverse effect, or a material adverse effect on the business assets or financial condition of Borrower, or a material adverse effect on Borrower’s interest or Lender’s security interest in the Collateral (collectively, a “Material Adverse Effect”). 6. Solvency, Payment of Debts. Borrower is solvent and able to pay its debts (including trade debts) as they mature. 7. Taxes. Borrower has filed or caused to be filed all tax returns required to be filed by Borrower, and has paid, or has made adequate provision for the payment of, all taxes reflected in such tax returns. 8. Government Consents. Borrower has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all governmental authorities that are necessary for, and the absence of which would not cause a material adverse effect upon, the continued operation of Borrower’s business as currently conducted. G. Affirmative Covenants. Borrower covenants and agrees that, until payment in full of all Secured Obligations, and until such time that Lender has no further obligation to make an Advance, Borrower shall do all of the following: 1. Perfection of Security Interest. Borrower agrees to take all actions requested by Lender and reasonably necessary to perfect, to continue the perfection of, and to otherwise give notice of, the Lien granted hereunder, including, but not limited to, execution of financing statements. 2. Good Standing. Borrower shall maintain its corporate existence in its jurisdiction of incorporation and maintain qualification in each jurisdiction in which the failure to be so qualified could have a material adverse effect upon the Borrower. Borrower shall maintain in force all licenses, approvals and agreements, the loss of which could have a Material Adverse Effect. 3. Government Compliance. Borrower shall meet the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA. Borrower shall comply with all statutes, laws, ordinances and government rules and regulations to which it is subject, noncompliance with which could have a Material Adverse Effect. 4. Financial Statements, Reports, Certificates. Borrower shall deliver to Lender such budgets, projections, operating plans, financial statements and other financial information as Lender may reasonably request from time to time, including, but not limited to monthly variance reports and monthly cash flow reports. 5. Taxes. Borrower shall make due and timely payment or deposit of all federal and state taxes, and all material local taxes, assessments, or contributions required of it by law. 6. Insurance. (a) Borrower, at its expense, shall keep the Collateral insured against loss or damage in such amounts as ordinarily insured against by other owners in similar businesses conducted in the locations where Borrower’s business is conducted on the date hereof. Borrower shall also maintain insurance relating to Borrower’s business, ownership and use of the Collateral in amounts and of a type that are customary to businesses similar to Borrower’s. (b) All such policies of insurance shall be in such form, with such companies, and in such amounts as are reasonably satisfactory to Lender. All such policies of property insurance shall contain a lender’s loss payable endorsement, in a form satisfactory to Lender, showing Lender as an additional loss payee thereof, and all liability insurance policies shall show Lender as an additional insured and shall specify that the insurer must give at least twenty (20) days notice to Lender before canceling its policy for any reason. Upon Lender’s request, Borrower shall deliver to Lender certified copies of such policies of insurance and evidence of the payments of all premiums therefor. All proceeds payable under any such policy shall, at the option of Lender, be payable to Lender to be applied on account of the obligations under the Loan Documents. 7. Registration of Intellectual Property Rights.   (a)   (intentionally left blank) (b) Borrower shall (i) protect, defend and maintain the validity and enforceability of the Trademarks, Patents and Copyrights which are necessary to the conduct of its business, (ii) use its reasonable efforts to detect infringements of the Trademarks, Patents and Copyrights and promptly advise Lender in writing of infringements detected and (iii) not allow any Trademarks, Patents or Copyrights to be abandoned, forfeited or dedicated to the public without the written consent of Lender, which shall not be unreasonably withheld. (c) Lender may audit Borrower’s Intellectual Property Collateral to confirm compliance with this Section, provided such audit may not occur more often than twice per year, unless an Event of Default has occurred and is continuing. Lender have the right, but not the obligation, to take, at Borrower’s sole reasonable expense, any actions that Borrower is required under this Section to take but which Borrower fails to take, after fifteen (15) calendar days’ notice to Borrower. Borrower shall reimburse and indemnify Lender for all reasonable costs and reasonable expenses incurred in the exercise of its rights under this Section. 8. Filings. Borrower shall file all reports and other information and documents which it is required to file with the Securities and Exchange Commission or the over-the-counter market, in connection with this Note or otherwise. 9. Further Assurances. At any time and from time to time Borrower shall execute and deliver such further instruments and take such further action as may reasonably be requested by Lender to effect the purposes of this Note. H. Negative Covenants. Borrower covenants and agrees that, until payment in full of all Secured Obligations, and until such time as Lender has no further obligation to make an Advance, Borrower will not do any of the following without express written consent of Lender: 1. Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively, a “Transfer”), all or any part of its business or property, other than: (i) Transfers of inventory in the ordinary course of business; (ii) Transfers of non-exclusive licenses for the use of the property of Borrower in the ordinary course of business; or (iii) Transfers of worn-out or obsolete equipment. 2. Change in Business; Change in Control or Executive Office. Engage in any business other than the businesses currently engaged in by Borrower and any business substantially similar or related thereto (or incidental thereto); or without thirty (30) days prior written notification to Lender, relocate its chief executive office or state of incorporation; or without Lender’s prior written consent, change the date on which its fiscal year ends. 3. Mergers or Acquisitions. Merge or consolidate or agree to merge or consolidate, with or into any other business organization, or acquire all or substantially all of the capital stock or property of another Person. 4. Indebtedness. Create, incur, assume or be or remain liable with respect to any indebtedness for borrowed money (other than trade debt), other than the indebtedness evidenced by this Note. 5. Encumbrances. Create, incur, assume or suffer to exist any Lien with respect to any of its property, or assign or otherwise convey any right to receive income, including the sale of any accounts, except for Permitted Liens and Liens disclosed on the Schedule. Agree with any Person other than Lender not to grant a security interest in, or otherwise encumber, any of its property. 6. Distributions. Pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock, except that Borrower may repurchase the stock of former employees pursuant to stock repurchase agreements as long as an Event of Default does not exist prior to such repurchase or would not exist after giving effect to such repurchase. 7. Investments. Directly or indirectly acquire or own, or make any investment in or to any Person, or permit any of its subsidiaries to do so, other than investments set forth on the Schedule; or maintain or invest any of its property with a Person unless such Person has entered into a control agreement with Lender, in form and substance satisfactory to Lender; or suffer or permit any subsidiary to be a party to, or be bound by, an agreement that restricts such subsidiary from paying dividends or otherwise distributing property to Borrower. 8. Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any affiliate of Borrower except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person. 9. Negative Pledge Agreements. Permit the inclusion in any contract to which it becomes a party of any provisions that could restrict or invalidate the creation of a security interest in any of Borrower’s property. I.   Events of Default. 1. Definition of Event of Default. The occurrence of any one or more of the following events shall constitute an “Event of Default” hereunder: (a) Borrower’s breach of the obligation to pay any amount of the Secured Obligations on the date that it is due and payable; (b) Borrower’s failure to perform, keep or observe any of its covenants, conditions, promises, agreements or obligations under any of the Loan Documents or any other agreement with any Person if such failure may have a material adverse effect on Borrower’s assets, operations or condition, financial or otherwise; (c) Borrower’s commencement of voluntary bankruptcy proceedings, or Borrower’s filing of a petition or answer or consent seeking reorganization or release, under the federal Bankruptcy Code, or any other applicable federal or state law relating to creditor rights and remedies, or Borrower’s consent to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee or other similar official of Borrower or of any substantial part of its property, or Borrower’s making of an assignment for the benefit of creditors, or the taking of corporate action in furtherance of such action; (d) the loss, theft, damage or destruction of, or sale (other than in the ordinary course of business), lease or furnishing under a contract of service of, any material portion of the Collateral; (e) the creation (whether voluntary or involuntary) of, or any attempt to create, any Lien upon any of the Collateral, other than the Permitted Liens, or any levy, seizure or attachment of any material portion thereof; (f) the occurrence and continuance of any default under any lease or agreement for borrowed money that gives the lessor or the creditor of such indebtedness, as applicable, the right to accelerate the lease payments or the indebtedness, as applicable, or the right to exercise any rights or remedies with respect to any of the Collateral; or (g) the entry of any judgment or order against Borrower which remains unsatisfied or undischarged and in effect for thirty (30) days after such entry without a stay of enforcement or execution. 1 2. Rights and Remedies on Event of Default. (a) During the continuance of an Event of Default, Lender shall have the right, itself or through any of its agents, with or without notice to Borrower (as provided below), as to any or all of the Collateral, by any available judicial procedure, or without judicial process (provided, however, that it is in compliance with the UCC), to exercise any and all rights afforded to a secured party under the UCC or other applicable law. Without limiting the generality of the foregoing, Lender shall have the right to sell or otherwise dispose of all or any part of the Collateral, either at public or private sale, in lots or in bulk, for cash or for credit, with or without warranties or representations, and upon such terms and conditions, all as Lender, in its reasonable discretion, may deem advisable, and it shall have the right to purchase at any such sale. Borrower agrees that a notice sent at least fifteen (15) days before the time of any intended public sale or of the time after which any private sale or other disposition of the Collateral is to be made shall be reasonable notice of such sale or other disposition. The proceeds of any such sale, or other Collateral disposition shall be applied, first to the expenses of retaking, holding, storing, processing and preparing for sale, selling, and the like, and to Lender’s reasonable attorneys’ fees and legal expenses, and then to the Secured Obligations and to the payment of any other amounts required by applicable law, after which Lender shall account to Borrower for any surplus proceeds. If, upon the sale or other disposition of the Collateral, the proceeds thereof are insufficient to pay all amounts to which Lender is legally entitled, Borrower shall be liable for the deficiency, together with interest thereon, and the reasonable fees of any attorneys Lender’s employs to collect such deficiency; provided, however, that the foregoing shall not be deemed to require Lender to resort to or initiate proceedings against the Collateral prior to the collection of any such deficiency from Borrower. To the extent permitted by applicable law, Borrower waives all claims, damages and demands against Lender arising out of the retention or sale or lease of the Collateral or other exercise of Lender’s rights and remedies with respect thereto. (b) To the extent permitted by law, Borrower covenants that it will not at any time insist upon or plead, or in any manner whatever claim or take any benefit or advantage of, any stay or extension law now or at any time hereafter in force, nor claim, take or insist upon any benefit or advantage of or from any law now or hereafter in force providing for the valuation or appraisal of the Collateral or any part thereof, prior to any sale or sales thereof to be made pursuant to any provision herein contained, or the decree, judgment or order of any court of competent jurisdiction; or, after such sale or sales, claim or exercise any right under any statute now or hereafter made or enacted by any state or otherwise to redeem the property so sold or any part thereof, and, to the full extent legally permitted, hereby expressly waives all benefit and advantage of any such law or laws, and covenants that it will not invoke or utilize any such law or laws or otherwise hinder, delay or impede the execution of any power herein granted and delegated to Lender, but will suffer and permit the execution of every such power as though no such power, law or laws had been made or enacted. (c) Any sale, whether under any power of sale hereby given or by virtue of judicial proceedings, shall operate to divest all Borrower’s right, title, interest, claim and demand whatsoever, either at law or in equity, in and to the Collateral sold, and shall be a perpetual bar, both at law and in equity, against Borrower, its successors and assigns, and against all persons and entities claiming the Collateral sold or any part thereof under, by or through Borrower, its successors or assigns. (d) Borrower appoints Lender, and any officer, employee or agent of Lender, with full power of substitution, as Borrower’s true and lawful attorney-in-fact, effective as of the date hereof, with power, in its own name or in the name of Borrower, during the continuance of an Event of Default, to endorse any notes, checks, drafts, money orders, or other instruments of payment in respect of the Collateral that may come into Lender’s possession, to sign and endorse any drafts against debtors, assignments, verifications and notices in connection with accounts, and other documents relating to Collateral; to pay or discharge taxes or Liens at any time levied or placed on or threatened against the Collateral; to demand, collect, issue receipt for, compromise, settle and sue for monies due in respect of the Collateral; to notify persons and entities obligated with respect to the Collateral to make payments directly to Lender; and, generally, to do, at Lender’s option and at Borrower’s expense, at any time, or from time to time, all acts and things which Lender deems necessary to protect, preserve and realize upon the Collateral and Lender’s security interest therein to effect the intent of the Loan Documents, all as fully and effectually as Borrower might or could do; and Borrower hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney shall be irrevocable as long as any of the Secured Obligations are outstanding. (e) All of Lender’s rights and remedies with respect to the Collateral, whether established hereby or by any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently. J.   Conversion Right. 1. Conversion Right. Lender shall have the right (the “Conversion Right”), in its sole discretion, at any time and from time to time to elect to convert all or any part of the Secured Obligations into that number of shares of Common Stock of Borrower as is obtained by dividing (a) the total amount of Secured Obligations by (b) the conversion price (the “Conversion Price”), which is equal to the lesser of (i) eighty percent (80%) of the five-day moving average price per share of the Common Stock (on the date of the Lender’s election to exercise its Conversion Right or (ii) 80% of $1.05. If the Borrower at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise, one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and if the Borrower at any time combines (by reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. 2. Exercise of Conversion Right. To convert any of the Secured Obligations into shares of Common Stock, Lender shall deliver to Borrower a written notice of election to exercise the Conversion Right (the “Conversion Notice”). Borrower shall, as soon as practicable thereafter, issue and deliver to Lender a certificate or certificates, registered in Lender’s name, for the number of shares of Common Stock to which Lender shall be entitled by virtue of such exercise. The conversion of the Secured Obligations shall be deemed to have been made on the date that Borrower receives the Conversion Notice (the “Conversion Date”) and Lender shall be treated for all purposes as the record holder of the Conversion Shares as of such date. 3. Fractional Shares. Borrower shall not issue fractional shares of Common Stock or scrip representing fractional shares of Common Stock upon exercise of the Conversion Right. As to any fractional share of Common Stock which Lender would otherwise be entitled to purchase from Borrower upon such exercise, Borrower shall purchase from Lender such fractional share at a price equal to an amount calculated by multiplying such fractional share (calculated to the nearest 1/100th of a share) by the price per share of Common Stock on the Conversion Date. Payment of such amount shall be made in cash or by check payable to the order of Lender at the time of delivery of any certificate or certificates arising upon such exercise. K. Registration Rights. Concurrent with the execution and delivery of this Note, Borrower shall take all actions necessary to cause Lender, upon the exercise of the Conversion Right provided for herein, to have similar registration and similar liquidity rights as the rights granted to the participants in HyperFeed’s Private Placement dated May 15, 2003, and during the term of this Note no stockholder of Borrower shall have more favorable registration or other liquidity rights than the rights granted to Lender pursuant to this Section. L.   Other Provisions. 1. Definitions. As used herein, the following terms shall have the following meanings: “Lender Expenses” means all reasonable costs or expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the preparation, negotiation, administration, and enforcement of the Loan Documents; reasonable Collateral audit fees; and Lender’s reasonable attorneys’ fees and expenses incurred in amending, enforcing or defending the Loan Documents (including fees and expenses of appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit is brought. “Collateral” means the Intellectual Property Collateral and the property described on Exhibit A attached hereto. “Copyrights” means any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held. “Intellectual Property Collateral” means all of Borrower’s right, title, and interest in and to the following:   (a)   Copyrights, Trademarks and Patents; (b) Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held; (c) Any and all design rights which may be available to Borrower now or hereafter existing, created, acquired or held; (d) Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above; (e) All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such license or rights; (f) All amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents; and (g) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing. “Insolvency Proceeding” means any proceeding commenced by conforms to J.1(c) any Person under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief. “Lien” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, charge, claim or other encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any agreement to give or refrain from giving a lien, mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, charge, claim or other encumbrance of any kind. “Loan Documents” means, collectively, this Note, any note or notes executed by Borrower and issued to Lender, and any other agreement entered into in connection with this Note, all as amended or extended from time to time. “Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same. “Permitted Liens” means: (i) Liens imposed by law, such as carriers’, warehousemen’s, materialmen’s and mechanics’ liens, or Liens arising out of judgments or awards against Borrower with respect to which Borrower at the time shall currently be prosecuting an appeal or proceedings for review; (ii) Liens for taxes not yet subject to penalties for nonpayment and Liens for taxes the payment of which is being contested in good faith and by appropriate proceedings and for which, to the extent required by U.S. generally accepted accounting principles then in effect, proper and adequate book reserves relating thereto are established by Borrower; (iii) liens securing the purchase price or lease of any goods, which liens attached only to the goods being purchased or leased; (iv) liens securing security bonds, bid bonds, performance bonds, and other similar items; (v) liens in the form of deposits or pledges in connection with worker’s compensation, social security unemployment compensation or other similar matter; and (vi) liens existing as of the date hereof. “Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, person or governmental agency. “Secured Obligations” means all debt, principal, interest, Lender Expenses and other amounts owed to Lender by Borrower pursuant to the Loan Documents, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower to others that Lender may have obtained by assignment or otherwise. “Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks. “UCC” means the Uniform Commercial Code in effect from time to time in the relevant jurisdiction. 2. Governing Law; Venue. The Loan Documents shall be governed by the laws of the State of California, without giving effect to conflicts of law principles. Borrower and Lender agree that all actions or proceedings arising in connection with the Loan Documents shall be tried and litigated only in the state and federal courts located in the City of San Diego, County of San Diego, State of California or, at Lender’s option, any court in which Lender determines it is necessary or appropriate to initiate legal or equitable proceedings in order to exercise, preserve, protect or defend any of its rights and remedies under the Loan Documents or otherwise or to exercise, preserve, protect or defend its Lien, and the priority thereof, against the Collateral, and which has subject matter jurisdiction over the matter in controversy. Borrower waives any right it may have to assert the doctrine of forum non conveniens or to object to such venue, and consents to any court ordered relief. Borrower waives personal service of process and agrees that a summons and complaint commencing an action or proceeding in any such court shall be promptly served and shall confer personal jurisdiction if served by registered or certified mail to Borrower. The choice of forum set forth herein shall not be deemed to preclude the enforcement of any judgment obtained in such forum, or the taking of any action under the Loan Documents to enforce the same, in any appropriate jurisdiction. 3. Notices. Any notice or communication required or desired to be served, given or delivered hereunder shall be in the form and manner specified below, and shall be addressed to the party to be notified as follows: If to Lender: James F. Mosier, Esq. General Counsel and Secretary PICO Holdings, Inc. 875 Prospect Street, Suit 301 La Jolla, CA 92037 Phone: 858.456.6022 Fax: 858.456.6480 If to Borrower: Gemma R. Lahera Principal Accounting Officer and Treasurer HyperFeed Technologies, Inc. 300 South Wacker Drive, #300 Chicago, IL 60606 or to such other address as each party designates to the other by notice in the manner herein prescribed. Notice shall be deemed given hereunder if (i) delivered personally or otherwise actually received, (ii) sent by overnight delivery service, (iii) mailed by first-class United States mail, postage prepaid, registered or certified, with return receipt requested, or (iv) sent via telecopy machine with a duplicate signed copy sent on the same day as provided in clause (ii) above. Notice mailed as provided in clause (iii) above shall be effective upon the expiration of three (3) business days after its deposit in the United States mail, and notice telecopied as provided in clause (iv) above shall be effective upon receipt of such telecopy if the duplicate signed copy is sent under clause (iv) above. Notice given in any other manner described in this section shall be effective upon receipt by the addressee thereof; provided, however, that if any notice is tendered to an addressee and delivery thereof is refused by such addressee, such notice shall be effective upon such tender unless expressly set forth in such notice. 4. Lender’s Rights; Borrower Waivers. Lender’s acceptance of partial or delinquent payment from Borrower hereunder, or Lender’s failure to exercise any right hereunder, shall not constitute a waiver of any obligation of Borrower hereunder, or any right of Lender hereunder, and shall not affect in any way the right to require full performance at any time thereafter. Borrower waives presentment, diligence, demand of payment, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note. In any action on this Note, Lender need not produce or file the original of this Note, but need only file a photocopy of this Note certified by Lender be a true and correct copy of this Note in all material respects. 5. Enforcement Costs. Borrower shall pay all reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees and expenses Lender expends or incurs in connection with the enforcement of the Loan Documents, the collection of any sums due thereunder, any actions for declaratory relief in any way related to the Loan Documents, or the protection or preservation of any rights of the holder thereunder. 6. Severability. Whenever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision is prohibited by or invalid under applicable law, it shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of the provision or the remaining provisions of this Note. 7. Amendment Provisions. This Note may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by Borrower and Lender. 8. Binding Effect. This Note shall be binding upon, and shall inure to the benefit of, Borrower and the holder hereof and their respective successors and assigns; provided, however, that Borrower’s rights and obligations shall not be assigned or delegated without Lender’s prior written consent, given in its sole discretion, and any purported assignment or delegation without such consent shall be void ab initio.   9.   Time of Essence. Time is of the essence of each and every provision of this Note. 10. Headings. Section headings used in this Note have been set forth herein for convenience of reference only. Unless the contrary is compelled by the context, everything contained in each section hereof applies equally to this entire Note. [The remainder of this page is intentionally left blank.] 2 IN WITNESS WHEREOF, the parties hereto have caused this Note to be executed as of the date first above written. BORROWER: HYPERFEED TECHNOLOGIES, INC. By: /s/ Gemma Lahera Title: Principal Accounting Officer LENDER: PICO HOLDINGS, INC. By: /s/ James F. Mosier Title: General Counsel and Secretary 3 DEBTOR: HyperFeed Technologies, Inc. SECURED PARTY: PICO Holdings, Inc. EXHIBIT A COLLATERAL DESCRIPTION ATTACHMENT TO AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE All personal property of Borrower (herein referred to as “Borrower” or “Debtor”) whether presently existing or hereafter created or acquired, and wherever located, including, but not limited to: (a) all accounts (including health-care-insurance receivables), chattel paper (including tangible and electronic chattel paper), deposit accounts, documents (including negotiable documents), equipment (including all accessions and additions thereto), general intangibles (including payment intangibles and software), goods (including fixtures), instruments (including promissory notes), inventory (including all goods held for sale or lease or to be furnished under a contract of service, and including returns and repossessions), investment property (including securities and securities entitlements), letter of credit rights, money, and all of Debtor’s books and records with respect to any of the foregoing, and the computers and equipment containing said books and records; (b) all common law and statutory copyrights and copyright registrations, applications for registration, now existing or hereafter arising, in the United States of America or in any foreign jurisdiction, obtained or to be obtained on or in connection with any of the forgoing, or any parts thereof or any underlying or component elements of any of the forgoing, together with the right to copyright and all rights to renew or extend such copyrights and the right (but not the obligation) of Secured Party to sue in its own name and/or in the name of the Debtor for past, present and future infringements of copyright; (c) all trademarks, service marks, trade names and service names and the goodwill associated therewith, together with the right to trademark and all rights to renew or extend such trademarks and the right (but not the obligation) of Secured Party to sue in its own name and/or in the name of the Debtor for past, present and future infringements of trademark; (d) all (i) patents and patent applications filed in the United States Patent and Trademark Office or any similar office of any foreign jurisdiction, and interests under patent license agreements, including, without limitation, the inventions and improvements described and claimed therein, (ii) licenses pertaining to any patent whether Debtor is licensor or licensee, (iii) income, royalties, damages, payments, accounts and accounts receivable now or hereafter due and/or payable under and with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (iv) right (but not the obligation) to sue in the name of Debtor and/or in the name of Secured Party for past, present and future infringements thereof, (v) rights corresponding thereto throughout the world in all jurisdictions in which such patents have been issued or applied for, and (vi) reissues, divisions, continuations, renewals, extensions and continuations-in-part with respect to any of the foregoing; (e) the Intellectual Property Collateral, as defined in the Amended and Restated Secured Convertible Promissory Note; and (f) any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without limitation, insurance proceeds, and all supporting obligations and the security therefor or for any right to payment. All terms above have the meanings given to them in the California Uniform Commercial Code, as amended or supplemented from time to time, including revised Division 9 of the Uniform Corrunercial Code-Secured Transactions, added by Stats. 1999, c.991 (S.B. 45), Section 35, operative July 1, 2004. 4 EXHIBIT B Copyrights           Description   Registration Number   Registration Date           None 5 EXHIBIT C Patents       Registration/ Application   Registration/ Application Description Number Date None 6 EXHIBIT D Trademarks           Description   Registration/Application Number   Registration/Application Date           None 7 Schedule of Exceptions None 8 EXHIBIT 1 THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (1) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS. THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON THE THIRD ANNIVERSARY OF THE CLOSING DATE (THE “EXPIRATION DATE”). HYPERFEED TECHNOLOGIES, INC. WARRANT TO PURCHASE 125,000 SHARES OF COMMON STOCK, PAR VALUE [$0.001] PER SHARE PICO Holdings, Inc., a California corporation, (“Warrantholder”), and HyperFeed Technologies, Inc., a Delaware corporation (“Company”), are parties to that certain Amended and Restated Convertible Secured Promissory Note, as of even date herewith (the “Note”). This Warrant certifies that, in consideration of the Note and for other valuable received, Warrantholder is entitled to purchase, subject to the provisions of this Warrant, from the Company at any time not later than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an exercise price per share equal to $1.05 (the exercise price in effect being herein called the (“Warrant Price”), 125,000 shares (“Warrant Shares”) of the Company’s Common Stock, par value [$0.001] per share (“Common Stock”). The number of Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. Section 1. Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder. Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the Securities Act of 1933, as amended (the “Secutities Act”), or an exemption from such registration. Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for that purpose, upon surrender thereof for transfer, properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee and the surrendered Warrant shall be canceled by the Company. Section 3. Exercise of Warrant. Subject to the provisions hereof, the Warrantholder may exercise this Warrant, in whole or in part, at any time prior to its expiration upon surrender of the Warrant, together with delivery of a duly executed Warrant exercise form, in the form attached hereto as Appendix A (the “Exercise Agreement”) and payment by cash, certified check or wire transfer of immediately available funds (or, in certain circumstances, by cashless exercise as provided in Section 17 below) of the aggregate Warrant Price for that number of Warrant Shares then being purchased, to the Company during normal business hours on any business day at the Company’s principal executive offices (or such other office or agency of the Company as it may designate by notice to the Warrantholder). The Warrant Shares so purchased shall be deemed to be issued to the Warrantholder or the Warrantholder’s designee, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been surrendered (or the date evidence of loss, theft or destruction thereof and security or indemnity satisfactory to the Company has been provided to the Company), the Warrant Price shall have been paid and the completed Exercise Agreement shall have been delivered. Certificates for the Warrant Shares so purchased shall be delivered to the Warrantholder within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the Warrantholder and shall be registered in the name of the Warrantholder or such other name as shall be designated by the Warrantholder, as specified in the Exercise Agreement. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Warrantholder a new Warrant representing the right to purchase the number of shares with respect to which this Warrant shall not then have been exercised. As used herein, “business day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business. Section 4. Compliance with the Securities Act of 1933. The Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant, and a similar legend on any security issued or issuable upon exercise of this Warrant, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary. Section 5. Payment of Taxes. The Company will pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer or assignment involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the Warrantholder in respect of which such shares are issued or any substitute or balance Warrant, and in such case, the Company shall not be required to issue or deliver any certificate for Warrant Shares or any substitute or balance Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company’s reasonable satisfaction that such tax has been paid. The Warrantholder shall be responsible for income taxes due under federal, state or other law, if any such tax is due. Section 6. Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and substitution of and upon surrender and cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto, if requested by the Company. Section 7. Reservation of Common Stock. The Company hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved until issued (if necessary) as contemplated by this Section 7, out of the authorized and unissued shares of Common Stock, sufficient shares to provide for the exercise of the rights of purchase represented by this Warrant. The Company agrees that all Warrant Shares issued upon due exercise of the Warrant shall be, at the time of delivery of the certificates for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company. Section 8. Adjustments. Subject and pursuant to the provisions of this Section 8, the Warrant Price and number of Warrant Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter. (a) If the Company shall, at any time or from time to time while this Warrant is outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the number of Warrant Shares purchasable upon exercise of the Warrant and the Warrant Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Warrantholder thereafter exercising the Warrant shall be entitled to receive the number of shares of Common Stock or other capital stock which the Warrantholder would have received if the Warrant had been exercised immediately prior to such event upon payment of a Warrant Price that has been adjusted to reflect a fair allocation of the economics of such event to the Warrantholder. Such adjustments shall be made successively whenever any event listed above shall occur. (b) If any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation in which the Company is not the survivor or becomes a subsidiary of another entity or a sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation shall be effected (other than a pledge or hypothecation to a lender as security for a bona fide loan to the Company), then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby each Warrantholder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of the Warrant, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Warrant Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets, or other appropriate corporation or entity, shall assume the obligation to deliver to the Warrantholder, at the last address of the Warrantholder appearing on the books of the Company, such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Warrantholder may be entitled to purchase, and the other obligations under this Warrant. The provisions of this paragraph (b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions. (c) In case the Company shall fix a payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 8(a)), or subscription rights or warrants, the Warrant Price to be in effect after such payment date shall be determined by multiplying the Warrant Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the Market Price (as defined below) per share of Common Stock immediately prior to such payment date, less the fair market value (as determined by the Company’s Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price per share of Common Stock immediately prior to such payment date. “Market Price” as of a particular date (the “Valuation Date”) shall mean (i) the closing sale price on the last trading day prior to the Valuation Date of one share of Common Stock as listed on The Nasdaq Stock Market, Inc. (“Nasdaq”), the National Association of Securities Dealers, Inc., OTC Bulletin Board (the “Bulletin Board”) or such similar quotation system or association, or a national stock exchange, or, if no such closing sale price is available therefor, the average of the high bid and the low asked price on the last trading day prior to the Valuation Date; or (ii) if the Common Stock is not then or quoted on Nasdaq, the Bulletin Board or similar quotation system or association, or listed on a national stock exchange, the fair market value of one share of Common Stock as of the Valuation Date, as determined in good faith by the Board of Directors of the Company and the Warrantholder. If the Common Stock is not then listed on a national securities exchange, the Bulletin Board or such other quotation system or association, the Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Warrantholder prior to the exercise hereunder as to the fair market value of a share of Common Stock as determined by the Board of Directors of the Company. In the event that the Board of Directors of the Company and the Warrantholder are unable to agree upon the fair market value in respect of subpart (c) of this paragraph, the Company and the Warrantholder shall jointly select an appraiser, who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the fee payable to such appraiser shall be borne equally by the Company and the Warrantholder. Such adjustment shall be made successively whenever such a payment date is fixed. (d) An adjustment to the Warrant Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment. (e) In the event that, as a result of an adjustment made pursuant to this Section 8, the Warrantholder shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant. Section 9. Fractional Interest. The Company shall not be required to issue fractions of Warrant Shares or other capital stock upon the exercise of this Warrant. If any fractional share of Common Stock or other capital stock would, except for the provisions of the first sentence of this Section 9, be deliverable upon such exercise, the Company, in lieu of delivering such fractional share, shall pay to the exercising Warrantholder an amount in cash equal to the Market Price of such fractional share of Common Stock or other capital stock on the date of exercise. Section 10. Benefits. Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and the Warrantholder. Section 11. Notices to Warrantholder. Upon the happening of any event requiring an adjustment of the Warrant Price, the Company shall promptly give written notice thereof to the Warrantholder at the address appearing in the records of the Company, stating the adjusted Warrant Price and the adjusted number of Warrant Shares resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Failure to give such notice to the Warrantholder or any defect therein shall not affect the legality or validity of the subject adjustment. Section 12. Identity of Transfer Agent. The Transfer Agent for the Common Stock is Computershare. Upon the appointment of any subsequent transfer agent for the Common Stock or other shares of the Company’s capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Company will mail to the Warrantholder a statement setting forth the name and address of such transfer agent. Section 13. Notices. Any notice or communication required or desired to be served, given or delivered hereunder shall be in the form and manner specified below, and shall be addressed to the party to be notified as follows: If to Warrantholder: James F. Mosier, Esq. General Counsel and Secretary PICO Holdings, Inc. 875 Prospect Street, Suite 301 La Jolla, CA 92037 Phone: 858.456.6022 Fax: 858.456.6480 With a copy to: DLA Piper Rudnick Gray Cary US LLP 4365 Executive Drive, Suite 1100 San Diego, CA 92121 Attention: Marty B. Lorenzo, Esq. Fax: 858.677.1401 If to the Company: Gemma R. Lahera Principal Accounting Officer and Treasurer HyperFeed Technologies, Inc. 300 South Wacker Drive, #300 Chicago, IL 60606 or to such other address as each party designates to the other by notice in the manner herein prescribed. Notice shall be deemed given hereunder if (i) delivered personally or otherwise actually received, (ii) sent by overnight delivery service, (iii) mailed by first-class United States mail, postage prepaid, registered or certified, with return receipt requested, or (iv) sent via telecopy machine with a duplicate signed copy sent on the, same day as provided in clause (ii) above. Notice mailed as provided in clause (iii) above shall be effective upon the expiration of three (3) business days after its deposit in the United States mail, and notice telecopied as provided in clause (iv) above shall be effective upon receipt of such telecopy if the duplicate signed copy is sent under clause (iv) above. Notice given in any other manner described in this section shall be effective upon receipt by the addressee thereof; provided, however, that if any notice is tendered to an addressee and delivery thereof is refused by such addressee, such notice shall be effective upon such tender unless expressly set forth in such notice. Section 14. Registration Rights. The Warrantholder and any subsequent Warrantholder is entitled to the benefit of certain registration rights with respect to the shares of Common Stock issuable upon the exercise of this Warrant as set forth on Appendix C hereto. Section 15. Successors. All the covenants and provisions hereof by or for the benefit of the Warrantholder shall bind and inure to the benefit of its respective successors and assigns hereunder. Section 16. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of California, without reference to the choice of law provisions thereof. The Company and, by accepting this Warrant, the Warrantholder, each irrevocably submits to the exclusive jurisdiction of the courts of the State of California in San Diego County and the United States District Court for the Southern District of California for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto by the same methods as are specified for the giving of notices under this Warrant. The Company and, by accepting this Warrant, the Warrantholder, each 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. The Company and, by accepting this Warrant, the Warrantholder, each 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 COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. Section 17. Cashless Exercise. Notwithstanding any other provision contained herein to the contrary, from and after the first anniversary of the Closing Date (as defined in the Purchase Agreement) and so long as the Company is required under the Registration Rights Agreement to have effected the registration of the Warrant Shares for resale to the public pursuant to a Registration Statement (as such term is defined in the Registration Rights Agreement), if the Warrant Shares may not be freely sold to the public for any reason (including, but not limited to, the failure of the Company to have effected the registration of the Warrant Shares or to have a current prospectus available for delivery or otherwise, but excluding the period of any Allowed Delay (as defined in the Registration Rights Agreement), the Warrantholder may elect to receive, without the payment by the Warrantholder of the aggregate Warrant Price in respect of the shares of Common Stock to be acquired, shares of Common Stock of equal value to the value of this Warrant, or any specified portion hereof, by the surrender of this Warrant (or such portion of this Warrant being so exercised) together with a Net Issue Election Notice, in the form annexed hereto as Appendix B, duly executed, to the Company. Thereupon, the Company shall issue to the Warrantholder such number of fully paid, validly issued and nonassessable shares of Common Stock as is computed using the following formula: X = Y (A — B) A where X = the number of shares of Common Stock to which the Warrantholder is entitled upon such cashless exercise; Y = the total number of shares of Common Stock covered by this Warrant for which the Warrantholder has surrendered purchase rights at such time for cashless exercise (including both shares to be issued to the Warrantholder and shares as to which the purchase rights are to be canceled as payment therefor); A = the “Market Price” of one share of Common Stock as at the date the net issue election is made; and B = the Warrant Price in effect under this Warrant at the time the net issue election is made. Section 18. No Rights as Stockholder. Prior to the exercise of this Warrant, the Warrantholder shall not have or exercise any rights as a stockholder of the Company by virtue of its ownership of this Warrant. Section 19. Section Headings. The section headings in this Warrant are for the convenience of the Company and the Warrantholder and in no way alter, modify, amend, limit or restrict the provisions hereof. [SIGNATURE PAGE FOLLOWS] 9 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as of the 30th day of March, 2006. HYPERFEED TECHNOLOGIES, INC. By: \s\ Gemma Lahera Name: Gemma Lahera Title: Principal Accounting Officer * Authorized signatory under corporate resolutions to borrow or an authorized signer under a resolution covering warrants must sign the warrant. APPENDIX A HYPERFEED TECHNOLOGIES, INC. WARRANT EXERCISE FORM To HyperFeed Technologies, Inc: The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant (“Warrant”) for, and to purchase thereunder by the payment of the Warrant Price and surrender of the Warrant,      shares of Common Stock (“Warrant Shares”) provided for therein, and requests that certificates for the Warrant Shares be issued as follows: Name Address Federal Tax ID or Social Security No. and delivered by certified mail to the above address, or electronically provide DWAC Instructions or other specify: . and, if the number of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Shares purchasable upon exercise of this Warrant be registered in the name of the undersigned Warrantholder or the undersigned’s Assignee as below indicated and delivered to the address stated below.           Dated:     ,             Note:   The signature must correspond with     Signature:       the name of the Warrantholder as written on the first page of the Warrant in every         particular, without alteration or enlargement or any change whatever, unless the Warrant has been assigned.   Name (please print)       Address Federal Identification or Social Security No. Asignee: 10 APPENDIX B HYPERFEED TECHNOLOGIES, INC. NET ISSUE ELECTION NOTICE       To:HyperFeed Technologies, Inc.       Date: [   ]       The undersigned hereby elects under Section 17 of this Warrant to surrender the right to purchase [     ] shares of Common Stock pursuant to this Warrant and hereby requests the issuance of [     ] shares of Common Stock. The certificate(s) for the shares issuable upon such net issue election shall be issued in the name of the undersigned or as otherwise indicated below. Signature Name for Registration Mailing Address 11 APPENDIX C REGISTRATION RIGHTS. The common stock issuable upon exercise of this warrant, shall be deemed “registrable securities” or otherwise entitled to “piggy back” registration rights in accordance with the terms of the following agreement (the “Agreement”) between the Company and its investor(s): [Identify Agreement by date, title and parties. If no Agreement exists, indicate by “none.”] The Company agrees that no amendments will be made to the Agreement, which would have an adverse impact on Warrantholder’s registration rights thereunder without the consent of Warrantholder. By acceptance of the Warrant to which this Appendix C is attached, Warrantholder shall be deemed to be a party to the Agreement. If no Agreement exists, then the Company and the Holder shall enter into Holder’s standard form of Registration Rights Agreement as in effect on the issue date of the Warrant. 12

  EXHIBIT 10.1 First Amendment to the Temple-Inland Inc. 1993 Stock Option Plan      WHEREAS, Temple-Inland Inc. (the “Company”) maintains the Temple-Inland Inc. 1993 Stock Option Plan (the “Plan”); and      WHEREAS, the Board of Directors of the Company (the “Board”) has authority to amend the Plan; and      WHEREAS, the Board has determined that it is desirable to amend the Plan’s capital adjustment provisions;      NOW, THEREFORE, Article 13 of the Plan is hereby amended as follows: Notwithstanding any other provisions of the Plan, in the event of any change in the outstanding Common Stock by reason of any stock dividend, split up, recapitalization, reclassification, combination or exchange of shares, merger, consolidation or liquidation and the like, the Board shall provide for a substitution for or adjustment in (i) the number and class of shares subject to outstanding Stock Options, (ii) the exercise prices of outstanding Stock Options, (iii) the aggregate number and class of shares reserved for issuance under the Plan, (iv) the number of shares to be covered by Stock Options to be granted to Non-Employee Directors upon election to the Board pursuant to paragraph 8 hereof, and (v) the number of shares to be granted to Non-Employee Directors in lieu of annual retainer fees pursuant to paragraph 9 and the formula pursuant to which the exercise price of such options is determined. The adjustments made with respect to Stock Options granted pursuant to paragraphs 8 and 9 hereof shall be equivalent to the treatment accorded to all other holders of Common Stock. The Board’s determinations with regard to the adjustments or substitutions provided for by this paragraph 13 shall be conclusive.      IN WITNESS WHEREOF, Temple-Inland Inc. has caused this First Amendment to the Temple-Inland Inc. 1993 Stock Option Plan to be adopted as of this 4th day of August 2006.                   TEMPLE-INLAND INC.                       By:                           Leslie K. O’Neal         Vice President, Secretary and Assistant General Counsel     ATTEST:             Grant F. Adamson         Assistant Secretary        

  Exhibit 10.2 Extension Agreement      This Extension Agreement is dated as of March 22, 2006 between Tollgrade Communications, Inc., having an address at 493 Nixon Road, Cheswick, PA 15024 (“Tollgrade”) and Bulova Technologies EMS LLC, with an address at 3900 W. Sarno Rd., Melbourne, FL 32934 (“Bulova Technologies”).      WHEREAS, Tollgrade (as successor in interest to Acterna Corporation) and Bulova Technologies (as successor in interest to Dictaphone Corporation’s Electronic Manufacturing Services Division) are parties to a Supply Agreement dated July 25, 2002, which sets forth the terms pursuant to which Bulova Technologies manufactures and supplies to Tollgrade, and Tollgrade purchases from Bulova, certain products (the “Supply Agreement”);      WHEREAS, the Supply Agreement was initially scheduled to expire on July 24, 2004, and has been successively extended through March 31, 2006;      WHEREAS, Tollgrade and Bulova Technologies desire to replace the Supply Agreement with a new supply agreement, but have not yet completed negotiations with respect to such new supply agreement; and      WHEREAS, Tollgrade and Bulova Technologies desire to further extend the term of the Supply Agreement through September 30, 2006 or until a new supply agreement is executed, if sooner;      NOW THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the parties agree as follows:      1.  Extension of Supply Agreement. The parties hereby agree that the Supply Agreement is hereby extended through September 30, 2006 or until such time as the parties execute a new supply agreement, if sooner.      2. Miscellaneous. Except as extended hereby, the provisions of the Supply Agreement shall remain in full force and effect. This Extension Agreement will be governed in all respects by the laws of the Commonwealth of Pennsylvania without reference to any choice of law provisions. This Extension Agreement may be executed in any number of counterparts and by the different parties 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.      IN WITNESS WHEREOF, the parties have hereunto set their hands the date first above written.                   TOLLGRADE COMMUNICATIONS, INC.       BULOVA TECHNOLOGIES EMS LLC                   By:   /s/ Jennifer M. Reinke       By:   /s/ James Davis                   Name: Jennifer M. Reinke       Name: James Davis Title: Assistant Secretary       Title: President  

MAYSIA RESOURCES CORPORATION (presently doing business as PRIMEGEN ENERGY CORPORATION) (the “Company”)   3625 N. Hall Street, Suite 900, Dallas, Texas 75219                                                                                                                                                     Purchase Agreement   This letter agreement (“LA”) constitutes a definitive and binding sales and assumption document between the Company and Projection Capital Limited (“Projection") whereby the Company will acquire a 100% right title and interest in and to the interest of Projection in the in Partnership and the Partnership Agreement (as those terms are defined hereinbelow) and will assume the rights and obligations of Projection under the Partnership Agreement. The parties agree to enter into all other agreements as are necessary to give effect to the transactions ("Transactions") described hereinbelow. The parties acknowledge and understand the following: Effective July 14, 2006, FS Subparticipation #1 L.P., Wildes Exploration, LLC (“Wildes”) and Projection entered into an agreement (the “Partnership Agreement”), a copy of which is attached hereto as Schedule “A”, to form a Texas limited liability partnership (“Partnership”) with respect to a shale gas leasing and exploration program (the “Program”) in Arkansas with the following parameters: A.           Pursuant to several underlying participation agreements (the “Participation Agreements”), Wildes has participated in the acquisition of a 10% interest in the acquisition of leasehold title to certain oil and gas leases (covering approximately 29,250 acres located in Van Buren, Stone and Cleburne Counties, Arkansas), proprietary 2-D seismic data and/or 3-D seismic data and drilling and completion costs of certain wells in the follow-up development program;   B.           Rather than attempting to become a direct participant in the Participation Agreements, through the Partnership Agreement Projection acquired the right to have distributed to it, as a limited partner of the Partnership (managed directly or indirectly by Wildes) certain proceeds, net of Partnership obligations, of a silent sub participation (“Sub participation”) by the Partnership in the Participation Agreements structured to parallel in substance and effect the Participation Agreements, but functioning independently of the same as follows:     (1) Under the Sub participation, among other things, Wildes will remit to the Partnership all proceeds received on account of its 10% Working Interest;     (2) As the initial consideration for allowing such a Sub participation, an amount of US$1,700,000 has been paid pursuant to the Partnership Agreement by Projection on account of the Program, including the cost of the leases and other matters associated with the Participation Agreements;     -------------------------------------------------------------------------------- 2         (3) An additional US$682,500 is presently due from Projection under the Partnership Agreement;     (4) Additional consideration on account of adjustments and exploration costs will become due and payable under the Partnership Agreement as the Program proceeds.   1. The Company hereby purchases, and Projection hereby sells and assigns to the Company, 100% of the interest (the “Interest”) of Projection in the Partnership, for and in consideration (the “Consideration”) of the cash payment of US$2,500,000 payable at the closing (“Closing”) of the Transactions. The Consideration will be paid by a Promissory Note bearing simple interest at 6%, due one year from Closing. 2. The Company acknowledges and agrees that it has conducted sufficient due diligence investigations to satisfy itself that it wishes to complete acquisition of the Interest and the Transactions and has waived the right to conduct further due diligence. 3. From and after Closing, if required, Projection will hold the interests of the Company in the Program and Partnership in trust for the Company pending the consent of the general partner of the Partnership to the assignment contemplated hereby and the transfer of the Interest to the Company, and will remit all proceeds as directed by the Company. 4. The Company represents and warrants to Projection:   a) the Transactions and this LA have been duly authorized by all required corporate action and the LA is enforceable against the Company in accordance with its terms, subject to equitable remedies and the rights of creditors generally;   b) the Company is not a party to any actions, suits or proceedings that could materially affect its business or financial condition and, to the best of its knowledge, no such actions, suits, proceedings or regulatory investigations are contemplated or have been threatened;   c) the Company has due and sufficient right and authority to enter into this LA on the terms and conditions herein set forth and to acquire legal and beneficial title and ownership of the Interest;   d) the completion of the Transactions will not result in a breach of, any of the terms of its incorporating documents of the Company or any agreements or instruments to which the Company is a party; and   e) the Company is a valid and subsisting corporation, duly incorporated and in good standing under the laws of the State of Nevada, and has the necessary corporate power, authority and capacity to own property and assets and to carry on business. 5. Projection represents and warrants to the Company:     -------------------------------------------------------------------------------- 3       a) the performance of this LA will not give any person or company any right to terminate or cancel any agreement or any right enjoyed by the Partnership and will not result in the creation or imposition of any lien, encumbrance or restriction of any nature whatsoever in favour of a third party upon or against the Partnership or the Interest;   b) Projection has due and sufficient right and authority to enter into this LA on the terms and conditions herein set forth and to transfer the legal and beneficial title and ownership of the Interest to the Company;   c) no person, firm or corporation has any agreement or option or a right capable of becoming an agreement for the purchase of the Interest, or any right capable of becoming an agreement for the purchase of the Interest;   d) this LA has been authorized by all necessary corporate action on the part of Projection and is a legal, valid and binding obligation of Projection;   e) there are no liabilities, contingent or otherwise, relating to the Interest which have not been previously disclosed;   f) there is no basis for and there are no actions, suits, judgments, investigations or proceedings outstanding or pending or, to the knowledge of Projection, threatened against or affecting the Partnership or Interest at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau or agency;   g) Projection owns the Interest as the legal and beneficial owner thereof, free of all liens, claims, charges and encumbrances whatsoever;   h) neither Projection nor the Partnership have experienced, nor are they aware of any occurrence or event which has had, or might reasonably be expected to have, a materially adverse affect on the Partnership, the Interest or the Project and Projection has not knowingly withheld any facts relating to the Partnership, the Interest or the Program which could reasonably be expected to adversely influence the decision of the Company to complete the purchase of the Interest; and   i) neither Projection nor any company controlled by it owns any property or assets which are used in the by the Partnership or are necessary or useful for the Project. 6. In the event Closing has not occurred on or before on or before October 31, 2006, this LA shall be terminated and of no further force or effect. 7. Subject to paragraph 3, this LA is not intended to create any partnership or agency relationship between the parties or fiduciary obligations of any description, and this LA shall not be construed so as to render the parties liable as partners or as creating a partnership, and no party shall be or shall be deemed to be, or shall hold itself out to be an agent of any other party.     -------------------------------------------------------------------------------- 4     8. This LA shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties.   9. This LA may be executed in counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto validity execute this LA by signing any such counterpart.   The parties hereby acknowledge the terms of this LA, entered into as of the 11th day of August, 2006.   MAYSIA RESOURCES CORPORATION     per: /s/ Gordon Samson                                           PROJECTION CAPITAL LIMITED     per: /s/ signed                                                               

  Exhibit 10-4 AMENDMENT NO. 1 TO CREDIT AGREEMENT      AMENDMENT dated as of November 22, 2005 (this “Amendment”) to the Credit Agreement dated as of December 7, 2004 among The Clorox Company, Citicorp USA, Inc. and JPMorgan Chase Bank, N.A., as Administrative Agents, and the other Agents and Banks parties thereto (the “Agreement”). W I T N E S S E T H :      WHEREAS, the Agreement includes a provision whereby the Commitments of the Banks may be extended from time to time; and      WHEREAS, the parties hereto desire to amend this provision to modify the timetable specified therein; and      WHEREAS, the parties hereto also desire to utilize this Amendment to memorialize the initial extension of Commitments pursuant to said provision;      NOW, THEREFORE, the parties hereto agree as follows:      Section 1 . Defined Terms; References. Unless otherwise specifically defined herein, each term used herein that is defined in the Agreement has the meaning assigned to such term in the Agreement. Each reference to “hereof”, “hereunder”, “herein” and “hereby” and each other similar reference and each reference to “this Agreement” and each other similar reference contained in the Agreement shall, after this Amendment becomes effective, refer to the Agreement as amended hereby.      Section 2 . Amendment. Section 2.01(b) of the Agreement is amended to read as follows:      ”Extension of Commitments. The Borrower may, upon not less than 45 days notice to the Servicing Agent (which shall notify each Bank of receipt of such request), propose to extend the Termination Date for an additional one-year period measured from the Termination Date then in effect. Each Bank shall endeavor to respond to such request, whether affirmatively or negatively (such determination in the sole discretion of such Bank), by notice to the Borrower and the Servicing Agent within 30 days of its receipt of such request. Subject to the execution by the Borrower, the Administrative Agents and such Banks of a duly completed Extension Agreement in substantially the form of Exhibit H (or other comparable documentation satisfactory to the Borrower and the Administrative Agents), the Termination Date applicable to the Commitment of each Bank so affirmatively notifying the Borrower and   --------------------------------------------------------------------------------   the Servicing Agent shall be extended for the period specified above; provided that the Termination Date shall not be extended unless Banks having at least 66 2/3% in aggregate amount of the Commitments in effect at the time any such extension is requested shall have elected so to extend their Commitments. Any Bank which does not give such notice to the Borrower and the Servicing Agent shall be deemed to have elected not to extend as requested, and the Commitment of each non-extending Bank shall terminate on, and each of its outstanding Loans shall mature on a date no later than, the Termination Date determined without giving effect to such requested extension. The Borrower shall have the right, with the assistance of the Administrative Agents, to seek a mutually satisfactory substitute bank or banks or other financial institution (which may be, but need not be, an extending Bank) to replace a non-extending Bank.”      Section 3 . Extension of Commitments. The Termination Date is hereby extended for a one-year period to December 7, 2010 as applicable to the Commitment of each Bank from which the Servicing Agent shall have received a signed counterpart as contemplated by Section 7(b) hereof.      Section 4 . Representations of Borrower. The Borrower represents and warrants that on and as of the date hereof (i) the representations and warranties of such Borrower set forth in Article 4 of the Agreement are true and (ii) no Default has occurred and is continuing on such date.      Section 5 . Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York.      Section 6 . Counterparts. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.      Section 7 . Effectiveness. (a) Section 2 of this Amendment shall become effective when the Servicing Agent shall have received from each of the Borrower and the Required Banks a counterpart hereof signed by such party or facsimile or other written confirmation (in form satisfactory to the Servicing Agent) that such party has signed a counterpart hereof.      (b) Section 3 of this Amendment shall become effective when the Servicing Agent shall have received from each of the Borrower, the Administrative Agents and Banks having at least 66 2/3% in aggregate amount of the Commitments a counterpart hereof signed by such party or facsimile or other written confirmation (in form satisfactory to the Servicing Agent) that such party has signed a counterpart hereof.   --------------------------------------------------------------------------------             IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.             THE CLOROX COMPANY       By:     /s/ Charles R. Conradi         Name:   Charles R. Conradi        Title:   Treasurer              By:     /s/ Mary Beth Springer         Name:   Mary Beth Springer        Title:   Group V.P.        --------------------------------------------------------------------------------               CITICORP USA, INC.,      as a Bank, as Servicing Agent and as      Administrative Agent       By:     /s/ J. Gregory Davis         Name:   J. Gregory Davis        Title: Vice President      --------------------------------------------------------------------------------                         JPMORGAN CHASE BANK, N.A.,      as a Bank and as Administrative      Agent       By:     /s/ William P. Rindfuss         Name:   William P. Rindfuss        Title:   Vice President        --------------------------------------------------------------------------------               WACHOVIA BANK, N.A., as a Bank       By:      /s/ Thomas M. Harper         Name:   Thomas M. Harper        Title:   Senior Vice President        --------------------------------------------------------------------------------               THE BANK OF TOKYO-MITSUBISHI,      LTD., SEATTLE BRANCH, as a      Bank       By:     /s/ Tsuneto Kodama         Name:   Tsuneto Kodama        Title:   General Manager        --------------------------------------------------------------------------------               ING CAPITAL LLC, as a Bank       By:     /s/ Bill Redmond         Name:   Bill Redmond        Title:   Managing Director        --------------------------------------------------------------------------------               BNP PARIBAS, as a Bank       By:     /s/ Katherine Wolfe         Name:   Katherine Wolfe        Title:   Director              By:   /s/ Sandy Bertram                       Sandy Bertram                      Vice President        --------------------------------------------------------------------------------               CALYON NEW YORK BRANCH, as a      Bank       By:     /s/ Dianne M. Scott         Name:   Dianne M. Scott        Title:   Managing Director              By:   /s/ Richard Laborie         Name:   Richard Laborie        Title:   Director        --------------------------------------------------------------------------------               WILLIAM STREET COMMITMENT      CORPORATION (Recourse only to      assets of William Street Commitment      Corporation), as a Bank       By:     /s/ Mark Walton         Name:   Mark Walton        Title:   Assistant Vice President      --------------------------------------------------------------------------------                         THE BANK OF NEW YORK, as a Bank       By:     /s/ Lisa Y. Brown         Name:   Lisa Y. Brown        Title:   Managing Director      --------------------------------------------------------------------------------                         BANCO BILBAO VIZCAYA      ARGENTARIA, S.A., as a Bank       By:     /s/ Hector O. Villegas         Name:   Hector O. Villegas        Title:   Vice President Global Corporate Banking              By:   /s/ Giampaolo Consigliere                       Giampaolo Consigliere                      Vice President               Global Trade Finance        --------------------------------------------------------------------------------               WELLS FARGO BANK, NATIONAL      ASSOCIATION, as a Bank       By:     /s/ Margarita Chichioco         Name:   Margarita Chichioco        Title:   Vice President        --------------------------------------------------------------------------------               UNION BANK OF CALIFORNIA, N.A.,      as a Bank       By:     /s/ J. William Bloore         Name:   J. William Bloore        Title:   Vice President      --------------------------------------------------------------------------------                         U.S. BANK NATIONAL      ASSOCIATION, as a Bank       By:     /s/ Janet Jordan         Name:   Janet Jordan        Title:   Vice President        --------------------------------------------------------------------------------               SANPAOLO IMA S.P.A., as a Bank       By:     /s/ Renato Carducci         Name:   Renato Carducci        Title:   G.M.        SANPAOLO IMA S.P.A., as a Bank       By:     /s/ Robert Wurster         Name:   Robert Wurster        Title:   S.V.P.      --------------------------------------------------------------------------------                         FIFTH THIRD BANK, as a Bank       By:     /s/ Gary S. Losey         Name:   Gary S. Losey        Title:   AVP — Relationship Manager        --------------------------------------------------------------------------------               THE NORTHERN TRUST COMPANY,      as a Bank       By:     /s/ John P. Brazzale         Name:   John P. Brazzale        Title:   Vice President     

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES. No. PAW-_____ Number of Shares Purchasable upon Issue Date: _____________, 2006 Exercise of the Warrant: ______ PLACEMENT AGENT’S WARRANT  GUARDIAN TECHNOLOGIES INTERNATIONAL, INC. THIS PLACEMENT AGENT’S WARRANT (the “Warrant”) certifies that, for value received, Midtown Partners & Co., LLC (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, (i) at any time on or after the date hereof (such date, the “First Initial Exercise Date”) to subscribe for and purchase up to ______ shares of common stock, $.001 par value per share (the “Common Stock”), of Guardian Technologies International, Inc. (the “Company”) (such shares, the “First Closing Warrant Shares”) and (ii) at any time on or after the later of the Second Closing Date or the Second Closing Payment Date (as defined in Section 2(d)(ii) below) (the later of such dates, the “Second Initial Exercise Date”) and subject to the exercise limitations and cancellation provisions set forth in Section 2(d)(ii), to subscribe for and purchase up to ______ shares of Common Stock of the Company (such shares, the “Second Closing Warrant Shares” and together with the First Closing Warrant Shares, the “Warrant Shares”) and on or prior to the close of business on the 5 year anniversary of the First Initial Exercise Date (such date, the “First Termination Date”) in connection with the First Closing Warrant Shares or the 5 year anniversary of the Second Initial Exercise Date (such date, the “Second Termination Date”) in connection with the Second Closing Warrant Shares, but not thereafter.  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).  This Warrant is being issued by the Company to the Placement Agent pursuant to the terms of the Placement Agent Agreement. 1 The term “Warrant” as defined herein shall hereafter include any warrant into which this Warrant may be divided, exchanged or combined and any Warrant as the same may be modified or amended from time to time. Section 1. Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated November __, 2006, among the Company and the purchasers signatory thereto. Section 2. Exercise. a) Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the First Initial Exercise Date in connection with the First Closing Warrant Shares or, subject to Section 2(d)(ii), on or after the Second Initial Exercise Date in connection with the Second Closing Warrant Shares and on or before the First Termination Date in connection with the First Closing Warrant Shares or on or before the Second Termination Date in connection with the Second Closing Warrant Shares by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed  hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); and, within 3 Trading Days of the date said Notice of Exercise is delivered to the Company, the Holder shall deliver to the Company this Warrant together with  payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank in immediately available United States dollars.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases.  The Company shall deliver any objection to any Notice of Exercise Form within 1 Business Day of receipt of such notice. b) Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $1.15634 subject to adjustment hereunder (the “Exercise Price”). c) Cashless Exercise.  At any time after the First Initial Exercise Date in connection with the First Closing Warrant Shares or, subject to Section 2(d)(ii) below, at any time after the Second Initial Exercise Date in connection with the Second Closing Warrant Shares, this Warrant may be exercised by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:  (A) = the VWAP on the Trading Day immediately preceding the date of such election; (B) =  the Exercise Price of this Warrant, as adjusted; and 2 (X) = the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise. In addition, on the First Termination Date in connection with the First Closing Warrant Shares or on the Second Termination Date in connection with the Second Closing Warrant Shares, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c). d) Exercise Limitations. i. Holder’s Restrictions.  The Company shall not effect any exercise of this Warrant, and a  Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2(c) or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, such Holder (together with such Holder’s Affiliates, and any other person or entity acting as a group together with such Holder or any of such Holder’s Affiliates), as set forth on the applicable Notice of Exercise, would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by such Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by such Holder or any of its affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by a Holder that the Company is not representing to such Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and such Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2(d)(i) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder together with any Affiliates) and of which a portion of this Warrant is exercisable shall be in the sole discretion of a Holder, and the submission of a Notice of Exercise shall be deemed to be each Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage 3 limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(d)(i), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company’s Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written request of a Holder, the Company shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by such Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The Beneficial Ownership Limitation provisions of this Section 2(d)(i) may be waived by such Holder, at the election of such Holder, upon not less than 61 days’ prior notice to the Company to change the Beneficial Ownership Limitation to 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant, and the provisions of this Section 2(d)(i) shall continue to apply.  Upon such a change by a Holder of the Beneficial Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the Beneficial Ownership Limitation may not be further waived by such Holder.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(d)(i) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant. ii. Payment of Subscription Amounts at Second Closing.   Notwithstanding any other provision of this Warrant, until such time as the full amount of the Subscription Amount for the Second Closing (the “Second Closing Subscription Amount”) has been paid and delivered to the Company by a Purchaser pursuant to the Purchase Agreement, the Warrants issued to the Holder pursuant to this Placement Agent’s Warrant to purchase the Second Closing Warrant Shares attributable to such Purchaser’s Second Closing Subscription Amount shall not be exercisable.    4 If, within 15 Trading Days after the Company delivers to Purchasers the Notice to Holders (the “Second Closing Payment Date”), any Purchaser has not paid and delivered the full amount of the Second Closing Subscription Amount for the Second Closing required of such Purchaser by the Purchase Agreement (each such event, a “Failed Debenture Purchase”), the portion of this Warrant attributable to any such Failed Debenture Purchase (such portion of this Warrant, the “Second Closing Unpaid Placement Agent Warrants”) shall not become exercisable hereunder. Promptly upon the occurrence of a Failed Debenture Purchase, the Company shall send notice to the Holder requiring the Holder to deliver this Warrant to the Company and the Company shall cancel the Second Closing Unpaid Placement Agent Warrants and shall reissue to the Holder a Warrant for the remaining portion of the Warrants. e) Mechanics of Exercise. i. Authorization of Warrant Shares.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and upon payment therefor, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).   ii. Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within 3 Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”).  This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company.  The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance of such shares, have been paid.   iii. Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of 5 delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. iv. Rescission Rights.  If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 2(e)(iv) by the second Trading Day following the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise. v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the second Trading Day following the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (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 Warrant Shares that the Company 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 Warrant Shares 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 Company 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 Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof. 6 vi. No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share. vii. Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. viii. Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof. f) Call Provision.  Subject to the provisions of Section 2(d) and this Section 2(f), if, after the Effective Date (i) the Closing Price on each of 20 consecutive Trading Days (the “Measurement Period,” which 20 consecutive Trading Day period shall not have commenced until after the Effective Date) exceeds 200% of the then Exercise Price (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and the like after the First Initial Exercise Date) (the “Threshold Price”), (ii) the daily trading volume for such Measurement Period, exceeds 100,000 shares of Common Stock per Trading Day (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and the like after the First Initial Exercise Date) and (iii) the Holder is not in possession of any information that constitutes, or might constitute, material non-public information, then the Company may, within one Trading Day of the end of such Measurement Period, call for cancellation of all or any portion of this Warrant for which a Notice of Exercise has not yet been delivered (such right, a “Call”) for consideration equal to $.001 per Share.  To exercise this right, the Company must deliver to the Holder an irrevocable written notice (a “Call Notice”), indicating therein the portion of unexercised portion of this Warrant to which such notice applies.  If the conditions set forth below for such Call are satisfied from the period from the date of the Call Notice through and including the Call Date (as defined below), then any portion of this Warrant subject to such Call Notice for which a Notice of Exercise shall not have been received by the Call Date will be cancelled at 6:30 p.m. (New York City time) on the fifteenth Trading Day after the date the Call Notice is received by the Holder (such date and time, the “Call Date”).  Any unexercised portion of this Warrant to which the 7 Call Notice does not pertain will be unaffected by such Call Notice.  In furtherance thereof, the Company covenants and agrees that it will honor all Notices of Exercise with respect to Warrant Shares subject to a Call Notice that are tendered through 6:30 p.m. (New York City time) on the Call Date.  The parties agree that any Notice of Exercise delivered following a Call Notice which calls less than all the Warrants shall first reduce to zero the number of Warrant Shares subject to such Call Notice prior to reducing the remaining Warrant Shares available for purchase under this Warrant.  For example, if (x) this Warrant then permits the Holder to acquire 100 Warrant Shares, (y) a Call Notice pertains to 75 Warrant Shares, and (z) prior to 6:30 p.m. (New York City time) on the Call Date the Holder tenders a Notice of Exercise in respect of 50 Warrant Shares, then (1) on the Call Date the right under this Warrant to acquire 25 Warrant Shares will be automatically cancelled, (2) the Company, in the time and manner required under this Warrant, will have issued and delivered to the Holder 50 Warrant Shares in respect of the exercises following receipt of the Call Notice, and (3) the Holder may, until the First Termination Date or Second Termination Date, as applicable, exercise this Warrant for 25 Warrant Shares (subject to adjustment as herein provided and subject to subsequent Call Notices).  Subject again to the provisions of this Section 2(f), the Company may deliver subsequent Call Notices for any portion of this Warrant for which the Holder shall not have delivered a Notice of Exercise.  Notwithstanding anything to the contrary set forth in this Warrant, the Company may not deliver a Call Notice or require the cancellation of this Warrant (and any such Call Notice will be void), unless, from the beginning of the Measurement Period through the Call Date, (i) the Company shall have honored in accordance with the terms of this Warrant all Notices of Exercise delivered by  6:30 p.m. (New York City time) on the Call Date, and (ii) the Registration Statement shall be effective as to all Warrant Shares and the prospectus thereunder available for use by the Holder for the resale of all such Warrant Shares, and (iii) the Common Stock shall be listed or quoted for trading on the Trading Market, and (iv) there is a sufficient number of authorized shares of Common Stock for issuance of all Securities under the Transaction Documents, and (v) the issuance of the shares shall not cause a breach of any provision of 2(d) herein.  The Company’s right to call the Warrants under this Section 2(f) shall be exercised ratably among the Holders based on each Holder’s initial purchase of Warrants. Section 3. Certain Adjustments. a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of 8 shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. b) Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance.  The Company shall promptly notify the Holder in writing of any issuance of Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”).  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled, upon the subsequent exercise thereof, to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. c) Subsequent Rights Offerings.  Unless Holders holding at least 51% of the Warrant Shares underlying the then outstanding Warrants and Series D Common Stock Purchase Warrants issued pursuant to the Purchase Agreement (the “Series D Warrants”) shall otherwise consent in writing, if the Company, at any time while the Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the VWAP at the record date mentioned below, then the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or 9 warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP.  Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants. d) Pro Rata Distributions.  Unless Holders holding at least 51% of the Warrant Shares underlying the then outstanding Warrants and Series D Warrants shall otherwise consent in writing, if the Company, at any time prior to the First Termination Date (or, if applicable, the Second Termination Date) shall distribute to all holders of Common Stock (and not to Holders of the Warrants) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 3(b)), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith.  In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction (and in lieu thereof), at the option of the Holder, (a) upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder 10 of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event or (b) if the Company is acquired in an all cash transaction, cash equal to the value of this Warrant as determined in accordance with the Black-Scholes option pricing formula.  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3(e) and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding. g) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. h) Notice to Holder.   i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company issues a variable rate security, despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined in the Purchase Agreement). ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the 11 Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  The Holder is entitled to exercise this Warrant during the 20-day period commencing on the date of such notice to the effective date of the event triggering such notice. Section 4. Transfer of Warrant. a) Transferability.  Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer; provided, however, that the Second Closing Warrant Shares shall not be transferable until the Second Initial Exercise Date.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so 12 assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.   b) New Warrants. This Warrant may be divided or combined with other Warrants (which carry identical rights) upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. d) Transfer Restrictions. If , at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company, (iii) that the transferee be an “accredited investor” as defined in Rule 501(a) under the Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act and (iv) that the transferee agrees in writing to be bound to the terms of the Purchase Agreement. Section 5. Miscellaneous. a) No Rights as Shareholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(e)(ii).   b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock 13 certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate. c) Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day. d) Authorized Shares.   The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.   Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, 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 Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. 14 e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement. f) Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws. g) Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the First Termination Date or Second Termination Date, as applicable.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. h) Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement. i) Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. j) Remedies.  Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate. k) Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares. l) Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder. m) Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any 15 provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant. n) Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. o) Registration Rights.   (i) If, at any time after the Initial Exercise Date, the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act), or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the stock option or other employee benefit plans, the Company shall send to the Holder a written notice of determination and if, within 15 calendar days after the date of such notice, the Holder shall so request in writing, the Company shall include in such registration statement all or any part of the Warrant Shares that the Holder requests to be registered; provided, however, that the Company shall not be required to register any Warrant Shares pursuant to this Section 5(o) that are eligible for resale pursuant to Rule 144(k) under the Securities Act.   (ii) If, in connection with the preparation, filing or obtaining of the effectiveness of the Registration Statement (as defined in the Purchase Agreement), the Placement Agent is required to make a filing under NASD Corporate Financing Rule 2710 or any successor rule or any other applicable NASD rule (“Rule 2710”) with regard to the transactions contemplated by the Purchase Agreement, the Placement Agent Agreement, or any other terms and arrangements related thereto, the Placement Agent shall promptly make all such required filings with the NASD, obtain any required review thereof by the NASD Corporate Financing Department, provided that the Company shall pay any and all applicable filing fees related thereto; provided, further, that (A) in the event such NASD review is required pursuant to Rule 2710 (or any other applicable NASD Rule) and the Placement Agent is unable to obtain a “no objection” opinion pursuant to Rule 2710(b)(4)(B)(ii) (or any successor rule) or other appropriate written ruling or determination of the NASD’s Corporate Finance Department and furnish a copy thereof to the Company at least 7 Trading Days prior to the Effective Date and (B) if the withdrawal from registration under the Registration Statement of the Warrant Shares would enable the Placement Agent to obtain or expedite such a “no objection” opinion, or other appropriate written ruling or determination from the NASD prior to the Effective Date, then the 16 Company shall have the right to withdraw and exclude the Warrant Shares from registration under the Registration Statement and file an appropriate amendment or supplement to the Registration Statement to effect such withdrawal.   ******************** 17 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized. Dated: November 8, 2006   GUARDIAN TECHNOLOGIES INTERNATIONAL, INC. By:__________________________________________      Name:      Title: 18 NOTICE OF EXERCISE TO: GUARDIAN TECHNOLOGIES INTERNATIONAL, INC. (1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. (2) Payment shall take the form of (check applicable box): [  ] in lawful money of the United States; or [ ] [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c). (3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below: _______________________________ The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to: _______________________________ _______________________________ _______________________________ (4)  Accredited Investor.  The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended. [SIGNATURE OF HOLDER] Name of Investing Entity: ________________________________________________________________________ Signature of Authorized Signatory of Investing Entity: _________________________________________________ Name of Authorized Signatory: ___________________________________________________________________ Title of Authorized Signatory: ____________________________________________________________________ Date: ________________________________________________________________________________________ ASSIGNMENT FORM (To assign the foregoing warrant, execute this form and supply required information. Do not use this form to exercise the warrant.) FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to _______________________________________________ whose address is _______________________________________________________________. _______________________________________________________________ Dated:  ______________, _______ Holder’s Signature: _____________________________ Holder’s Address: _____________________________ _____________________________ Signature Guaranteed:  ___________________________________________ NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

  LA JOLLA COVE INVESTORS, INC. 1795 UNION STREET, 3rd FLOOR SAN FRANCISCO, CALIFORNIA 94123 TELEPHONE:  (415) 409-8703 FACSIMILE:    (415) 409-8704 E-MAIL: [email protected] www.ljcinvestors.com LA JOLLA                                                                                       SAN FRANCISCO November 7, 2006 James Bickel S3 Investment Company, Inc. 43180 Business Park Drive, Suite 202 Temecula, California 92590 Dear James: Reference is made to the Warrant to Purchase Common Stock (“Warrant”) for 4,000,000,000 shares issued by S3 Investment Company, Inc. (“Company”) to La Jolla Cove Investors, Inc. (“Holder”), and the Continuing Personal Guaranty (“Guaranty”) issued by James Bickel to Holder regarding the Warrant, both dated as of June 2, 2006. All terms used herein and not otherwise defined herein shall have the definitions set forth in the Warrant. Pursuant to a letter agreement dated June 1, 2006 between the Company and Holder, the Company delivered 100,000,000 shares (“Shares”) of the Company to Holder. It is hereby agreed that Holder shall be entitled to retain the Shares. The Company shall return to Holder the $100,000 Premium, by issuing a Promissory Note to Holder in the amount of $100,000, and shall issue an additional 100,000,000 shares of the Company (the “Additional Shares”) to Holder. Holder agrees that, notwithstanding the rules promulgated under Rule 144 of the Securities Act of 1933, it will not sell, transfer, hypothecate or otherwise dispose of a combination of Shares or Additional Shares in an amount exceeding 18% of the daily volume, which may be cumulated. The Warrant and Guaranty are hereby cancelled and Holder releases all of its interest in, and waives all of its rights under, the Warrant and Guaranty. Sincerely, /s/ Travis W. Huff Travis W. Huff Portfolio Manager S3 Investment Company, Inc.   /s/ James Bickel James Bickel   By: James Bickel Title: Chief Executive Officer and President --------------------------------------------------------------------------------

EXHIBIT 10.4 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 APPLICABLE FOREIGN OR STATE SECURITIES LAWS. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER SUCH ACT OR LAWS UNLESS OFFERRED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT OR LAWS. Warrant No. ___     WARRANT To Purchase Shares of Common Stock of CIPRICO INC. June 6, 2006 CIPRICO INC., a Delaware corporation (the “Company”), for value received, hereby certifies that Broadcom Corporation (the “Holder”) is entitled, subject to the terms set forth below, upon exercise of this Warrant to purchase from the Company such number of shares of the common stock, par value $0.01 per share, of the Company (the “Ciprico Common Stock”) specified in Section 2(b) below at the exercise price per share specified in Section 2(a) below (as adjusted pursuant to the terms of this Warrant). The shares of the Ciprico Common Stock issuable upon exercise of this Warrant, as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the “Warrant Shares.” This Warrant is one of a series of warrants issued pursuant to that certain Technology License and Asset Purchase Agreement of even date herewith to which the Company and the original Holder are parties (the “Agreement”). This Warrant is further subject to the following provisions, terms and conditions: 1.             TERM; TERMINATION OF WARRANT. (A)           SUBJECT TO THE VESTING REQUIREMENTS SET FORTH IN SECTION 2, THIS WARRANT MAY BE EXERCISED BY THE HOLDER, IN WHOLE OR IN PART, IN THE MANNER DESCRIBED IN SECTION 3 HEREOF AT ANY TIME BEFORE 5:00 P.M. IN MINNEAPOLIS, MINNESOTA ON JUNE 6, 2012 (THE “EXPIRATION DATE”). IN THE EVENT THAT THE EXPIRATION DATE OF THIS WARRANT FALLS ON A DAY WHICH IS NOT A BUSINESS DAY, THE EXPIRATION DATE SHALL BE ADJUSTED TO THE BUSINESS DAY IMMEDIATELY FOLLOWING SUCH EXPIRATION DATE. AS USED HEREIN, THE TERM “BUSINESS DAY” MEANS EACH DAY OTHER THAN A SATURDAY, SUNDAY OR OTHER DAY ON WHICH BANKS IN THE LOCATION OF THE PRINCIPAL OFFICE OF THE COMPANY ARE LEGALLY AUTHORIZED TO CLOSE. AT 5:00 P.M., MINNESOTA TIME ON THE EXPIRATION DATE, THE PORTION OF THIS WARRANT NOT EXERCISED PRIOR THERETO SHALL BE AND BECOME VOID AND OF NO VALUE, PROVIDED, THAT IF THE CLOSING SALES PRICE OF CIPRICO COMMON STOCK ON THE EXPIRATION DATE IS GREATER THAN 150% OF THE EXERCISE PRICE ON THE EXPIRATION DATE, THEN THIS WARRANT SHALL BE DEEMED TO HAVE BEEN -------------------------------------------------------------------------------- EXERCISED IN FULL (TO THE EXTENT NOT PREVIOUSLY EXERCISED) ON A “CASHLESS EXERCISE” BASIS AT 5:00 P.M. MINNESOTA TIME ON THE EXPIRATION DATE. 2.             WARRANT SHARES AND EXERCISE PRICE. (A)           EXERCISE PRICE. THE PER SHARE WARRANT EXERCISE PRICE (THE “EXERCISE PRICE”) SHALL EQUAL $10.00, SUBJECT TO ADJUSTMENT AS PROVIDED HEREIN. (B)           NUMBER OF WARRANT SHARES. THIS WARRANT SHALL BECOME EXERCISABLE BASED ON THE VESTING PROVISIONS SET FORTH IN PARAGRAPH 2(C), FOR 300,000 SHARES OF CIPRICO COMMON STOCK, SUBJECT TO ADJUSTMENT AS PROVIDED HEREIN. HOLDER MAY CONTINUE TO EXERCISE THIS WARRANT UNDER THE TERMS AND CONDITIONS SET FORTH HEREIN UNTIL THE TERMINATION OR EXPIRATION OF THE WARRANT AS PROVIDED HEREIN. IF THE HOLDER DOES NOT PURCHASE UPON AN EXERCISE OF THIS WARRANT THE FULL NUMBER OF SHARES WHICH HOLDER IS THEN ENTITLED TO PURCHASE, THE HOLDER MAY PURCHASE UPON ANY SUBSEQUENT EXERCISE PRIOR TO THIS WARRANT’S TERMINATION SUCH PREVIOUSLY UNPURCHASED SHARES IN ADDITION TO THOSE THE HOLDER IS OTHERWISE ENTITLED TO PURCHASE. (c)  Vesting. This Warrant shall vest and become exercisable as to 100% of the total Warrant Shares on June 6, 2009 if Company Revenues from the Licensed Software (whether pursuant to licenses sold by Holder or Company, and whether for Holder or non-Holder based platforms) for the period from June 6, 2008 to June 6, 2009 exceed four million dollars ($4,000,000) and Company Revenue for the period from June 6, 2008 to June 6, 2009 related to RAID Controller Cards exceeds twenty million dollars ($20,000,000). Otherwise, if this Warrant has not vested previously, then this Warrant shall vest and become exercisable as to 100% of the total Warrant Shares on June 6, 2009 if the aggregate Company Revenues from the Licensed Software (whether pursuant to licenses sold by Holder or Company, and whether for Holder or non-Holder based platforms) for the period from the date of the Closing to June 6, 2009 exceed ten million dollars ($10,000,000) and the aggregate Company Revenues related to RAID Controller Cards for the period from the date of the Closing to June 6, 2009 exceed forty million dollars ($40,000,000). For purposes of this Warrant, the terms “Revenue,” “Licensed Software,” “RAID Controller Cards,” and “Closing” shall have the meaning set forth in the corresponding definitions of the Agreement. 3.             MANNER OF EXERCISE. SUBJECT TO THE VESTING PROVISIONS SET FORTH IN PARAGRAPH 2 (C) ABOVE, THIS WARRANT MAY BE EXERCISED BY THE HOLDER, IN WHOLE OR IN PART (BUT NOT AS TO ANY FRACTION OF A SHARE OF CIPRICO COMMON STOCK), BY SURRENDERING THIS WARRANT, WITH THE EXERCISE FORM ATTACHED HERETO AS EXHIBIT A FILLED IN AND DULY EXECUTED BY SUCH HOLDER OR BY SUCH HOLDER’S DULY AUTHORIZED ATTORNEY, TO THE COMPANY AT ITS PRINCIPAL OFFICE ACCOMPANIED BY PAYMENT OF THE AGGREGATE EXERCISE PRICE THEREFORE (EQUAL TO THE EXERCISE PRICE MULTIPLIED BY THE NUMBER OF SHARES AS TO WHICH THE WARRANT IS BEING EXERCISED). AT THE OPTION OF THE HOLDER, THE EXERCISE PRICE MAY BE PAID IN ONE OR MORE OF THE FOLLOWING MANNERS: -------------------------------------------------------------------------------- (I)             A CERTIFIED CHECK OR WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS, (II)          SURRENDER OF STOCK CERTIFICATES THEN HELD REPRESENTING THAT NUMBER OF SHARES HAVING AN AGGREGATE CURRENT FAIR MARKET VALUE (AS DEFINED IN PARAGRAPH 5(B) BELOW) ON THE DATE OF EXERCISE EQUAL TO THE AGGREGATE EXERCISE PRICE FOR ALL SHARES TO BE PURCHASED PURSUANT TO THIS WARRANT, OR (III)       BY A “CASHLESS EXERCISE,” IN WHICH EVENT THE COMPANY SHALL ISSUE TO THE HOLDER THE NUMBER OF WARRANT SHARES DETERMINED AS FOLLOWS: X = Y [(A-B)/A] where: X = the number of Warrant Shares to be issued to the Holder. Y = the number of Warrant Shares with respect to which this Warrant is being exercised. A = the fair market value (as defined in paragraph 5(b) below) of Ciprico Common Stock on the date of exercise. B = the Exercise Price. (IV)      ANY COMBINATION OF THE FOREGOING METHODS. For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for such Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued. 4.             EFFECTIVE DATE OF EXERCISE. EACH EXERCISE OF THIS WARRANT SHALL BE DEEMED EFFECTIVE AS OF THE CLOSE OF BUSINESS ON THE DAY ON WHICH THIS WARRANT IS SURRENDERED TO THE COMPANY AS PROVIDED IN SECTION 3 ABOVE. AT SUCH TIME, THE PERSON OR PERSONS IN WHOSE NAME OR NAMES ANY CERTIFICATES FOR WARRANT SHARES SHALL BE ISSUABLE UPON SUCH EXERCISE SHALL BE DEEMED TO HAVE BECOME THE HOLDER OR HOLDERS OF RECORD OF THE WARRANT SHARES REPRESENTED BY SUCH CERTIFICATES. AS PROMPTLY AS PRACTICABLE, BUT IN NO EVENT LATER THAN 15 BUSINESS DAYS AFTER THE EXERCISE OF THIS WARRANT IN FULL OR IN PART, THE COMPANY WILL, AT ITS EXPENSE, CAUSE TO BE ISSUED IN THE NAME OF AND DELIVERED TO THE HOLDER OR SUCH OTHER PERSON AS THE HOLDER MAY (UPON PAYMENT BY SUCH HOLDER OF ANY APPLICABLE TRANSFER TAXES) DIRECT:  (I) A CERTIFICATE OR CERTIFICATES FOR THE NUMBER OF FULL WARRANT SHARES TO WHICH SUCH HOLDER IS ENTITLED UPON SUCH EXERCISE (OR UPON THE HOLDER’S REQUEST, THE COMPANY WILL DELIVER THE WARRANT SHARES HEREUNDER ELECTRONICALLY THROUGH THE DEPOSITORY TRUST CORPORATION OR ANOTHER ESTABLISHED CLEARING CORPORATION PERFORMING SIMILAR FUNCTIONS), AND (II) UNLESS THIS WARRANT HAS EXPIRED, A NEW WARRANT OR WARRANTS (DATED THE DATE HEREOF AND IN FORM IDENTICAL HERETO) REPRESENTING THE RIGHT TO PURCHASE THE REMAINING NUMBER OF SHARES OF CIPRICO COMMON STOCK, IF ANY, WITH RESPECT TO WHICH THIS WARRANT HAS NOT THEN BEEN EXERCISED. Notwithstanding the foregoing, however, the Company shall not be required to deliver any certificate for Warrant Shares upon exercise of this Warrant except in accordance with exemptions from the applicable securities registration requirements or registrations under applicable securities laws. Nothing herein, however, shall obligate the Company to effect registrations under federal or -------------------------------------------------------------------------------- state securities laws. If registrations are not in effect and if exemptions are not available when the Holder seeks to exercise the Warrant, the Warrant exercise period will be extended, if need be, to prevent the Warrant from expiring, until such time as either registrations become effective or exemptions are available, and the Warrant shall then remain exercisable for a period of at least 30 calendar days from the date the Company delivers to the Holder written notice of the availability of such registrations or exemptions. The Holder agrees to execute such documents and make such representations, warranties, and agreements as may be required solely to comply with the exemptions relied upon by the Company, or the registrations made, for the issuance of the Warrant Shares. 5.             PROTECTION AGAINST DILUTION. (A)           ADJUSTMENT FOR STOCK SPLITS, DIVIDENDS AND COMBINATIONS. IF THE COMPANY, AT ANY TIME AFTER THE DATE OF THIS WARRANT, SUBDIVIDES, DECLARES A DIVIDEND PAYABLE IN, OR COMBINES THE OUTSTANDING SHARES OF CIPRICO COMMON STOCK THEN (I) THE NUMBER OF SHARES OF CIPRICO COMMON STOCK FOR WHICH THIS WARRANT MAY BE EXERCISED AS OF IMMEDIATELY PRIOR TO THE SUBDIVISION, COMBINATION OR RECORD DATE FOR SUCH DIVIDEND PAYABLE IN CIPRICO COMMON STOCK SHALL FORTHWITH BE PROPORTIONATELY DECREASED, IN THE CASE OF COMBINATION, OR INCREASED, IN THE CASE OF SUBDIVISION OR DIVIDEND PAYABLE IN CIPRICO COMMON STOCK (CALCULATED TO THE NEXT HIGHEST WHOLE SHARE), AND (II) THE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO THE SUBDIVISION, COMBINATION OR RECORD DATE FOR SUCH DIVIDEND PAYABLE IN CIPRICO COMMON STOCK SHALL FORTHWITH BE PROPORTIONATELY INCREASED, IN THE CASE OF COMBINATION, OR DECREASED, IN THE CASE OF SUBDIVISION OR DIVIDEND PAYABLE IN CIPRICO COMMON STOCK, COMPUTED TO THE NEAREST WHOLE CENT. (B)           ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. IF THE COMPANY, AT ANY TIME AFTER THE DATE OF THIS WARRANT, DISTRIBUTES TO HOLDERS OF CIPRICO COMMON STOCK ANY ASSETS OR DEBT SECURITIES OR ANY RIGHTS OR WARRANTS TO PURCHASE DEBT SECURITIES, ASSETS OR OTHER SECURITIES (INCLUDING CIPRICO COMMON STOCK, OTHER THAN PURSUANT TO A STOCK SPLIT OR STOCK DIVIDEND UNDER SECTION 5(A) ABOVE), THE EXERCISE PRICE SHALL BE ADJUSTED IN ACCORDANCE WITH THE FORMULA: E1 = E x [(O x M) - F]       O x M where: E1  =        the adjusted Exercise Price, computed to the nearest whole cent. E   =        the Exercise Price prior to adjustment pursuant to this subsection. M  =                       the fair market value per share of Ciprico Common Stock before the record date mentioned below. O  =                          the number of shares of Ciprico Common Stock outstanding on the record date mentioned below. F  =                            the fair market value on the record date of the aggregate of all assets, securities, rights or warrants distributed, as determined in good faith by the Company’s Board of Directors. -------------------------------------------------------------------------------- The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. Upon each adjustment of the Exercise Price, the Holder shall be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares (calculated to the next highest whole share) that is equal to the quotient of (i) the Exercise Price immediately prior to such adjustment multiplied by the number of shares purchasable pursuant hereto immediately prior to such adjustment; divided by (ii) the Exercise Price resulting from such adjustment. (C)           FOR PURPOSES OF THIS PARAGRAPH 5(B) AND PARAGRAPH 3 ABOVE, THE “FAIR MARKET VALUE” OF A SHARE OF CIPRICO COMMON STOCK SHALL BE CALCULATED AS FOLLOWS: (i)            if the Ciprico Common Stock is listed on the Nasdaq National Market, Nasdaq SmallCap Market, or an established stock exchange, then the average of the prices of such stock at the close of the regular trading session of such market or exchange for the ten (10) Business Days immediately preceding the applicable valuation date, or (ii)           if the Common Stock is not so listed on the Nasdaq National Market, Nasdaq SmallCap Market, or an established stock exchange, then the average of the closing “bid” and “asked” prices quoted by the OTC Bulletin Board, the National Quotation Bureau, or any comparable reporting service for the ten (10) Business Days immediately preceding the applicable valuation date, or (iii)         if the Common Stock is not publicly traded as of such date, the per share fair market value as reasonably determined in good faith by the Company’s Board of Directors. (D)           IF, AT ANY TIME WHILE THIS WARRANT IS OUTSTANDING, (I) THE COMPANY EFFECTS ANY MERGER OR CONSOLIDATION OF THE COMPANY WITH OR INTO ANOTHER PERSON (AS DEFINED BELOW), (II) THE COMPANY EFFECTS ANY SALE OF ALL OR SUBSTANTIALLY ALL OF ITS ASSETS OR LICENSES ALL OR SUBSTANTIALLY ALL OF ITS INTELLECTUAL PROPERTY IN ONE OR A SERIES OF RELATED TRANSACTIONS, OR (III) THE COMPANY EFFECTS ANY RECLASSIFICATION OF THE CIPRICO COMMON STOCK OR ANY COMPULSORY SHARE EXCHANGE PURSUANT TO WHICH THE CIPRICO COMMON STOCK IS EFFECTIVELY CONVERTED INTO OR EXCHANGED FOR OTHER SECURITIES, CASH OR PROPERTY (IN ANY SUCH CASE, A “FUNDAMENTAL TRANSACTION”), THEN THE HOLDER SHALL HAVE THE RIGHT THEREAFTER TO RECEIVE, UPON EXERCISE OF THIS WARRANT, THE SAME AMOUNT AND KIND OF SECURITIES, CASH OR PROPERTY AS IT WOULD HAVE BEEN ENTITLED TO RECEIVE UPON THE OCCURRENCE OF SUCH FUNDAMENTAL TRANSACTION IF IT HAD BEEN, IMMEDIATELY PRIOR TO SUCH FUNDAMENTAL TRANSACTION, THE HOLDER OF THE NUMBER OF WARRANT SHARES THEN ISSUABLE UPON EXERCISE IN FULL OF THIS WARRANT (THE “ALTERNATE CONSIDERATION”). FOR PURPOSES OF ANY SUCH EXERCISE, THE DETERMINATION OF THE EXERCISE PRICE SHALL BE APPROPRIATELY ADJUSTED TO APPLY TO SUCH ALTERNATE CONSIDERATION BASED ON THE AMOUNT OF ALTERNATE CONSIDERATION ISSUABLE IN RESPECT OF ONE SHARE OF CIPRICO COMMON STOCK IN SUCH FUNDAMENTAL TRANSACTION, AND THE COMPANY SHALL APPORTION THE EXERCISE PRICE AMONG THE ALTERNATE CONSIDERATION IN A REASONABLE MANNER REFLECTING THE RELATIVE VALUE OF ANY DIFFERENT COMPONENTS OF THE ALTERNATE CONSIDERATION. IF HOLDERS OF CIPRICO COMMON STOCK ARE GIVEN ANY CHOICE AS TO THE SECURITIES, CASH OR PROPERTY TO BE RECEIVED IN A FUNDAMENTAL TRANSACTION, THEN THE HOLDER SHALL BE GIVEN THE SAME CHOICE AS TO THE ALTERNATE CONSIDERATION IT RECEIVES UPON ANY EXERCISE OF THIS WARRANT FOLLOWING SUCH FUNDAMENTAL TRANSACTION. AT THE HOLDER’S REQUEST, ANY SUCCESSOR TO THE COMPANY OR SURVIVING ENTITY IN SUCH FUNDAMENTAL TRANSACTION SHALL, ISSUE TO THE HOLDER A NEW WARRANT SUBSTANTIALLY IN THE FORM OF THIS WARRANT AND CONSISTENT WITH THE FOREGOING PROVISIONS AND EVIDENCING THE HOLDER’S RIGHT TO PURCHASE THE ALTERNATE CONSIDERATION FOR THE -------------------------------------------------------------------------------- AGGREGATE EXERCISE PRICE UPON EXERCISE THEREOF. THE TERMS OF ANY AGREEMENT PURSUANT TO WHICH A FUNDAMENTAL TRANSACTION IS EFFECTED SHALL INCLUDE TERMS REQUIRING ANY SUCH SUCCESSOR OR SURVIVING ENTITY TO COMPLY WITH THE PROVISIONS OF THIS PARAGRAPH (C) AND INSURING THAT THE WARRANT (OR ANY SUCH REPLACEMENT SECURITY) WILL BE SIMILARLY ADJUSTED UPON ANY SUBSEQUENT TRANSACTION ANALOGOUS TO A FUNDAMENTAL TRANSACTION. “PERSON” MEANS ANY NATURAL PERSON, CORPORATION, GENERAL PARTNERSHIP, LIMITED PARTNERSHIP, LIMITED LIABILITY COMPANY OR PARTNERSHIP, PROPRIETORSHIP, OR OTHER BUSINESS ORGANIZATION. (E)           IF, PRIOR TO JUNE 6, 2009, (I) A FUNDAMENTAL TRANSACTION OCCURS, (II) IN THE ONE YEAR PERIOD PRIOR TO THE FUNDAMENTAL TRANSACTION THE COMPANY HAS GENERATED REVENUES FROM THE LICENSED SOFTWARE (WHETHER PURSUANT TO LICENSES SOLD BY HOLDER OR COMPANY, AND WHETHER FOR HOLDER OR NON-HOLDER BASED PLATFORMS) OF AT LEAST THREE MILLION TWO HUNDRED THOUSAND DOLLARS ($3,200,000) AND REVENUES RELATED TO RAID CONTROLLER CARDS OF AT LEAST SIXTEEN MILLION DOLLARS ($16,000,000), AND (III) THE SURVIVING ENTITY FOLLOWING THE FUNDAMENTAL TRANSACTION (THE “SURVIVING COMPANY”) FAILS TO GENERATE MINIMUM POST-ACQUISITION REVENUES (AS DEFINED BELOW) IN THE PERIOD ENDING ON THE ONE YEAR ANNIVERSARY OF THE FUNDAMENTAL TRANSACTION, THEN ANY WARRANT SHARES AT THE TIME SUBJECT TO THIS WARRANT BUT NOT OTHERWISE VESTED SHALL AUTOMATICALLY VEST SO THAT THIS WARRANT SHALL BECOME EXERCISABLE FOR ALL OF THE WARRANT SHARES AS FULLY VESTED SHARES OF COMMON STOCK OF THE SURVIVING COMPANY AND MAY BE EXERCISED FOR ANY OR ALL OF THOSE VESTED SHARES. “MINIMUM POST-ACQUISITION REVENUES” SHALL EQUAL THE SUM OF (I) 80% OF THE COMPANY’S REVENUE RELATING TO RAID CONTROLLER CARDS IN THE FOUR MOST RECENT FISCAL QUARTERS PRIOR TO THE FUNDAMENTAL TRANSACTION; AND (II) 80% OF THE COMPANY’S REVENUE FROM THE LICENSED SOFTWARE (WHETHER PURSUANT TO LICENSES SOLD BY HOLDER OR COMPANY, AND WHETHER FOR HOLDER OR NON-HOLDER BASED PLATFORMS) IN THE FOUR MOST RECENT FISCAL QUARTERS PRIOR TO THE FUNDAMENTAL TRANSACTION. (F)            SUCCESSIVE ADJUSTMENTS AND NOTICE. THE ABOVE PROVISIONS OF THIS SECTION 5 SHALL SIMILARLY APPLY TO SUCCESSIVE STOCK SPLITS, COMBINATIONS, DIVIDENDS, REORGANIZATIONS, RECLASSIFICATIONS, CONSOLIDATIONS, MERGERS OR SALES. THE COMPANY SHALL DELIVER WRITTEN NOTICE OF EACH SUCH EVENT, AND OF EACH SUCH ADJUSTMENT TO THE EXERCISE PRICE AND TYPE OF SHARES OR OTHER CONSIDERATION ACQUIRABLE UPON EXERCISE OF THIS WARRANT RESULTING FROM SUCH PROPOSED EVENT, TO THE HOLDER NOT LESS THAN TWENTY (20) DAYS PRIOR TO SUCH EVENT. SUCH NOTICE SHALL SET FORTH, IN REASONABLE DETAIL, THE EVENT REQUIRING THE ADJUSTMENT, THE AMOUNT OF THE ADJUSTMENT AND THE METHOD BY WHICH SUCH ADJUSTMENT WAS CALCULATED. IF ANY EVENT OCCURS OF THE TYPE CONTEMPLATED BY THE ADJUSTMENT PROVISIONS HEREIN, BUT WHICH IS NOT EXPRESSLY PROVIDED FOR BY SUCH PROVISIONS, THE COMPANY WILL DELIVER NOTICE OF SUCH EVENT AS PROVIDED ABOVE AND THE COMPANY WILL MAKE AN APPROPRIATE ADJUSTMENT IN THE EXERCISE PRICE AND THE NUMBER AND TYPE OF SHARES ACQUIRABLE UPON EXERCISE OF THIS WARRANT SO THAT THE RIGHTS OF THE HOLDER SHALL BE NEITHER ENHANCED NOR DIMINISHED AS A RESULT OF SUCH EVENT. 6.             NO VOTING RIGHTS. THIS WARRANT SHALL NOT ENTITLE THE HOLDER TO ANY VOTING RIGHTS OR OTHER RIGHTS AS A STOCKHOLDER OF THE COMPANY UNLESS AND UNTIL EXERCISED PURSUANT TO THE PROVISIONS HEREOF. 7.             TRANSFER OR EXCHANGE WITHOUT REGISTRATION; COVENANTS OF HOLDER. (A)           IN THE EVENT THE HOLDER DESIRES TO TRANSFER THIS WARRANT OR THE WARRANT SHARES ACQUIRABLE UPON EXERCISE THEREOF, THE HOLDER SHALL PROVIDE THE COMPANY WRITTEN NOTICE DESCRIBING THE MANNER OF SUCH TRANSFER AND AN OPINION OF COUNSEL WHICH SHALL BE SATISFACTORY TO -------------------------------------------------------------------------------- THE COMPANY AND COUNSEL TO THE COMPANY, THAT THE PROPOSED TRANSFER MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES REGISTRATION LAWS, WHEREUPON THE HOLDER SHALL BE ENTITLED TO TRANSFER THIS WARRANT OR THE WARRANT SHARES IN ACCORDANCE WITH SUCH NOTICE UPON RECEIPT OF THE CONSENT OF THE COMPANY TO SUCH TRANSFER, WHICH CONSENT WILL NOT BE UNREASONABLY WITHHELD. UPON RECEIPT OF EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY OF THE LOSS, THEFT, DESTRUCTION OR MUTILATION OF THIS WARRANT AND, IN THE CASE OF ANY SUCH LOSS, THEFT, OR DESTRUCTION, UPON DELIVERY OF AN INDEMNITY AGREEMENT REASONABLY SATISFACTORY IN FORM AN AMOUNT TO THE COMPANY, OR, IN THE CASE OF ANY SUCH MUTILATION, UPON SURRENDER OF THIS WARRANT, THE COMPANY, AT ITS EXPENSE, WILL EXECUTE AND DELIVER, IN LIEU THEREOF, A NEW WARRANT OF LIKE TENOR. THE COMPANY MAY CONDITION ANY ISSUANCE OR SALE, PLEDGE, ASSIGNMENT OR OTHER DISPOSITION OF THE WARRANT OR THE WARRANT SHARES ON THE RECEIPT FROM THE PARTY TO WHOM THIS WARRANT IS TO BE SO TRANSFERRED OR TO WHOM WARRANT SHARES ARE TO BE ISSUED OR SO TRANSFERRED OF ANY REPRESENTATIONS AND AGREEMENTS REQUESTED BY THE COMPANY IN ORDER TO PERMIT SUCH ISSUANCE OR TRANSFER TO BE MADE PURSUANT TO EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND APPLICABLE STATE SECURITIES LAWS. EACH CERTIFICATE REPRESENTING THE WARRANT (OR ANY PART THEREOF) AND ANY WARRANT SHARES SHALL BE STAMPED WITH APPROPRIATE LEGENDS SETTING FORTH THESE RESTRICTIONS ON TRANSFERABILITY. (B)           THE HOLDER, BY ACCEPTANCE HEREOF, REPRESENTS AND WARRANTS THAT (I) THE HOLDER IS ACQUIRING THIS WARRANT FOR HOLDER’S OWN ACCOUNT FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO ITS RESALE OR DISTRIBUTION, (II) THE HOLDER HAS NO PRESENT INTENTION TO RESELL OR OTHERWISE DISPOSE OF ALL OR ANY PART OF THIS WARRANT OR THE WARRANT SHARES ACQUIRABLE HEREUNDER, OTHER THAN PURSUANT TO REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION, THE AVAILABILITY OF WHICH THE COMPANY SHALL DETERMINE IN ITS SOLE AND REASONABLE DISCRETION, (III) THE HOLDER IS AN “ACCREDITED INVESTOR” AS THAT TERM IS DEFINED IN REGULATION D OF THE GENERAL RULES AND REGULATIONS PROMULGATED UNDER THE SECURITIES ACT, AND (IV) THE HOLDER IS EXPERIENCED AND KNOWLEDGEABLE IN FINANCIAL AND BUSINESS MATTERS, IS CAPABLE OF EVALUATING THE MERITS AND RISKS OF INVESTING IN THE WARRANT SHARES, AND DOES NOT NEED OR DESIRE THE ASSISTANCE OF A KNOWLEDGEABLE REPRESENTATIVE TO AID IN THE EVALUATION OF SUCH RISKS. 8.             COVENANTS OF THE COMPANY. THE COMPANY COVENANTS AND AGREES THAT ALL SHARES THAT MAY BE ISSUED UPON EXERCISE OF THIS WARRANT WILL, UPON ISSUANCE, BE DULY AUTHORIZED AND ISSUED, FULLY PAID, NONASSESSABLE AND FREE FROM ALL TAXES, LIENS AND CHARGES WITH RESPECT TO THE ISSUANCE THEREOF. THE COMPANY FURTHER COVENANTS AND AGREES THAT THE COMPANY HAS AND WILL AT ALL TIMES HAVE AUTHORIZED, AND RESERVED FOR THE PURPOSE OF ISSUANCE UPON EXERCISE HEREOF, A SUFFICIENT NUMBER OF SHARES OF ITS CIPRICO COMMON STOCK TO PROVIDE FOR THE EXERCISE OF THIS WARRANT. THE COMPANY AGREES THAT ITS ISSUANCE OF THIS WARRANT SHALL CONSTITUTE FULL AUTHORITY TO ITS OFFICERS WHO ARE CHARGED WITH THE DUTY OF EXECUTING STOCK CERTIFICATES TO EXECUTE AND ISSUE THE NECESSARY CERTIFICATES FOR SHARES OF CIPRICO COMMON STOCK UPON THE EXERCISE OF THIS WARRANT 9.             CERTAIN NOTICES. THE HOLDER SHALL BE ENTITLED TO RECEIVE FROM THE COMPANY, IMMEDIATELY UPON DECLARATION THEREOF AND AT LEAST 20 DAYS PRIOR TO THE RECORD DATE FOR DETERMINATION OF STOCKHOLDERS ENTITLED THERETO OR TO VOTE THEREON (OR, IF NO RECORD DATE IS SET, PRIOR TO THE EVENT), WRITTEN NOTICE OF ANY EVENT THAT COULD REQUIRE AN ADJUSTMENT PURSUANT TO SECTION 5 HEREOF OR OF THE DISSOLUTION, LIQUIDATION OR WINDING UP OF THE COMPANY. ALL NOTICES UNDER THIS WARRANT SHALL BE IN WRITING AND SHALL BE DELIVERED PERSONALLY OR BY TELECOPY (RECEIPT CONFIRMED) TO SUCH PARTY (OR, IN THE CASE OF AN ENTITY, TO AN EXECUTIVE OFFICER OF SUCH PARTY) OR SHALL BE SENT BY A REPUTABLE EXPRESS DELIVERY SERVICE OR BY CERTIFIED MAIL, POSTAGE PREPAID WITH RETURN RECEIPT REQUESTED, ADDRESSED AS FOLLOWS: -------------------------------------------------------------------------------- if to the Holder, to: Broadcom Corporation Attn: David A. Dull General Counsel 16215 Alton Parkway Irvine, CA 92618 Fax: (949) 450-0504 if to the Company to: Ciprico Inc. Attn:  Mr. Monte S. Johnson Sr. Vice President, Chief Financial Officer 7400 Medina Road, Suite 800 Plymouth, MN 55447 Ph:  (763) 551-4016 with a copy to: Fredrikson & Byron, P.A. Attn:  Melodie Rose, Esq. 200 South Sixth Street, Suite 4000 Minneapolis, MN 55402-1425 Ph:    (612) 492-7162 Fax:  (612) 492-7077 Any party may change the above-specified recipient and/or mailing address by notice to all other parties given in the manner herein prescribed. All notices shall be deemed given on the day when actually delivered as provided above (if delivered personally or by telecopy) or on the day shown on the return receipt (if delivered by mail or delivery service). 10.           GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. WITHOUT LIMITING THE RIGHTS OF THE PARTIES TO PURSUE IN ANY APPROPRIATE JURISDICTION THEIR RESPECTIVE RIGHTS WITH RESPECT TO ANY JUDGMENT OBTAINED IN RESPECT HEREOF, THE PARTIES HEREBY IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF DELAWARE OR ANY UNITED STATES COURT OF COMPETENT JURISDICTION SITUATED THEREIN TO ADJUDICATE ANY LEGAL ACTION COMMENCED IN RESPECT OF THIS WARRANT AND WAIVE ANY OBJECTIONS EITHER MAY HAVE AT ANY TIME TO SUCH JURISDICTION AND VENUE. THE PARTIES AGREE TO THE PERSONAL JURISDICTION OF SUCH COURTS AND AGREE THAT SERVICE OF PROCESS MAY BE MADE PURSUANT TO NOTICE SENT IN ACCORDANCE WITH SECTION 10. [signature page follows] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its authorized officer and dated as of the date stated above. CIPRICO INC. By:/s/ James W. Hansen Its: Chairman and Chief Executive Officer --------------------------------------------------------------------------------

Exhibit 10.1 SUBLEASE AGREEMENT THIS SUBLEASE AGREEMENT (“Sublease”) made as of the 28th day of July, 2006 by and between Omtool, Ltd., a Delaware corporation (hereinafter “Omtool” or “Sublessor”) with a principal place of business at 6 Riverside Drive, Andover, MA 01810 and eSped.com, Inc., a Delaware corporation (hereinafter “eSped” or “Sublessee”) with a place of business at 8A Industrial Way Salem, NH 03079. WHEREAS Omtool has leased approximately 44,048 square rentable feet of space (the “Omtool Premises”) located on the first and second floors of the building located at 6 Riverside Drive, Andover, MA (the “Building”) pursuant to that certain Lease Agreement dated January 6, 2006 (as the same may be modified or amended from time to time, the “Lease”) by and between Omtool, as tenant, and SFI I, LLC, as landlord (herein “Landlord”).  A copy of the Lease is annexed hereto as Exhibit A; and WHEREAS eSped desires to sublease from Omtool, and Omtool desires to sublease to eSped, a portion of the Omtool Premises consisting of approximate seven thousand twenty five (7,025) rentable square feet of space, as more particularly described on Exhibit B attached hereto (the “Subleased Premises”), all subject to and in accordance with the provisions of this Sublease; NOW THEREFORE, for Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, Sublessor and Sublessee hereby covenant and agree as follows: 1.             CAPITALIZED TERMS USED IN THIS SUBLEASE AND NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS ASCRIBED TO SUCH TERMS IN THE LEASE. 2.             REFERENCE DATA. Definitions:       2.1 Commencement Date: July 1, 2006     2.2 Term: Fifty-eight (58) months     2.3 eSped’s Pro Rata Share of Operating Costs and Taxes: 16% (7,025/44,048)   --------------------------------------------------------------------------------   2.4 Permitted Use: Professional Office and related uses, and for no other use   or  urpose.     2.5 Base Rent: Base Rent under this Sublease shall be the following amounts   for the following periods of time for so long as this Sublease   remains in force and effect:   Lease Month   Annualized per RSF   Monthly Base Rent 1-58   $14.32   $8,383.17   2.6 Omtool’s Chief Financial Officer Notice/Mailing Address: Omtool, Ltd.   6 Riverside Drive   Andover, MA 01810     2.7 eSped’s Notice/Mailing eSped.com, Inc. Address prior to 8A Industrial Way Commencement Date: Salem, NH 03079     eSped’s Notice/Mailing eSped.com, Inc. Address following 6 Riverside Drive Commencement Date: Andover, MA 01810     2.8 Sublessee’s Trade Name: eSped.com     2.9 Sublessee Emergency Contact: Mark Ventre     2.10 Broker: None     2.11 Security Deposit: None     2.12 Sublessor’s Work: None     2.13 Signage: Subject to Landlord’s approval, if required under the Lease, Sublessee shall be entitled  to maintain a vinyl door sign.     2.14 Required Insurance: As required in Lease.   2 --------------------------------------------------------------------------------   3.             SUBLESSOR HEREBY LEASES TO SUBLESSEE, AND SUBLESSEE HEREBY LEASES FROM SUBLESSOR, THE SUBLEASED PREMISES AND THE COMMON AREAS (TO BE USED IN COMMON WITH OTHERS ENTITLED THERETO) MORE SPECIFICALLY DESCRIBED IN THE LEASE FOR THE PERMITTED USES. 4.             THE TERM OF THIS SUBLEASE SHALL BE FOR A PERIOD OF FIFTY-EIGHT (58) MONTHS COMMENCING ON THE COMMENCEMENT DATE AND TERMINATING ON THE LAST CALENDAR DAY OF THE FIFTY-EIGHTH (58TH) MONTH OF THE TERM, UNLESS EARLIER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF. 5.             SUBLESSEE COVENANTS AND AGREES TO PAY TO SUBLESSOR BASE RENT IN THE AMOUNTS SET FORTH ABOVE FOR SO LONG AS THIS SUBLEASE REMAINS IN FULL FORCE AND EFFECT.  EACH PAYMENT OF BASE RENT SHALL BE MADE IN ADVANCE ON OR BEFORE THE FIRST DAY OF EACH CALENDAR MONTH OF THE TERM AT SUBLESSOR’S ADDRESS SHOWN HEREIN OR AT SUCH PLACE AS SUBLESSOR SHALL FROM TIME TO TIME DESIGNATE IN WRITING AND OTHERWISE IN ACCORDANCE WITH THE PROVISIONS OF THE LEASE. 6.             SUBLESSEE SHALL PAY TO SUBLESSOR AS ADDITIONAL RENT (“ADDITIONAL RENT”) ESPED’S PRO RATA SHARE OF OPERATING COSTS AND TAXES.  SUBLESSOR MAY MAKE A GOOD FAITH ESTIMATE OF THE ADDITIONAL RENT TO BE DUE BY SUBLESSEE FOR ANY CALENDAR YEAR OR PART THEREOF DURING THE TERM.  DURING EACH CALENDAR YEAR OR PARTIAL CALENDAR YEAR OF THE TERM, SUBLESSEE SHALL PAY TO SUBLESSOR, IN ADVANCE CONCURRENTLY WITH EACH MONTHLY INSTALLMENT OF BASE RENT, AN AMOUNT EQUAL TO THE ESTIMATED ADDITIONAL RENT FOR SUCH CALENDAR YEAR OR PART THEREOF DIVIDED BY THE NUMBER OF MONTHS THEREIN.  SUBLESSOR AND SUBLESSEE AGREE THAT ESPED’S ESTIMATED PRO RATA SHARE OF OPERATING COSTS AND TAXES FOR THE FIRST LEASE YEAR SHALL BE $3.67 AND $2.06 PER RENTABLE SQUARE FOOT OF SUBLEASED PREMISES, RESPECTIVELY; AND ACCORDINGLY, ESPED SHALL PAY TO SUBLESSOR, IN ADVANCE CONCURRENTLY WITH EACH MONTHLY INSTALLMENT OF BASE RENT, $5.73 PER RENTABLE SQUARE FOOT OF SUBLEASED PREMISES AS ADDITIONAL RENT HEREUNDER DURING THE FIRST LEASE YEAR.  FROM TIME TO TIME, SUBLESSOR MAY ESTIMATE AND RE-ESTIMATE THE ADDITIONAL RENT TO BE DUE BY SUBLESSEE AND DELIVER A COPY OF THE ESTIMATE OR RE-ESTIMATE TO SUBLESSEE.  THEREAFTER, THE MONTHLY INSTALLMENTS OF ADDITIONAL RENT PAYABLE BY SUBLESSEE SHALL BE APPROPRIATELY ADJUSTED IN ACCORDANCE WITH THE ESTIMATIONS SO THAT, BY THE END OF THE CALENDAR YEAR IN QUESTION, SUBLESSEE SHALL HAVE PAID ALL OF THE ADDITIONAL RENT AS ESTIMATED BY SUBLESSOR.  ANY AMOUNTS PAID BASED ON SUCH AN ESTIMATE SHALL BE SUBJECT TO ADJUSTMENT AS HEREIN PROVIDED WHEN ACTUAL OPERATING COSTS  AND TAXES ARE AVAILABLE FOR EACH CALENDAR YEAR OR TAX YEAR, AS APPLICABLE.  BY MAY 1 OF EACH CALENDAR YEAR, OR AS SOON THEREAFTER AS PRACTICABLE, SUBLESSOR SHALL FURNISH TO SUBLESSEE A STATEMENT OF OPERATING COSTS FOR THE PREVIOUS YEAR AND OF THE TAXES FOR THE PREVIOUS YEAR (THE “OPERATING COSTS AND TAX STATEMENT”).  IF SUBLESSEE’S ESTIMATED PAYMENTS OF OPERATING COSTS OR TAXES UNDER THIS SECTION 6 FOR THE YEAR COVERED BY THE OPERATING COSTS AND TAX STATEMENT EXCEED SUBTENANT’S SHARE OF SUCH ITEMS AS INDICATED IN THE OPERATING COSTS AND TAX STATEMENT, THEN SUBLESSOR SHALL PROMPTLY CREDIT OR REIMBURSE SUBLESSEE FOR SUCH EXCESS; LIKEWISE, IF SUBLESSEE’S ESTIMATED PAYMENTS OF OPERATING COSTS OR TAXES UNDER THIS SECTION 6 FOR SUCH YEAR ARE LESS THAN SUBLESSEE’S SHARE OF SUCH ITEMS AS INDICATED IN THE OPERATING COSTS AND TAX STATEMENT, THEN SUBLESSEE SHALL, WITHIN NOT MORE THAN TEN (10) BUSINESS DAYS, PAY SUBLESSOR SUCH DEFICIENCY. 3 --------------------------------------------------------------------------------   SUBLESSEE SHALL ALSO PAY TO SUBLESSOR, AS ADDITIONAL RENT, ANY ADDITIONAL OPERATING EXPENSES AGREED BY SUBLESSOR AND SUBLESSEE TO BE REQUIRED TO KEEP THE BUILDING IN GOOD OPERATING CONDITION. 7.             SECURITY DEPOSIT.  [INTENTIONALLY OMITTED]. 8.             ADDITIONAL SUBLESSEE COVENANTS.  SUBLESSEE HEREBY COVENANTS: (A)           TO COMPLY WITH THE TERMS AND PROVISIONS OF THE LEASE APPLICABLE TO THE SUBLEASED PREMISES EXCEPT AS SPECIFICALLY MODIFIED BY PROVISIONS OF THIS SUBLEASE, AND TO DO NOTHING WHICH WILL SUBJECT THE LEASE TO TERMINATION BY LANDLORD UNDER THE PROVISIONS OF THE LEASE. (B)           TO MAINTAIN THE SUBLEASED PREMISES IN THE SAME CONDITION AS THEY ARE AT THE COMMENCEMENT OF THE TERM, REASONABLE WEAR AND TEAR, DAMAGE BY FIRE AND OTHER CASUALTY EXCEPTED. (C)           IN THE EVENT THAT THIS SUBLEASE SHALL TERMINATE FOR ANY REASON PRIOR TO THE EXPIRATION OF THE TERM, TO REMOVE PROMPTLY ALL OF SUBLESSEE’S GOODS AND EFFECTS FROM THE SUBLEASED PREMISES UPON THE TERMINATION OF THIS SUBLEASE AND TO DELIVER TO SUBLESSOR THE SUBLEASED PREMISES IN THE SAME CONDITION AS THEY WERE AT THE COMMENCEMENT OF THE TERM, OR AS THEY WERE PUT DURING THE TERM, REASONABLE WEAR AND TEAR, DAMAGE BY FIRE AND OTHER CASUALTY EXCEPTED. (D)           TO USE THE SUBLEASED PREMISES ONLY FOR THE PERMITTED USES. 9.             CONDITION AND ALTERATIONS OF THE SUBLEASED PREMISES.  SUBLESSEE AND SUBLESSOR HEREBY COVENANT AND AGREE THAT: (A)           SUBLESSEE HAS INSPECTED THE SUBLEASED PREMISES AND ACCEPTS THE SAME “AS IS” AS OF THE DATE OF THIS SUBLEASE.  SUBLESSOR SHALL HAVE NO OBLIGATION OR DUTY TO SUBLESSEE REGARDING THE PREPARATION OF THE SUBLEASED PREMISES FOR OCCUPANCY OF SUBLESSEE, EXCEPT THAT SUBLESSOR SHALL DELIVER FULL AND EXCLUSIVE POSSESSION THEREOF TO SUBLESSEE ON THE COMMENCEMENT DATE, THE SUBLEASED PREMISES TO BE THEN FREE OF ALL TENANTS AND OCCUPANTS AND SUBLESSOR’S PERSONAL PROPERTY, AND IN BROOM CLEAN CONDITION, AND OTHERWISE IN THE SAME CONDITION THE SUBLEASED PREMISES ARE IN AS OF THE DATE OF THIS SUBLEASE. (B)           NOTWITHSTANDING ANY PROVISIONS OF THE LEASE OR THIS SUBLEASE TO THE CONTRARY, NEITHER LANDLORD NOR SUBLESSOR SHALL HAVE ANY OBLIGATIONS TO PERFORM ANY TENANT IMPROVEMENTS OR TO PROVIDE SUBLESSEE WITH ANY TENANT IMPROVEMENT ALLOWANCE IN CONNECTION WITH THE SUBLEASED PREMISES. (C)           IN THE EVENT SUBLESSEE DESIRES TO MAKE ALTERATIONS AND IMPROVEMENTS TO THE SUBLEASED PREMISES, SUBLESSEE SHALL OBTAIN THE PRIOR WRITTEN CONSENT OF :  (I) SUBLESSOR, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED BY SUBLESSOR; AND (II) LANDLORD PURSUANT TO THE PROVISIONS OF THE LEASE. 4 --------------------------------------------------------------------------------   10.           LEASE. (A)           EXCEPT AS MAY BE INCONSISTENT WITH THE TERMS HEREOF, ALL OF THE TERMS, PROVISIONS, COVENANTS AND CONDITIONS CONTAINED IN THE LEASE ARE INCORPORATED HEREIN BY REFERENCE AND ARE MADE A PART OF THIS SUBLEASE WITH THE SAME FORCE AND EFFECT AS IF SUBLESSOR WERE THE LANDLORD UNDER THE LEASE AND SUBLESSEE WERE THE TENANT THEREUNDER FROM AND AFTER THE SUBLEASE COMMENCEMENT DATE, AND:  (I) IN CASE OF ANY BREACH OF THIS SUBLEASE BY SUBLESSOR, SUBLESSEE SHALL HAVE ALL OF THE RIGHTS AND REMEDIES AGAINST THE SUBLESSOR AS WOULD BE AVAILABLE TO TENANT AGAINST LANDLORD UNDER THE LEASE IF SUCH BREACH WERE MADE BY THE LANDLORD THEREUNDER; AND (II) IN CASE OF ANY BREACH OF THIS SUBLEASE BY SUBLESSEE, SUBLESSOR SHALL HAVE ALL OF THE RIGHTS AND REMEDIES AGAINST THE SUBLESSEE AS WOULD BE AVAILABLE TO LANDLORD AGAINST TENANT UNDER THE LEASE IF SUCH BREACH WERE MADE BY THE TENANT THEREUNDER.  FURTHER, ANY REFERENCES IN THE LEASE TO THE “PREMISES” SHALL MEAN AND BE DEEMED TO BE REFERENCES TO THE “SUBLEASED PREMISES.” (B)           SUBLESSEE SHALL NOT DO ANYTHING WHICH WOULD CAUSE THE LEASE TO BE TERMINATED OR FORFEITED, AND SUBLESSEE SHALL INDEMNIFY AND HOLD SUBLESSOR HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES, LOSSES, DAMAGE, DEMANDS, EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEY’S FEES), ACTIONS AND CAUSES OF ACTION OF ANY KIND WHATSOEVER BY REASON OF ANY BREACH OR DEFAULT ON THE PART OF SUBLESSEE HEREUNDER BY REASON OF WHICH THE LEASE MAY BE TERMINATED OR FORFEITED, INCLUDING, WITHOUT LIMITATION, THE FAILURE TO PAY ANY AND ALL AMOUNTS DUE AND PAYABLE BY SUBLESSEE UNDER THIS SUBLEASE, WHETHER CHARACTERIZED AS BASE RENT, ADDITIONAL RENT, OR OTHERWISE, ON OR BEFORE THE DATE WHEN DUE PURSUANT TO THE PROVISIONS OF THIS SUBLEASE. (C)           THIS SUBLEASE IS SEPARATE FROM AND SUBJECT AND SUBORDINATE TO THE LEASE. IF THE LEASE TERMINATES, THIS SUBLEASE SHALL AUTOMATICALLY TERMINATE, AND SUBLESSOR SHALL NOT BE LIABLE TO SUBLESSEE FOR ANY DAMAGES ARISING OUT OF SUCH TERMINATION. (D)           SUBLESSEE SHALL HAVE ALL OF THE RIGHTS OF SUBLESSOR UNDER THE LEASE WITH RESPECT TO THE SUBLEASED PREMISES. (E)           SUBLESSOR AGREES TO FULFILL ALL ITS OBLIGATIONS UNDER THE LEASE, INCLUDING THE PAYMENT OF ALL AMOUNTS DUE AND PAYABLE BY SUBLESSOR UNDER THE LEASE, WHETHER CHARACTERIZED AS BASIC RENT, ADDITIONAL RENT, TAXES, OR OTHERWISE, ON OR BEFORE THE DATE WHEN DUE PURSUANT TO THE LEASE.  SUBLESSOR SHALL NOT CAUSE A TERMINATION OF THE LEASE, NOR ENTER INTO ANY AGREEMENT THAT WILL MODIFY OR AMEND THE LEASE SO AS TO ADVERSELY AFFECT SUBLESSEE’S RIGHT TO USE AND OCCUPY THE SUBLEASED PREMISES OR ANY OTHER RIGHTS OF SUBLESSEE UNDER THIS SUBLEASE, OR INCREASE OR ADVERSELY AFFECT THE OBLIGATIONS OF SUBLESSEE UNDER THIS SUBLEASE.  SUBLESSOR AGREES TO INDEMNIFY, DEFEND AND HOLD SUBLESSEE HARMLESS FROM AND AGAINST ANY CLAIM WITH RESPECT TO MATTERS OCCURRING OR ARISING PRIOR TO THE COMMENCEMENT DATE FROM SUBLESSOR’S USE OF THE SUBLEASED PREMISES OR THE CONDUCT OF ITS BUSINESS OR FROM ANY ACTIVITY, WORK OR THING DONE, PERMITTED OR SUFFERED BY SUBLESSOR ON OR ABOUT THE SUBLEASED PREMISES, AND FROM ANY CLAIM FROM INJURY OR DAMAGE TO ANY PERSON OR PROPERTY WHILE ON OR ABOUT THE SUBLEASED PREMISES.  SUBLESSOR SHALL ALSO INDEMNIFY AND HOLD SUBLESSEE HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES, 5 --------------------------------------------------------------------------------   LOSSES, DAMAGE, DEMANDS, EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEY’S FEES), ACTIONS AND CAUSES OF ACTION OF ANY KIND WHATSOEVER BY REASON OF ANY BREACH OR DEFAULT ON THE PART OF SUBLESSOR OF THE TERMS OF THE LEASE, INCLUDING, WITHOUT LIMITATION, THE FAILURE TO PAY ANY AND ALL AMOUNTS DUE AND PAYABLE BY SUBLESSOR UNDER THE LEASE, WHETHER CHARACTERIZED AS BASIC RENT, ADDITIONAL RENT, OR OTHERWISE, ON OR BEFORE THE DATE WHEN DUE PURSUANT TO THE LEASE; PROVIDED, HOWEVER, THAT IF SUBLESSEE FAILS TO PAY TO SUBLESSOR ANY AND ALL AMOUNTS DUE AND PAYABLE BY SUBLESSEE UNDER THIS SUBLEASE, WHETHER CHARACTERIZED AS BASE RENT, ADDITIONAL RENT, OR OTHERWISE, ON OR BEFORE THE DATE WHEN DUE HEREUNDER, SUBLESSEE SHALL THEREBY FOREGO AND WAIVE ITS RIGHT HEREUNDER WITH RESPECT TO SUBLESSOR’S LIABILITY FOR AND INDEMNIFICATION OF SUBLESSEE AS TO ANY AND ALL CLAIMS, LIABILITIES, LOSSES, DAMAGE, DEMANDS, EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEY’S FEES), ACTIONS AND CAUSES OF ACTION RELATED THERETO. (F)            SUBLESSOR, AS SUBLESSOR UNDER THIS SUBLEASE, SHALL HAVE THE BENEFIT OF ALL RIGHTS, REMEDIES AND LIMITATIONS OF LIABILITY ENJOYED BY LANDLORD, AS THE LANDLORD UNDER THE LEASE, BUT (I) SUBLESSOR SHALL HAVE NO OBLIGATIONS UNDER THIS SUBLEASE TO PERFORM THE OBLIGATIONS OF LANDLORD, AS LANDLORD UNDER THE LEASE, INCLUDING WITHOUT LIMITATION ANY OBLIGATION TO PROVIDE SERVICES OR MAINTAIN INSURANCE; (II) SUBLESSOR SHALL NOT BE BOUND BY ANY REPRESENTATIONS OR WARRANTIES OF THE LANDLORD UNDER THE LEASE; (III) IN ANY INSTANCE WHERE THE CONSENT OF LANDLORD IS REQUIRED UNDER THE TERMS OF THE LEASE, THE CONSENT OF SUBLESSOR AND LANDLORD SHALL BE REQUIRED; AND (IV) SUBLESSOR SHALL NOT BE LIABLE TO SUBLESSEE FOR ANY FAILURE OR DELAY IN LANDLORD’S PERFORMANCE OF ITS OBLIGATIONS, AS LANDLORD UNDER THE LEASE; PROVIDED, HOWEVER, THAT WHENEVER THERE SHALL BE ANY RIGHT TO ENFORCE ANY RIGHTS AGAINST LANDLORD UNDER THE LEASE WITH RESPECT TO THE SUBLEASED PREMISES, INCLUDING WITHOUT LIMITATION, A DEFAULT BY LANDLORD RELATING TO THE SUBLEASED PREMISES, SUBLESSOR SHALL PROMPTLY NOTIFY ESPED IN WRITING OF SUCH DEFAULT, AND SUBLESSOR SHALL USE REASONABLE EFFORTS TO EFFORTS TO ENFORCE SUCH RIGHTS.  IF SUCH A REQUEST IS MADE AND SUBLESSOR FAILS TO ENFORCE SUCH RIGHTS WITHIN A REASONABLE PERIOD OF TIME THEREAFTER, AND LANDLORD FAILS TO CURE, THEN ESPED SHALL HAVE THE RIGHT, IN ITS OWN NAME, OR IN SUBLESSOR’S NAME, TO ATTEMPT TO ENFORCE ANY SUCH RIGHTS OF ESPED, AT ITS SOLE EXPENSE. 11.           ASSIGNMENT AND SUBLETTING.   SUBLESSEE SHALL NOT DIRECTLY OR INDIRECTLY TRANSFER OR ASSIGN ANY OF ITS RIGHT, TITLE OR INTEREST IN AND TO THIS SUBLEASE (WHETHER BY OPERATION OF LAW OR OTHERWISE) OR SUBLET ANY PORTION OF THE SUBLEASED PREMISES WITHOUT THE PRIOR WRITTEN CONSENT OF LANDLORD AND SUBLESSOR, WHICH CONSENT OF SUBLESSOR SHALL NOT BE UNREASONABLY WITHHELD. 12.           BROKER.  EACH OF THE PARTIES HERETO REPRESENTS AND WARRANTS TO THE OTHER THAT IT HAS NOT DEALT WITH ANY BROKER IN CONNECTION WITH THE NEGOTIATION AND APPROVAL OF THIS SUBLEASE, AND EACH PARTY SHALL INDEMNIFY AND HOLD HARMLESS THE OTHER AGAINST ANY CLAIM FOR BROKERAGE FEES DUE TO SUCH PARTY’S BREACH OF ITS REPRESENTATION AND WARRANTY UNDER THIS SECTION. 13.           INSURANCE.  SUBLESSEE SHALL CARRY SUCH INSURANCE WITH RESPECT TO THE SUBLEASED PREMISES AS IS REQUIRED OF SUBLESSOR UNDER THE LEASE IN THE AMOUNTS SET FORTH ABOVE.  BOTH SUBLESSOR AND LANDLORD SHALL BE NAMED AS ADDITIONAL INSUREDS ON ALL POLICIES 6 --------------------------------------------------------------------------------   REQUIRED TO BE CARRIED BY SUBLESSEE.  CERTIFICATES OF INSURANCE EVIDENCING SUBLESSEE’S INSURANCE COVERAGE SHALL BE DEPOSITED WITH SUBLESSOR AND LANDLORD PRIOR TO THE COMMENCEMENT DATE. 14.           NOTICES.  ALL NOTICES REQUIRED OR PERMITTED HEREUNDER SHALL BE IN WRITING AND SHALL BE DEEMED DULY SERVED IF AND WHEN DELIVERED BY HAND OR MAILED BY REGISTERED, CERTIFIED OR EXPRESS MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, AND ADDRESSED TO THE APPLICABLE NOTICE ADDRESS SET FORTH ABOVE. 15.           SEVERABILITY.  IF ANY PROVISION OF THIS SUBLEASE SHALL TO ANY EXTENT BE DETERMINED BY ANY COURT OF COMPETENT JURISDICTION TO BE INVALID OR UNENFORCEABLE FOR ANY REASON, THE PARTIES AGREE TO AMEND THIS SUBLEASE SO AS TO EFFECTUATE THE ORIGINAL INTENT OF SUBLESSOR AND SUBLESSEE. 16.           ENTIRE AGREEMENT; AMENDMENT.  THIS SUBLEASE MAY NOT BE AMENDED, ALTERED OR MODIFIED EXCEPT BY INSTRUMENT IN WRITING AND EXECUTED BY SUBLESSOR AND SUBLESSEE AND APPROVED BY LANDLORD. 17.           GOVERNING LAW.  THIS SUBLEASE SHALL BE GIVEN BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. 18.           BINDER AND INURE.  THIS SUBLEASE SHALL BE BINDING UPON, AND INURE TO THE BENEFIT OF, THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. [Remainder of page intentionally left blank. Signatures appear on next following page.] 7 --------------------------------------------------------------------------------   Executed as a sealed instrument, all as of the day and year first above written. eSped.com, Inc. Omtool, Ltd.         By: /s/ George Dhionis By: /s/ Daniel A. Coccoluto   Duly authorized officer   Duly authorized officer         Date: July 28, 2006 Date: July 28, 2006   8 --------------------------------------------------------------------------------   EXHIBIT A Attached as Exhibit 10.1 to Omtool, Ltd.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 12, 2006. --------------------------------------------------------------------------------   EXHIBIT B Attached hereto. [g172931kpi001.gif] --------------------------------------------------------------------------------

EXHIBIT 10.2 EXECUTION VERSION AMENDED AND RESTATED GUARANTEE AND COLLATERAL AGREEMENT dated as of December 29, 2004 (as amended and restated as of September 1, 2006) among SYMBOL TECHNOLOGIES, INC., THE SUBSIDIARIES OF SYMBOL TECHNOLOGIES, INC., IDENTIFIED HEREIN and JPMORGAN CHASE BANK, N.A., 1 as Collateral Agent TABLE OF CONTENTS ARTICLE I Definitions     SECTION 1.01. Credit Agreement     SECTION 1.02. Other Defined Terms ARTICLE II Guarantee     SECTION 2.01. Guarantee     SECTION 2.02. Guarantee of Payment     SECTION 2.03. No Limitations     SECTION 2.04. Reinstatement     SECTION 2.05. Agreement To Pay; Subrogation     SECTION 2.06. Information     SECTION 2.07. Withholding Taxes ARTICLE III Pledge of Securities     SECTION 3.01. Pledge     SECTION 3.02. Delivery of the Pledged Securities     SECTION 3.03. Representations, Warranties and Covenants     SECTION 3.04. Certification of Limited Liability Company and Limited Partnership Interests     SECTION 3.05. Registration in Nominee Name; Denominations     SECTION 3.06. Voting Rights; Dividends and Interest     SECTION 3.07. Conflicts with Foreign Pledge Agreements     SECTION 3.08. Financing Statements; Annual Certificates     SECTION 3.09. Further Assurances ARTICLE IV Remedies     SECTION 4.01. Remedies Upon Default     SECTION 4.02. Application of Proceeds     SECTION 4.03. Securities Act     SECTION 4.04. Registration     SECTION 4.05. Symbol de Mexico Guarantee ARTICLE V Indemnity, Subrogation and Subordination     SECTION 5.01. Indemnity and Subrogation     SECTION 5.02. Contribution and Subrogation     SECTION 5.03. Subordination ARTICLE VI Miscellaneous       SECTION 6.01. Notices SECTION 6.02. Waivers; Amendment         SECTION 6.03. Collateral Agent’s Fees and Expenses; Indemnification       SECTION 6.04. Successors and Assigns SECTION 6.05. Survival of Agreement         SECTION 6.06. Counterparts; Effectiveness; Several Agreement       SECTION 6.07. Severability SECTION 6.08. Right of Set-Off         SECTION 6.09. Governing Law; Jurisdiction; Consent to Service of Process       SECTION 6.10. WAIVER OF JURY TRIAL SECTION 6.11. Headings SECTION 6.12. Security Interest Absolute SECTION 6.13. Termination or Release SECTION 6.14. Additional Subsidiaries         SECTION 6.15. Collateral Agent Appointed Attorney-in-Fact       SECTION 6.16. Parallel Debt (Covenant to pay the Collateral Agent)       Schedules Schedule I Schedule II   Guarantors Pledged Stock       Exhibits Exhibit I Exhibit II   Form of Supplement Form of Perfection Certificate 2 AMENDED AND RESTATED GUARANTEE AND COLLATERAL AGREEMENT (this “Agreement”)dated as of December 29, 2004, as amended and restated as of September 1, 2006, among SYMBOL TECHNOLOGIES, INC., the Subsidiaries of SYMBOL TECHNOLOGIES, INC. identified herein and JPMORGAN CHASE BANK, N.A., as Collateral Agent. Reference is made to the Credit Agreement dated as of December 29, 2004, as amended and restated as of September 1, 2006 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Symbol Technologies, Inc. (the “Borrower”), the lenders from time to time party thereto (the “Lenders”), JPMorgan Chase Bank, N.A., as Administrative Agent and Bank of America, N.A., as Syndication Agent. The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the Credit Agreement. The obligations of the Lenders to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. The Guarantors are affiliates of the Borrower, will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement and are willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit. Accordingly, the parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Credit Agreement. (a) Capitalized terms used in this Agreement and not otherwise defined herein have the meanings specified in the Credit Agreement. All terms defined in the New York UCC (as defined herein) and not defined in this Agreement have the meanings specified therein; the term “instrument” shall have the meaning specified in Article 9 of the New York UCC. (b) The rules of construction specified in Sections 1.03, 1.04 and 1.05 of the Credit Agreement also apply to this Agreement. SECTION 1.02. Other Defined Terms. As used in this Agreement, the following terms have the meanings specified below: “Card Programs” means (a) purchasing card programs established to enable headquarters and field staff of each Loan Party or any Domestic Subsidiary to purchase goods and supplies from vendors and (b) any travel and entertainment card program established to enable headquarters and field staff of each Loan Party or any Domestic Subsidiary to make payments for expenses incurred related to travel and entertainment; provided that (i) the aggregate amount of outstanding obligations at any time under all such Card Programs that is secured and guaranteed hereunder does not exceed US$7,000,000 and (ii) any such Card Program is (x) is in effect on the Effective Date with an institution that is a Lender or an Affiliate of a Lender as of the Effective Date or (y) is established after the Effective Date with an institution that is a Lender or an Affiliate of a Lender at the time such Card Program is established. “Collateral” has the meaning assigned to such term in Section 3.01. “Continuing Grantors” has the meaning assigned to such term in Section 6.13(e). “Credit Agreement” has the meaning assigned to such term in the preliminary statement of this Agreement. “Existing Collateral Agreement” means the “Collateral Agreement” as defined in the Existing Credit Agreement as such Collateral Agreement was in effect immediately prior to its amendment and restatement as of the Effective Date. “Federal Securities Laws” has the meaning assigned to such term in Section 4.03. “Grantors” means the Borrower and the Guarantors (other than Symbol de Mexico). “Guarantee Excluded Taxes” means, with respect to the Collateral Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on behalf of any obligation of the Guarantor hereunder, the following taxes, including interest, penalties or other additions thereto: (a) income taxes imposed on (or measured by) its net income or franchise taxes imposed on (or measured by) its gross or net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized, or in which its principal office is located or in which it is otherwise deemed to be engaged in a trade or business for tax purposes or, in the case of any Lender, in which its applicable lending office is located, in each case including any political subdivision thereof; (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above or (c) any withholding tax that is attributable to a Lender’s failure to comply with Section 2.06(b) of the Credit Agreement. “Guarantors” means (a) each Subsidiary that is identified as a Guarantor on Schedule I and (b) each other Subsidiary that becomes a party to this Agreement as a Guarantor after the Effective Date. “Loan Document Obligations” means (a) the due and punctual payment by the Borrower of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral, and (iii) all other monetary obligations of the Borrower to any of the Secured Parties under the Credit Agreement and each of the other Loan Documents, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Borrower under or pursuant to the Credit Agreement and each of the other Loan Documents and (c) the due and punctual payment and performance of all the obligations of each other Loan Party under or pursuant to this Agreement and each of the other Loan Documents. For the avoidance of doubt, (i) all obligations referred to in clause (b), (c), (d) and (e) of the definition of “Obligations” shall not constitute Loan Document Obligations and (ii) any obligations of the Borrower or any other Loan Party to a Lender or any Affiliate of a Lender under Section 6.16 of this Agreement shall not constitute Loan Document Obligations to the extent that such obligations are of a type referred to in clause (b), (c), (d) or (e) of the definition of “Obligations”. “New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York. “Obligations” means (a) Loan Document Obligations, (b) the due and punctual payment and performance of all obligations of each Loan Party under each Hedging Agreement that (i) is in effect on the Effective Date with a counterparty that is a Lender or an Affiliate of a Lender as of the Effective Date or (ii) is entered into after the Effective Date with any counterparty that is a Lender or an Affiliate of a Lender at the time such Hedging Agreement is entered into, (c) the due and punctual payment and performance of all obligations owed from time to time by each Loan Party or Subsidiary to any Lender or its Affiliates in respect of treasury and cash management services, including obligations in respect of overdraft, interest and fees, in each case relating to such treasury or cash management services, (d) the due and punctual payment and performance of all obligations owed from time to time by each Loan Party or Domestic Subsidiary to any Lender or its Affiliates in respect of Card Programs; provided that in no event shall any Obligations in respect of any Obligations described in clauses (b), (c) or (d) hereof, in each case provided by an Affiliate of a Lender, constitute Obligations for the purpose of any Security Document governed by the laws of The United Kingdom unless the documents evidencing such Hedging Agreement, treasury services, cash management services or Card Programs, as applicable, contain the following language: “We [name of hedging counterparty, treasury services or cash management provider or Card Programs provider] hereby confirm that by entering into this [insert name of contract], we intend to be party to the Trust Agreement (the “Trust Agreement”) dated February 16, 2005, between, among others, JPMorgan Chase Bank, N.A., as Security Trustee (the “Security Trustee”), and the Secured Parties named therein, and (a) undertake to perform all the obligations expressed in the Trust Agreement to be assumed by a Secured Party, and (b) agree that we shall be bound by all the provisions of the Trust Agreement, as if we had been an original party thereto. We further agree that the Security Trustee may rely upon our undertaking and agreement given herein.” ; provided further that any reference to “Obligations” or “Secured Obligations” in any Security Document governed by the laws of any jurisdiction other than the United States of America or The United Kingdom (in the case of The United Kingdom, to the extent that the relevant documents evidencing such Hedging Agreement, treasury services, cash management services or Card Programs, as applicable, contain the language noted above) shall not be deemed to include the proviso following clause (d) of this definition and (e) the due and punctual payment of all reimbursement obligations and interest thereon owed from time to time by the Borrower to a Lender or an Affiliate of a Lender in respect of letters of credit permitted by Section 6.01(a)(x) of the Credit Agreement. “Perfection Certificate” means a certificate substantially in the form of Exhibit II, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Financial Officer and the chief legal officer of the Borrower. “Pledged Securities” means any stock certificates or other securities now or hereafter included in the Collateral, including all certificates, instruments or other documents representing or evidencing any Collateral. “Pledged Stock” has the meaning assigned to such term in Section 3.01. “Proceeds” has the meaning specified in Section 9-102 of the New York UCC. “Secured Parties” means (a) the Lenders, (b) the Collateral Agent, (c) the Issuing Banks, (d) each counterparty to any Hedging Agreement with a Loan Party the obligations under which constitute Obligations, (e) each Lender or Affiliate thereof providing treasury, cash management or similar services the obligations under which constitute Obligations, (f) each Lender or Affiliate thereof providing Card Programs or similar services the obligations under which constitute Obligations, (g) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document, (h) each Lender and Affiliate of a Lender issuing letters of credit permitted by Section 6.01(a)(x) of the Credit Agreement, the reimbursement obligations under which constitute Obligations and (i) the successors and assigns of each of the foregoing. ARTICLE II Guarantee SECTION 2.01. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Obligations. Each of the Guarantors further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. Each of the Guarantors waives presentment to, demand of payment from and protest to the Borrower or any other Loan Party of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. SECTION 2.02. Guarantee of Payment. Each of the Guarantors further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any security held for the payment of the Obligations or to any balance of any deposit account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other Person. SECTION 2.03. No Limitations. (a) Except for termination of a Guarantor’s obligations hereunder as expressly provided in Section 6.13, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by (i) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any right or remedy under the provisions of any Loan Document or otherwise; (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement; (iii) the release of any security held by the Collateral Agent or any other Secured Party for the Obligations or any of them; (iv) any default, failure or delay, wilful or otherwise, in the performance of the Obligations; or (v) any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). Each Guarantor expressly authorizes the Secured Parties to take and hold security for the payment and performance of the Obligations, to accept an exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in their sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations of any Guarantor hereunder. (b) To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Borrower or any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other Loan Party or exercise any other right or remedy available to them against the Borrower or any other Loan Party, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully and indefeasibly paid in full in cash. To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Loan Party, as the case may be, or any security. SECTION 2.04. Reinstatement. Each of the Guarantors agrees that its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Collateral Agent or any other Secured Party upon the bankruptcy or reorganization of the Borrower, any other Loan Party or otherwise. SECTION 2.05. Agreement To Pay; Subrogation. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Obligation. Upon payment by any Guarantor of any sums to the Collateral Agent as provided above, all rights of such Guarantor against the Borrower or any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article V. SECTION 2.06. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower’s and each other Loan Party’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Collateral Agent or the other Secured Parties will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks. SECTION 2.07. Withholding Taxes. (a) Any payment made by a Guarantor pursuant to this Agreement which results in the imposition of Taxes (except Guarantee Excluded Taxes) which would not have been imposed had the payment been made by the Borrower shall be made free and clear of and without deduction for any such Taxes; provided that if a Guarantor shall be required to deduct any such Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums paid under this section) the Collateral Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Guarantor shall make such deductions and (iii) such Guarantor shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law; provided, however that any additional payment to be made under this Section 2.07 shall only be made to the Collateral Agent, Lender or Issuing Bank, as the case may be, to the extent that the total payment received by such entity does not exceed the total payment such entity would have received if the Borrower had made such payment. For the avoidance of doubt, this Section 2.07 shall be read as an obligation of the Guarantors that is in addition to their assumption of the Borrower’s obligations to indemnify for Indemnified Taxes and Other Taxes pursuant to Section 2.16 of the Credit Agreement and shall not relieve a Guarantor of its obligations to make payments pursuant to Section 2.16 of the Credit Agreement on the Borrower’s behalf. ARTICLE III Pledge of Securities SECTION 3.01. Pledge. As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest in, all of such Grantor’s right, title and interest in, to and under (a) the shares of capital stock and other Equity Interests of Subsidiaries owned by it, including those listed on Schedule II and any other Equity Interests of Subsidiaries obtained in the future by such Grantor and the certificates representing all such Equity Interests (the “Pledged Stock”); provided that the Pledged Stock shall not include (i) any Equity Interests of Immaterial Domestic Subsidiaries, (ii) more than 65% of the issued and outstanding voting Equity Interests of any Foreign Subsidiary, (iii) any Equity Interests of any Foreign Subsidiary that is (y) organized in Australia or (z) not a Significant Foreign Subsidiary or (iv) any Equity Interests of Symbol de Mexico and Symbol Technologies, C.V.; (b) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms of this Section 3.01; (c) subject to Section 3.06, all payments of dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clause (a) above; (d) subject to Section 3.06, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (a), (b) and (c) above; and (e) all Proceeds of any of the foregoing (the items referred to in clauses (a) through (e) above being collectively referred to as the “Collateral”). SECTION 3.02. Delivery of the Pledged Securities. (a) Each Grantor agrees, to the extent not otherwise required by a Foreign Pledge Agreement or prohibited by applicable law, promptly to deliver or cause to be delivered to the Collateral Agent any and all certificates constituting Pledged Securities (other than such certificates previously delivered to the Collateral Agent). (b) Upon delivery to the Collateral Agent, (i) any certificates constituting Pledged Securities shall be accompanied by stock powers duly executed in blank or other instruments of transfer satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property comprising part of the Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be attached hereto as Schedule II and made a part hereof; provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered. (c) If the charter, by-laws or any other organizational document of an issuer of Pledged Stock restricts the transfer of such Pledged Stock and such issuer is a wholly owned Subsidiary, then the applicable Grantor shall deliver to the Collateral Agent a certified copy of a resolution of the directors or shareholders of such issuer consenting to the transfer(s) contemplated by this Agreement, including any prospective transfer of such Pledged Stock and any other related Collateral by the Collateral Agent or any Secured Party upon a realization on the security constituted hereby in accordance with this Agreement. SECTION 3.03. Representations, Warranties and Covenants. The Grantors jointly and severally represent, warrant and covenant to and with the Collateral Agent, for the benefit of the Secured Parties, that: (a) Schedule II correctly sets forth the percentage of the issued and outstanding units of each class of the Equity Interests of the issuer thereof represented by the Pledged Stock and includes all Equity Interests required to be pledged hereunder in order to satisfy the Collateral and Guarantee Requirement; (b) The Pledged Stock has been duly and validly authorized and issued by the issuers thereof and is fully paid and nonassessable; (c) except for the security interests granted hereunder and/or under any other Security Documents governed by laws other than the laws of the United States of America, each of the Grantors (i) is and, subject to any transfers made in compliance with the Credit Agreement, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Grantor, (ii) holds the same free and clear of all Liens, other than Liens created by this Agreement, Permitted Encumbrances and transfers made in compliance with the Credit Agreement, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Collateral, other than Liens created by this Agreement, Permitted Encumbrances and transfers made in compliance with the Credit Agreement, and (iv) will defend its title or interest thereto or therein against any and all Liens (other than the Lien created by this Agreement and Permitted Encumbrances), however, arising, of all Persons whomsoever; (d) except for restrictions and limitations imposed by the Loan Documents or securities laws generally, the Collateral is and will continue to be freely transferable and assignable, and none of the Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions (or any analogous organizational documents in any jurisdiction) or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder; (e) each of the Grantors has the power and authority to pledge the Collateral pledged by it hereunder in the manner hereby done or contemplated; (f) except as otherwise required with respect to collateral pledged pursuant to the terms of the Foreign Pledge Agreements, no consent or approval of any Governmental Authority, any securities exchange or any other Person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect); (g) by virtue of the execution and delivery by the Grantors of this Agreement, when any Pledged Securities are delivered to the Collateral Agent in accordance with this Agreement, and with respect to Pledged Securities pledged pursuant to any Foreign Pledge Agreement, by virtue of any additional requirements set forth in such Foreign Pledge Agreement, the Collateral Agent will obtain a legal, valid and perfected lien upon and security interest in such Pledged Securities, as security for the payment and performance of the Obligations; (h) the performance of this Agreement and each Foreign Pledge Agreement does not contravene any material law, contract provision or the charter, by-laws or other organizational documents of each Grantor or order binding on such Grantor; (i) the pledge effected hereby, when taken together with the Foreign Pledge Agreements, is effective to vest in the Collateral Agent, for the benefit of the Secured Parties, the rights of the Collateral Agent in the Collateral as set forth herein; (j) the Perfection Certificates have been duly prepared, completed and executed and the information set forth therein, including the exact legal name of each Grantor, is correct and complete as of the Effective Date. The Uniform Commercial Code financing statements prepared by the Collateral Agent based upon the information provided to the Collateral Agent in the Perfection Certificates for filing in each governmental, municipal or other office specified in Schedule 5 to the Perfection Certificates (or specified by notice from the Borrower to the Collateral Agent after the Effective Date in the case of filings, recordings or registrations required by Section 5.03(a) or 5.12 of the Credit Agreement), are all the filings, recordings and registrations that are necessary to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the benefit of the Secured Parties) in respect of all Collateral in which a security interest may be perfected by filing, recording or registration in the United States of America (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. (k) None of the Grantors has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Collateral, (ii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to clause (iii), (iv) or (v) of Section 6.02 of the Credit Agreement. SECTION 3.04. Certification of Limited Liability Company and Limited Partnership Interests. Each interest in any limited liability company or limited partnership controlled by any Grantor and pledged hereunder shall, to the extent permitted by the applicable laws of any country other than the United States of America, be represented by a certificate, shall be a “security” within the meaning of Article 8 of the New York UCC and shall be governed by Article 8 of the New York UCC. SECTION 3.05. Registration in Nominee Name; Denominations. The Administrative Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Administrative Agent. At any time upon the occurrence and during the continuance of an Event of Default, the Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Collateral Agent. Each Grantor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Grantor. The Collateral Agent shall at all times have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement. SECTION 3.06. Voting Rights; Dividends and Interest. (a) Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have notified the Grantors that their rights under this Section 3.06 are being suspended: (i) Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided that such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Securities or the rights and remedies of any of the Collateral Agent or the other Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same. (ii) The Collateral Agent shall execute and deliver to each Grantor, or cause to be executed and delivered to such Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above. (iii) Each Grantor shall be entitled to receive and retain any and all dividends and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws; provided that any noncash dividends or other distributions that would constitute Pledged Stock, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Collateral, and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement). (b) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Grantors of the suspension of their rights under paragraph (a)(iii) of this Section 3.06, then all rights of any Grantor to dividends or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.06 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends or other distributions. All dividends or other distributions received by any Grantor contrary to the provisions of this Section 3.06 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Grantor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 4.02 of this Agreement. After all Events of Default have been cured or waived and the Borrower has delivered to the Collateral Agent a certificate to that effect, the Collateral Agent shall, promptly repay to each Grantor (without interest) all dividends or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.06 and that remain in such account. (c) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Grantors of the suspension of their rights under paragraph (a)(i) of this Section 3.06, then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.06, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 3.06, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights. (d) Any notice given by the Collateral Agent to the Grantors suspending their rights under paragraph (a) of this Section 3.06 (i) may be given by telephone if promptly confirmed in writing, (ii) may be given to one or more of the Grantors at the same or different times and (iii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing. SECTION 3.07. Conflicts with Foreign Pledge Agreements. To the extent that there is any overlap between, or conflict with, the provisions of this Agreement and any Foreign Pledge Agreement such Foreign Pledge Agreement shall prevail with respect only to (i) any provision relating to the portion of the Collateral described in and covered under such Foreign Pledge Agreement and (ii) any other provision in respect of which adherence to the law governing such Foreign Pledge Agreement is required for such Foreign Pledge Agreement to be valid or enforceable in accordance with its terms. SECTION 3.08. Financing Statements; Annual Certificates. (a) Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements with respect to the Collateral or any part thereof and amendments thereto that (i) identify the Collateral and (ii) contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (a) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor. Each Grantor agrees to provide such information to the Collateral Agent promptly upon request. Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof. (b) Each Grantor agrees promptly to notify the Collateral Agent in writing of any change (i) in corporate name, (ii) in the location of its chief executive office, its principal place of business and any office in which it maintains books or records relating to the Collateral owned by it, (iii) in its identity or type of organization or corporate structure, (iv) in its Federal Taxpayer Identification Number or organizational identification number or (v) in its jurisdiction of organization. Each Grantor agrees to promptly provide the Collateral Agent with certified organizational documents reflecting any of the changes described in the first sentence of this paragraph. Each Grantor agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Collateral. (c) Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to Section 5.01(a) of the Credit Agreement, the Borrower shall deliver to the Collateral Agent a certificate as required under Section 5.01(c) of the Credit Agreement. SECTION 3.09. Further Assurances. Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, preserve, protect and perfect the security interest granted hereunder and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of security interests hereunder and the filing of any financing statements or other documents in connection herewith or therewith. ARTICLE IV Remedies SECTION 4.01. Remedies Upon Default. Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees that the Collateral Agent shall have the right to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale of Pledged Securities or other securities (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any sale of Collateral shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Collateral Agent shall give the applicable Grantors 10 days’ written notice of the Collateral Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 4.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions. SECTION 4.02. Application of Proceeds. The Collateral Agent shall apply the proceeds of any collection or sale of Collateral, including any Collateral consisting of cash, as follows: FIRST, to the payment of all costs and expenses incurred by the Collateral Agent in connection with such collection or sale or otherwise in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the reasonable fees and expenses of its agents and legal counsel, the repayment of all advances made by the Collateral Agent hereunder or under any other Loan Document on behalf of any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document; SECOND, to the payment in full of the Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution); and THIRD, to the Grantors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct. The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. SECTION 4.03. Securities Act. In view of the position of the Grantors in relation to the Collateral, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Federal Securities Laws”) with respect to any disposition of the Collateral permitted hereunder. Each Grantor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Collateral under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Grantor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Collateral, limit the purchasers to those who will agree, among other things, to acquire such Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Grantor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Collateral at a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 4.03 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells. SECTION 4.04. Registration. Each Grantor agrees that, upon the occurrence and during the continuance of an Event of Default, if for any reason the Collateral Agent desires to sell any of the Collateral at a public sale, it will, at any time and from time to time, upon the written request of the Collateral Agent, use its best efforts to take or to cause the issuer of such Collateral to take such action and prepare, distribute and/or file such documents, as are required or advisable in the reasonable opinion of counsel for the Collateral Agent to permit the public sale of such Collateral. Each Grantor further agrees to indemnify, defend and hold harmless the Collateral Agent, each other Secured Party, any underwriter and their respective officers, directors, affiliates and controlling persons from and against all loss, liability, expenses, costs of counsel (including, without limitation, reasonable fees and expenses to the Collateral Agent of legal counsel), and claims (including the costs of investigation) that they may incur insofar as such loss, liability, expense or claim arises out of or is based upon any alleged untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements in any thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished in writing to such Grantor or the issuer of such Collateral by the Collateral Agent or any other Secured Party expressly for use therein. Each Grantor further agrees, upon such written request referred to above, to use its best efforts to qualify, file or register, or cause the issuer of such Collateral to qualify, file or register, any of the Collateral under the Blue Sky or other securities laws of such states as may be requested by the Collateral Agent and keep effective, or cause to be kept effective, all such qualifications, filings or registrations. Each Grantor will bear all costs and expenses of carrying out its obligations under this Section 4.04. Each Grantor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 4.04 and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section 4.04 may be specifically enforced. SECTION 4.05. Symbol de Mexico Guarantee. Notwithstanding (a) any provisions to the contrary contained in this Agreement or (b) any provisions that partially address the terms covered hereunder, in respect of the obligations and liabilities of Symbol de Mexico hereunder, Symbol de Mexico waives, to the extent applicable and to the fullest extent permitted by law, any right to which it may be entitled (i) so that the assets of the Borrower or any other Grantor are first used, depleted and/or applied in satisfaction of the Borrower’s or any other Grantor’s obligations before any amounts can be claimed from or paid by Symbol de Mexico, (ii) so that any suit or claim against the Borrower or any Grantor be initiated, completed or enforced before any action or proceeding can be initiated against Symbol de Mexico, (iii) so that amounts payable hereunder be divided among Guarantors or between Guarantors and the Borrower and (iv) to the extent applicable, the benefits of órden, excusión, division, quita and espera under Articles 2813, 2814, 2815, 2816, 2817, 2818, 2819, 2820, 2821, 2822, 2823, 2826, 2827, 2836, 2837, 2838, 2839, 2840, 2841, 2842, 2845, 2846 and 2848 of Mexico’s Federal Civil Codes and of the Civil Codes of any applicable States within Mexico. ARTICLE V Indemnity, Subrogation and Subordination SECTION 5.01. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 5.03), the Borrower agrees that (a) in the event a payment of an obligation shall be made by any Guarantor under this Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the Person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Grantor shall be sold pursuant to this Agreement or any other Security Document to satisfy in whole or in part an obligation owed to any Secured Party, the Borrower shall indemnify such Grantor in an amount equal to the greater of the book value or the fair market value of the assets so sold. SECTION 5.02. Contribution and Subrogation. Each Guarantor and Grantor (a “Contributing Party”) agrees (subject to Section 5.03) that, in the event a payment shall be made by any other Guarantor hereunder in respect of any Obligation or assets of any other Grantor shall be sold pursuant to any Security Document to satisfy any Obligation owed to any Secured Party and such other Guarantor or Grantor (the “Claiming Party”) shall not have been fully indemnified by the Borrower as provided in Section 5.01, the Contributing Party shall indemnify the Claiming Party in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Party on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors and Grantors on the date hereof (or, in the case of any Guarantor or Grantor becoming a party hereto pursuant to Section 6.14, the date of the supplement hereto executed and delivered by such Guarantor or Grantor). Any Contributing Party making any payment to a Claiming Party pursuant to this Section 5.02 shall be subrogated to the rights of such Claiming Party under Section 5.01 to the extent of such payment. SECTION 5.03. Subordination. (a) Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors and Grantors under Sections 5.01 and 5.02 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor or Grantor to make the payments required by Sections 5.01 and 5.02 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor or Grantor with respect to its obligations hereunder, and each Guarantor and Grantor shall remain liable for the full amount of the obligations of such Guarantor or Grantor hereunder. (b) Each Guarantor and Grantor hereby agrees that all Indebtedness and other monetary obligations owed by it to any other Guarantor, Grantor or any other Subsidiary shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. ARTICLE VI Miscellaneous SECTION 6.01. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Guarantor shall be given to it in care of the Borrower as provided in Section 9.01 of the Credit Agreement. SECTION 6.02. Waivers; Amendment. (a) No failure or delay by the Collateral Agent, the Issuing Banks or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 6.02, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Collateral Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time. No notice or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.02 of the Credit Agreement. SECTION 6.03. Collateral Agent’s Fees and Expenses; Indemnification. (a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.03 of the Credit Agreement. (b) Without limitation of its indemnification obligations under the other Loan Documents, each Grantor and each Guarantor jointly and severally agree to indemnify the Collateral Agent and the other Indemnitees (as defined in Section 9.03 of the Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of, the execution, delivery or performance of this Agreement or any claim, litigation, investigation or proceeding relating to any of the foregoing agreement or instrument contemplated hereby, or to the Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the bad faith, gross negligence or wilful misconduct of such Indemnitee or any of its Related Parties. (c) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 6.03 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 6.03 shall be payable on written demand therefor. (d) Each Grantor hereby acknowledges the authorization by the Secured Parties under the Credit Agreement of the Collateral Agent to act as the representative of each Secured Party in connection with any Foreign Pledge Agreement. SECTION 6.04. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Guarantor, Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. SECTION 6.05. Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any Lender or on its behalf and notwithstanding that the Collateral Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under any Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. SECTION 6.06. Counterparts; Effectiveness; Several Agreement. This Agreement may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute single contract. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. This Agreement shall become effective as to any Loan Party when a counterpart hereof executed on behalf of such Loan Party shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Loan Party and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of such Loan Party, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Loan Party shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Loan Party and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party and without affecting the obligations of any other Loan Party hereunder. SECTION 6.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 6.08. Right of Set-Off. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Guarantor against any of and all the obligations of such Guarantor now or hereafter existing under this Agreement owed to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section 6.08 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have. SECTION 6.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) Each of the Loan Parties hereby irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and to the courts of its own corporate domicile, in respect of actions brought against it as a defendant, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Collateral Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Grantor or Guarantor, or its properties in the courts of any jurisdiction. (c) Each of the Loan Parties hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section 6.09 and further waives any right to which it may be entitled on account of place of residence or domicile. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.01. The Borrower hereby consents to its appointment by Symbol de Mexico as agent to receive service of process to the extent permitted by applicable law on behalf of Symbol de Mexico in the manner specified in this Agreement for any action or proceeding arising out of or relating to this Agreement or any other Loan Document, including any action or proceeding for recognition or enforcement of any judgment relating to the foregoing. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 6.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.10. SECTION 6.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 6.12. Security Interest Absolute. All rights of the Collateral Agent hereunder, the grant of security interests in the Collateral and all obligations of each Grantor and Guarantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor or Guarantor in respect of the Obligations or this Agreement. SECTION 6.13. Termination or Release. (a) This Agreement, the Guarantees made herein and the security interests granted hereby shall terminate when all the Loan Document Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the LC Exposure has been reduced to zero and the Issuing Banks have no further obligations to issue Letters of Credit under the Credit Agreement. (b) Upon the occurrence of the Collateral Release Event, the Liens on the Collateral will be released and terminated in accordance with and subject to Section 9.15 of the Credit Agreement. (c) A Guarantor shall automatically be released from its obligations hereunder and any security interest granted hereby in the Collateral of such Guarantor shall be automatically released upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Guarantor ceases to be a Subsidiary of the Borrower; provided that the Required Lenders shall have consented to such transaction (to the extent required by the Credit Agreement) and the terms of such consent do not provide otherwise. (d) Upon any sale or other transfer by any Grantor of any Collateral that is permitted under the Credit Agreement, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.02 of the Credit Agreement, the security interest in such Collateral shall be automatically released. (e) Upon the effectiveness of this Agreement, (i) the security interests and other liens granted by Symbol de Mexico, Symbol Technologies Finance, Inc., Telxon System Services, Inc. and The Retail Technology Group, Inc. in the Existing Collateral Agreement shall be automatically released and terminated, (ii) the security interests and other liens granted by the Borrower, @pos.com, Inc., Covigo, Inc., Symbol Technologies International, Inc., Symbolease, Inc., and Telxon Corporation (collectively, the “Continuing Grantors”) in the Existing Collateral Agreement shall be automatically released and terminated, except those that are expressly granted by the Continuing Grantors in this Agreement, which shall, as so granted, continue without prejudice and remain in full force and effect, (iii) the security interests and other liens granted pursuant to the Mexican Pledge Agreement (as defined in the Existing Credit Agreement) shall be automatically released and terminated, (iv) all obligations of Symbol Technologies Finance, Inc., Telxon System Services, Inc. and The Retail Technology Group, Inc. under the Affiliate Subordination Agreement (as defined in the Existing Credit Agreement) and the Existing Collateral Agreement shall be released and discharged, except those that are expressly specified in any such agreement as surviving that agreement’s termination, which shall, as so specified, survive without prejudice and remain in full force and effect and (v) all obligations of Symbol de Mexico under the Existing Collateral Agreement in its capacity as a “Grantor” thereunder shall be released and discharged (it being agreed, however, that such release and discharge shall not be applicable insofar as obligations of Symbol de Mexico under the Existing Credit Agreement are undertaken or owed in its capacity as a “Guarantor” thereunder), except those that are expressly specified in the Existing Collateral Agreement as surviving its termination, which shall, as so specified, survive without prejudice and remain in full force and effect. (f) In connection with any termination or release pursuant to paragraph (a), (b), (c), (d) or (e) of this Section 6.13, the Collateral Agent shall (i) execute and deliver to the Borrower, at the Borrower’s expense, all documents that the Borrower shall reasonably request to evidence such termination or release and (ii) promptly return to the Borrower any stock or other certificates and other items of collateral in respect of which the security interests have been terminated and released pursuant to this Section 6.13. Any execution and delivery of documents pursuant to this Section 6.13 shall be without recourse to or warranty by the Collateral Agent. SECTION 6.14. Additional Subsidiaries. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of a Loan Party that was not in existence or not a Subsidiary on the date of the Credit Agreement may be required to enter into this Agreement as a Guarantor and Grantor upon becoming such a Subsidiary. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Exhibit I hereto, such Subsidiary shall become a Guarantor and Grantor hereunder with the same force and effect as if originally named as a Guarantor and Grantor herein. The execution and delivery of any such instrument shall not require the consent of any other Loan Party hereunder. The rights and obligations of each Loan Party hereunder shall remain in full force and effect notwithstanding the addition of any new Loan Party as a party to this Agreement. SECTION 6.15. Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby appoints the Collateral Agent the attorney-in-fact of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Collateral Agent’s name or in the name of such Grantor (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (d) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; and (e) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own bad faith, gross negligence or wilful misconduct. SECTION 6.16. Parallel Debt (Covenant to pay the Collateral Agent). (a) Notwithstanding any other provision of this Agreement and solely for the purpose of ensuring and preserving the validity and continuity of certain of the Foreign Pledge Agreements and subject as provided below, each of the Guarantors hereby irrevocably and unconditionally undertakes to pay to the Collateral Agent, as creditor in its own right and not as representative of the other Secured Parties, sums equal to and in the currency of each amount payable by such Guarantor (as required by Section 2.17(a) of the Credit Agreement) to each and any of the Secured Parties under any of the Loan Documents and/or any of the Hedging Agreements and/or for treasury or cash management services and/or Card Programs as and when that amount falls due for payment under the relevant Loan Document and/or Hedging Agreement and/or for treasury or cash management service and/or Card Programs as described above or would have fallen due but for any discharge resulting from failure of another Secured Party to take appropriate steps, in insolvency proceedings affecting that Guarantor, to preserve its entitlement to be paid that amount (the “Parallel Debt”). (b) The Collateral Agent shall have its own independent right to demand payment of the amounts payable by each Guarantor under this Section 6.16, irrespective of any discharge of such Guarantor’s obligation to pay those amounts to the other Secured Parties resulting from failure by them to take appropriate steps, in insolvency proceedings affecting that Guarantor, to preserve their entitlement to be paid those amounts. (c) Any amount due and payable by a Guarantor to the Collateral Agent under this Section 6.16 shall be decreased to the extent that the other Secured Parties have received (and are able to retain) payment in full of the corresponding amount under the other provisions of the Loan Documents and/or the Hedging Agreements and/or for treasury or cash management services and/or Card Programs as described in Section 6.16 and any amount due and payable by a Guarantor to the other Secured Parties under those provisions shall be decreased to the extent that the Collateral Agent has received (and is able to retain) payment in full of the corresponding amount under this Section 6.16. (d) The rights of the Secured Parties (other than the Collateral Agent) to receive payment of amounts payable by each Guarantor under the Loan Documents and/or the Hedging Agreements and/or treasury or cash for management services and/or Card Programs as described in Section 6.16 are several and are separate and independent from, and without prejudice to, the rights of the Collateral Agent to receive payment under this Section 6.16. 3 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.       SYMBOL TECHNOLOGIES, INC.,       by           /s/ James Porretto                 Name: James Porretto           Title: Vice President Tax & Treasurer       @POS.COM, INC., by /s/ James Porretto Name: James Porretto Title: Vice President & Treasurer       COVIGO, INC., by /s/ James Porretto Name: James Porretto Title: Vice President & Treasurer       SYMBOLEASE, INC., by /s/ James Porretto Name: James Porretto Title: Vice President & Treasurer       SYMBOL TECHNOLOGIES AFRICA, INC., by /s/ James Porretto Name: James Porretto Title: Vice President & Treasurer 4       SYMBOL TECHNOLOGIES ASIA, INC.,       by           /s/ James Porretto                 Name: James Porretto           Title: Vice President & Treasurer       SYMBOL TECHNOLOGIES DELAWARE, INC., by /s/ James Porretto Name: James Porretto Title: Vice President & Treasurer       SYMBOL TECHNOLOGIES INTERNATIONAL, INC., by /s/ James Porretto Name: James Porretto Title: Vice President & Treasurer       TELXON CORPORATION, by /s/ James Porretto Name: James Porretto Title: Vice President & Treasurer       SYMBOL DE MEXICO, S. DE R.L. DE C.V.,         by             /s/ James Porretto             Name: James Porretto             Title:     Vice President & Legal     Representative 5       JPMORGAN CHASE BANK, N.A., AS COLLATERAL AGENT,       by           /s/ Anne Biancardi                             Name:                       Title:       6

  EXHIBIT 10.6 [letterhead of International Wire Group, Inc. March 27, 2006 William Lane Pennington Suite 260 2431 East 61st Street Tulsa, OK 74114 Dear Lane:      We are writing to confirm that your term as Vice Chairman has been extended through December 31, 2006. Effective as of February 1, 2006, your cash compensation has been increased from $150,000 to $175,000 annually. Your company-provided medical and other insurance benefits will continue and your stock options are unaffected.      If the foregoing is correct, please so indicate by signing this letter in the space provided below. [The remainder of this page has intentionally been left blank]   --------------------------------------------------------------------------------               Very truly yours, INTERNATIONAL WIRE GROUP, INC.       By:   /s/ Rodney D. Kent         Name:   Rodney D. Kent        Title:   Chief Executive Officer      AGREED AND ACCEPTED April 4, 2006: WILLIAM LANE PENNINGTON /s/ William Lane Pennington  

EXHIBIT 10 (d) THE BLACK & DECKER 1992 STOCK OPTION PLAN         The proper execution of the duties and responsibilities of the executives and other key employees of The Black & Decker Corporation and its subsidiaries is a vital factor in the continued growth and success of the Corporation. Toward this end, it is necessary to attract and retain effective and capable employees to assume positions that contribute materially to the successful operation of the business of the Corporation. It will benefit the Corporation, therefore, to bind the interests of these persons more closely to its own interests by offering them an attractive opportunity to acquire a proprietary interest in the Corporation and thereby provide them with added incentive to remain in its employ and to increase the prosperity, growth, and earnings of the Corporation. This stock option plan will serve these purposes. ARTICLE 1:00 DEFINITIONS         The following terms wherever used herein shall have the meanings set forth below.   1:01   The term “Board of Directors” shall mean the Board of Directors of the Corporation.   1:02   The term “Cash Appreciation Right” shall mean a right to receive cash pursuant to Article 11:00 of the Plan.   1:03   The term “Change in Control” shall have the meaning provided in Section 10:02 of the Plan.   1:04   The term “Code” shall mean the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder.   1:05   The term “Committee” shall mean the Compensation Committee of the Board of Directors.   1:06   The term “Common Stock” shall mean the shares of common stock, par value $.50 per share, of the Corporation.   1:07   The term “Corporation” shall mean The Black & Decker Corporation.   1:08   The term “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.   1:09   The term “Fair Market Value of a share of Common Stock” shall mean the average of the high and low sale price per share of Common Stock as finally reported in the New York Stock Exchange Composite Transactions for the New York Stock Exchange, or if shares of Common Stock are not sold on such date, the average of the high and low sale price per share of Common Stock as finally reported in the New York Stock Exchange Composite Transactions for the New York Stock Exchange for the most recent prior date on which shares of Common Stock were sold.   1:10   The term “Immediate Family Member” shall mean each of (i) the children, step children or grandchildren of the Initial Holder, (ii) the spouse or any parent of the Initial Holder, (iii) any trust solely for the benefit of any such family members, and (iv) any partnership or other entity in which such family members are the only partners or other equity holders.   1:11   The term “Incentive Stock Option” shall mean any Option granted pursuant to the Plan that is designated as an Incentive Stock Option and that satisfies the requirements of Section 422(b) of the Code. --------------------------------------------------------------------------------   1:12   The term “Initial Holder,” with respect to an Option or Right granted under the Plan, shall mean the executive or other key employee of the Corporation granted the Option or Right.   1:13   The term “Limited Stock Appreciation Right” shall mean a limited tandem stock appreciation right that entitles the holder to receive cash upon a Change in Control pursuant to Article 10:00 of the Plan.   1:14   The term “Nonqualified Stock Option” shall mean any Option granted pursuant to the Plan that is not an Incentive Stock Option.   1:15   The term “Option” or “Stock Option” shall mean a right granted pursuant to the Plan to purchase shares of Common Stock, and shall include the terms Incentive Stock Option and Nonqualified Stock Option.   1:16   The term “Option Agreement” shall mean the written agreement representing Options granted pursuant to the Plan as contemplated by Article 6:00 of the Plan.   1:17   The term “Option Holder” shall mean the Initial Holder so long as he or she holds an Option initially granted to the Initial Holder, and thereafter shall mean the beneficiary or the Immediate Family Member to whom the Option has been transferred in accordance with the terms and conditions provided in Section 6:05.   1:18   The term “Plan” shall mean The Black & Decker 1992 Stock Option Plan as approved by the Board of Directors on February 20, 1992, and adopted by the stockholders of the Corporation at the 1992 Annual Meeting of Stockholders, as the same may be amended from time to time.   1:19   The term “Rights” shall include Stock Appreciation Rights, Limited Stock Appreciation Rights and Cash Appreciation Rights.   1:20   The term “Section 162(m) Regulations” shall mean the regulations adopted pursuant to Section 162(m) of the Code.   1:21   The term “Stock Appreciation Right” shall mean a right to receive cash or shares of Common Stock pursuant to Article 8:00 of the Plan.   1:22   The term “Stock Appreciation Right Agreement” shall mean the written agreement representing Stock Appreciation Rights granted pursuant to the Plan as contemplated by Article 8:00 of the Plan.   1:23   The term “Stock Appreciation Right Base Price” shall mean the base price for determining the value of a Stock Appreciation Right under Section 8:02, which Stock Appreciation Right Base Price shall be established by the Committee at the time of the grant of Stock Appreciation Rights pursuant to the Plan and shall not be less than 90% of the Fair Market Value of a share of Common Stock on the date of grant. If the Committee does not establish a specific Stock Appreciation Right Base Price at the time of grant, the Stock Appreciation Right Base Price shall be equal to the Fair Market Value of a share of Common Stock on the date of grant of the Stock Appreciation Right.   1:24   The term “Stock Appreciation Right Holder” shall mean the Initial Holder so long as he or she holds a Stock Appreciation Right initially granted to the Initial Holder, and thereafter shall mean the beneficiary or the Immediate Family Member to whom the Stock Appreciation Right has been transferred in accordance with the terms and conditions provided in Section 8:05.   1:25   The term “subsidiary” or “subsidiaries” shall mean a corporation of which capital stock possessing 50% or more of the total combined voting power of all classes of its capital stock entitled to vote generally in the election of directors is owned in the aggregate by the Corporation directly or indirectly through one or more subsidiaries. -2- -------------------------------------------------------------------------------- ARTICLE 2:00 EFFECTIVE DATE OF THE PLAN   2:01   The Plan shall become effective upon stockholder approval, provided that such approval is received on or before May 31, 1992, and provided further that the Committee may grant Options or Rights pursuant to the Plan prior to stockholder approval if such Options or Rights by their terms are contingent upon subsequent stockholder approval of the Plan. ARTICLE 3:00 ADMINISTRATION   3:01   The Plan shall be administered by the Committee.   3:02   The Committee may establish, from time to time and at any time, subject to the limitations of the Plan as set forth herein, such rules and regulations and amendments and supplements thereto as it deems necessary to comply with applicable law and regulation and for the proper administration of the Plan.   3:03   The Committee shall from time to time determine the names of those executives and other key employees who, in its opinion, should receive Options or Rights, and shall determine the numbers of shares on which Options should be granted or upon which Rights should be based to each such person and the nature of the Options or Rights to be granted, including without limitation whether the Options or Rights shall be transferable in accordance with the terms and conditions provided in Section 6:12 or Section 8:11.   3:04   Options and Rights shall be granted by the Corporation only upon prior approval of the Committee, and upon the execution of an Option Agreement or Stock Appreciation Right Agreement between the Corporation and the Initial Holder.   3:05   The Committee’s interpretation and construction of the provisions of the Plan and the rules and regulations adopted by the Committee shall be final. No member of the Committee or the Board of Directors shall be liable for any action taken or determination made, in respect of the Plan, in good faith. ARTICLE 4:00 PARTICIPATION IN THE PLAN   4:01   Participation in the Plan shall be limited to such executives and other key employees of the Corporation and its subsidiaries who at the date of grant of an Option or Right are regular, full-time employees of the Corporation or any of its subsidiaries and who shall be designated by the Committee together with any permitted transferees in accordance with the terms and conditions of the Plan.   4:02   No member of the Board of Directors who is not also an employee shall be eligible to participate in the Plan. No employee who owns beneficially more than 10% of the total combined voting power of all classes of stock of the Corporation shall be eligible to participate in the Plan. -3- -------------------------------------------------------------------------------- ARTICLE 5:00 STOCK SUBJECT TO THE PLAN   5:01   There shall be reserved for the granting of Options or Stock Appreciation Rights pursuant to the Plan and for issuance and sale pursuant to such Options or Stock Appreciation Rights 2,400,000 shares of Common Stock. To determine the number of shares of Common Stock available at any time for the granting of Options or Stock Appreciation Rights, there shall be deducted from the total number of reserved shares of Common Stock the number of shares of Common Stock in respect of which Options have been granted pursuant to the Plan that are still outstanding or have been exercised. The shares of Common Stock to be issued upon the exercise of Options or Stock Appreciation Rights granted pursuant to the Plan shall be made available from the authorized and unissued shares of Common Stock. If for any reason shares of Common Stock as to which an Option has been granted cease to be subject to purchase thereunder, then such shares of Common Stock again shall be available for issuance pursuant to the exercise of Options or Stock Appreciation Rights pursuant to the Plan. Except as provided in Section 5:03, however, the aggregate number of shares of Common Stock that may be issued upon the exercise of Options and Stock Appreciation Rights pursuant to the Plan shall not exceed 2,400,000 shares and no more than 2,400,000 Stock Appreciation Rights shall be granted pursuant to the Plan.   5:02   Proceeds from the purchase of shares of Common Stock upon the exercise of Options granted pursuant to the Plan shall be used for the general business purposes of the Corporation.   5:03   Subject to the provisions of Section 10:01, in the event of reorganization, recapitalization, stock split, stock dividend, combination of shares of Common Stock, merger, consolidation, share exchange, acquisition of property or stock, or any change in the capital structure of the Corporation, the Committee shall make such adjustments as may be appropriate in the number of Options or Stock Appreciation Rights that may be granted to an employee in any calendar year, in the number and kind of shares reserved for purchase by executives or other key employees, in the number, kind and price of shares covered by Options and Stock Appreciation Rights granted pursuant to the Plan but not then exercised, and in the number of Rights, if any, granted pursuant to the Plan but not then exercised. ARTICLE 6:00 TERMS AND CONDITIONS OF OPTIONS   6:01   Each Option granted pursuant to the Plan shall be evidenced by an Option Agreement in such form and with such terms and conditions (including, without limitation, noncompete, confidentiality or other similar provisions or provisions relating to transfer) as the Committee from time to time may determine. The right of an Option Holder to exercise his, her or its Option shall at all times be subject to the terms and conditions set forth in the respective Option Agreement.   6:02   The exercise price per share for Options shall be established by the Committee at the time of the grant of Options pursuant to the Plan and shall not be less than 90% of the Fair Market Value of a share of Common Stock on the date on which the Option is granted. If the Committee does not establish a specific exercise price per share at the time of grant, the exercise price per share shall be equal to the Fair Market Value of a share of Common Stock on the date of grant of the Options.   6:03   Each Option, subject to the other limitations set forth in the Plan, may extend for a period of up to 10 years from the date on which it is granted. The term of each Option shall be determined by the Committee at the time of grant of the Option, provided that if no term is established by the Committee the term of the Option shall be 10 years from the date on which it is granted. -4- --------------------------------------------------------------------------------   6:04   Unless otherwise provided by the Committee, the number of shares of Common Stock subject to each Option shall be divided into four installments of 25% each. The first installment shall be exercisable 12 months after the date the Option was granted, and each succeeding installment shall be exercisable 12 months after the date the immediately preceding installment became exercisable. If an Option Holder does not purchase the full number of shares of Common Stock that he, she or it at any time has become entitled to purchase, the Option Holder may purchase all or any part of those shares of Common Stock at any subsequent time during the term of the Option.   6:05   Options shall be nontransferable and nonassignable, except that (i) Options may be transferred by testamentary instrument or by the laws of descent and distribution, and (ii) subject to the terms and conditions of the Option Agreement or any other terms and conditions imposed by the Committee from time to time, Options may be transferred in accordance with the terms and conditions provided in Section 6:12 if the applicable Option Agreement or other action of the Committee expressly provides that the Options are transferable.   6:06   Upon voluntary or involuntary termination of an Initial Holder’s employment, his or her Option (including any Option transferred in accordance with the terms and conditions provided in Section 6.12) and all rights thereunder shall terminate effective at the close of business on the date the Initial Holder ceases to be a regular, full-time employee of the Corporation or any of its subsidiaries, except (i) to the extent previously exercised, (ii) as provided in Sections 6:07, 6:08, and 6:09, and (iii) in the case of involuntary termination of employment, for a period of 30 days thereafter the Option Holder shall be entitled to exercise that portion of the Option that was exercisable at the close of business on the date the Initial Holder ceased to be a regular, full-time employee of the Corporation or any of its subsidiaries, provided that in no event may any Option be exercised after the expiration of the term of the Option.   6:07   In the event an Initial Holder (i) ceases to be an executive or other key employee of the Corporation or any of its subsidiaries due to involuntary termination, (ii) takes a leave of absence from the Corporation or any of its subsidiaries for personal reasons or as a result of entry into the armed forces of the United States, or any of the departments or agencies of the United States government, or (iii) terminates employment by reason of illness, disability, or other special circumstance, the Committee may consider his or her case and may take such action in respect of the related Option Agreement as it may deem appropriate under the circumstances, including accelerating the time previously granted Options may be exercised and extending the time following the Initial Holder’s termination of employment during which the Option Holder is entitled to purchase the shares of Common Stock subject to such Options, provided that in no event may any Option be exercised after the expiration of the term of the Option.   6:08   If an Initial Holder dies during the term of his or her Option without the Option having been exercised in full, (i) the executor or administrator of his or her estate or the person who inherits the right to exercise the Option by bequest or inheritance in the event the Initial Holder was the Option Holder at the date of death or (ii) the Option Holder in the event the Option had been transferred in accordance with the terms and conditions provided in Section 6:12, shall have the right within three years of the Initial Holder’s death to purchase the number of shares of Common Stock that the deceased Initial Holder (or Option Holder, as the case may be) was entitled to purchase at the date of death, after which the Option shall lapse, provided that in no event may any Option be exercised after the expiration of the term of the Option.   6:09   If an Initial Holder’s employment is terminated without the Option having been exercised in full and (i) the Initial Holder is 62 years of age or older, or (ii) the Initial Holder has been employed by the Corporation or any of its subsidiaries for at least 10 years and the Initial Holder’s age plus years of such employment total not less than 55 years, then such Initial Holder (or the Option Holder in the event the Option had been transferred in accordance with the terms and conditions provided in Section 6:12) shall have the right within three years of the Initial Holder’s termination of employment -5- --------------------------------------------------------------------------------     to purchase the number of shares of Common Stock that the Initial Holder (or Option Holder, as the case may be) was entitled to purchase at the date of termination, after which the Option shall lapse, provided that in no event may any Option be exercised after the expiration of the term of the Option.   6:10   The granting of an Option pursuant to the Plan shall not constitute or be evidence of any agreement or understanding, express or implied, on the part of the Corporation or any of its subsidiaries to employ the Initial Holder for any specified period.   6:11   In addition to the general terms and conditions set forth in this Article 6:00 in respect of Options granted pursuant to the Plan, Incentive Stock Options granted pursuant to the Plan shall be subject to the following additional terms and conditions: (a) The aggregate fair market value (determined at the time the Incentive Stock Option is granted) of the shares of Common Stock in respect of which “incentive stock options” are exercisable for the first time by the Option Holder during any calendar year (under all such plans of the Corporation and its subsidiaries) shall not exceed $100,000; (b) The Option Agreement in respect of an Incentive Stock Option may contain any other terms and conditions specified by the Committee that are not inconsistent with the Plan, except that such terms and conditions must be consistent with the requirements for “incentive stock options” under Section 422 of the Code; and (c) Incentive Stock Options shall not be transferable in accordance with the terms and conditions provided in Section 6:12.   6:12   The Committee may provide, in the original grant of a Nonqualified Stock Option or in an amendment or supplement to a previous grant, that some or all of the Nonqualified Stock Options granted under the Plan are transferable by the Initial Holder to an Immediate Family Member of the Initial Holder, provided that (i) the Option Agreement, as it may be amended from time to time, expressly so provides or the Committee otherwise designates the Option as transferable, (ii) the transfer by the Initial Holder is a bona fide gift without consideration, (iii) the transfer is irrevocable, (iv) the Initial Holder and any such transferee provides such documentation or other information concerning the transfer or the transferee as the Committee or any employee of the Corporation acting on behalf of the Committee may from time to time request, and (v) the Initial Holder or the Option Holder complies with all of the terms and conditions (including, without limitation, any further restrictions or limitations) included in the Option Agreement. Any Nonqualified Stock Option transferred in accordance with the terms and conditions provided in this Section 6:12 shall continue to be subject to the same terms and conditions that were applicable to such Nonqualified Stock Option prior to the transfer. Notwithstanding any other provisions of the Plan, the Corporation shall not be required to honor any exercise of an Option by an Immediate Family Member of an Option transferred in accordance with the terms and conditions provided in this Section 6:12 unless and until payment or provision for payment of any applicable withholding taxes has been made. ARTICLE 7:00 METHODS OF EXERCISE OF OPTIONS   7:01   An Option Holder (or other person or persons, if any, entitled to exercise an Option hereunder) desiring to exercise an Option granted pursuant to the Plan as to all or part of the shares of Common Stock covered by the Option shall (i) notify either the Corporation at its principal office at 701 East Joppa Road, Towson, Maryland 21286, or the third party retained by the Corporation to administer the Plan to that effect, specifying the number of shares of Common Stock to be purchased and the -6- --------------------------------------------------------------------------------     method of payment therefor, and (ii) make payment or provision for payment for the shares of Common Stock so purchased in accordance with this Article 7:00.   7:02   Payment or provision for payment shall be made as follows: (a) The Option Holder shall deliver to the Corporation at the address set forth in Section 7:01 United States currency in an amount equal to the aggregate purchase price of the shares of Common Stock as to which such exercise relates; or (b) The Option Holder shall tender to the Corporation shares of Common Stock already owned by the Option Holder that, together with any cash tendered therewith, have an aggregate fair market value (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 7:01 is received by the Corporation) equal to the aggregate purchase price of the shares of Common Stock as to which such exercise relates; or (c) The Option Holder shall deliver irrevocable instructions to a broker to deliver promptly to the Corporation the amount of sale or loan proceeds necessary to pay the aggregate purchase price of the shares of Common Stock as to which such exercise relates and to sell the shares of Common Stock to be issued upon exercise of the Option and deliver the cash proceeds less commissions and brokerage fees to the Option Holder or to deliver the remaining shares of Common Stock to the Option Holder.     Notwithstanding the foregoing provisions, the Committee, in granting Options pursuant to the Plan, may limit the methods in which an Option may be exercised by any person and, in processing any purported exercise of an Option granted pursuant to the Plan, may refuse to recognize the method of exercise selected by the Option Holder (other than the method of exercise set forth in Section 7:02(a)) if, (A) in the opinion of counsel to the Corporation, (i) the Initial Holder or the Option Holder is or within the six months preceding such exercise was subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the method of exercise selected by the Option Holder would subject the Initial Holder or the Option Holder to a substantial risk of liability under Section 16 of the Exchange Act, (B) in the opinion of the Committee, the method of exercise could have an adverse tax or accounting effect to the Corporation, or (C) in the opinion of counsel to the Corporation, the method of exercise selected by the Option Holder would subject the Corporation to a risk of liability under the Exchange Act.   7:03   In addition to the alternative methods of exercise set forth in Section 7:02, holders of Nonqualified Stock Options shall be entitled, at or prior to the time the notice provided for in Section 7:01 is provided to the Corporation, to elect to have the Corporation withhold from the shares of Common Stock to be delivered upon exercise of the Nonqualified Stock Option that number of shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 7:01 is received by the Corporation) necessary to satisfy any withholding taxes attributable to the exercise of the Nonqualified Stock Option. The maximum number of shares that an Option Holder may elect to have withheld from the shares of Common Stock otherwise deliverable upon exercise shall be the number of shares that have an aggregate fair market value (based on the Fair Market Value of a share of Common Stock on the date of the exercise) equal to the dollar amount of the minimum statutory withholding for federal, state and local taxes, including payroll taxes, payable by the Option Holder. Alternatively, such holder of a Nonqualified Stock Option may elect to deliver previously owned shares of Common Stock (which shares have been held for at least six months) upon exercise of the Nonqualified Stock Option to satisfy any withholding taxes attributable to the exercise of the Nonqualified Stock Option. Notwithstanding the foregoing provisions, the Committee may include in the Option Agreement relating to any such Nonqualified Stock Option provisions limiting or eliminating the Option Holder’s ability to pay his or her withholding tax obligation by withholding or delivering shares of Common Stock or, if no such -7- --------------------------------------------------------------------------------     provisions are included in the Option Agreement but in the opinion of the Committee such withholding or delivery of shares would have an adverse tax or accounting effect to the Corporation, at or prior to exercise of the Nonqualified Stock Option the Committee may so limit or eliminate the Option Holder’s ability to pay his or her withholding tax obligation with shares of Common Stock. Notwithstanding the foregoing provisions, a holder of a Nonqualified Stock Option may not elect any of the methods of satisfying his or her withholding tax obligation in respect of any exercise if, in the opinion of counsel to the Corporation, (i) the Initial Holder or the holder of the Nonqualified Stock Option is or within the six months preceding such exercise was subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the election or timing of the election would subject the Initial Holder or the holder of the Nonqualified Stock Option to a substantial risk of liability under Section 16 of the Exchange Act.   7:04   An Option Holder at any time may elect in writing to abandon an Option in respect of all or part of the number of shares of Common Stock as to which the Option shall not have been exercised.   7:05   An Option Holder shall have none of the rights of a stockholder of the Corporation until the shares of Common Stock covered by the Option are issued upon exercise of the Option. ARTICLE 8:00 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS   8:01   Each Stock Appreciation Right granted pursuant to the Plan shall be evidenced by a Stock Appreciation Right Agreement in such form and with such terms and conditions (including, without limitation, noncompete, confidentiality or other similar provisions or provisions relating to transfer) as the Committee from time to time may determine. Notwithstanding the foregoing provision, Stock Appreciation Rights granted in tandem with a related Option shall be evidenced by the Option Agreement in respect of the related Option. The right of a Stock Appreciation Right Holder to exercise his, her or its Stock Appreciation Right shall at all times be subject to the terms and conditions set forth in the respective Stock Appreciation Right Agreement.   8:02   Each Stock Appreciation Right shall entitle the holder, subject to the terms and conditions of the Plan, to receive upon exercise of the Stock Appreciation Right an amount, payable in cash or shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 9:01 is received by the Corporation), equal to the Fair Market Value of a share of Common Stock on the date of receipt by the Corporation of the notice required by Section 9:01 less the Stock Appreciation Right Base Price. Notwithstanding the foregoing provision, each Stock Appreciation Right that is granted in tandem with a related Option shall entitle the holder, subject to the terms and conditions of the Plan, to surrender to the Corporation for cancellation all or a portion of the related Option, but only to the extent such Stock Appreciation Right and related Option then are exercisable, and to be paid therefor an amount, payable in cash or shares of Common Stock (determined based on the Fair Market Value of a share of Common Stock on the date the notice set forth in Section 9:01 is received by the Corporation), equal to the Fair Market Value of a share of Common Stock on the date of receipt by the Corporation of the notice required by Section 9:01 less the Stock Appreciation Right Base Price.   8:03   Each Stock Appreciation Right, subject to the other limitations set forth in the Plan, may extend for a period of up to 10 years from the date on which it is granted. The term of each Stock Appreciation Right shall be determined by the Committee at the time of grant of the Stock Appreciation Right, provided that if no term is established by the Committee the term of the Stock Appreciation Right shall be 10 years from the date on which it is granted.   8:04   Unless otherwise provided by the Committee, the number of Stock Appreciation Rights granted -8- --------------------------------------------------------------------------------     pursuant to each Stock Appreciation Right Agreement shall be divided into four installments of 25% each. The first installment shall be exercisable 12 months after the date the Stock Appreciation Right was granted, and each succeeding installment shall be exercisable 12 months after the date the immediately preceding installment became exercisable. If a Stock Appreciation Right Holder does not exercise the Stock Appreciation Right to the extent that he, she or it at any time has become entitled to exercise the Stock Appreciation Right, the Stock Appreciation Right Holder may exercise all or any part of the Stock Appreciation Right at any subsequent time during the term of the Stock Appreciation Right.   8:05   Stock Appreciation Rights shall be nontransferable and nonassignable, except that (i) Stock Appreciation Rights may be transferred by testamentary instrument or by the laws of descent and distribution, and (ii) subject to the terms and conditions of the Stock Appreciation Right Agreement or any other terms and conditions imposed by the Committee from time to time, Stock Appreciation Rights may be transferred in accordance with the terms and conditions provided in Section 8:11 if the applicable Stock Appreciation Right Agreement or other action of the Committee expressly provides that the Stock Appreciation Rights are transferable.   8:06   Upon voluntary or involuntary termination of an Initial Holder’s employment, his or her Stock Appreciation Rights (including any Stock Appreciation Rights transferred in accordance with the terms and conditions provided in Section 8:11) and all rights thereunder shall terminate effective as of the close of business on the date the Initial Holder ceases to be a regular, full-time employee of the Corporation or any of its subsidiaries, except (i) to the extent previously exercised, (ii) as provided in Sections 8:07, 8:08, and 8:09, and (iii) in the case of involuntary termination of employment, for a period of 30 days thereafter the Stock Appreciation Right Holder shall be entitled to exercise that portion of each Stock Appreciation Right that was exercisable at the close of business on the date the Initial Holder ceased to be a regular, full-time employee of the Corporation or any of its subsidiaries.   8:07   In the event an Initial Holder (i) ceases to be an executive or other key employee of the Corporation or any of its subsidiaries due to involuntary termination, (ii) takes a leave of absence from the Corporation or any of its subsidiaries for personal reasons or as a result of entry into the armed forces of the United States, or any of the departments or agencies of the United States government, or (iii) terminates employment by reason of illness, disability, or other special circumstance, the Committee may consider his or her case and may take such action in respect of the related Stock Appreciation Right Agreement as it may deem appropriate under the circumstances, including accelerating the time previously granted Stock Appreciation Rights may be exercised and extending the time following the Initial Holder’s termination of employment during which the Stock Appreciation Right Holder is entitled to exercise the Stock Appreciation Rights, provided that in no event may any Stock Appreciation Right be exercised after the expiration of the term of the Stock Appreciation Right.   8:08   If an Initial Holder dies during the term of his or her Stock Appreciation Right without the Stock Appreciation Right having been exercised in full, (i) the executor or administrator of the Stock Appreciation Right Holder’s estate or the person who inherits the right to exercise the Stock Appreciation Right by bequest or inheritance in the event the Initial Holder was the Stock Appreciation Right Holder at the date of death or (ii) the Stock Appreciation Right Holder in the event the Stock Appreciation Right had been transferred in accordance with the terms and conditions provided in Section 8:11, shall have the right within three years of the Initial Holder’s death to exercise the Stock Appreciation Rights that the deceased Initial Holder (or the Stock Appreciation Right Holder, as the case may be) was entitled to purchase at the date of death, after which the Stock Appreciation Right shall lapse, provided that in no event may any Stock Appreciation Right be exercised after the expiration of the term of the Stock Appreciation Right.   8:09   If an Initial Holder’s employment is terminated without his or her Stock Appreciation Rights having been exercised in full and (i) the Initial Holder is 62 years of age or older, or (ii) the Initial Holder has been employed by the Corporation or any of its subsidiaries for at least 10 years and the Initial -9- --------------------------------------------------------------------------------     Holder’s age plus years of such employment total not less than 55 years, then such Initial Holder (or the Stock Appreciation Right Holder in the event the Stock Appreciation Right had been transferred in accordance with the terms and conditions provided in Section 8:11) shall have the right within three years of the Initial Holder’s termination of employment to exercise the Stock Appreciation Rights that the Initial Holder (or Stock Appreciation Right Holder, as the case may be) was entitled to exercise at the date of termination, after which the Stock Appreciation Right shall lapse, provided that in no event may any Stock Appreciation Right be exercised after the expiration of the term of the Stock Appreciation Right.   8:10   The granting of a Stock Appreciation Right pursuant to the Plan shall not constitute or be evidence of any agreement or understanding, expressed or implied, on the part of the Corporation or any of its subsidiaries to employ the Initial Holder for any specified period.   8:11   The Committee may provide, in the original grant of a Stock Appreciation Right or in an amendment or supplement to a previous grant, that some or all of the Stock Appreciation Rights granted under the Plan are transferable by the Initial Holder to an Immediate Family Member of the Initial Holder, provided that (i) the Stock Appreciation Right Agreement, as it may be amended from time to time, expressly so provides or the Committee otherwise designates the Stock Appreciation Right as transferable, (ii) the transfer by the Initial Holder is a bona fide gift without consideration, (iii) the transfer is irrevocable, (iv) the Initial Holder and any such transferee provides such documentation or other information concerning the transfer or the transferee as the Committee or any employee of the Corporation acting on behalf of the Committee may from time to time request, and (v) the Initial Holder or the Stock Appreciation Right Holder complies with all of the terms and conditions (including, without limitation, any further restrictions or limitations) included in the Stock Appreciation Right Agreement. Any Stock Appreciation Right transferred in accordance with the terms and conditions provided in this Section 8:11 shall continue to be subject to the same terms and conditions that were applicable to such Stock Appreciation Right prior to the transfer. Notwithstanding any other provisions of the Plan, the Corporation shall not be required to honor any exercise of a Stock Appreciation Right by an Immediate Family Member of a Stock Appreciation Right transferred in accordance with the terms and conditions provided in this Section 8:11 unless and until payment or provision for payment of any applicable withholding taxes has been made. ARTICLE 9:00 METHODS OF EXERCISE OF STOCK APPRECIATION RIGHTS   9:01   A Stock Appreciation Right Holder (or other person or persons, if any, entitled to exercise a Stock Appreciation Right hereunder) desiring to exercise a Stock Appreciation Right granted pursuant to the Plan shall notify the Corporation in writing at its principal office at 701 East Joppa Road, Towson, Maryland 21286, to that effect, specifying the number of Stock Appreciation Rights to be exercised. Such written notice may be given by means of a facsimile transmission. If a facsimile transmission is used, the Stock Appreciation Right Holder should mail the original executed copy of the written notice to the Corporation promptly thereafter.   9:02   The Committee in its sole and absolute discretion shall determine whether a Stock Appreciation Right shall be settled upon exercise in cash or in shares of Common Stock. The Committee, in making such a determination, may from time to time adopt general guidelines or determinations as to whether Stock Appreciation Rights shall be settled in cash or in shares of Common Stock. -10- -------------------------------------------------------------------------------- ARTICLE 10:00 LIMITED STOCK APPRECIATION RIGHTS   10:01   Notwithstanding any other provision of the Plan, the Committee, in its sole and absolute discretion, may grant Limited Stock Appreciation Rights entitling Option Holders to receive, in connection with a Change in Control (as defined in Section 10:02), a cash payment in cancellation of all of their Options that are outstanding on the date the Change in Control occurs (whether or not such Options are then presently exercisable), which payment shall be equal to the number of shares covered by the cancelled Options multiplied by the excess over the exercise price of the Options of the higher of the (i) Fair Market Value of a share of Common Stock on the date of the Change in Control or (ii) the highest per share price paid for the shares of Common Stock in connection with the Change in Control (with the value of any noncash consideration paid in connection with the Change in Control to be determined by the Committee in its sole and absolute discretion and if the Committee, in its sole and absolute discretion, determines that such valuation will comply with Section 409A of the Code). For purposes of this Section 10:01 as well as the other provisions of this Plan, once an Option or portion of an Option has terminated, lapsed or expired, or has been abandoned, in accordance with the provisions of the Plan, the Option (or the portion of the Option) that has terminated, lapsed or expired, or has been abandoned, shall cease to be outstanding. Limited Stock Appreciation Rights shall not be exercisable at the discretion of the Option Holder but shall automatically be exercised upon a Change in Control.   10:02   A “Change in Control” shall mean a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Corporation is in fact required to comply therewith, provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any of its subsidiaries, or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation’s then outstanding securities; or (B) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clauses (A) or (D) of this Section 10.02) whose election by the Board of Directors or nomination for election by the Corporation’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; (C) the Corporation enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; or (D) the stockholders of the Corporation approve a merger, share exchange or consolidation of the Corporation with any other corporation, other than a merger, share exchange or consolidation that would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 60% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger, share exchange or consolidation, or the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation’s assets.   10:03   Limited Stock Appreciation Rights shall be nontransferable and nonassignable, except that Limited Stock Appreciation Rights shall automatically be transferred and assigned in tandem with a transfer of -11- --------------------------------------------------------------------------------     the related Options in accordance with Section 6:05. ARTICLE 11:00 TERMS AND CONDITIONS OF CASH APPRECIATION RIGHTS   11:01   Cash Appreciation Rights may be granted concurrently with Options or Stock Appreciation Rights granted pursuant to the Plan in the sole and absolute discretion of the Committee. If Cash Appreciation Rights are granted to an Initial Holder, the number of Cash Appreciation Rights granted to the Initial Holder shall equal the number of shares of Common Stock that may be purchased upon exercise of the related Option or the number of Stock Appreciation Rights granted, as the case may be.   11:02   Cash Appreciation Rights shall entitle the Initial Holder or the Option Holder, as the case may be, subject to the terms and conditions of the Plan including but not limited to the limitations set forth in Section 11:03, to receive from the Corporation or the subsidiary employing the Initial Holder upon exercise of all or part of the related Option or Stock Appreciation Right, as the case may be, or in the case of Options granted in tandem with Stock Appreciation Rights upon the surrender of all or part of the related Option granted in exchange for the exercise of Stock Appreciation Rights granted to the Initial Holder pursuant to the Plan, whether or not such exercise or surrender was by the Initial Holder or a permitted transferee, a payment in cash equal to the sum of (i) the increase in income taxes, if any, incurred by the Initial Holder or the Option Holder, as the case may be, as a result of the full or partial exercise of the related Option or Stock Appreciation Right, as the case may be, and (ii) the increase in income taxes, if any, incurred by the Initial Holder or the Option Holder, as the case may be, as a result of receipt of this cash payment.   11:03   In no event shall the payment in respect of a Cash Appreciation Right exceed the increase, if any, of the Fair Market Value of a share of Common Stock on the date of exercise of the related Option or Stock Appreciation Right, as the case may be, over the exercise price per share of the related Option or the Stock Appreciation Right Base Price of the related Stock Appreciation Right, as the case may be.   11:04   Except as otherwise contemplated in this Article 11:00, Cash Appreciation Rights shall be nontransferable and nonassignable. ARTICLE 12:00 AMENDMENTS AND DISCONTINUANCE OF THE PLAN   12:01   The Board of Directors shall have the right at any time and from time to time to amend, modify, or discontinue the Plan provided that, except as provided in Section 5:03, no such amendment, modification, or discontinuance of the Plan shall (i) revoke or alter the terms of any valid Option, Stock Appreciation Right, Limited Stock Appreciation Right, or Cash Appreciation Right previously granted pursuant to the Plan, (ii) increase the number of shares of Common Stock to be reserved for issuance and sale pursuant to Options or Stock Appreciation Rights granted pursuant to the Plan, (iii) decrease the price determined pursuant to the provisions of Section 6:02 or increase the amount of cash or shares of Common Stock that a Stock Appreciation Right Holder is entitled to receive upon exercise of a Stock Appreciation Right, (iv) change the class of employee to whom Options or Stock Appreciation Rights may be granted pursuant to the Plan, or (v) provide for Options or Stock Appreciation Rights exercisable more than 10 years after the date granted. -12- -------------------------------------------------------------------------------- ARTICLE 13:00 PLAN SUBJECT TO GOVERNMENTAL LAWS AND REGULATIONS   13:01   The Plan and the grant and exercise of Options, Stock Appreciation Rights, Limited Stock Appreciation Rights, and Cash Appreciation Rights pursuant to the Plan shall be subject to all applicable governmental laws and regulations. Notwithstanding any other provision of the Plan to the contrary, the Board of Directors may in its sole and absolute discretion make such changes in the Plan as may be required to conform the Plan to such laws and regulations. ARTICLE 14:00 DURATION OF THE PLAN   14:01   No Option or Stock Appreciation Right shall be granted pursuant to the Plan after the close of business on February 19, 2002. -13- --------------------------------------------------------------------------------

  EXHIBIT 10.2 NOTE       $50,000,000   November 1, 2006      FOR VALUE RECEIVED, the undersigned, U-STORE-IT, L.P., a limited partnership formed under the laws of the State of Delaware (the “Borrower”), hereby promises to pay to the order of Wachovia Bank, National Association, (the “Lender”) at One Wachovia Center, 301 South College Street, Charlotte, North Carolina 28288, or at such other address as may be specified in writing by the Lender to the Borrower, the principal sum of FIFTY MILLION AND NO/100 DOLLARS ($50,000,000) (or such lesser amount as shall equal the unpaid principal amount of the Loan made by the Lender to the Borrower under the Credit Agreement (as herein defined)), on the dates and in the principal amounts provided in the Credit Agreement, and to pay interest on the unpaid principal amount owing hereunder, at the rates and on the dates provided in the Credit Agreement.      The date and amount of the Loan made by the Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Note, endorsed by the Lender on the schedule attached hereto or any continuation thereof, provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower to make a payment when due of any amount owing under the Credit Agreement or hereunder in respect of the Loan made by the Lender.      This Note is the Note referred to in the Credit Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and between the Borrower and the Lender. Capitalized terms used herein, and not otherwise defined herein, have their respective meanings given them in the Credit Agreement.      The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events and for prepayments of the Loan upon the terms and conditions specified therein.      Except as permitted by Section 9.5.(d) of the Credit Agreement, this Note may not be assigned by the Lender to any other.      THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.   --------------------------------------------------------------------------------        The Borrower hereby waives presentment for payment, demand, notice of demand, notice of non-payment, protest, notice of protest and all other similar notices.      Time is of the essence for this Note.      IN WITNESS WHEREOF, the undersigned has executed and delivered this Note under seal as of the date first written above.             U-STORE-IT, L.P.       By:   U-Store-It Trust, its sole general partner                 By:   /s/ Christopher P. Marr         Name:   Christopher P. Marr        Title:   Chief Financial Officer    

Exhibit 10.7 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (“Agreement”) is entered into as of May 10, 2006, by and between Services Acquisition Corp. International (the “Company”) (to be renamed Jamba, Inc. upon consummation of the merger between JJC Acquisition Company and Jamba Juice Company, pursuant to that certain Agreement and Plan of Merger, dated as of March 10, 2006, by and among the Company, JJC Acquisition Company and Jamba Juice Company (the “Merger Agreement”)), and Paul Clayton, an individual resident of the State of California (the “Employee”). Capitalized terms used herein but not otherwise defined herein shall have their respective meanings as set forth in the Merger Agreement. In consideration of the mutual representations, warranties, covenants and agreements contained in this Agreement, the parties hereto agree as follows:   1) Employment; Term; Compensation.     a) Employment. Employee’s employment with the Company, and this Agreement, will only become effective upon Closing of the Merger Agreement. Upon Closing (such date of Closing referred to as the “Effective Date”), the Company agrees to employ the Employee as an employee of the Company, and the Employee agrees to accept such employment and serve as an employee of the Company, subject to the terms and conditions of this Agreement.     b) Term. The period during which the Employee shall serve as an employee of the Company shall commence on the Effective Date and, unless earlier terminated pursuant to this Agreement, shall expire on the third anniversary of the Effective Date (the “Initial Term”) provided that this Agreement shall automatically extend for one or more additional twelve month periods (each an “Additional Term,” the Initial Term and any Additional Term, collectively referred to as the “Term”) unless either party delivers written notice of cancellation to the other party at least 120 days prior to expiration of the then current term.     c) Duties and Responsibilities. During the Term, the Employee shall have such authority and responsibility and perform such duties as may reasonably be assigned to the Employee from time to time at the direction of the Board of Directors of the Company (the “Board”), and in the absence of such assignment, such duties customary to Employee’s position as are necessary to the business and operations of the Company. During the Term, the Employee’s employment shall be full time in the Company’s (or Jamba Juice Company’s) San Francisco bay area support center. The Employee shall perform Employee’s duties honestly, diligently, competently, in good faith and in the best interests of the Company and shall use Employee’s best efforts to promote the interests of the Company.     d) Compensation. In consideration of the Employee’s services hereunder and compliance with the restrictive covenants and other obligations imposed on the Employee in this Agreement, the Employee shall be paid compensation (“Compensation”) as follows:     (i) an annual base salary of $525,000 (the “Salary”), payable in accordance with the Company’s customary payroll practices, which Salary will be reviewed annually by the Compensation Committee of the Board;   1 --------------------------------------------------------------------------------   (ii) a target bonus of up to 100% of Employee’s Salary for the 2007 fiscal year of Jamba Juice Company, based on targets reasonably established by the Board (or the appropriate committee thereof) and communicated to Employee within 90 days following the Effective Date. Thereafter any annual bonus shall be as determined in good faith by the Compensation Committee of the Board. The payment of any such bonuses will be made within 90 days after the close of the Jamba Juice Company fiscal year, but in no event prior to receipt by the Company of its annual audited financial statements;     (iii) (A) an initial option grant of 510,000 shares, made at the Effective Date, with a strike price equal to the fair market value of the Company’s common stock at the date of grant as defined in the Company’s 2006 Employee, Director and Consultant Stock Plan (the “Plan”) (the “Initial Option Grant”). Following the Initial Option Grant, any other grants of options or restricted stock to the Employee, and the terms and conditions thereof, will be determined by the Board (or appropriate committee thereof), and (B) an initial restricted stock grant of 70,000 shares with equal annual vesting over a four year period (the “Initial Restricted Stock Grant”). Following the Initial Option Grant and Initial Restricted Stock Grant, any other grants of options or restricted stock to the Employee, and the terms and conditions thereof, will be determined by the Board (or appropriate committee thereof); and     (iv) all options and restricted stock granted pursuant to Id) (iii) above shall be 100% vested upon termination without cause pursuant to Section 2)b or a Change of Control that occurs prior to the first anniversary of the Effective Date. For purposes of this Agreement Change of Control is defined as (a) a sale of substantially all of the assets of the Company, (b) a merger of or consolidation with an unaffiliated third party in which the Company is not the surviving corporation (c) a reverse merger with an unaffiliated third party in which the Company is the surviving corporation but the shares of common stock of the Company outstanding immediately preceding the merger are converted by virtue of the merger into other property, or (d) an acquisition by any person, entity or group within the meaning of Section 13 (d) or 14(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors of the Board. All options and restricted stock granted pursuant to Id) (iii) above shall also be governed by the terms of the Plan.     e) Benefits. Employee shall be entitled to participate, in any vacation, relocation, retirement, deferred compensation, medical, prescription drug, dental, vision, disability, employee life, group life, accidental death or travel accident insurance benefits or any other benefit that the Company may adopt for the benefit of similarly situated executive employees, in accordance with the terms of such plan.   2 --------------------------------------------------------------------------------   f) Expense Reimbursement. The Company shall reimburse Employee for all authorized expenses reasonably incurred or paid by Employee in connection with the performance of Employee’s services under this Agreement upon presentation of expense statement or vouchers and such other supporting information as the Company may from time to time reasonably require or request.     g) No Other Compensation or Benefits; Payment. The compensation and benefits specified in this Section 1 of this Agreement shall be in lieu of any and all other compensation and benefits. Payment of all compensation and benefits to Employee hereunder shall be made in accordance with the relevant Company policies in effect from time to time, including normal payroll practices, and shall be subject to all applicable employment and withholding taxes.   2) Termination.     a) Death, Disability and Cause. At any time during the Term, the Company shall have the right to terminate the Term and to discharge the Employee for Cause (as herein defined) effective upon delivery of written notice to the Employee. Upon any such termination by the Company for Cause, the Employee or the Employee’s legal representatives shall be entitled to that portion of the unpaid Compensation through the date of termination, and the Company shall have no further obligations hereunder from and after the date of such termination. Termination for “Cause” shall mean termination because of (i) the Employee’s breach of any of the Employee’s covenants contained in Sections 3, 4, 5 and/or 8 of this Agreement or breach of any representation or warranty in this Agreement, (ii) the Employee’s failure or refusal to perform any of the reasonably assigned duties or responsibilities required to be performed by the Employee under the terms of this Agreement, provided that the Employee has first received from a duly authorized representative of the Board written notice that describes in detail such failure or refusal and that the Employee be given a period of thirty 30 days after receipt to correct or cure such failure or refusal, provided that the occurrence of a second violation similar in nature to a prior violation which was cured following notice from the Company shall constitute “Cause” immediately upon notice without any further opportunity to cure, (iii) the Employee’s gross negligence or willful misconduct in the performance of the Employee’s duties hereunder, (iv) the Employee’s commission of an act of dishonesty affecting the Company or the commission of an act constituting fraud or a felony, , (v) the Employee’s death or (vi) the Employee’s inability to perform any of the Employee’s duties or responsibilities as provided in this Agreement due to the Employee’s physical or mental disability or illness extending for, or reasonably expected to extend for, greater than sixty (60) days (as determined in good faith by the Board). If the Employee shall resign or otherwise terminate the Employee’s employment with the Company, either expressly or by abandonment, the Employee shall be deemed for purposes of this Agreement to have been terminated for Cause.     b) Without Cause. At any time during the Term, the Company shall have the right to terminate the Term and to discharge the Employee without Cause effective upon delivery of written notice to the Employee. Upon any such termination by the Company without Cause, the Employee shall be entitled to receive any unpaid portion of the Employee’s Compensation and un-reimbursed expenses in accordance with Section 1(f) payable when and as the same would have been due and payable hereunder but for such termination. If the Company terminates Employee’s employment without Cause at any time during the Term, then the Company shall also   3 --------------------------------------------------------------------------------   continue to pay Employee, as severance, Salary for a period of twelve (12) months following the date of termination (“Severance Period”). In addition, if at any time during the Severance Period the Employee was entitled to receive a bonus as set forth in this Agreement, the Company shall also pay to Employee the bonus to which Employee would have been entitled had Employee remained employed with the Company. All benefits shall, unless otherwise provided by Company policy applicable to its employees generally or otherwise required by law, terminate on the date of termination.     c) Notwithstanding any other provision with respect to the timing of payments under this Section 2, if, at the time of the Employee’s termination, the Employee is deemed to be a “specified employee” (within the meaning of Section 409A of the Code, and any successor statute, regulation and guidance thereto) of the Company, then only to the extent necessary to comply with the requirements of Section 409A of the Code, any payments to which the Employee may become entitled under this Section 2 which are subject to Section 409A of the Code (and not otherwise exempt from its application) will be withheld until the first business day of the seventh month following the termination of the Employee’s employment, at which time the Employee shall be paid an aggregate amount equal to six months of payments otherwise due to the Employee under the terms of this Section 2, as applicable. After the first business day of the seventh month following the termination of the Employee’s employment and continuing each month thereafter, the Employee shall be paid the regular payments otherwise due to the Employee in accordance with the terms of this Section 2, as applicable.   3) Non-Solicitation.     a) In consideration of the foregoing, the Employee agrees that during the Term and for a period of one (1) year following termination of the Term for any or no reason, the Employee shall not directly or indirectly:     i) induce any customer, franchisee or licensee of any of the Employer Companies (as herein defined) to patronize any business that is directly or indirectly in competition with the Protected Business (as herein defined) conducted by any of the Employer Companies; (B) canvass or solicit from any person or entity which is a franchisee or licensee of the Protected Business conducted by any of the Employer Companies, any such competitive business; or (C) request or advise any customer, supplier, franchisee or licensee of the Protected Business conducted by any of the Employer Companies to withdraw, curtail or cancel any such customer’s, franchisee’s or licensee’s business with any of the Employer Companies; and/or     ii) employ or engage any person who serves in a managerial capacity who is then employed or engaged by any of the Employer Companies or who was within the six-month period prior thereto employed or engaged by any of the Employer Companies, or in any manner seek to induce any employee or independent contractor of any of the Employer Companies to leave its, his or her employment or engagement.   4 --------------------------------------------------------------------------------   b) “Protected Business” Defined. As used in this Agreement, the term “Protected Business” means the business of owning, operating, franchising or licensing any business that provides any or all of the following:     i) the retailing of fruit smoothies, juices, blended beverages and healthy snacks; or     ii) the wholesale sale or distribution of fruit smoothies, juices, blended beverages and healthy snacks.     c) “Employer Companies” Defined. As used in this Agreement, the term “Employer Companies” means the Company or any of its subsidiaries or affiliates or any entity in which any of the foregoing owns, directly or indirectly, any securities or other interests or which any of the foregoing controls, or any of their respective franchisees or licensees, or any successors or assigns of any of the foregoing.     d) Reasonableness. Each party hereto acknowledges that (i) the provisions of this Agreement are reasonable and necessary to protect and preserve the interests of the Company and the other Employer Companies and their right to operate the Protected Business and (ii) the Company and the other Employer Companies would be irreparably damaged if Employee were to breach any of the covenants set forth in Section 3 of this Agreement.     e) Successors and Assigns. Employee hereby agrees that the Employer Companies may assign, without limitation, the foregoing restrictive covenants in this Section 3 to any successor to the Protected Business conducted by the Employer Companies and any such assignee may enforce the foregoing restrictive covenants.   4) Confidentiality. The Employee agrees that at all times during and after the Term, the Employee shall (i) hold in confidence and refrain from disclosing to any other party all information, whether written or oral, tangible or intangible, of a private, secret, proprietary or confidential nature, of or concerning any of the Employer Companies and their respective businesses and operations, and all files, letters, memoranda, reports, records, computer disks or other computer storage medium, data, models or any photographic or other tangible materials containing such information (collectively hereinafter referred to as “Confidential Information”), including without limitation, any sales, promotional or marketing plans, programs, techniques, practices or strategies, pricing information, any expansion plans (including existing and entry into new geographic and/or product markets), and any customer lists, supplier lists or lists of prospective franchisees or licensees, (ii) use the Confidential Information solely in connection with the Employee’s employment with the Employer Companies and for no other purpose, (iii) take all reasonable precautions necessary to ensure that the Confidential Information shall not be, or be permitted to be, shown, copied or disclosed to any third parties, without the prior written consent of the Company, and (iv) observe all security policies implemented by the Company from time to time with respect to the Confidential Information. In the event that the Employee is ordered to disclose any Confidential Information, whether in a legal or regulatory proceeding or otherwise, the Employee shall provide the Company with prompt notice of such request or order so that the Company may seek to prevent disclosure. In the case of any disclosure, the Employee shall disclose only that portion of the Confidential Information that the Employee is ordered to disclose.   5 -------------------------------------------------------------------------------- 5) Employee Creations.     a) Definition. Employee agrees that all Creations (as herein defined) shall be the property of the Company. “Creations” shall mean all ideas, prospects and customer lists, inventions, research, plans for products or services, potential marketing and sales relationships, business development strategies, marketing plans, designs, logos, branding, layouts, templates, computer software, computer programs, original works of authorship, copyrightable expression, characters, know-how, trade secrets, information, data, developments, discoveries, improvements, modifications, technology, designs, whether or not subject to patent or copyright protection, made, conceived, expressed, developed, or actually or constructively reduced to practice by Employee solely or jointly with others in connection with Employee’s work conducted on behalf of the Company.     b) Ownership. Employee acknowledges that all Creations shall be considered as “work made for hire” belonging to the Company. To the extent that any such Creations, under applicable law, may not be considered work made for hire by Employee for the Company, Employee agrees to assign and, upon its creation, automatically assigns to the Company the ownership of such Creations, including any copyright or other intellectual property rights in such materials, without the necessity of any further consideration. At the Company’s expense, Employee will assist the Company in every proper way to protect the Creations throughout the world, including, without limitation, executing in favor of the Company or any affiliate of the Company patent, copyright, and other applications and assignments relating to the Creations, as set forth in Exhibit A. In the event that the Company is unable for any reason to secure Employee’s signature to any document that Employee is required to execute under this Section 5 (b), Employee hereby irrevocably designates and appoints the Company and the Company’s duly authorized officers and agents as Employee’s agents and attorneys-in-fact to act for an on Employee’s behalf and instead of Employee, to execute such document with the same legal force and effect as if executed by Employee. Employee acknowledges and agrees that the Company has notified Employee that the assignment provided for herein does not apply to any Invention which qualifies fully for exemption from assignment under the provisions of Section 2870 of the California Labor Code, a copy of which is attached as Exhibit B.   6) Return of Property and Information. The Employee agrees that upon the termination of this Agreement, the Employee shall transfer and return to the Company all things belonging to the Company, including, without limitation, any and all cellular telephones, computers, monitors, modems, keyboards, pagers, facsimile machines, corporate files, documents, records, notebooks, disk, diskettes or other software media, and similar repositories of or containing trade secrets and other Confidential Information of or about the Company or its customers, including without limitation, copies thereof then in the Employee’s possession, whether prepared by the Employee or others.   7) No Prior Agreement. The Employee hereby represents and warrants to the Company that the execution of this Agreement by the Employee and the Employee’s employment by the Company and the performance of the Employee’s duties hereunder will not violate or cause a   6 --------------------------------------------------------------------------------   breach of any agreement with a former employer, client or any other person or entity. Further, the Employee agrees to indemnify the Company for all losses, liabilities, claims, costs or damages incurred by the Company, including, but not limited to, reasonable attorney’s fees, costs and expenses of investigation, arising or resulting from any reasonable claim by any third party based upon or arising out of any non-competition agreement, invention or secrecy agreement between the Employee and such third party that was in existence as of the Effective Date.   8) Cooperation. The Employee agrees to cooperate to the full extent possible with the Company, through the Term, and for a reasonable period subsequent to the termination of the Term in connection with any legal matters involving potential or actual litigation relating to events that occurred during the Term and with the completion and transfer of the Employee’s work assignments and any necessary follow-up thereto. The Employee also agrees and promises not to undertake any disparaging conduct directed at the Company or any of its members, managers, officers, employees, customers or affiliates, and to refrain from making any negative, disparaging, ridiculing or derogatory statements concerning the Company or any of its members, managers, officers, employees, customers or affiliates, or the Company’s business.   9) Acknowledgments of the Parties. The parties agree and acknowledge that the restrictions contained in Sections 3 and 4 are reasonable in scope and duration and are necessary to protect the Employer Companies. If any provision of Section 3 or 4 as applied to any party or to any circumstance is adjudged by a court to be invalid or unenforceable, the same shall in no way affect any other circumstance or the validity or enforceability of any other provision of this Agreement. If any such provision, or any part thereof, is held to be unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision, and/or to delete specific words or phrases, to the minimum extent necessary to make it enforceable, and in its reduced form, such provision shall then be enforceable and shall be enforced. The Employee agrees and acknowledges that the breach of Section 3 or 4 will cause irreparable injury to the Employer Companies and upon breach of any provision of such Sections, the Employer Companies shall be entitled to injunctive relief, specific performance or other equitable relief; provided, however, that this shall in no way limit any other remedies that any of the Employer Companies may have (including, without limitation, the right to seek monetary damages). Employer or any of the Employer Companies may assign, without limitation, the restrictive covenants set forth in Section 3 and Section 4 hereof to any successor or assignee to its business, and any such successor or assignee may enforce any of the foregoing restrictive covenants. Notwithstanding anything to the contrary in this Agreement, each of the Employer Companies not a signatory to this Agreement is an intended third-party beneficiary of the provisions of Section 3 and Section 4 hereof and is entitled to enforce any such provisions.   10) Notices. All notices, requests, demands, claims and other communications hereunder shall be in writing and shall be deemed given if delivered by certified or registered mail (first class postage pre-paid), guaranteed overnight delivery or facsimile transmission if such transmission is confirmed by delivery by certified or registered mail (first class postage prepaid) or guaranteed overnight delivery to the following addresses and telecopy numbers (or to such other addresses or telecopy numbers which such party shall designate in writing to the other parties): (a) if to the Company, to the Board, and (b) if to the Employee, to the address and/or telecopy number listed on the signature page hereto.   7 -------------------------------------------------------------------------------- 11) Amendment; Waiver. This Agreement may not be modified, amended, supplemented, canceled or discharged, except by written instrument executed by all parties hereto. No failure to exercise, and no delay in exercising, any right, power or privilege under this Agreement shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or privilege. No waiver of any breach of any provision shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the parties. No extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts. The rights and remedies of the parties under this Agreement are in addition to all other rights and remedies, at law or equity, that they may have against each other.   12) Assignment. This Agreement, and the Employee’s rights and obligations hereunder, may not be assigned or delegated by the Employee. The Company may assign its rights, and delegate its obligations, hereunder to any affiliate of the Company or to any successor to the Company’s business. The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon their respective successors and assigns, and shall be enforceable by such successors and assigns.   13) Severability; Survival. In the event that any provision of this Agreement is found to be void and unenforceable by a court of competent jurisdiction, then such unenforceable provision shall be deemed modified to the minimum extent possible so as to be enforceable (or if not subject to modification, then eliminated herefrom) for the purpose of those procedures to the extent necessary to permit the remaining provisions to be enforced. The provisions of Sections 3 through 16 of this Agreement shall survive the termination for any reason of the Employee’s relationship with the Company.   14) Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.   15) Governing Law. This Agreement shall be construed in accordance with and governed for all purposes by the laws of the State of California applicable to contracts executed and to be wholly performed within such State, except that no doctrine of choice of law shall be used to apply any law other than that of the State of California.   16) Entire Agreement; No Third Party Beneficiaries. This Agreement (including the exhibits and schedules attached hereto, if any) contains the entire understanding of the parties hereto in respect of its subject matter and supersedes all prior (oral or written) agreements, understandings, representations and warranties between or among the parties with respect to such subject matter. In furtherance of the foregoing, Employee acknowledges and agrees that that certain Change of Control Retention and Severance Agreement, dated November 1, 2005, by and between Employee and Jamba Juice Company shall, as of the effective date, terminate and be of no further force or effect and no further action to evidence such termination shall be required. The exhibits and schedules attached hereto, if any, constitute a part hereof as though set forth in full above. This Agreement is not intended to confer upon any person or entity, other than the parties hereto and the Employer Companies as provided above, any rights or remedies hereunder. Each party hereto agrees that, except for the statements, representations and warranties contained in this Agreement and any exhibit, schedule or document attached hereto, neither the Company nor Employee makes any other statements, representations or   8 --------------------------------------------------------------------------------   warranties (whether in writing or otherwise) that the other is entitled to rely upon, and each hereby disclaims any other statements, representations or warranties (whether in writing or otherwise) made by each party or, as applicable, any of the officers, directors, members, managers, employees, agents, financial and legal advisors or other representatives of such party with respect to the preparation, execution and delivery of this Agreement and any exhibit, schedule or document attached hereto, or the transactions contemplated hereby, notwithstanding the delivery or disclosure to the other or the other’s representatives of any documentation or other information (whether oral or written) with respect to any one or more of the foregoing. [SIGNATURES ON FOLLOWING PAGE]   9 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.     SERVICES ACQUISITION CORP. INTERNATIONAL By:   /s/ Thomas Byrne   Name: Thomas Byrne   Title: Director   EMPLOYEE:   /s/ Paul Clayton   Address for Notices:   Telecopy:      -------------------------------------------------------------------------------- EXHIBIT A ASSIGNMENT OF CREATIONS For good and valuable consideration which has been received, the undersigned sells, assigns, transfers to Jamba, Inc. (the “Company”), and the Company’s successors and assigns, and Company accepts such sale, assignment and transfer of all rights, title and interest of Employee, vested and contingent, in and to Creations (as defined by that certain Employment Agreement between the undersigned and the Company), and all associated intellectual property rights (including without limitation, patent, copyright, moral right, mask-work, and trade secret rights), that were conceived, reduced to practice, created, derived, developed or made during the term that the Employee performs work on behalf of the Company.   Executed this 10th day of May, 2006     Employee       Company By:   /s/ Paul Clayton     By:   /s/ Thomas Byrne Name:   Paul Clayton     Name:   Thomas Byrne Title:   CEO & President     Title:   Director Date:   5/10/06     Date:   5/12/06 -------------------------------------------------------------------------------- EXHIBIT B California Labor Code § 2870 provides as follows:   (a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:     (1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or     (2) Result from any work performed by the employee for the employer.   (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable. (Amended by Stats. 1991, c. 647 (S.B.879), § 5) -------------------------------------------------------------------------------- AMENDMENT TO EMPLOYMENT AGREEMENT This Amendment (“Amendment”) is entered into as of November 29, 2006, by and among Jamba, Inc., a Delaware corporation formerly named Services Acquisition Corp. International (the “Company”), Jamba Juice Company, a California corporation and wholly-owned subsidiary of the Company (“Jamba Juice”), and the undersigned individual (the “Employee”). WHEREAS, an Employment Agreement was entered into as of May 10, 2006 (the “Agreement”) between the Company and Employee, which Agreement shall be effective upon the closing of the transactions contemplated by that certain Agreement and Plan of Merger, dated as of March 10, 2006, by and among the Company, JJC Acquisition Company and Jamba Juice (the “Closing”); WHEREAS, upon the Closing, the Company desires that its wholly-owned subsidiary Jamba Juice be the employer of record for the Employee; WHEREAS, pursuant to Section 11 of the Agreement, the Agreement may be modified, amended, supplemented, canceled or discharged, by a written instrument executed by all parties thereto and pursuant to Section 12 of the Agreement, Company may assign its rights, and delegate its obligations, hereunder to any affiliate of the Company; and WHEREAS, the Company, Employee and Jamba Juice now desire to amend the Agreement and to assign certain of its rights, duties and obligations as Employee’s employer under the Agreement to Jamba Juice. NOW, THEREFORE, effective as of the Closing, it is hereby agreed as follows: 1. Assignment. Company hereby assigns to Jamba Juice, and Jamba Juice hereby assumes, each of the rights, duties and obligations of the Company identified in Sections 1, 2, 5, 6 and 8 of the Agreement such that Jamba Juice shall be the employer of Employee; provided, however, the Company shall continue to be the issuer of the options and restricted stock reference in Section 1.d.(iii). 2. Amendment. Jamba Juice shall be joined as a party to the Agreement, and any reference to “Company” in the sections set forth above in paragraph 1 herein shall be deemed to refer to Jamba Juice except for paragraphs 1.d.(iii) and 1.d.(iv) which shall continue to refer to the Company. Furthermore any references to the Company’s Board of Directors (the “Board”) or the Compensation Committee of the Board in the above- referenced sections shall be deemed to be a reference to Jamba Juice’s Board of Directors acting in a manner consistent with the Company’s Board and the Company’s Compensation Committee. Paragraphs 3 through 9 shall be deemed to inure to the benefit of both the Company and Jamba Juice. 3. Confirmation. All other terms, conditions and contained in the Agreement shall continue in full force and effect. 4. Counterparts. This Amendment may be signed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one instrument. -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto, intending legally to be bound hereby, have executed this Amendment as of the date first above written.   /s/ Paul Clayton Paul Clayton Jamba, Inc. By:   /s/ Donald Breen Name: Donald Breen Title: Vice President and CFO Jamba Juice Company By:   /s/ Donald Breen Name: Donald Breen Title: Vice President and CFO

Exhibit 10.1   Confidential   1/5/2006   AGREEMENT   THIS AGREEMENT (the “Agreement”) is made effective as of this 22nd day of December 2005, by and between Memry Corporation, having its principal place of business at 3 Berkshire Boulevard, Bethel, CT 06801 (“Memry”), and United States Surgical, Division of Tyco Healthcare Group LP, having its principal place of business at 195 McDermott Road, North Haven, CT 06473, on its own behalf and on behalf of its subsidiaries and affiliates (“Customer”).   Recitals:   A. Customer develops, manufactures and sells certain medical products on a worldwide basis for use in critical medical procedures.   B. Customer desires to obtain, and Memry desires to manufacture for and make available to Customer, products for Customer’s use in the manufacture of various products.   C. Memry has been supplying Customer with products for certain of such products.   NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, the parties agree as follows:   Article I: Manufacture, Purchase and Supply of Products; Terms; Acceptance   1.1 Supply.   A. Memry shall supply the products listed and further described on Exhibit A (the “Products”) on the terms and conditions set forth in this Agreement.   B. Subject to the provisions of Section 1.3 of this Agreement, during the term of this Agreement, Customer shall be required to purchase the Products exclusively from Memry and Customer shall be precluded from manufacturing the Products internally.   1.2 Purchase Orders. Customer or its designee shall issue a purchase order to Memry for the Products as desired. Each order placed by Customer for Products during the term of this Agreement (“Purchase Order”) shall be subject to the terms and conditions set forth in this Agreement, including Customer’s Standard Terms and Conditions referred to herein. In the event of modifications from a Purchase Order after its original submission, Memry shall use reasonable efforts to satisfy Customer’s revised volume and/or timing requirements. If there is any conflict between the terms of this Agreement and Customer’s Standard Terms and Conditions, the terms of this Agreement shall control. Customer shall issue a Purchase Order for Products 30 days prior to the beginning of each Contract Year during the term of this Agreement, and each Purchase Order shall, consistent with the terms of this Agreement, specify applicable prices, quantities, delivery schedule, destination, any special specifications, trace documentation, and other information necessary for the Purchase Order to be processed. Not less than 30 days prior to the beginning of each quarterly period in the Contract Year Customer may revise the quantities and delivery schedule applicable to such quarterly period and the balance of such Contract Year. Each Purchase Order shall be subject to Customer’s Purchase Order Standard Terms and Conditions set forth in Exhibit C, except where terms are conflicting to those indicated in this Agreement, at which point the Agreement terms shall prevail.   1.3 Exclusivity. During the term of the Agreement, Memry shall not manufacture or supply any organ retrieval bags to any customers other than Customer. Customer will not purchase Nitinol based components for organ retrieval bags from any other supplier, nor shall Customer purchase finished sub-assembly products as outlined in Exhibit A, from any supplier other than Memry unless, during the term of this Agreement, Customer develops an organ retrieval bag other than those listed on Exhibit A, and pursuant to section 7.9 of this Agreement, Memry is unable to demonstrate to the satisfaction of Customer that it can manufacture and supply such items, or the pricing, quality, or service levels provided by Memry, are unacceptable to Customer. -------------------------------------------------------------------------------- 1.4 Volume Assumptions. The prices set forth in Exhibit A are based on estimated annual volume of 600,000 to 750,000 units per year. Notwithstanding the foregoing, Customer shall have no minimum volume purchase obligations or requirements.   1.5 Price. The prices to be paid by Customer for the Products purchased hereunder are set forth on Exhibit A or, for new items added as Products during the term of this Agreement, as may be agreed upon in writing by the parties. These prices include packaging costs and all applicable taxes and other governmental charges, but do not include shipping costs, which Customer shall pay.   1.6 Payment Terms. Memry shall submit invoices upon shipment of the applicable Products, and Customer shall pay such invoices in full within 60 days after the later of: (a) acceptance of the Products, or (b) receipt of the related invoices, unless Customer disputes the invoice. Memry shall also give Customer a 2% discount for payments made within 10 days after the later of receipt of the applicable invoice or receipt of the applicable Products. Notwithstanding the foregoing, upon the request of any subsidiary of Customer, Memry shall directly invoice such subsidiary for, and such subsidiary shall directly be responsible for payment of Products ordered by such subsidiary.   1.7 Shipping. Memry shall ship all Products according to Customer’s shipping instructions, FOB delivered freight prepaid, with title to the Products and risk of loss and damage passing to Customer upon delivery of the Products to the carrier specified by Customer. Memry shall pack all Products suitably for shipment according to the common carrier’s requirements and in such manner as to secure lowest transportation cost and to protect against damage during transport. Memry shall manufacture, store and transport all Products consistent with the applicable requirements to ensure the quality of the Products, including without limitation all requirements relating to storage, handling, temperature, humidity controls, etc. Customer shall pay all actual shipping costs.   1.8 No Back orders. Memry shall plan production schedules and provide the Products in accordance with the Purchase Orders, to the extent that such Purchase Orders are consistent with the then current forecasts, without back orders.   1.9 Acceptance. Customer may inspect Products at its facility. Products will be deemed accepted by Customer unless Customer notifies Memry in writing that such Products have been rejected within ten business days of their delivery to Customer. Customer may return non-conforming Products to Memry for credit, refund of purchase price or replacement at Customer’s option. Memry shall bear all costs (including shipping) and risk of loss for such returned Products provided that Memry has provided Customer written authorization to return such Products, which authorization shall not be unreasonably withheld. Products shall be deemed non-conforming if Customer determines in its reasonable inspection that they fail to materially comply with the Product Specifications (defined below) and timely furnish Memry with a written report specifying such non-conformity. All Products returned to Memry for replacement shall be replaced by Memry and shipped to Customer at Memry’s expense within ten (10) business days of Memry’s receipt of notice from Customer concerning the non-conforming Product(s).   1.10 Inventory. Memry agrees to maintain a two (2) week inventory of P/N 10000-27910 based upon shipping an average of 16,000 units per week. This inventory will be maintained on a constant basis, as safety stock to account for fluctuations in demand. In the event one half or greater of this inventory is depleted at any given time, Memry will advise Customer of rebuild schedule therefore simultaneous to current shipment schedule, such rebuild schedule not to exceed a six month time period. Said six month schedule will also be consistent to original build of inventory, unless Memry can reasonably complete same in a shorter time period. -------------------------------------------------------------------------------- CONFIDENTIAL   Article II. Specifications; Quality Assurance; Inspections; Manufacture Support   2.1 Product Specifications and Quality Assurance.   A. All Products supplied by Memry shall:   (i.) Meet all standards and specifications set forth in this Agreement, including those set forth on Exhibit B hereto, subject to change upon 90 days prior written notice by Customer (the “Specifications”) and all other applicable specifications, drawings, samples and descriptions approved by Customer. Notwithstanding the foregoing, Memry shall not be required to accept changes to the Specifications if the resulting Product is not within Memry’s then-current production capabilities. In the event Memry is unable to accept the Specification changes as provided above, Memry shall provide Customer with documentation to support its claim that such Specification changes are not within Memry’s then-current production capabilities.   (i.i.) comply with all applicable laws and regulations, including without limitation those relating to manufacturing, packaging, labeling and sale of the Products and the Fair Labor Standards Act and all regulations and orders issued thereunder;   (i.i.i.) meet ISO 9001 standards;   (i.i.i.i) consist only of materials, components and other items that are new and of suitable quality for their intended purpose; and   (i.i.i.i.i)  be free from any defects in material or workmanship; (clauses (i) through (iiiii) are collectively referred to herein as “QA Standards”).   B. Memry agrees to maintain ongoing quality assurance and testing procedures sufficient to satisfy: (a) the QA Standards; (b) Memry’s quality assurance policies and procedures; and (c) Customer’s standard requirements to be approved as a vendor. If Customer determines that the Products are subject to review and periodic audits of supplied data, Memry shall supply a certificate of compliance setting forth information required by Customer pertaining to each lot of Products to verify compliance with minimum levels of conformance according to the Specifications. Memry may use any of its nitinol ingot melters and/or vendors to supply the nitinol for the Products provided that the material meets Memry’s then current specifications for incoming nitinol alloys and provided that the Products manufactured from said incoming nitinol alloys meet the Specifications. Upon Customer’s request, Memry shall perform any failure analyses and take any necessary corrective action with respect to any defects in any Product.   C. Memry shall take all actions necessary to become and remain a “certified supplier” under Customer’s corporate quality assurance requirements.   D. Memry agrees to give Customer prompt written notice if it becomes aware of any adverse facts or issues relating to the safety or efficacy of any Product sold hereunder to Customer.   2.2 Documentation and Inspections. Memry agrees to provide Customer with copies of all: (a) reasonably requested documentation in its possession relating to Products, Specifications, compliance with QA Standards, raw material vendor, manufacturing processes and proof of manufacturability (including packaging and labeling); and (b) U.S. and international regulatory approvals, regulatory inspections, and other communications with regulatory authorities related to the Products. Upon two business days written notice, Customer and its representatives shall have the right, during regular business hours, to enter upon and examine the plants and other facilities where the Products are manufactured, packaged and/or stored, and to make any further examination reasonably necessary to properly ascertain compliance with the QA Standards and this Agreement. In connection therewith, Customer may to the extent it deems reasonably necessary or appropriate, observe and examine all operating methods, quality assurance procedures and production and inventory records relevant to the business conducted pursuant to this Agreement. Customer’s rights under this Section 2.2 shall not extend to those portions of information, records, -------------------------------------------------------------------------------- processes, or procedures that reveal Memry’s trade secrets or which Memry is obligated to keep confidential by virtue of agreements with third parties.   2.3 Required Notification. Memry shall, at least 90 days prior to making any substantial changes in the materials, processing, composition, Specifications, manufacturing processes, manufacturing locations, inspection, testing, or performance characteristics of any Product: (i) give notice to Customer disclosing in reasonable detail the proposed change and the possible effects, if any, on the Products; and (ii) provide a sample of the affected Product, incorporating such proposed change for Customer’s review and approval. Memry shall not implement any such change without Customer’s prior written approval, which may be withheld, by Customer as it deems necessary or desirable.   2.4 Tracing. Memry agrees to trace and maintain records regarding the source and lot number of each Product. Memry agrees to maintain such records for not less than fifteen years after the termination or expiration of this Agreement.   Article III: Confidentiality   3.1 Confidential Information.   A. For purpose of this Agreement, “Confidential Information” means all information disclosed by or on behalf of one party to the other party, or any of their respective employees, officers, directors affiliates, agents, representatives, successors or assigns (“Representatives”) regarding the party’s or any of its agents’ or affiliates’ technology, designs, know-how, computer programs, products, markets, business plans, and the terms and conditions and the conditions and the nature of this Agreement, except information that: (a) is at the time of disclosure, or thereafter becomes, a part of the public domain without breach of this Agreement by the receiving party; (b) is lawfully in the possession of the receiving party prior to disclosure by the disclosing party as shown by the receiving party’s written records; (c) is lawfully disclosed to the receiving party by a third party that did not acquire such information under an obligation of confidentiality to the disclosing party; (d) is independently developed by the receiving party without use of the disclosing party’s Confidential Information as shown by written records; or (e) is required to be disclosed in compliance with a governmental regulation, provided that the receiving party shall notify the disclosing party in advance of any such disclosure, if feasible. The parties agree to: (x) limit dissemination of Confidential Information to only those Representatives having a “need to know”; (y) advise each Representative who receives Confidential Information that such information is confidential; and (z) require each Representative to comply with all obligations of the respective party relating to confidentiality and non-disclosure.   B. Neither party shall issue a press release or other announcement concerning this Agreement, the transactions contemplated herein or the relationship between the parties without the prior written approval of an authorized representative of the other party, which approval shall not be unreasonably withheld if such disclosure is required by law. -------------------------------------------------------------------------------- 3.2 Confidentiality Obligation. Neither party shall: (i) disclose the other party’s Confidential Information to any person or entity other than its Representatives on a “need to know” basis only; nor (ii) appropriate or use the other party’s Confidential Information in its own manufacture of products or for any other purpose. Neither party shall, by virtue of either this Agreement or its manufacture of the Products, obtain any title to or any interest or license in, any of the other party’s Confidential Information. Within 60 days after termination or expiration of this Agreement, each party shall return to the other party all Confidential Information of the other party (including all copies thereof) that the party received from the other party, or prepared from Confidential Information received from the other party, provided however that each party shall have the right to retain one copy of all Confidential Information, or prepared from Confidential Information received from the other party, of the other party in its law department files for archival purposes.   3.3 Injunctive Relief. Each of the parties agree that any breach by a party under this Article III may cause irreparable injury to the other party which may be difficult to quantify. Therefore, the non-breaching party may seek the entry of temporary and permanent injunctive or other equitable relief, as well as any other remedies available at law.   Article IV: Representations and Warranties; Additional Covenants; Limitation of Warranty; Limitation of Liabilities   4.1 Of Memry. Memry represents and warrants that the Products that are delivered to Customer hereunder shall:   (a) conform to and be manufactured, packaged and stored in accordance with the QA Standards and Memry’s quality assurance polices and procedures;   (b) conform in all respects with the requirements of this Agreement, including the then-current Specifications, and the applicable Purchase Order;   (c) subject to Section 5.4, not infringe the patent claims or trade secrets of any person and Memry shall indemnify and defend Customer and its affiliates against all such infringement claims, demands, actions, losses, damages, fines, penalties, costs and expenses (including attorneys’ fees); and   (d) be free and clear of all liens and encumbrances, or other defects in title.   The foregoing representations and warranties shall survive inspection, delivery, and payment of the applicable Products, and shall be for the benefit of Customer and its customers.   4.2 Other Representations and Warranties. Each of the parties hereby represents and warrants to the other that; (a) it has full power and authority required to enter into, execute and deliver this Agreement, to carry out its obligations hereunder and to perform the transactions contemplated; (b) this Agreement has been duly executed and delivered by, is the valid and binding obligation of and is enforceable against such party in accordance with its terms; and (c) the execution, delivery and performance of this Agreement by such party does not conflict with or violate any other agreement to which it is a party or by which it is bound, or any applicable law to which it is bound or subject.   4.3 Use of Name. Neither party shall, without the prior written consent of the other party, use in advertising, publicity, or otherwise, the name, trademark, logo, symbol, or other image of the other party including without limitation, any of such relating to Customer or any affiliate of Customer with the exception of SEC reporting requirements. -------------------------------------------------------------------------------- 4.4 Warranty and Liability Limitation. Other than the express warranties made in Article IV and elsewhere in this agreement Memry makes no warranty or representation, express or implied, by operation of law or otherwise, as to the merchantability or fitness for a particular purpose of the goods sold hereunder. Customer acknowledges that it alone has determined that the goods purchased hereunder will suitably meet the requirement of their intended use.   It is expressly understood that any technical advice furnished by Memry with respect to the use of its goods or services is given without charge, and Customer assumes no obligation or liability for the advice given or results obtained, all such advice being given and accepted at Customer’s risk.   Except as set forth in Sections 4.1 and 5.1 should Memry breach any express warranties made herein Customer’s only remedy and Memry’s only obligation shall be the replacement or repair by Memry of such non conforming goods F.O.B. Memry’s plant, or the refund of the price paid for such defective goods, at Memry’s option. Memry will not be liable for consequential, incidental or any damages other than repair or replacement of defective goods or refund of the purchase price paid for such defective goods, at Memry’s option.   Article V: Indemnification; Insurance   5.1 Indemnification by Memry. Memry shall indemnify, defend and hold harmless, Customer and its affiliated entities (including subsidiaries), and Customer’s and such entities’ respective officers, directors, agents, insurers, employees, shareholders, and customers, from and against all claims, suits, liability, and expense (including but not limited to reasonable attorneys’ fees), (each a “Liability”), whether or not such Liability is stated as a product liability claim, a strict liability claim or other similar claim, that is caused by or based upon any: (a) breach by Memry of any of the representations or warranties in Article IV, including without limitation any Liability based upon any alleged defect in a Product resulting form Memry’s failure to meet the Specifications or QA Standards; (b) material breach by Memry of any other provision of this Agreement; or (c) the negligence, misconduct, or violation of any applicable law, rule or regulation by Memry or any of its affiliates in the performance of Memry’s obligations under this Agreement; provided, however, that Customer shall: (i) give Memry prompt notice of any such Liabilities; (ii) give Memry all information in its possession relating to such Liabilities; (iii) permit Memry to defend the same through its counsel and (iv) give its authorization for and assistance in such defense.   5.2 Indemnification by Customer. Customer shall indemnify, defend and hold harmless Memry and its affiliated entities (including subsidiaries), and Memry’s and such entities’ respective officers, directors, agents, insurers, employees, and shareholders (“Memry Indemnities”) from and against all Liabilities relating to any product manufactured or sold by Customer that incorporates a Product to the extent such Liabilities are based upon allegations of personal injuries, death, or property damages or loss proximately caused by the use of a product manufactured or sold by Customer, whether such Liability is stated as a product liability claim, a strict liability claim or other similar claim; provided, however, that   A. Memry shall: (i) give Customer prompt notice of any such Liabilities; (ii) give Customer the right to assume full and sole control of the defense or settlement of the same through Customer’s counsel; (iii) give Customer all information in its possession relating to such Liabilities; (iv) give its authorization for and assistance in such defense; and (v) give Customer the right to approve any settlement, which approval shall not be unreasonably withheld; and   B. Customer shall not indemnify, defend or hold harmless the Memry Indemnities for any matter which would give rise to a claim by Customer for indemnity from Memry under Section 5.1.   C. Customer shall have sole and unqualified discretion to select attorneys to defend any Liability which is the subject of Customer’s obligations hereunder, and, notwithstanding anything contained herein to the contrary, Customer’s Liability for attorney fees will only apply to Customer-selected attorneys. -------------------------------------------------------------------------------- CONFIDENTIAL   5.3 Insurance.   A. Memry shall purchase and maintain in full force and effect, during the term hereof and for a period of 10 years after the termination or expiration of this Agreement, comprehensive general liability insurance or equivalent self-insurance (including but not limited to product liability, completed operations, vendor’s coverage, and contractual liability, including Memry’s indemnification obligations under Article V of this Agreement), in an amount not less than $5 million in the aggregate and $2 million per occurrence.   B. Customer shall purchase and maintain in full force and effect, during the term hereof and for a period of 10 years after the termination or expiration of this Agreement, comprehensive general liability insurance or equivalent self-insurance (including but not limited to product liability, completed operations, vendor’s coverage, and contractual liability, including Customer’s indemnification obligations under Article V of this agreement), in an amount not less than $5 million in the aggregate and $2 million per occurrence.   C. Upon Memry’s or Customer’s written request, the other party shall provide a certificate of insurance evidencing the coverage required under this Section 5.3 which provides that the insurer(s) will endeavor to give the requesting party at least 30 days written notice prior to any non-renewal, cancellation or reduction of such coverage.   5.4 Patent Infringement. Customer will defend and indemnify Memry and its directors, officers, and employees, in any claim or action brought against Memry, alleging that a Product infringes a United States patent, copyright, or trade secret right because it contains the component purchased by Memry from the bag subsupplier specified by Customer. Memry must promptly notify Customer of the claim or action, give reasonable assistance to Customer, and permit Customer the exclusive control of the defense. Memry must not take any action that impairs Customer’s defense. Customer will pay all damages and costs finally awarded against Memry in any suit based on the infringement claim, but Customer will have no liability for settlements or costs incurred without its consent.   Article VI: Term and Termination   6.1 Term. Subject to Section 6.2, the initial term of this Agreement shall commence on the date hereof and end as September 30, 2008. As used in this Agreement, the term “Contract Year” shall mean each of the 12-month periods beginning on October 1 during the term of this Agreement; provided, however, that the initial “Contract Year” shall mean the period commencing on the date of this Agreement and ending on September 30, 2006. The parties shall begin discussions on or about October 1, 2007 regarding whether to extend the term of this Agreement beyond the initial term, and any such extension beyond the initial term shall be in writing and signed by both parties.   6.2 Early Termination.   A. Notwithstanding Section 6.1 hereof, either party shall have the right to terminate this Agreement without liability therefore, after written notice to the other if the other party: (i) breaches any of its obligations under this Agreement and fails to cure such breach within 60 days of receiving written notice from the non-breaching party; or (ii) becomes the subject of voluntary or involuntary bankruptcy, reorganization, receivership, or insolvency proceedings that are not dismissed within 60 days after commencement thereof.   B. Notwithstanding Section 6.1 hereof, Customer shall also have the right to terminate this Agreement and its obligations hereunder (other than its obligations with respect to the Products scheduled to be released in the 90 days after issuance of such notice to termination) upon 90 days’ prior written --------------------------------------------------------------------------------   notice to Memry, if Customer deems necessary, if Customer’s related product launches are delayed or canceled as a result of regulatory delays or other regulatory or clinical issues.   C. Notwithstanding Section 6.1 hereof, Memry shall also have the right to terminate this Agreement after 45 days written notice to Customer of Customer’s failure to pay any undisputed invoice from Memry and Customer fails to cure such default within such 45 day period.   D. In the event that Customer terminates this Agreement and its obligations hereunder pursuant to Section 6.2 B, Customer shall nevertheless be obligated to immediately purchase from Memry the inventory described in Section 1.10 above at then current prices.   E. Customer may terminate this Agreement, with a 1 year written notice, subsequent to year one of initial term, if product other than the Products listed in Exhibit A, is introduced by Customer during the term of this Agreement as substitute or replacement for Products listed in Exhibit A. Under these circumstances no penalty or other obligation shall be the responsibility of the Customer, provided that Section 7.9 is satisfied.   6.3 Force Majeure. Neither party shall be in default in the performance of its obligations under this Agreement if such performance is prevented or delayed because of war or similar unrest, labor dispute or strike, transportation difficulties, unavailability of necessary raw materials, an act or omission of Memry’s bag subsupplier for which Memry was not at fault, epidemic, fire, natural disaster, any law, rule or regulation of any government or other authority, acts of God, or other similar cause, that is beyond the control of or could not have reasonably been prevented by the party whose performance is affected; provided, however, that if such delay continues for 90 days or more, then Customer may upon written notice immediately cancel all or any portion of unfilled Purchase Orders and terminate this Agreement, except in the instance of an act or omission of Memry’s bag subsupplier for which Memry was not at fault, in which case a viable bag alternative that is qualified by Customer, and meets Customer’s specifications, pricing, quality, and service levels, will be sourced for supply continuation, and in that case this Agreement will remain in full force and effect, in accordance with the terms hereof.   Article VII: Miscellaneous   7.1 Independent Contractors. The parties hereto are independent contractors and nothing contained in this Agreement shall be deemed to create the relationship of employment, partnership, joint venture or any association or relationship between the parties other than that of supplier and buyer.   7.2 Entire Agreement; Amendments. The terms of this Agreement shall constitute the entire agreement between the parties as to each and all manufacturing and sales of Products. No additional or different terms set forth in correspondence concerning such manufacturing and sales, including Purchase Orders, shall be of any force or effect. All exhibits attached to this Agreement, and the Specifications and other documentation referenced herein, are hereby incorporated by reference in this Agreement and made a part hereof. This Agreement may be amended only by a writing signed by both parties. This Agreement is intended to be for the benefit of Customer and its subsidiaries and affiliates.   7.3 Governing Law: Severability. This Agreement shall be governed by and construed in accordance with the internal laws of the state of Connecticut (without reference to principles of conflicts of laws). If any provision of this Agreement is determined to be unenforceable or prohibited by applicable law, such -------------------------------------------------------------------------------- provision shall be ineffective only to the extent of such unenforceability or prohibition, without invalidating the remaining provision of this Agreement, as long as the general intent of the Agreement remains capable of being effected.   7.4 Waiver; Remedies. The waiver of a breach of provision of this Agreement shall not be deemed a waiver of any other breach of the same or different provision of this Agreement. Termination of this Agreement, or the exercise of any remedy herein, shall not be deemed to be an exclusive remedy, and shall be in addition to any other remedies available at law or in equity. The parties acknowledge and agree that time is of the essence with respect to all matters under this Agreement.   7.5 Assignment; Subcontracting. Neither party shall assign this Agreement, whether voluntarily or involuntary, without the prior written consent of the other, except that Customer may assign this Agreement to one of its subsidiaries or affiliates or to the purchaser of all or substantially all of its assets. This Agreement shall be binding on the permitted successors and assigns, and shall inure to the benefit of the permitted successor and assigns of the party hereto. Memry may subcontract its obligations, subject to the following:   (a) Memry shall not subcontract the tube drawing of the Products; and   (b) Memry shall continue to be accountable, responsible, and liable, for all work performed by subcontractors, and Memry shall ensure that all Products and services provided under this Agreement meet QA Standards; and   (c) Memry receives Customer’s prior written consent, which shall not be unreasonably withheld.   7.6 Notices. All notices, consents or approvals required or permitted hereby shall be deemed given only upon:   (a) transmission by telecopier, acknowledged by the recipient at the fax number indicated below;   (b) enclosure thereof in an adequately post-paid envelope, sent certified mail – return receipt; or   (c) sent via a nationally-recognized express delivery service that guarantees express delivery; and addressed to the party to be given notification at the address/facsimile number given below or such change of address/facsimile number as may be hereafter supplied in writing.   If to Memry:    If to Customer: Memry Corporation    United States Surgical 3 Berkshire Boulevard    Division of Tyco Healthcare Group LP Bethel, CT 06801    195 McDermott Road Attn: Director of Marketing    North Haven, CT 06473 Fax: (203) 798-6606    Attn: Vice President - Manufacturing      Fax: (203) 492-8369 With a copies to:      Memry Corporation 3 Berkshire Boulevard Bethel, CT 06801 - USA Attn: Chief Executive Officer Fax: (203) 748-6207      Finn Dixon & Herling LLP      One Landmark Square Suite 1400      Stamford, CT 06901 Attn: David I. Albin, Esq. Fax: (203) 348-5777      -------------------------------------------------------------------------------- 7.7 Survival. In any event, all obligations which are by their nature continuing, including without limitation the obligations contained in Sections 2.4, 6.1, and 6.3 and Article III, Article IV and V shall survive the expiration and/or termination of this Agreement.   7.8 Compliance with Law. During the term of this Agreement, each of the parties agrees to comply with all applicable laws, rules and regulations relating to the performance of the services contemplated by this Agreement and the performance of each party’s obligations hereunder.   7.9 Preferred Supplier.   (a) During the term of this Agreement, Memry shall be considered a “preferred supplier” (as defined by Customer) of Customer for any and all development and further production agreements relating to successor products to the Products, including (but not limited to) those designs utilizing nitinol components.   (b) During the term of this Agreement, Customer recognizes Memry as a preferred supplier. As a preferred supplier, Customer will include Memry in all development activities for organ retrieval bag assemblies that may or may not involve nitinol. These activities may include ESI (Early Supplier Involvement) meetings and RFQ’s (Requests for Quote). If Memry demonstrates to the satisfaction of Customer that it can manufacture and supply such items, and the pricing, quality, and service levels provided by Memry are acceptable to Customer, then Memry and Customer will use reasonable efforts to enter into an agreement providing for the supply of such items based on mutually acceptable terms and conditions.   IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the first date set forth above.   MEMRY Corporation       UNITED STATES SURGICAL DIVISION OF TYCO HEALTHCARE GROUP LP By   /s/    ROBERT BELCHER               By   /s/    DAVID J. SHUMSKI         Print Name:   Robert Belcher       Print Name:   David J. Shumski Title   CFO & SVP       Title   Director Strategic Procurement Date 1/9/2006       Date 1/16/06 -------------------------------------------------------------------------------- EXHIBIT A   PRICING FOR PRODUCTS   Product: USS P/N: 10000-27910 Year 1: $*** per unit Year 2: $*** per unit Year 3: $*** per unit   INVOICE PRICING: Customer shall be invoiced throughout the Contract Year at the applicable price for the amount of Product shipped pursuant to each Purchase Order.   Rebate:   A rebate of 1% of price paid per unit will be applied to all orders placed in Q1 of the following contract year for all quantities above the volumes listed below in the prior contract year. Orders must have delivery dates scheduled within the contract year to be eligible for the rebate program.   Year 1: 775,000 units Year 2: 800,000 units Year 3: 825,000 units -------------------------------------------------------------------------------- *** Denotes confidential information that has been omitted from the exhibit and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934. -------------------------------------------------------------------------------- EXHIBIT B   SPECIFICATIONS FOR PRODUCTS   (Intentionally Omitted) -------------------------------------------------------------------------------- EXHIBIT C   CUSTOMER’S PURCHASE ORDER STANDARD TERMS AND CONDITIONS   *    *    *    *    *    *    *    *    *     U.S.S. LIMIT OF LIABILITY     *    *    *    *    *    *    *    *    *    *     *   U.S.S. LIMITS LIABILITY ON COMPONENTS AND ASSEMBLIES AT OUR SUPPLIERS TO FOUR (4) WEEKS OF FINISHED COMPONENTS/ASSEMBLIES AND AN ADDITIONAL NINE (9) WEEKS RAW MATERIAL ON ALL ITEMS WITH MORE THAN ONE SCHEDULED DELIVERY ON THE P.O. THIS LIABILITY LIMIT SHALL BE BASED UPON THE DELIVERY DATE ON THE P.O. OR OPEN ORDER REPORT, WHICH EVER IS MOST RECENT. THE NEW DELIVERY DATES LISTED ON THE OPEN ORDER REPORT THAT FALL WITHIN FOUR (4) CALENDAR WEEKS ARE FIRM PLANNED REQUIREMENTS (FPR). THE FOLLOWING NINE (9) CALENDAR WEEKS OF REQUIREMENTS ARE ESTIMATED PLANNED REQUIREMENTS (EPR). THE BALANCE OF THE SCHEDULE ARE FORECASTED REQUIREMENTS FOR PLANNING PURPOSES ONLY.   THIS PURCHASE ORDER INCLUDES ALL THE TERMS AND CONDITIONS ON THE FACE HEREOF. ACKNOWLEDGEMENT MUST BE RETURNED WITHIN FIVE DAYS OF RECEIPT WITH CONFIRMED DELIVERY DATE(S) TO THE PLANNER/BUYER.   UNITED STATES SURGICAL, A DIVISION OF TYCO HEALTHCARE GROUP LP   TERMS AND CONDITIONS OF PURCHASE   General Provisions   1. Definitions   The term “Buyer” in this document is United States Surgical (USS), a division of Tyco Healthcare Group LP, and the term “Seller” is the organization(s) or individual(s) to whom this Purchase Order is addressed as such name(s) appears on the top of this Purchase Order.   2. Acceptance   By accepting this Purchase Order, either by acknowledgment or performing hereunder, Seller agrees: (a) that the terms and conditions set forth on the face hereof, and all documents expressly included by reference herein constitute the entire agreement between the parties regarding the subject matter hereof, and (b) to comply fully with the terms and conditions of purchase set forth on the face of this document. Acceptance of this Purchase Order is expressly limited to the terms and conditions of this Order and none of Seller’s terms -------------------------------------------------------------------------------- and conditions shall apply in acknowledging this Order, or in the acceptance of this Order, unless expressly agreed in writing by Buyer’s authorized representative. Neither reference to Seller’s bids or proposals, nor acceptance by Buyer of the goods, services or work delivered under this Purchase Order shall constitute agreement to Seller’s terms or conditions or otherwise modify the terms or conditions hereof. Stenographic and clerical errors and omissions are subject to correction by Buyer at any time.   An acknowledgment is requested to be returned upon receipt of order.   3. Modification   Changes, modifications, waivers, additions or amendments to the terms and conditions of this Order shall be binding on Buyer only if such changes, modifications, waivers, additions or amendments are in writing and signed by a duly authorized representative of Buyer. A “verbal” Purchase Order number given by Buyer must be confirmed by receipt by Seller of a hard copy Purchase Order within five (5) business days or further work against such “verbal” Purchase Order number must terminate.   4. Advertising or Release of Information   Neither party hereto shall, without the prior written consent of the other party (which shall not be unreasonably withheld), publicly announce or otherwise disclose to third parties, by advertising, publicity or other oral or written communication, the existence or terms of this Purchase Order or the purchases referred to herein. This provision will survive the expiration, termination, or cancellation of this Purchase Order.   5. Applicable Law   The validity interpretation and performance of these terms and conditions and any purchase made hereunder shall be governed by the laws of the State of Connecticut in force at the date of this Order. Where not modified by the terms herein, the provisions of such State’s enactment of Article 2 of the Uniform Commercial Code shall apply to this transaction. No rights, remedies and warranties available to Buyer or Seller under this contract or by operation of law are waived or modified unless expressly waived or modified by Buyer or Seller in writing. Any failure of the Buyer or Seller to enforce at any time, or for any period of time, any of the provisions of this Purchase Order, shall not constitute waiver of such provisions of Buyer’s or Seller’s right to enforce each and every provision. -------------------------------------------------------------------------------- 6. Compliance With Law   In filing this Order, Seller certifies, warrants and represents that it has complied with all applicable Federal, State and local laws, rules, regulations and/or ordinances in the manufacture, sale or other performance with respect to the goods or services that are the subject of this Purchase Order. Such laws and rules include, but are not limited to, the Fair Labor Standards Act, Civil Rights Act of 1964, Title VII, Executive Order 11246, as amended, Executive Order 11701, as amended and the provisions of 38 USC 2012, the Vietnam Era Veterans Readjustment Assistance Act of 1974, as amended, Executive Order 11758, as amended and the provisions of Section 503 of the Rehabilitation Act of 1973, the Federal Occupational Safety and Health Act and Executive Order 11625, as amended. Further, Seller certifies, represents and warrants that Seller does not maintain segregated facilities for it’s employees at any of it’s establishments and that it will forward notice to obtain identical certifications from its subcontractors and will otherwise comply with the May 21, 1968 Order of Elimination of Segregated Facilities by the Secretary of Labor (33 Fed. Reg. 2804, May 28, 1968). Seller further certifies, represents, warrants that (i) No Federal appropriated funds have been paid or will be paid, by or on behalf of the Seller, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, or the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan or cooperative agreement; (ii) if any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this Federal contract, grant, loan or cooperative agreement, the Seller shall complete and submit Standard Form LLL “Disclosure Form to Report Lobbying” in accordance with its instructions; and (iii) The undersigned shall require that the language of this certification be included in the award documents for all subawards at all tiers (including subcontracts, subgrants, and contracts under grants, loans, and cooperative agreements) and that all sub recipients shall certify and disclose accordingly.   7. Confidential Information   Seller shall not disclose to any person outside of it’s employ, or use for any purpose other than to fulfill it’s obligations under this Purchase Order, any information received from Buyer pursuant to this Purchase Order, which has been disclosed to Seller by Buyer, except such information which is otherwise publicly available or is publicly disclosed by Buyer subsequent to Seller’s receipt of such information or is rightfully received by -------------------------------------------------------------------------------- Seller from a third party. Seller will maintain in confidence such information at least to the same extent as with Seller’s proprietary information. Upon termination or fulfillment of the Purchase Order, Seller shall return to Buyer all drawings, blueprints, descriptions or other material received from Buyer and all materials containing said confidential information. Seller shall not disclose to Buyer any information which Seller deems to be confidential, and it is understood that any information received by Buyer, including all manuals, drawings and documents, will not be of a confidential nature and there shall be no restrictions on the use of such information by Buyer. Seller agrees that any legend or other notice on any information supplied by Seller, which is inconsistent with the provisions of this Paragraph 7 does not create any obligation on the part of Buyer.   8. Indemnity   In the event Seller, its officers, employees, and agents, a subcontractor, or any of them enter premises owned, leased, occupied by or under the control of Buyer in the performance of or in connection with this Purchase Order, Seller agrees to indemnify and hold Buyer, its officers, agents and employees harmless from any loss, cost, damage or bodily injury (including death) of whatsoever kind of nature, arising out of such entry and to the extent occasioned in whole or in part by any action or omission of Seller, its employees, officers and agents or any of them. Seller will maintain workmen’s compensation insurance covering it’s officers, employees or agents while on such premises of Buyer and general comprehensive liability, property damage and automobile liability insurance, including contractual endorsements and products hazards coverage, in reasonable amounts covering the obligations set forth in this Purchase Order but not less than $2,000,000 and, upon request, it will provide Buyer with a Certificate of Insurance indicating the amount of such insurance. Workmen’s Compensation Insurance shall include a waiver of subrogation in favor of United States Surgical, a division of Tyco Healthcare Group. Contractors or subcontractors providing construction or installation shall include “completed operations” endorsements to their liability insurance.   9. Product Specifications   Specifications, drawings, notes, instructions, engineering information or technical data furnished by either Buyer or Seller to the other, or referred to in this Purchase Order shall be incorporated into this Purchase Order by their reference. Seller shall be fully and solely responsible for obtaining data adequate to design, manufacture, fabricate, construct, and deliver the items in compliance with all requirements of the order. The finished items delivered to Buyer under this Purchase Order will be supplied according to Buyer’s instructions regarding the above information and in accordance with the FDA Quality System Regulation (21CFR Part -------------------------------------------------------------------------------- 820) and all applicable international standards. No changes are to be made to the specifications or the items manufactured from those specifications without written approval from Buyer. Seller shall obtain from Buyer written approval of all specification deviations. This shall include deviations for all items produced from Buyer tooling which are not in compliance with Buyer drawings or specifications. Buyer shall retain title to all such documents which it provides or causes to be given to Seller. Seller shall not use any of such documents or the information contained therein for any purpose other than in performance of this Purchase Order. Seller shall not disclose such documents or information to any party other than Buyer or party duly authorized by the Buyer. Upon Buyer’s request, Seller shall promptly return to Buyer all such documents and copies.   10. Packaging, Shipping and Delivery   All packaging and shipping memoranda must bear this ORDER NUMBER. Packaging, etc., must be PLAINLY MARKED and accompanied by a shipping memorandum specifying: A. Goods and Quantities in each container. B. Material Number and Revision Level. C. Certificate of Compliance (as required) which will accurately reflect materials, methods of construction and other manufacturing aspects as may be so specified on the Certificate. Packages must show gross, tare and net weights and/or quantity. The Seller, or carrier it uses to transport the items on this order, whichever is applicable, shall maintain a satisfactory safety rating from the U.S. Department of Transportation. The Seller or carrier shall provide Buyer with written proof of such rating on request, if the carrier is a motor carrier. Seller shall deliver the item(s) specified on this order to the Buyer on the date(s) specified on this Purchase Order. If Seller fails to make delivery of any part of quantity of items on the date(s) indicated, Buyer may terminate this Purchase Order and pursue other remedies. Shipments to Buyer’s offshore facilities of production parts and raw material will be F.O.B. Seller’s facility. Shipments to Buyer’s facility in the U.S. will be F.O.B. destination. Seller shall not be liable for any non-delivery or delay in delivery of any goods covered by this Purchase Order, insofar as such non-delivery or delay is due to one or more of the following causes: acts of God, fires, strike, lock out, epidemics, floods, accidents, war, blockades, embargoes, new governmental regulations or requirements, restraining orders or decrees of any court or judge or causes clearly beyond the control of Seller; provided that the Seller has promptly notified Buyer of any delay or any anticipated delay in delivery, and uses it’s best efforts to effect such delivery as soon as possible. -------------------------------------------------------------------------------- 11. Patents and Copyrights   Seller agrees to indemnify, defend and save Buyer, its subsidiaries, affiliates, and respective officers, agents, employees, and vendees from any and all proceedings, suits, loss, expense damage, liability, claims or demands either at law or in equity, including attorneys fees for actual or alleged infringement of any U.S. or foreign patent (including utility models), design, trademark or copyright arising from the purchase, use or sale of materials or articles required by the Purchase Order, except where such infringement or alleged infringement arises by reason of designs for such materials or articles originally furnished to Seller by Buyer. Buyer will give Seller reasonable notice of any patent, trademark, or copyright claim of infringement.   12. Changes   Buyer may change from time to time any of the drawings, specifications or instructions for work covered by this Purchase Order and Seller shall comply with such change notices. If such changes result in a decrease or increase in Seller’s cost or in the time for performance, an equitable adjustment in the price and time for performance may be made by the parties in writing. In such an event Seller must notify Buyer, in writing, of the request for such adjustments within five (5) working days after receipt by Seller of the change notice or such claim shall be null and void. Only duly authorized representatives of Buyer may issue, change or amend any Buyer Purchase Order. Seller work performed without a written Purchase Order signed by a duly authorized representative of Buyer or a “verbal” purchase order number issued and confirmed in accordance with Paragraph 3 above, will not be recognized as or constitute Buyer’s responsibility of liability.   13. Assignments And Subcontracts   Performance obligations shall not be assigned or transferred by Seller without prior written approval by Buyer, and any attempted assignment or transfer without such consent shall be void. Any such work subcontracted will be controlled by the Seller in accordance with the requirements of this Purchase Order. Purchase of parts and materials normally purchased by Seller or required by this Purchase Order shall not be construed as subcontracts or delegations. The Seller will obtain and maintain on file a confidentiality agreement satisfactory to Buyer signed by each design, tooling and production sub-contractor of the Seller where such work is identifiable to a Buyer Purchase Order. Such agreement will contain the same undertakings by the sub-contractor as are set forth in Paragraph 7 hereof. A list of all design, tooling and production subcontractors performing work for the Seller against Buyer’s Purchase Orders will be submitted to Buyer monthly. -------------------------------------------------------------------------------- 14. Acceptance And Warranty   Final acceptance of articles or material by Buyer will not occur until after arrival of the same at the Buyer’s facility from which this Purchase Order originates, unless otherwise specified herein. Seller warrants that all articles, materials and work supplied or performed by Seller under this Purchase Order conform to the requirements, specifications, drawings, samples or other descriptions furnished or adopted by Buyer and that they are merchantable, suitable for the use intended, of good material and workmanship and free from all defects in workmanship, manufacture, material or design. All warranties shall run to Buyer and its customers, and shall not be deemed to exclude other rights and remedies of Buyer under law, equity or this Purchase Order. All articles and material are subject to Buyer’s inspection and acceptance without time restrictions. If specifications, warranties or other requirements under this Purchase Order are not met, the non-conforming articles or material may be returned at the Seller’s expense for a full refund, and in the case of non-conforming services, at Buyer’s option and without limiting Buyer’s other rights and remedies under law, equity or this Purchase Order, shall be re-performed at Seller’s expense. Payment shall not constitute an acceptance of non-conforming articles, material or services nor impair Buyer’s right to inspect the same or any of Buyer’s rights and remedies.   15. Sales And Use Tax Exemption   It is hereby certified that the above described articles and material is exempt from the sales, and use tax, unless otherwise noted, for the reason that such property is purchased for resale or will become an ingredient or component part of, or be incorporated into, or used or consumed in a manufactured product produced for ultimate sale at retail. In those municipalities where the foregoing does not apply, such charges are to be incorporated into the unit component price appearing on the face of this Purchase Order.   16. Termination   In addition to any other rights Buyer might have to terminate this Purchase Order, Buyer may terminate this Purchase Order and the work to be performed hereunder, in whole or in part, at any time without cause by written notice to Seller. Such notice shall state the extent and effective date of such termination and, upon the receipt of such notice, Seller will comply with the directions pertaining to work stoppage, hereunder and the placement of further orders or subcontracts hereunder. Within five (5) business days of receiving such notice, Seller shall provide to Buyer a written, detailed and itemized report of all materials, labor and other costs, if any, incurred by Seller for purposes of completing work which has been stopped in accordance with Buyer’s termination notice. The parties shall thereupon employ commercially reasonable efforts to agree by negotiation, within two (2) months of such termination, the amount of compensation, if any, to be paid to -------------------------------------------------------------------------------- Seller with respect for such termination. Termination under this Paragraph 16 shall not be deemed a breach of contract. The provisions of this paragraph shall not limit or affect the right of Buyer to terminate this Purchase Order for cause and shall not apply to any such termination. Seller shall mitigate any claim for compensation to the maximum extent possible. In no event shall any claim be payable by Buyer insofar as this Purchase Order relates to Seller’s standard commercial products. Without limiting the foregoing, no claim shall exceed or be payable by Buyer in excess of the fair market value or, if less, Seller’s actual and administrative cost plus it’s standard profit for work and raw materials that (i) are in process by Seller or in it’s inventory or contracted for by it, specifically for this Purchase Order, as of the date of Seller’s receipt of Buyer’s termination notice, and (ii) cannot be directed by Seller for other uses or, if raw materials, cancelled or returned. Should Buyer so desire, payment of compensation in connection with a termination of this Purchase Order will be subject to Buyer’s prior audit of Seller’s relevant books and records.   17. Attachments And Precedence   Any attachments referenced on this Purchase Order shall be deemed for all purposes to be an integrated part of this Purchase Order. In the event of irreconcilable conflict between such referenced attachments and the terms stated herein, the terms of such attachments shall control.   18. Overshipments   Seller is instructed to ship only the quantity(ies) specified in this Purchase Order. However, any small (less than 5%) deviation caused by conditions of loading, shipping, packing, or allowances in manufacturing processes may be accepted by Buyer. Buyer reserves the right to return any overshipment in excess of the allowance at the Sellers expense.   19. Inspection of Records and Facilities   All articles, materials and workmanship, as well as facilities where they are produced, will be subject to inspection and tests by Buyer, the FDA, or Buyer’s ISO Notified Body during manufacture and at all times and places to the extent practicable. Seller shall provide and shall require all of Seller’s subcontractors to provide full opportunity for such inspections in a manner acceptable to the inspectors. If an inspection or test is made on Seller’s premises, Seller shall provide all reasonable facilities and assistance for the safety and convenience of the inspectors in the performance of their duties. In the event this Purchase Order is in excess of $2,500, the duly authorized representatives of the Buyer and the government of the United States shall, -------------------------------------------------------------------------------- until three years after final payment under this Purchase Order or until such further time as may be designated in the applicable government regulations, have access to and the right to examine any pertinent books, papers, documents and records of Seller involving manufacturing and quality assurance transactions related to this Purchase Order other than financial records. The Seller agrees to retain in proper order for efficient retrieval, all such records for a period of five (5) years. Seller agrees to include in each subcontract Seller might make hereunder appropriate provisions to the same effect.   20. Extra Charges   No charges of any kind, including charges for boxing or cartage, freight or special handling, will be allowed unless specifically agreed to by Buyer in writing. Pricing by weight, where applicable, covers net weight of material, unless otherwise agreed.   21. Notice Of Labor Disputes Or Plant Shutdown   Whenever any actual or potential labor dispute delays or threatens to delay the timely performance of this Purchase Order, Seller shall immediately give notice thereof to Buyer. Any plant shutdowns for vacation or other reasons planned by the Seller requires at least three (3) months prior written notification to Buyer.   22. Price   The price for the items on this Purchase Order shall be that which is stated on this order, unless that price exceeds the lowest price at which the Seller is offering or selling the same or similar items to it’s other customers as of the date of delivery to Buyer. In this case, the lower price shall be the price for items on this Purchase Order. If prior to delivery of all articles, materials or services to be delivered or performed by Seller under this Purchase Order, Buyer is able to purchase from another seller a portion or all of the same or similar articles, materials or services of like quality at a price which is less than the price applicable thereto pursuant to this Purchase Order, Buyer may so notify Seller. In such event, should Seller fail to promptly agree to an amendment of this Purchase Order to meet the lower price, Buyer may, at it’s option, purchase the applicable articles, material or services from the other source at the lower price, and, thereupon, Buyer shall be relieved of it’s obligation to purchase and any liability for termination of this Purchase Order as to, and Seller shall be relieved of it’s obligation to manufacture or perform, the articles, material or services so purchased from the other source. -------------------------------------------------------------------------------- 23. Payments and Invoices   The specific terms of payment for all items are stated in this Purchase Order. Unless otherwise specified, there or in a separate written instrument signed by the Buyer, no invoice shall be issued before shipment or performance of the items covered thereby. No payment shall be made before receipt of items and of a proper invoice for such items. Buyer may withhold any payment otherwise due under this Purchase Order to such extent as necessary to protect Buyer from loss which it incurred or may incur as a result of: (a) any actual or reasonably anticipated financial difficulty of Seller which might prevent complete performance of this Purchase Order by the Seller; or (b) a breach by the Seller of any provision of this Purchase Order.

AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT This Amendment No. 1 (this “Amendment”) to the Stock Purchase Agreement dated as of December 29, 2004 (the “Purchase Agree-ment”) among Franklin Capital Corporation, a Delaware corporation (currently, Patient Safety Technologies, Inc.) (the “Purchaser”), and the shareholders of Digicorp, a Utah corporation (the “Company”), set forth in Section A of the signature page thereto (the “Principal Shareholders”), and the shareholders of the Company set forth in Section B of the signature page thereto (the “Other Shareholders”), is dated December 28, 2005. WITNESSETH: WHEREAS, on or about December 30, 2004, the Purchaser, the Principal Shareholders and the Other Shareholders entered into the Purchase Agreement, a copy of which is attached hereto as Exhibit A; WHEREAS, simultaneously with the execution of this Amendment, the parties are entering into an Assignment Agreement (the “Assignment”), whereby the Purchaser is assigning part of its obligations pursuant to the Purchase Agreement, as amended by this Amendment, to Alan Morelli (“Morelli”); and WHEREAS, the parties now desire to amend the Purchase Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of and for the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Purchase Agreement is hereby amended as follows: 1. All capitalized terms not defined herein shall have the meanings ascribed to such terms in the Purchase Agreement. 2. Section 1.1 of the Purchase Agreement is hereby amended to be and read as follows:   “1.1 Sale and Purchase of Shares.   Upon the terms and subject to the conditions contained herein, on the Closing Date each Seller shall sell, assign, transfer, convey and deliver to the Purchaser, and the Purchaser shall purchase from each Seller, the Shares of such Seller set forth opposite such Seller’s name in the column entitled “Shares Sold on Signing of Agreement” on Schedule A hereto. Each Seller with Shares set forth opposite such Seller’s name in the column entitled “Shares To Be Registered” further agrees to sell the Shares in such column upon effectiveness of the Registration Statement (as hereafter defined) (the “Registration Date”). The purchase and sale of the Shares pursuant to this Agreement shall be effective as of the close of business on December 29, 2004 (the “Effective Time”), except for the Registrable Shares, which shall be sold effective as of the Registration Date.”   1 --------------------------------------------------------------------------------   3. Section 2.1 of the Purchase Agreement is hereby amended to be and read as follows: “2.1 Amount of Purchase Price.   The purchase price for the Shares shall be an amount equal to (a) $0.135 per share for all Sellers selling 80% of their Total Shares, in the amounts set forth on Schedule A(1) hereto, and (b) $0.145 per share for all Sellers selling 100% of their Total Shares, in the amounts set forth on Schedule A(2) hereto (the “Purchase Price”). The purchase price for the Registrable Shares shall be $0.135 per share if the Registration Date is within six months from the date hereof and shall be $0.145 if the Registration Date is after six months from the date hereof.”   4. The closing and the sale and purchase of the Registrable Shares provided for in Section 1.1 shall take place at the offices of Sichenzia Ross Friedman Ference LLP located at 1065 Avenue of the Americas, New York, New York 10018 (or at such other place as the parties may designate in writing) as of the Registration Date. 5. Section 3.2(a) of the Purchase Agreement, which is set forth below in its entirety, is hereby deleted. “(a) At the election of the Sellers or the Purchaser on or after December 31, 2004, if the Closing shall not have occurred by the close of business on such date, provided that the terminating party is not in default of any of its obligations hereunder;” 6. The parties hereto hereby acknowledge that the Registrable Shares may not be purchased and sold until the sale of such Registrable Shares is registered pursuant to an effective Registration Statement. Accordingly, solely as applicable to the Registrable Shares, the parties hereto hereby waive Section 3.2(c) of the Purchase Agreement. 7. Section 6.7(b) of the Purchase Agreement, which is set forth below in its entirety, is hereby deleted. “(b) If, and to the extent, such Registration Statement is not declared effective by the SEC within one year from the Effective Date, the Purchaser shall cause the Company to redeem the Registrable Shares at a rate of $0.145 per share.” 8. As consideration (the “Consideration”) for entering into this Amendment, upon deposit of the Registrable Shares into escrow in accordance with the Escrow Agreement attached hereto as Exhibit C: (a) Morelli shall deliver one hundred forty-five thousand dollars and three cents ($145,000.03) to the holders of Registrable Shares set forth on the signature page hereto (the “Registrable Shareholders”); and (b) the Purchaser shall deliver thirty-two thousand four hundred eighty dollars and three cents ($32,480.03) to the Registrable Shareholders. The Consideration shall constitute a loan to the Registrable Shareholders which shall not be repayable until such time that the Registrable Shares are delivered to Morelli and the Purchaser as contemplated pursuant to the terms of the Assigment. The Consideration shall be paid by Morelli and the Purchaser in accordance with Schedule I hereto.   2 --------------------------------------------------------------------------------   9. Upon Execution of this Amendment: (a) the Registrable Shareholders shall deliver to Morelli and the Purchaser promissory notes, in the form attached hereto as Exhibit B (the “Notes”), in accordance with Schedule I; and (b) the Registrable Shareholders shall deposit the Registrable Shares into escrow in accordance with the Escrow Agreement attached hereto as Exhibit C. On the Registration Date, the Consideration shall be applied against payment of the purchase price for the Registrable Shares, at which time the Notes shall be cancelled and the Registrable Shares shall be delivered to Morelli and the Purchaser. 10. The Company hereby agrees that if it does not register the resale of the Registrable Shares as required pursuant to Section 4 of the Assignment on or before June 30, 2005, then the Company shall redeem the Registrable Shares from the Registrable Shareholders at a price of $0.145 per share (the “Redemption Price”) and the Company shall thereupon sell an aggregate of 1,224,000 shares of the Company’s common stock at a price of $0.145 per share (the “Redemption Share Purchase Price”) to Morelli and the Purchaser in accordance with the Allocation of Registrable Shares described in Schedule I. Upon such redemption and sale, the Consideration described in Section 8 hereof shall constitute the Redemption Price paid by the Company to the Registrable Shareholders and also the Redemption Share Purchase Price paid by Morelli and the Purchaser to the Company, and the Notes shall automatically be cancelled. 11. (a) This Amendment shall be construed and interpret-ed in accordance with the laws of the State of California without giving effect to the conflict of laws rules thereof or the actual domiciles of the parties. (b) Except as amended hereby, the terms and provisions of the Purchase Agreement shall remain in full force and effect, and the Purchase Agreement is in all respects ratified and confirmed. On and after the date of this Amendment, each reference in the Purchase Agreement to the “Agree-ment,” “hereinaf-ter,” “herein,” “herein-after,” “hereunder,” “hereof,” or words of like import shall mean and be a reference to the Purchase Agreement as amended by this Amendment. (c) This Amendment may be executed in one or more counter-parts, each of which shall be deemed an original and all of which taken together shall constitute a single Amendment. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]     3 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to the Purchase Agreement as of the date first stated above.     PURCHASER:   PATIENT SAFETY TECHNOLOGIES, INC. (FORMERLY, FRANKLIN CAPITAL CORPORATION) By: /s/ Milton “Todd” Ault III                             Milton “Todd” Ault III Chairman and Chief Executive Officer HOLDERS OF REGISTRABLE SHARES: /s/ Don J. Colton                                                    Don J. Colton Registrable Shares Owned: 304,500 /s/ Gregg B. Colton                                                Gregg B. Colton Registrable Shares Owned: 328,550 VERNAL WESTERN DRILLING By: /s/ Gregg B. Colton                                         Name: Gregg B. Colton Title: President Registrable Shares Owned: 500,000 /s/ Norman Sammis                                                Norman Sammis Registrable Shares Owned: 18,200 /s/ Glenn W. Stewart                                             Glenn W. Stewart Registrable Shares Owned: 18,200 [SIGNATURES CONTINUE ON FOLLOWING PAGE]   4 --------------------------------------------------------------------------------     /s/ Andrew Buffmire                                              Andrew Buffmire Registrable Shares Owned: 54,550 ACKNOWLEDGED AND AGREED: /s/ Alan Morelli                                                       Alan Morelli DIGICORP By: /s/ William B. Horne                                         Name: William B. Horne Title: Chief Executive Officer   5 --------------------------------------------------------------------------------   Schedule I Allocation of Consideration and Notes Alan Morelli: Holder of Registrable Shares   Number of Registrable Shares   Consideration and Notes to be Delivered               Don J. Colton     248,775   $ 36,072.38   Vernal Western Drilling     408,497   $ 59,232.07   Gregg B. Colton     268,423   $ 38,921.34   Norman Sammis     14,869   $ 2,156.01   Glenn W. Stewart     14,869   $ 2,156.01   Andrew Buffmire     44,567   $ 6,462.22                   Total     1,000,000   $ 145,000.03     Patient Safety Technologies, Inc.: Holder of Registrable Shares   Number of Registrable Shares   Consideration and Notes to be Delivered               Don J. Colton     55,725   $ 8,080.13   Vernal Western Drilling     91,503   $ 13,267.94   Gregg B. Colton     60,127   $ 8,718.42   Norman Sammis     3,331   $ 483.00   Glenn W. Stewart     3,331   $ 483.00   Andrew Buffmire     9,983   $ 1,447.54                   Total     224,000   $ 32,480.03       --------------------------------------------------------------------------------   Exhibit A Stock Purchase Agreement     --------------------------------------------------------------------------------   Exhibit B Form of Promissory Note   $____________ [CITY], [STATE] __________, 2005 FOR VALUE RECEIVED, ____________________ (the “Maker”), [individually/a __________ corporation] with [his/its] principal [residence/office] located at ________________________________________, hereby promises to pay [Alan Morelli/Patient Safety Technologies, Inc.] (the “Payee”), [an individual/a Delaware corporation] with an address at ________________________________________, the principal sum of _________________________ dollars and __________ cents ($____________) in lawful money of the United States on the Registration Date (as defined in that certain Stock Purchase Agreement dated as of December 29, 2004 by and among Franklin Capital Corporation (currently, Patient Safety Technologies, Inc.) and the Sellers identified on the signature page thereto) (the “Maturity Date”). No interest shall accrue on the principal amount of this Note. Upon redemption of the Registrable Shares (defined in that certain Stock Purchase Agreement dated as of December 29, 2004 (the “Purchase Agreement”) among Franklin Capital Corporation, a Delaware corporation (currently, Patient Safety Technologies, Inc.), and the shareholders of Digicorp, a Utah corporation (the “Company”), set forth in Section A of the signature page thereto, and the shareholders of the Company set forth in Section B of the signature page thereto) pursuant to Amendment No. 1 to the Purchase Agreement, this Note shall be automatically cancelled and all obligations hereunder shall be deemed null and void. This Note may not be changed, modified or terminated orally, but only by an agreement in writing, signed by the party to be charged. The Maker hereby authorizes the Payee to complete this Note and any particulars relating thereto according to the terms of the indebtedness evidenced hereby. In the event of any litigation with respect to the obligations evidenced by this Note, the Maker waives the right to a trial by jury and all rights of set-off and rights to interpose permissive counterclaims and cross-claims. This Note shall be governed by and construed in accordance with the laws of the State of California and shall be binding upon the successors, assigns, heirs, administrators and executors of the Maker and inure to the benefit of the Payee, [his/its] successors, endorsees, assigns, heirs, administrators and executors. The Maker hereby irrevocably consents to the jurisdiction of the state and federal courts located in the County of Los Angeles, California in connection with any action or proceeding arising out of or relating to this Note. 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.   B-1 --------------------------------------------------------------------------------       [_________________________]   By: __________________________ Name: ________________________ Title: _________________________   ATTEST:         _________________________     B-2 --------------------------------------------------------------------------------   Exhibit C Escrow Agreement     --------------------------------------------------------------------------------  

  Exhibit 10.3 SAMPLE ADVANTA CORP. STOCK AWARD GRANT DOCUMENT (AMIP VI)      This Restricted Stock Award Grant Document (the “Grant Document”) constitutes the Grant Document for the Award granted by Advanta Corp. pursuant to the terms of the Advanta Management Incentive Program VI (“AMIP VI”), a program established under the Advanta Corp. 2000 Omnibus Stock Incentive Plan (the “Plan”), on <<GrantDate>> (the “Date of Grant”) to <<Recipient>> (the “Grantee”), and is subject to all applicable terms and conditions set forth in AMIP VI and subject to the limitations of the Plan.      1. Definitions. All terms stated with initial capitalization within this Grant Document shall have the meaning set forth in AMIP VI or the Plan unless otherwise defined herein or as may be required by the context. As used herein:           (a) “Restricted Period” means, with respect to each Share that is subject to this Grant Document, the period beginning on the Date of Grant and ending on the Vesting Date.           (b) “Restricted Stock” means the <<#>> Shares that have been granted subject to the terms of this Grant Document.           (c) “Vesting Date” shall mean the date on which a Share ceases to be subject to restrictions.      2. Restrictions on the Restricted Stock. During the Restricted Period, the Grantee shall not be permitted to sell, transfer, pledge or assign the Restricted Stock except by will or by the laws of descent and distribution. The Company shall, in its discretion, either maintain possession of the certificates respecting the Restricted Stock, place the certificates in the custody of an escrow agent for the duration of the Restricted Period or transfer the certificates to the Grantee; provided, however, that such certificates shall be legended in a manner determined to be appropriate by the Committee that indicates such restrictions as are in effect with respect to the Restricted Stock evidenced by such certificates.      3. Lapse of Restrictions. Subject to the terms and conditions set forth herein, in AMIP VI and in the Plan, the restrictions set forth in Section 2 with respect to each of the shares of Restricted Stock shall lapse on the applicable Vesting Date.           (a) General Vesting Date: The applicable Vesting Date for all shares of Restricted Stock shall occur on the 10th anniversary of the Date of Grant; provided, however, that on such date the Grantee is, and has continuously been, during the period commencing on the Date of Grant and ending on the Vesting Date as determined under this subsection 3(a), an employee of the Company.           (b) Establishment of Accelerated Vesting Date: Notwithstanding the determination of the applicable Vesting Date under subsection 3(a) above, consistent with the terms and conditions of AMIP VI and the Plan, the Committee may determine, at its discretion,   --------------------------------------------------------------------------------   to establish an earlier Vesting Date with respect to all or a portion of the shares of Restricted Stock upon the occurrence of certain events or conditions, including without limitation, the determination by the Committee that the Grantee should receive a bonus either below, at or in excess of the Grantee’s Target Bonus, upon the retirement of the Grantee, upon the disability or death of the Grantee and upon the occurrence of a Change in Control.      4. Rights of Grantee. During the Restricted Period, the Grantee shall have all of the rights of an owner of Common Stock, including the right to receive dividends. Stock dividends with respect to the Restricted Stock shall be subject to the same restrictions as the Restricted Stock.      5. Forfeiture of Restricted Shares. All shares of Restricted Stock for which a Vesting Date has not been attained shall be forfeited without the receipt of any payment by the Grantee upon the last day of the Grantee’s employment or service with the Company or upon a Change of Control, except to the extent that the Committee determines to establish a Vesting Date, including, without limitation, as set forth in Section 3 hereof. Shares of Restricted Stock which are forfeited shall be canceled by the Company without any action by the Grantee.      6. Notices. Any notice to the Company under this Agreement shall be made in care of the Committee to the office of the General Counsel, at the Company’s main office in Spring House, Pennsylvania. All notices under this Agreement shall be deemed to have been given when hand-delivered or mailed, first class postage prepaid, and shall be irrevocable once given.      7. Securities Laws. The Committee may from time to time impose any conditions on the Restricted Stock as it deems necessary or advisable to ensure compliance with all applicable state and federal securities laws, including the Securities Act of 1933, as amended.      8. Delivery of Shares. As soon as reasonably practicable following the Vesting Date, the Company shall, without payment from the Grantee (or the person to whom ownership rights may have passed by will or the laws of descent and distribution) for the applicable shares of Restricted Stock as to which a Vesting Date has occurred (the “Vested Shares”), deliver to the Grantee (or such other person) a certificate for the applicable Vested Shares without any legend or restrictions, except for such restrictions as may be imposed by the Committee, in its sole judgment, under this Section 8. Prior to delivery of the certificate for the Vested Shares, the Grantee must satisfy all of the Company’s applicable federal, state and/or local withholding tax requirements. The Company may condition delivery of certificates for Vested Shares upon the prior receipt from the Grantee (or such other person) of any undertakings which it may determine are required to assure that the certificates are being issued in compliance with federal and state securities laws. The Grantee authorizes the Company to withhold, in accordance with applicable law, from any compensation payable to him/her any taxes required to be withheld under federal, state or local law in connection with the Award and, at the Company’s discretion, to withhold Vested Shares which are subject to this Grant Document, in satisfaction of the Company’s minimum withholding obligations arising from this Award.      9. Award Not to Affect Employment. The Award granted hereunder shall not confer upon the Grantee any right to continue in the employment of the Company. - 2 - --------------------------------------------------------------------------------        10. Amendment to Grant Document. Notwithstanding anything contained herein to the contrary, the Committee shall have the authority to amend or modify the terms and conditions set forth in this Grant Document, if the Committee determines, at its discretion, that any such amendment or modification is appropriate in order to maintain the effectiveness of the Award as a method for providing current performance incentives for the Grantee or to effectuate such other goals or objectives that the Committee determines may appropriately be furthered by any such amendment or modification; provided, however, that the terms of this Grant Document may not be changed in a manner that materially adversely affects the Award without the Grantee’s consent. Notwithstanding the foregoing, the Committee shall have the absolute right to amend this Grant Document in order to conform the terms hereof to the original intent of the Committee, and to correct any inadvertent operational errors or errors in the calculation and documentation that may arise in the implementation of AMIP VI, any grants made thereunder or in any Grant Document.      11. Miscellaneous.           (a) The address for the Grantee to which notice, demands and other communications to be given or delivered under or by reason of the provisions hereof shall be the Grantee’s address as reflected in the Company’s personnel records.           (b) In the event that any calculation of a number of shares shall result in a number that includes a fractional share, the number of shares shall be rounded down to the nearest whole number of shares.           (c) The validity, performance, construction and effect of this Award shall be governed by the laws of Pennsylvania, without giving effect to principles of conflicts of law.      IN WITNESS WHEREOF, Advanta Corp. has granted this Award as of the Date of Grant first above written.                   Advanta Corp.                       By:                                         Attest:                       - 3 -

Exhibit 10.9   RESTRICTED STOCK AGREEMENT     VERTIS HOLDINGS, INC. 1999 EQUITY AWARD PLAN   GRANTEE: DEAN DURBIN   NO. OF SHARES: 99,207   This Agreement (the “Agreement”), approved by Thomas H. Lee Equity Fund IV, L.P. (the “Sponsor”), evidences the award of 99,207 restricted shares (each, an “Award Share,” and collectively, the “Award Shares”) of the Common Stock of Vertis Holdings, Inc., a Delaware corporation (the “Company”), granted to you, Dean Durbin, effective as of March 6, 2006 (the “Grant Date”), pursuant to the Vertis Holdings, Inc. 1999 Equity Award Plan (the “Plan”) and conditioned upon your agreement to the terms described below. All of the provisions of the Plan are expressly incorporated into this Agreement.   You must return to Jennifer M. Bass an executed copy of this Agreement within 10 Business Days after the date indicated below the name of the officer who signed this Agreement on behalf of the Company. If you fail to do so, the Award Shares will be forfeited without consideration and this Agreement will be null and void.   1.                                       Terminology. The Glossary at the end of this Agreement contains definitions of all words that appear in this Agreement with an initial capital letter that are not defined elsewhere in this Agreement.   2.                                       Vesting. All of the Award Shares are nonvested and forfeitable as of the Grant Date. So long as your Service with the Company is continuous from the Grant Date through the applicable date upon which vesting occurs, the Award Shares will vest and become nonforfeitable immediately prior to the first to occur of the following:   (a)                                  a Liquidity Event; (b)                                 your death; or (c)                                  the date upon which you suffer a Disability.   Except as provided above, unless otherwise determined by the Administrator, none of the Award Shares will become vested and nonforfeitable after your Service with the Company ceases.   3.                                       Termination of Employment or Service.   3.1                                 Unvested Award Shares. If your Service with the Company ceases for any reason other than your death or Disability, all Award Shares that are not then vested and nonforfeitable will be immediately forfeited to the Company upon such cessation for no consideration.   3.2                                 Vested Award Shares. If your Service with the Company ceases for any reason, all Award Shares that are then vested and nonforfeitable will not be affected by such cessation but will remain subject to the provisions of this Agreement, including the restrictions on transfer set forth under Section 4 of this Agreement.   --------------------------------------------------------------------------------   4.                                       Restrictions on Transfer.   4.1                                 Except as otherwise provided under Sections 4.3 or 7 of this Agreement or in accordance with your will or the laws of descent and distribution upon your death, until an Award Share becomes vested and nonforfeitable and a Liquidity Event has occurred, the Award Share may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.   4.2                                 YOU HEREBY REPRESENT AND WARRANT TO THE COMPANY AS FOLLOWS:   (A)                                  YOU WILL HOLD THE AWARD SHARES FOR YOUR OWN ACCOUNT FOR INVESTMENT ONLY AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY “DISTRIBUTION” OF THE AWARD SHARES WITHIN THE MEANING OF THE SECURITIES ACT.   (B)                                 YOU UNDERSTAND THAT THE AWARD SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT BY REASON OF A SPECIFIC EXEMPTION AND THAT THE AWARD SHARES MUST BE HELD INDEFINITELY, UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OR YOU OBTAIN AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. YOU FURTHER ACKNOWLEDGE AND UNDERSTAND THAT THE COMPANY IS UNDER NO OBLIGATION TO REGISTER THE AWARD SHARES.   (C)                                  YOU UNDERSTAND THAT THE COMPANY MAY, IN ITS DISCRETION, IMPOSE RESTRICTIONS ON THE SALE, PLEDGE OR OTHER TRANSFER OF THE AWARD SHARES (INCLUDING THE PLACEMENT OF APPROPRIATE LEGENDS ON STOCK CERTIFICATES) IF, IN THE JUDGMENT OF THE COMPANY, SUCH RESTRICTIONS ARE NECESSARY OR DESIRABLE TO COMPLY WITH THE SECURITIES ACT, THE SECURITIES LAWS OF ANY STATE OR ANY OTHER LAW.   (D)                                 YOU ARE AWARE THAT YOUR INVESTMENT IN THE COMPANY IS A SPECULATIVE INVESTMENT THAT HAS LIMITED LIQUIDITY AND IS SUBJECT TO THE RISK OF COMPLETE LOSS.   4.3                                 The provisions of Sections 4.1 and 4.2(b) shall not apply to the following transfers; provided, however, that no transfer of Award Shares pursuant to this Section 4.3 (other than a transfer to the Company) shall be given effect on the books of the Company unless and until the Permitted Transferee (as defined below) executes an agreement in writing with the parties hereto pursuant to which he, she, or it agrees to be bound by all of the terms and conditions of this Agreement to the same extent as the parties hereto; provided, further, that no transfer will be permitted if the Company determines that, in its sole discretion, such transfer is, or is reasonably likely to be, in violation of applicable federal or state securities laws:   (a)                                  a transfer of vested Award Shares made to an Affiliate of the Company or an Affiliate of any subsidiary of the Company;   (b)                                 a transfer of vested Award Shares upon your death to your executors, administrators, testamentary trustees, legatees or beneficiaries;   (c)                                  a transfer of vested Award Shares to a trust, the beneficiaries of which include only you and your spouse, siblings, or direct lineal ancestors or descendants;   (d)                                 a transfer of vested Award Shares made as a gift to your spouse or lineal descendants; or   (e)                                  a transfer of vested Award Shares made pursuant to a court order in connection with a divorce proceeding.   The transferee in each of the subclauses (a) through (e) above is referred to herein as a “Permitted Transferee.”  Notwithstanding anything to the contrary in this Agreement, no transfer made to the Company, any   2 --------------------------------------------------------------------------------   subsidiary of the Company, or the Sponsor shall be subject to any restriction on transfer contained herein, so long as any such transfer is made in accordance with all applicable federal and state securities laws and does not violate any contractual agreement in effect at the time of such transfer.   4.4                                 THE COMPANY SHALL NOT BE REQUIRED TO (A) TRANSFER ON ITS BOOKS ANY AWARD SHARES THAT HAVE BEEN SOLD OR TRANSFERRED IN CONTRAVENTION OF THIS AGREEMENT OR (B) TREAT AS THE OWNER OF AWARD SHARES, OR OTHERWISE ACCORD VOTING, DIVIDEND OR LIQUIDATION RIGHTS TO, ANY TRANSFEREE TO WHOM AWARD SHARES HAVE BEEN TRANSFERRED IN CONTRAVENTION OF THIS AGREEMENT.   5.                                       Stock Certificates. You will be reflected as the owner of record of the Award Shares as of the Grant Date on the Company’s books. The Company will hold the share certificates for safekeeping, or otherwise retain the Award Shares in uncertificated book entry form, until the Award Shares become vested and nonforfeitable and until they may be transferred freely without restriction under this Agreement. Until the Award Shares become vested and nonforfeitable, any share certificates representing such shares will include a legend in substantially the following form, in addition to any other legends that may be required under federal or state securities laws.   THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE APPLICABLE SECURITIES ACT OF ANY STATE BUT HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION CONTAINED IN SAID ACTS. NO SALE, OFFER TO SELL OR OTHER TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE UNLESS A REGISTRATION STATEMENT UNDER SAID ACTS IS IN EFFECT WITH RESPECT TO THE SECURITIES, OR AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH ACTS IS THEN APPLICABLE.   THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND THE OTHER TERMS AND CONDITIONS SET FORTH IN A CERTAIN RESTRICTED STOCK AGREEMENT DATED MARCH 6, 2006, AS AMENDED FROM TIME TO TIME, BETWEEN THE COMPANY AND THE REGISTERED OWNER OF THIS CERTIFICATE (OR HIS PREDECESSOR IN INTEREST), AND SUCH AGREEMENT IS AVAILABLE FOR INSPECTION WITHOUT CHARGE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.   All regular cash dividends and other distributions on the Award Shares held by the Company will be paid directly to you, but any stock dividends will be treated in the manner set forth in Section 9 of this Agreement.   6.                                       Market Stand-Off Agreement. You agree that following the effective date of a registration statement of the Company filed under the Securities Act, to the extent requested by the Company and an underwriter of Common Stock or other securities of the Company, you will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction is to be settled by delivery of such securities or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, in each case during the seven days prior to and the one hundred and eighty (180) days after the effectiveness of any underwritten offering of the Company’s equity securities (or such longer or shorter period as may be requested in writing by the managing underwriter and agreed to in writing by the Company) (the “Market Stand-Off Period”), except as part of such underwritten registration if otherwise permitted. In addition, you agree to execute any further letters, agreements and/or other documents requested by the Company or its underwriters which are consistent with the terms of this Section 6. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Stand-Off Period.   3 --------------------------------------------------------------------------------   7.                                       Tag-Along and Drag-Along Rights.   7.1.                              Tag-Along Rights. (a)  If the Sponsor proposes to transfer all or a portion of the shares of Common Stock beneficially owned by it to a Third Party which would not be an Affiliate of the Sponsor immediately upon consummation of such transfer, and the Sponsor does not exercise its Drag-Along Rights in accordance with Section 7.4 (a “Tag-Along Sale”), the Sponsor shall cause you and your Permitted Transferees to have the option to exercise your rights under this Section 7.1, provided, however, that you and your Permitted Transferees, if any, shall have no rights under this Section 7.1 if the shares of Common Stock to be transferred in such transaction and any shares of Common Stock which have been transferred to any Third Party within a 90-day period preceding the date of such transfer have, in the aggregate, a Fair Market Value less than ten million dollars ($10,000,000) (a “Small Transfer”), and provided, further, that when the cumulative Fair Market Value of all such Small Transfers, the value to be calculated at the time of each such transfer, exceeds fifty million dollars ($50,000,000), the restrictions provided for in the first proviso of this Section 7.1(a) shall no longer be in effect. Moreover, you and your Permitted Transferees, if any, shall have no rights under this Section 7.1 with respect to any transfer by the Sponsor of any shares of Common Stock beneficially owned by it to any limited partner of the Sponsor.   (b)                                 In the event of a proposed Tag-Along Sale:   (i)                                     the Sponsor shall provide you written notice of the terms and conditions of such proposed Tag-Along Sale, as described in Section 7.1(c) (“Tag-Along Notice”), at least 10 Business Days prior to the consummation of such proposed Tag-Along Sale and offer you and your Permitted Transferees the opportunity to participate in such Tag-Along Sale on the terms and conditions set forth in this Section 7.1; and   (ii)                                  subject to Section 7.1(c), you and your Permitted Transferees shall be entitled to sell up to a Pro Rata Portion (as defined below) of your Award Shares (the “Tag Shares”) at the same price and on the same terms as the shares of Common Stock proposed to be sold by the Sponsor in such Tag-Along Sale in accordance with the terms set forth in this Section 7.1.   The “Pro-Rata Portion” of your Tag Shares shall mean an amount of such Tag Shares equal to the product of:   (A)                              (x) a fraction, the numerator of which is the number of shares of Common Stock proposed to be transferred by the Sponsor and its Affiliates in such Tag-Along Sale and the denominator of which is the total number of shares of Common Stock beneficially owned by the Sponsor and its Affiliates collectively, immediately prior to transferring such shares of Common Stock; or, (y) for the first transfer after the restrictions set forth in the first proviso of Section 7.1(a) are no longer in effect, a fraction, the numerator of which is the number of shares of Common Stock proposed to be transferred by the Sponsor and its Affiliates in such Tag-Along Sale plus the cumulative number of shares of Common Stock transferred by the Sponsor and its Affiliates in all Small Transfers, and the denominator of which is the total number of shares of Common Stock beneficially owned by the Sponsor and its Affiliates collectively, immediately prior to transferring such shares of Common Stock plus the cumulative number of shares of Common Stock transferred by the Sponsor and its Affiliates in all Small Transfers; and   (B)                                the total amount of Tag Shares beneficially owned by such Executive at the time of the Tag-Along Sale.   (c)                                  The Tag-Along Notice shall identify the proposed transferee, the number of shares of Common Stock to be sold by the Sponsor in the Tag-Along Sale, the Pro Rata Portion of your Tag Shares which you shall be entitled to transfer in such Tag-Along Sale, the price at which the transfer of shares of Common Stock is proposed to be made, and all other material terms and conditions of the proposed Tag-Along Sale. From the date of   4 --------------------------------------------------------------------------------   the Tag-Along Notice, you and your Permitted Transferees shall have the right (a “Tag-Along Right”), exercisable by written notice (“Tag-Along Response Notice”) given by you to the Sponsor within seven Business Days from the date of the Tag-Along Notice (the “Tag-Along Response Notice Period”), to request that the Sponsor includes in the proposed transfer the number of Tag Shares held by you and your Permitted Transferees (up to their Pro Rata Portion) as is specified in such Tag-Along Response Notice at the same price and on the same terms and conditions set forth in the Tag Along Notice; provided, however, that if the aggregate number of shares of Common Stock proposed to be sold by (i) the Sponsor, (ii) you and your Permitted Transferees, (iii) Other Award Share Grantees and their permitted transferees giving tag-along notices similar to the Tag-Along Notice during such period prescribed in Other Award Share Grantees’ Agreements and (iv) any other persons entitled to give (and giving on a timely basis) tag-along notices similar to the Tag-Along Notice pursuant to agreements substantially similar to this Agreement, including those certain Option Transfer Agreements, those certain Amended and Restated Management Subscription Agreements, and those certain Retained Share Agreements, each between the Company, the Sponsor and you or Other Key People, as amended, (the persons identified in subclauses (i), (ii), (iii) and (iv) of this subsection, collectively, the “Participants”), in such Tag-Along Sale exceeds the number of shares of Common Stock which can be sold on the terms and conditions set forth in the Tag-Along Notice, then only the Tag-Along Portion of shares of Common Stock beneficially owned by you shall be sold pursuant to the Tag-Along Sale. “Tag-Along Portion” means, with respect to you and your Permitted Transferees, the number of shares of Common Stock beneficially owned by you and your Permitted Transferees on the date of the Tag-Along Notice multiplied by a fraction, the numerator of which is the maximum number of shares of Common Stock which can be sold in the Tag-Along Sale and the denominator of which is the aggregate number of shares of Common Stock beneficially owned by the Participants, collectively.   (d)                                 Delivery of a Tag-Along Response Notice by you to the Sponsor pursuant to Section 7.1(c) shall constitute an irrevocable election by you and your Permitted Transferees, if any, to sell the number of Tag Shares beneficially owned by it or them as is specified in such Tag-Along Response Notice in such Tag-Along Sale. If, at the end of a 90-day period after such delivery, the Tag-Along Sale has not been consummated on substantially the same terms and conditions set forth in the Tag-Along Notice, all restrictions on transfers of Tag Shares contained in this Agreement or otherwise applicable at such time with respect to Tag Shares owned by you and your Permitted Transferees shall again be in effect.   (e)                                  If at the termination of the Tag-Along Response Notice Period you and your Permitted Transferees, if any, shall not have exercised its or their Tag-Along Right by providing the Sponsor with a Tag-Along Response Notice, such Executive and such Executive’s Permitted Transferees shall be deemed to have waived its or their Tag-Along Right with respect to transferring its or their Tag Shares pursuant to such Tag-Along Sale.   (f)                                    The Sponsor may sell, on behalf of you and your Permitted Transferees, if you and your Permitted Transferees, if any, exercise your or their Tag-Along Right pursuant to this Section 7.1, the shares of Common Stock entitled to be transferred in the Tag-Along Sale on the terms and conditions set forth in the Tag-Along Notice within 90 days of the date on which Tag-Along Rights shall have been waived or exercised.   7.2.                              Limitation of Rights Following Termination of Employment. Notwithstanding any other provision of this Agreement, upon the termination of your employment with the Company or any of its subsidiaries for Cause, or if you terminate your employment with the Company or any of its subsidiaries without Good Reason (as such term is defined in your employment agreement with the Company, if any), you and your Permitted Transferees shall have no rights under Section 7.1. In the case of any other termination of your employment, you and your Permitted Transferees shall continue to have the rights specified in Section 7.1.   7.3.                              Termination of Tag-Along Rights. Notwithstanding anything to the contrary, the provisions of Section 7.1 shall not be applicable if the Common Stock is publicly traded on an Exchange and there exists a Minimum Public Float.   7.4.                              Drag-Along Rights. (a)  If the Sponsor and its Affiliates propose to transfer all or any portion of the shares of Common Stock beneficially owned by them to a Third Party (a “Drag-Along Sale”), you and your Permitted Transferees shall, at the Sponsor’s option and in the Sponsor’s sole discretion, upon your receipt   5 --------------------------------------------------------------------------------   of written notice from the Sponsor, sell the Drag-Along Portion of your Award Shares to such Third Party for the same consideration and otherwise on the same terms and conditions on which the Sponsor and its Affiliates sell their shares of Common Stock in such Drag-Along Sale (the “Drag-Along Rights”).   The “Drag-Along Portion” of your Award Shares means, at any time, the number of Award Shares beneficially owned by you and your Permitted Transferees, multiplied by a fraction, the numerator of which is the number of shares of Common Stock proposed to be sold on behalf of the Sponsor in such Drag-Along Sale and the denominator of which is the total number of shares of Common Stock then beneficially owned by the Sponsor.   (b)                                 The Sponsor shall provide written notice of such Drag-Along Sale to you (a “Drag-Along Notice”) not less than 20 days prior to the consummation of such proposed Drag-Along Sale which notice shall state that the Sponsor proposes to effect a transfer of a certain number of shares of Common Stock, the number of shares of Common Stock proposed to be transferred, the purchase price, the proposed transferee, the number of Award Shares which you are required to transfer in such Drag-Along Sale (based on the methodology set forth in Section 7.4(a)), and all other material terms and conditions of the Drag-Along Sale. Subject to Section 7.4(c), you shall be required to participate in the Drag-Along Sale on the terms and conditions set forth in the Drag-Along Notice. Not later than the tenth day following the date of the Drag-Along Notice (the “Drag-Along Notice Period”), you shall deliver to a representative of the Sponsor designated in the Drag-Along Notice certificates representing all the Award Shares beneficially owned and held by you, duly endorsed, together with all other documents required to be executed in connection with such Drag-Along Sale, or, if such delivery is not permitted by applicable law, an unconditional agreement to deliver such Award Shares pursuant to this Section 7.4 at the closing for such Drag-Along Sale against delivery to you of the consideration therefor. If you should fail to deliver such certificates to the Sponsor in a Drag-Along Sale pursuant to this Section 7.4, the Company shall cause the books and records of the Company to show that such shares of Common Stock are bound by the provisions of this Section 7.4 and that such shares of Common Stock shall be transferred to the purchaser of the shares of the Common Stock immediately upon surrender for transfer by the holder thereof.   (c)                                  The Sponsor shall have a period of 90 days from the date of the Drag-Along Notice to consummate the Drag-Along Sale on the terms and conditions set forth in such Drag-Along Sale Notice. If the Drag-Along Sale shall not have been consummated during such period, the Sponsor shall return to you all certificates representing Award Shares that you delivered for transfer pursuant hereto, together with any documents in the possession of the Sponsor executed by you in connection with such proposed transfer, and the Drag-Along Notice shall be deemed to be cancelled and this Agreement will remain in full force and effect in accordance with its terms.   7.5.                              Other Responsibilities. The delivery of any notices to, and the obtaining of any consents from, any Permitted Transferee with respect to any provision of this Agreement, including, but not limited to, Sections 7.1 and 7.4, shall be your sole responsibility, unless otherwise agreed to in writing between such Permitted Transferee and the Sponsor. Neither the Company nor the Sponsor shall be liable to any Permitted Transferee for your failure to deliver a notice to, or obtain a consent from, any Permitted Transferee with respect to any provision of this Agreement, including, but not limited to, Sections 7.1 and 7.4.   7.6.                              Sales to Principal Beneficial Owners. The Sponsor and its Affiliates shall not transfer all or any portion of the shares of Common Stock beneficially owned by them to a Principal Beneficial Owner, other than an Affiliate of the Sponsor, unless such Principal Beneficial Owner agrees to be bound by this Section 7 as if it were the Sponsor. To the extent that the Sponsor and its Affiliates transfer any shares of Common Stock to a Principal Beneficial Owner other than an Affiliate of the Sponsor, you and your Permitted Transferees agree that such Principal Beneficial Owner shall receive the benefits set forth in Sections 7.4 and 7.5 hereof as if such Principal Beneficial Owner were the Sponsor.   8.                                       Tax Withholding and Tax Election.   8.1                                 Tax Withholding. The Company shall have the right to deduct from any compensation or any other payment of any kind (including, upon approval of the Board of Directors of the Company, withholding the   6 --------------------------------------------------------------------------------   delivery of shares of Common Stock) due you the amount of any federal, state, local or foreign taxes required by law to be withheld which arise in connection with the Award Shares; provided, however, that the value of the shares of Common Stock withheld may not exceed the statutory minimum withholding amount required by law. In lieu of such deduction, the Company may require you to make a cash payment to the Company equal to the amount required to be withheld. If you do not make such payment when requested, the Company may refuse to issue any Common Stock certificate under this Agreement until arrangements satisfactory to the Administrator for such payment have been made.   8.2                                 Tax Election. You hereby acknowledge that you have been advised by the Company to seek independent tax advice from your own advisors regarding the availability and advisability of making an election under Section 83(b) of the Code, and that any such election, if made, must be made within 30 days of the Grant Date. You expressly acknowledge that you are solely responsible for filing any such Section 83(b) election with the appropriate governmental authorities, irrespective of the fact that such election is also delivered to the Company. You may not rely on the Company or any of its officers, directors or employees for tax or legal advice regarding this award. You acknowledge that you have sought tax and legal advice from your own advisors regarding this award or have voluntarily and knowingly foregone such consultation. You must pay over to the Company by check the amount of any and all applicable withholding taxes at the time that you make a Section 83(b) election.   9.                                       Adjustments for Corporate Transactions and Other Events.   9.1                                 Stock Dividend, Stock Split and Reverse Stock Split. Upon a stock dividend of, or stock split, reverse stock split, or similar event affecting, the Common Stock, the number of Award Shares and the number of such Award Shares that are nonvested and forfeitable shall, without further action of the Administrator, be adjusted to reflect such event. The Administrator may make adjustments, in its discretion, to address the treatment of fractional shares with respect to the Award Shares as a result of the stock dividend, stock split, reverse stock split, or similar event. Adjustments under this Section 9 will be made by the Administrator, whose determination as to what adjustments, if any, will be made and the extent thereof will be final, binding and conclusive. No fractional Award Shares will result from any such adjustments.   9.2                                 Binding Nature of Agreement. The terms and conditions of this Agreement shall apply with equal force to any additional and/or substitute securities received by you in exchange for, or by virtue of your ownership of, the Award Shares, whether as a result of any spin-off, stock split-up, stock dividend, stock distribution, other reclassification of the Common Stock of the Company, or similar event, except as otherwise determined by the Administrator. If the Award Shares are converted into or exchanged for, or stockholders of the Company receive by reason of any distribution in total or partial liquidation or pursuant to any merger of the Company or acquisition of its assets, securities of another entity, or other property (including cash), then the rights of the Company under this Agreement shall inure to the benefit of the Company’s successor, and this Agreement shall apply to the securities or other property received upon such conversion, exchange or distribution in the same manner and to the same extent as the Award Shares.   10.                                 Non-Guarantee of Employment or Service Relationship. Nothing in the Plan or this Agreement shall alter your at-will or other employment status or other service relationship with the Company, nor be construed as a contract of employment or service relationship between the Company and you, or as a contractual right of you to continue in the employ of, or in a service relationship with, the Company for any period of time, or as a limitation of the right of the Company to discharge you at any time with or without cause or notice and whether or not such discharge results in the forfeiture of any Award Shares or any other adverse effect on your interests under the Plan.   11.                                 Rights as Stockholder. Except as otherwise provided in this Agreement with respect to the nonvested and forfeitable Award Shares, you are entitled to all rights of a stockholder of the Company, including the right to vote the Award Shares and receive dividends and/or other distributions declared on the Award Shares.   12.                                 The Company’s Rights. Except as provided under Section 7.6 of this Agreement, the existence of the Award Shares shall not affect in any way the right or power of the Company or its stockholders to make or   7 --------------------------------------------------------------------------------   authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or other stocks with preference ahead of or convertible into, or otherwise affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of the Company’s assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.   13.                                 Notices. All notices and other communications made or given pursuant to this Agreement shall be in writing and shall be sufficiently made or given if hand delivered or mailed by certified mail, addressed to you at the address contained in the records of the Company, or addressed to the Administrator, care of the Company for the attention of its Corporate Secretary at its principal executive office or, if the receiving party consents in advance, transmitted and received via telecopy or via such other electronic transmission mechanism as may be available to the parties.   14.                                 Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the Award Shares granted hereunder. Any oral or written agreements, representations, warranties, written inducements, or other communications made prior to the execution of this Agreement with respect to the Award Shares granted hereunder shall be void and ineffective for all purposes.   15.                                 Amendment. This Agreement may be amended from time to time only be a written instrument duly executed by the Company, the Sponsor, and you.   16.                                 Conformity with Plan. This Agreement is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan. Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. In the event of any ambiguity in this Agreement or any matters as to which this Agreement is silent, the Plan shall govern. A copy of the Plan is available upon request. Please contact the Company by email at [email protected] or at 250 W. Pratt Street, 18th Floor, Baltimore, Maryland 21201, Attention: Dolores D. Selby (telephone: 410-361-8394), to receive a copy of the Plan.   17.                                 Governing Law. The validity, construction and effect of this Agreement, and of any determinations or decisions made by the Administrator relating to this Agreement, and the rights of any and all persons having or claiming to have any interest under this Agreement, shall be determined exclusively in accordance with the laws of the State of Delaware, without regard to its provisions concerning the applicability of laws of other jurisdictions. Any suit with respect hereto will be brought in the federal or state courts in the districts which include New York, New York, and you hereby agree and submit to the personal jurisdiction and venue thereof.   18.                                 Headings. The headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.   19.                                 Notices. All notices and other communications provided for herein shall be dated and in writing and shall be deemed to have been duly given when delivered, if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid and when received if delivered otherwise, to the party to whom it is directed:   (a)                        If to the Company, to it at the following address:   250 W. Pratt Street, 18th Floor Baltimore, Maryland  21201 Attention: General Counsel Fax No.: (410) 528-9287   with a copy to the Sponsor, at the address set forth below:   (b)                       If to you, at the address set forth in the Company’s records;   8 --------------------------------------------------------------------------------   (c)                        If to the Sponsor, to it at the following address:   Thomas H. Lee Equity Fund IV, L.P. c/o Thomas H. Lee Company 75 State Street, Suite 2600 Boston, Massachusetts  02109 Attention: Anthony J. DiNovi Fax No.: (617) 227-3514   or at such other address as the parties hereto shall have specified by notice in writing to the other parties (provided, that such notice of change of address shall be deemed to have been duly given only when actually received).   20.                                 Limitation of Liability. None of the Affiliates of the Sponsor shall have any liability to the you or any of your Permitted Transferees or the Company or any of its subsidiaries under any provision of this Agreement. In the event of an alleged breach of this Agreement by the Sponsor, the parties hereto acknowledge and agree that the sole remedy which may be sought against the Sponsor shall be specific performance, provided, however, that if the remedy of specific performance is not available, you, your Permitted Transferees, if any, and the Company will only seek to recover direct damages for any breach of this Agreement. You, your Permitted Transferees, if any, and the Company agree to waive any other remedy against the Sponsor to which they might be entitled at law, including, but not limited to, compensatory damages, consequential damages, continuing damages, future damages, incidental damages, punitive damages and nominal damages. The Company shall indemnify, defend, save and hold harmless Sponsor from and against any and all liabilities arising under, pursuant to or in connection with this Agreement.   21.                                 Severability. The invalidity, illegality or unenforceability of one or more of the provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.   22.                                 Counterparts. 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 instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.   9 --------------------------------------------------------------------------------   GLOSSARY   (a)                                  “Administrator” means the Committee as determined under Section 2.7 of the Plan.   (b)                                 “Affiliate” has the meaning given to such term in the Plan.   (c)                                  “Business Day” means any day other than a Saturday, Sunday, or other day during which the Company’s principal executive office is not open for business.   (d)                                 “Cause” generally means your insubordination, dishonesty, incompetence, moral turpitude, other misconduct of any kind or the refusal to perform your duties or responsibilities for any reason other than illness or incapacity, in each case as determined by the Board in good faith. However, if you have an employment agreement, consulting agreement, change of control agreement or similar agreement in effect with the Company at the time in question that defines “cause” (or words of like import), then “cause” has the meaning ascribed to it under such agreement, as such agreement shall provide at the time in question; provided that with respect to any agreement that conditions “cause” on the occurrence of a change of control, such definition of “cause” shall not apply until a change of control actually takes place and then only with regard to a termination thereafter.   (e)                                  “Common Stock” means the common stock, $.01 par value, of Vertis Holdings, Inc..   (f)                                    “Company” means Vertis Holdings, Inc. and its Affiliates, except where the context otherwise requires. For purposes of determining whether a Liquidity Event has occurred, Company shall mean only Vertis Holdings, Inc.   (g)                                 “Disability” means your inability to perform substantially your duties and responsibilities to the Company by reason of a physical or mental disability or infirmity for a continuous period of three months. The date of such disability shall be the earlier of (1) the last day of such three-month period or (2) the day on which you submit, or cause to be submitted, to the Board any medical evidence of such disability reasonably satisfactory to the Board.   (h)                                 “Exchange” means the principal stock exchange, including The Nasdaq Stock Market, on which the Common Stock is listed or approved for listing, if any.   (i)                                     “Liquidity Event” means (1) a public offering of the Common Stock registered pursuant to the Securities Act where there is a Minimum Public Float immediately following such offering, (2) a merger or other business combination or recapitalization whereby the Common Stock is exchanged for cash and/or publicly traded equity or debt securities in another entity or a combination of cash and other non-publicly traded equity or debt securities where cash constitutes at least a majority of the consideration to be received in such merger, business combination or recapitalization or (3) a sale or other disposition of all or substantially all of the Company’s assets to another entity, for cash and/or publicly traded equity or debt securities of another entity or a combination of cash and other non-publicly traded equity or debt securities where cash constitutes at least a majority of the proceeds of such sale or disposition, in each case, other than to the Company, any subsidiary of the Company, or any entity controlled by the ultimate control persons of the Company.   (j)                                     “Minimum Public Float” means the circumstances existing when (i) the consummation of one or more public offerings registered pursuant to the Securities Act of shares of Common Stock if, upon such consummation, the aggregate number of shares of Common Stock held by the public, not including Affiliates of the Company, represents at least 20% of the total number of outstanding shares of Common Stock at the time of such public offering and (ii) the Common Stock is listed on an Exchange.   (k)                                  “Other Award Share Grantees” means other persons receiving Award Shares pursuant to a restricted stock agreement having terms substantially identical to those contained in this Agreement.   10 --------------------------------------------------------------------------------   (l)                                     “Other Key People” means the officers, members of management, key employees of the Company and its Affiliates.   (m)                               “Principal Beneficial Owner” means any of the Sponsor, CLI/THLEF IV Vertis LLC, Evercore Capital Partners L.P., CLI Associates LLC, J.P. Morgan Partners (BHCA), L.P., Wachovia Capital Partners, LLC (formerly First Union Capital Partners, LLC), and Cadogan Capital, LLC and their respective Affiliates and successors.   (n)                                 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.   (o)                                 “Service” means your employment or other service relationship with the Company and its Affiliates. Service will be considered to have ceased with the Company if, after a sale, merger or other corporate transaction, the trade, business or entity with which you are employed is no longer an Affiliate of Vertis Holdings, Inc.   (p)                                 “Third Party” means any person or entity excluding each of the following:  (a) the Company and its employees, officers, directors and (b) the Principal Beneficial Owners.   (q)                                 “You”; “Your”. You means the recipient of the Award Shares as reflected in the first paragraph of this Agreement. Whenever the word “you” or “your” is used in any provision of this Agreement under circumstances where the provision should logically be construed, as determined by the Administrator, to apply to the estate, personal representative, or beneficiary to whom the Award Shares may be transferred by will or by the laws of descent and distribution, the words “you” and “your” shall be deemed to include such person.   11 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the Company and the Sponsor have caused this Agreement to be executed by their duly authorized officers.     VERTIS HOLDINGS, INC.           By: /s/ John V. Howard, Jr.       Name:     Title:       Date:  March 6, 2006           THOMAS H. LEE EQUITY FUND IV, L.P.           By: /s/ Anthony J. DiNovi             Date:  March 6, 2006     The undersigned hereby acknowledges that he/she has carefully read this Agreement and agrees to be bound by all of the provisions set forth herein.   WITNESS: GRANTEE         /s/ Maureen R. Dry   /s/ Dean D. Durbin             Date:  March 6, 2006   Enclosure:  Vertis Holdings, Inc. 1999 Equity Award Plan   12 --------------------------------------------------------------------------------   STOCK POWER   FOR VALUE RECEIVED, the undersigned, Dean Durbin, hereby sells, assigns and transfers unto Vertis Holdings, Inc., a Delaware corporation (the “Company”), or its successor, 99,207k shares of common stock, par value $0.01 per share, of the Company standing in my name on the books of the Company, represented by Certificate No.                       , which is attached hereto, and hereby irrevocably constitutes and appoints                                                                                                              as my attorney-in-fact to transfer the said stock on the books of the Company with full power of substitution in the premises.   WITNESS:           /s/ Maureen R. Dry   /s/ Dean D. Durbin           Dated:       --------------------------------------------------------------------------------

Exhibit 10.5   EXECUTION COPY         EMPLOYEE MATTERS AGREEMENT   by and among   SOCIÉTÉ GÉNÉRALE,   SG AMERICAS, INC.   SG AMERICAS SECURITIES HOLDINGS, INC.,   COWEN AND COMPANY, LLC   and   COWEN GROUP, INC.     Dated as of July 12, 2006       -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   EMPLOYEE MATTERS AGREEMENT   THIS EMPLOYEE MATTERS AGREEMENT (the “Agreement”) is made as of July July 12, 2006 by and among Société Générale (“SG”), SG Americas, Inc., SG Americas Securities Holdings, Inc. (“SGASH”), Cowen and Company, LLC (“Cowen LLC”) and Cowen Group, Inc. (“Cowen Inc.”).   BACKGROUND   The parties have entered into a Separation Agreement dated as of July 11, 2006 (the “Separation Agreement”) pursuant to which SG shall or shall cause its subsidiaries to assign, transfer, convey and deliver to Cowen Inc. the Cowen Assets (as defined in the Separation Agreement), which Cowen Assets shall include all of the outstanding membership interests of Cowen LLC and all of the capital stock of Cowen International Limited (each of which, immediately prior to the transactions contemplated by the Separation Agreement, were owned in their entirety by SGASH) and thereafter Cowen Inc., directly or indirectly, will operate the Cowen Business (as defined in the Separation Agreement), own the Cowen Assets (as defined in the Separation Agreement) and have responsibility for the Cowen Liabilities (as defined in the Separation Agreement). The parties have agreed to enter into this Agreement for the purpose of allocating between SG and the SG Subsidiaries (as defined in the Separation Agreement) on the one hand, and Cowen Inc., Cowen LLC and the Cowen Inc. Subsidiaries (each as defined in the Separation Agreement) on the other hand, responsibilities and liabilities for employees, employee compensation and benefit plans, programs, policies and arrangements following the transactions contemplated by the Separation Agreement.   AGREEMENT   ARTICLE I DEFINITIONS   SECTION 1.1                 Certain Defined Terms. The following capitalized terms as used in this Agreement shall have the meaning set forth below unless otherwise specified herein. Capitalized terms used herein that are not defined below or elsewhere in this Agreement shall have the meaning set forth in the Separation Agreement.   “Award,” when immediately preceded by “SG,” means SG Restricted Stock and SG Restricted Stock Units and, when immediately preceded by “Cowen Inc.,” means Cowen Inc. Restricted Stock and Restricted Stock Units.   “Benefit Plan” shall mean, in the context where used, any employee benefit plan, program, policy, contract or arrangement, including, but not limited to, any employee benefit plan as defined in section 3(3) of ERISA.   “Benefit Plan Bifurcation Date” means January 1, 2004.   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   “Business Day”  means any day other than (i) a Saturday or Sunday or (ii) a day on which banks are required or authorized to close in New York, New York.   “Cowen Benefit Plans” shall mean the Benefit Plans sponsored, maintained or contributed to by any Cowen Entity immediately prior to the Separation Date and each other Benefit Plan sponsored, maintained or contributed to by any Cowen Entity at any time since the Benefit Plan Bifurcation Date.   “Cowen Employee” means any individual who, immediately prior to the Separation Date, is either actively employed by, or then on an approved leave of absence from, any Cowen Entity.   “Cowen Employee Ownership Plan” means the 2006 Equity and Incentive Plan adopted by Cowen Inc. on July 11, 2006.   “Cowen Entities” means, collectively, Cowen Inc., Cowen LLC and the Cowen Subsidiaries.   “Cowen Subsidiaries” means, collectively, the Cowen Inc. Subsidiaries and Cowen LLC Subsidiaries.   “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.   “Fidelity Plan” means the SG-USA Fidelity Bonus Plan.   “Final Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of state, local or foreign law, as applicable, or any other event (including the execution of a Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax.   “Former Cowen Employee” means any individual who is a former employee of any Cowen Entity as of the Separation Date.   “Indemnification Agreement” has the meaning give to such term in the Separation Agreement.   “IPO” has the meaning given to such term in the Separation Agreement.   “IPO Date” has the meaning given to such term in the Separation Agreement.   “Option” when immediately preceded by “SG,” means an option (either nonqualified or incentive) to purchase shares of SG Common Stock pursuant to a SG Long-Term Incentive Plan. When immediately preceded by “Cowen Inc.,” Option means an option (either nonqualified or incentive) to purchase shares of Cowen Inc. Common Stock pursuant to the Cowen Employee Ownership Plan.   “Principal Transaction Document”  has the meaning give to such term in the Separation Agreement.   2 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   “Registration Statement” has the meaning given to such term in the Separation Agreement.   “SCIB Partnership” means the Société Générale Corporate and Investment Banking Partnership.   “Separation” has the meaning given to such term in the Separation Agreement.   “SG Benefit Plans” shall mean the Benefit Plans sponsored, maintained or contributed to by SG or any SG Subsidiary; provided that the term “SG Benefit Plans” shall not include any of the SG Executive Benefit Plans.   “SG Common Stock” shall mean the common shares of SG.   “SG Compensation Expense” has the meaning given to such term in Section 3.12(a) below.   “SG Cowen Ventures” means SG Cowen Ventures L.L.P., a Delaware limited partnership.   “SG Deferred Compensation Plan” means the Société Générale Deferred Compensation Plan for Executives, As Amended and Restated Effective January 1, 2003.   “SG Entities” means, collectively, SG and the SG Subsidiaries.   “SG Executive Benefit Plans” means the compensation and benefit plans, programs, and other arrangements established, sponsored, maintained, or agreed upon, by SG or its affiliates for the benefit of employees and former employees of SG or its affiliates and/or the Cowen Employees and Former Cowen Employees before the Separation Date, if the participants in such plan or arrangement benefits are solely or primarily executive and other management employees. The SG Executive Benefit Plans shall include, without limitation, deferred compensation plans that are not qualified under Code section 401(a), including the Fidelity Plan, the SG Deferred Compensation Plan and the SG Merchant Banking Plan.   “SG Stock Option Plan” means the Societe Generale Stock Option Plan, as in effect as of the time relevant to the applicable provisions of this Agreement.   “SG Merchant Banking Plan” means the SG Merchant Banking Co-investment Plan.   “Tax” has the meaning given to such term in the Separation Agreement.   “Vesting Event” has the meaning given to such term in Section 3.12(b) below.   3 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   ARTICLE II GENERAL EMPLOYMENT AND COMPENSATION MATTERS   SECTION 2.1                 Employment of Employees. As of the Separation Date, all Cowen Employees shall continue to be employees of a Cowen Entity.   SECTION 2.2                 General Allocation of Benefit Plan Liabilities.   (a)           As of the Separation Date, except as expressly provided in this Agreement, the Separation Agreement or any other Transaction Document (as defined in the Separation Agreement), SG shall, and cause the SG Subsidiaries to, assume or retain, as applicable, and SG hereby agrees to (or to cause an SG Subsidiary to) pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all SG Benefit Plans, (ii) all Liabilities under all SG Executive Benefit Plans (other than Liabilities related to Cowen Employees and Former Cowen Employees under the Fidelity Plan), and (iii) any other Liabilities expressly assigned to SG and/or the SG Subsidiaries under this Agreement or the Separation Agreement.   (b)           From and after the Separation Date, except as expressly provided in this Agreement, the Separation Agreement or any other Transaction Document (as defined in the Separation Agreement), Cowen Inc. and Cowen LLC shall, and shall cause the other Cowen Entities to, assume or retain, as applicable, and Cowen Inc. and Cowen LLC hereby agree to (or cause another Cowen Entity, as applicable, to) pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all Cowen Benefit Plans, (ii) all Liabilities related to Cowen Employees and Former Cowen Employees under the Fidelity Plan and (iii) any other Liabilities that are expressly assigned to the Cowen Entities under this Agreement or the Separation Agreement.   SECTION 2.3                 Cowen Participation in SG Plans. Except as expressly provided in this Agreement, effective as of Separation Date, the Cowen Entities shall cease to be participating companies in all SG Benefit Plans and SG Executive Benefit Plans, and SG, Cowen Inc. and Cowen LLC shall take all necessary actions before the Separation Date to effectuate such cessation.   SECTION 2.4                 Interpretation of Cowen Obligations. Nothing in this Agreement shall be interpreted or construed to restrict the ability or right of any Cowen Entity to modify or change any employee’s or service provider’s terms and conditions of employment or engagement (including compensation or Benefit Plans) with respect to services performed for the Cowen Entities after the IPO Date, or to establish the terms and conditions of employment for Cowen Employees with respect to services performed after the IPO Date. Except as otherwise provided in any Transaction Document, nothing in this Agreement shall be interpreted or construed to require any Cowen Entity to offer any Benefit Plan to any person or to restrict any Cowen Entity’s ability to amend, modify, change, terminate or establish any Cowen Benefit Plan after the IPO Date.   SECTION 2.5                 Interpretation of SG Obligations. Except as otherwise provided in any Transaction Document, nothing in this Agreement shall be interpreted or construed to require any SG Entity to offer any Benefit Plan to any person or to restrict any SG Entity’s ability to amend, modify, change, terminate or establish any SG Benefit Plan or any SG Executive Benefit Plans after the IPO Date.   4 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   ARTICLE III EXECUTIVE BENEFITS AND OTHER BENEFITS   SECTION 3.1                 Assumption Of Obligations. Schedule 3.1(a) sets forth a complete list of SG Benefit Plans and the SG Executive Benefit Plans other than the Fidelity Plan, which it is agreed shall not be listed in Schedule 3.1(a). Schedule 3.1(b) sets forth a complete list of Cowen Benefit Plans, including the Fidelity Plan. Except as otherwise provided in this Agreement or in any Transaction Document, effective as of the Separation Date, Cowen Inc. shall assume and be solely responsible for all Liabilities to or relating to the Cowen Benefit Plans and for all Liabilities to or relating to Cowen Employees and Former Cowen Employees under any Benefit Plan that is not set forth in Schedule 3.1(a). For the avoidance of doubt, it is agreed that, except to the extent otherwise expressly provided in this Agreement, the foregoing provisions of this Section 3.1 shall apply to all Liabilities payable or otherwise distributable on or after the Separation Date, regardless of when such Liabilities arose. If (i) the Separation, or any other transaction related to the Separation, constitutes a change in control (as that term is defined in Code section 280G); (ii) any Cowen Employee becomes subject to tax under Code section 4999 in connection with such change in control; and (iii) the Cowen Employee becomes eligible for any reimbursement for such taxes (or any other additional taxes incurred as a consequence of such reimbursement described in this clause (iii)), the Cowen Entities shall be solely responsible for payment of such reimbursement.   SECTION 3.2                 SG Cowen Ventures.   (a)           After the Separation Date, SG shall (or shall cause the applicable SG Subsidiaries to) assume and be responsible for all Liabilities relating to, arising out of or resulting from the administration of SG Cowen Ventures as described in Section 2.02(b)(ii) of the Separation Agreement, including Liabilities relating to, arising out of or resulting from the administration of hypothetical investments in SG Cowen Ventures made by Cowen Employees who are not “accredited investors” (within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act of 1933). After the Separation Date, Cowen Inc. shall be responsible for all Liabilities relating to, arising out of or resulting from investment decisions or the management of portfolio companies relating to SG Cowen Ventures as described in Section 2.02(a)(ii)(D) of the Separation Agreement.   (b)           No Cowen Employee shall make additional contributions for any new actual or hypothetical investments in SG Cowen Ventures after the Separation Date. Subject to Section 3.2(c), SG Cowen Ventures, in the case of actual investments in SG Cowen Ventures, or by SG (or the applicable SG Subsidiaries) in the case of hypothetical investments in SG Cowen Ventures, shall be responsible for paying any and all distributions that are payable to or with respect to Cowen Employees in accordance with the terms of SG Cowen Ventures, including distributions to Cowen Employees whose investments in SG Cowen Ventures are hypothetical and not actual; provided, however, that with respect to distributions that are payable to or with respect to any such Cowen Employee who received a leveraged investment in connection with such Cowen Employee’s participation in SG Cowen Ventures and pursuant to the terms of the SG Cowen Ventures employee investment program (including as such program relates to   5 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   hypothetical investments by Cowen Employees who are not accredited investors), such distributions shall first be applied toward such leverage obligation and any remaining distributions shall be made to such Cowen Employee.   (c)           Notwithstanding anything in this Section 3.2 to the contrary, Cowen Inc. shall act as a paying agent with respect to amounts distributed in respect of SG Cowen Ventures, it being understood that SG shall (or shall cause SG Cowen Ventures or the applicable SG Subsidiaries to) pay such amounts to Cowen Inc. and Cowen Inc. shall promptly pay such amounts to the applicable Cowen Employees. Cowen Inc. shall, and shall cause its Subsidiaries to, cooperate reasonably and in good faith with SG with respect to the determination of amounts payable in respect of SG Cowen Ventures to Cowen Employees.   SECTION 3.3                 SG Annual Bonus Plan. With respect to any annual bonus that Cowen Employees may merit under the SG Annual Bonus Plan, for the period commencing January 1, 2006 and ending on the IPO Date, Cowen LLC shall accrue and record liabilities to reflect such in accordance with the methodology used in the first quarter of calendar year 2006, as reflected in the combined statements of financial condition of Cowen Inc. contained in the Registration Statement, and Cowen LLC shall be solely responsible for payment to Cowen Employees of any such annual bonus; provided, however, that in the event that Cowen LLC accrues or records an aggregate amount of such Liabilities in excess of the aggregate amount of such bonuses that are actually paid, Cowen LLC shall pay to SG, promptly, but in no event more than ten Business Days, after the bonus payment date, an amount equal to such excess accrual or recording. At least ten Business Days prior to Cowen LLC paying any such annual bonus to Cowen Employees, Cowen LLC shall notify SGAI in writing of such payment and such notice shall set forth in reasonable detail the calculation of such payment and whether Cowen LLC is required to make any payment to SG pursuant to this Section 3.3. Neither Cowen LLC nor any other Cowen Entity shall accrue or record any Liabilities for any other bonuses with respect to any period ending on or prior to the IPO Date.   SECTION 3.4                 SG Merchant Banking Plan.   (a)           On or prior to the Separation Date, the actions described in Section 2.07(a) of the Separation Agreement shall occur with respect to the SG Merchant Banking Plan. SG will (or will cause the applicable SG Subsidiaries to) maintain the SG Merchant Banking Plan after the Separation Date.   (b)           Other than hypothetical investments in the SG Merchant Banking Plan made prior to the date hereof by Cowen Employees, no Cowen Employee currently holds an investment in the SG Merchant Banking Plan. No Cowen Employee shall make additional contributions for any new hypothetical investments in respect of the SG Merchant Banking Plan after the Separation Date; provided, however, that the leverage component of any previous hypothetical investment of any Cowen Employee under the plan shall continue to vest in accordance with its terms as though the Separation had not occurred.   (c)           SG shall (or shall cause the applicable SG Subsidiaries to) be responsible for those Liabilities with respect to the SG Merchant Banking Plan that are described in Section 2.02(b)(iii) of the Separation Agreement and Cowen shall be responsible for those Liabilities   6 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   with respect to the SG Merchant Banking Plan that are described in Section 2.02(a)(ii)(E) of the Separation Agreement. Subject to Section 3.4(d), SG (or the applicable SG Subsidiaries) shall be responsible for paying any and all distributions that, pursuant to the terms of the employee investment program that related to hypothetical investments by Cowen Employees in the SG Merchant Banking Plan, are payable to or with respect to Cowen Employees; provided, however, that with respect to distributions that are payable to or with respect to any such Cowen Employee who received a leveraged investment in connection with such Cowen Employee’s hypothetical investment in the SG Merchant Banking Plan (and pursuant to the terms of the employee investment program that relates to hypothetical investments by Cowen Employees in the SG Merchant Banking Plan), such distributions shall first be applied toward repayment of such leverage obligation and any remaining distributions shall be made directly to such Cowen Employee.   (d)           Notwithstanding anything in this Section 3.4 to the contrary, Cowen Inc. shall act as a paying agent with respect to amounts distributed in respect of the SG Merchant Banking Plan, it being understood that SG shall (or shall cause the applicable SG Subsidiaries to) pay such amounts to Cowen Inc. and Cowen Inc. shall promptly pay such amounts to the applicable Cowen Employees. Cowen Inc. shall, and shall cause its Subsidiaries to, cooperate reasonably and in good faith with SG with respect to the determination of amounts payable in respect of the SG Merchant Banking Plan to Cowen Employees.   SECTION 3.5                 Stock Options. All SG Options granted under the SG Stock Option Plan (collectively, the “SG Option Awards”) that are held by Cowen Employees as of the IPO Date shall become nonforfeitable as of such date. For purposes of the SG Option Awards, the occurrence of the Separation or the IPO shall not result in any SG Option Awards being replaced with awards based on Cowen Inc. stock, and the IPO Date shall constitute a termination of employment for all Cowen Employees (who are not employed by an SG entity immediately after the IPO Date) for purposes of any SG Option Award. The right of either Cowen Inc. or SGAI to claim any federal, state, local or foreign income Tax compensation deductions in respect of any Stock Award shall be determined in accordance with Section 3.12 hereof.   SECTION 3.6                 Foreign Grants/Awards. To the extent that the SG Option Awards are granted to any non-U.S. Cowen Employee under any domestic or foreign equity-based incentive program that, prior to the IPO Date, was sponsored by a SG Entity, then, subject to the provisions of this Section 3.6, SG and Cowen LLC shall use their commercially reasonable efforts to preserve, at and after the IPO Date, the value and tax treatment accorded to such awards. The parties hereby delegate to the SG Executive Vice President-Human Resources, for periods before the IPO Date, the authority to determine an appropriate methodology for adjusting such grants or awards in a manner that is, to the extent possible, consistent with the treatment of such awards and grants for U.S. employees. The right of either Cowen Inc. or SGAI to claim any federal, state, local or foreign income Tax compensation deductions in respect of any Stock Award shall be determined in accordance with Section 3.12 hereof.   SECTION 3.7                 Miscellaneous Option And Other Award Terms. After the IPO Date, Cowen Inc. Options and Cowen Inc. Awards, regardless of by whom held, shall be settled by Cowen Inc. pursuant to the terms of the Cowen Employee Ownership Plan.   7 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   SECTION 3.8                 Approval of Cowen Employee Ownership Plan. Prior to the Separation Date, SGASH shall cause Cowen Inc. to adopt the Cowen Employee Ownership Plan substantially in the form attached as Exhibit C to the Separation Agreement, and SGASH shall approve the plan, subject to Section 4.04(a) of the Separation Agreement.   (a)           All awards granted under the Cowen Employee Ownership Plan shall permit cancellation without cost to Cowen Inc., SG, or any of their respective Subsidiaries or affiliates if conditions established by SG and SGASH relating to the IPO or the Separation are not satisfied.   (b)           A participant’s receipt of awards under the Cowen Employee Ownership Plan shall be conditioned on such participant’s execution and delivery of an Executive Award Agreement and a release satisfactory to SG and Cowen Inc. and the occurrence of the IPO.   (c)           If the IPO is not consummated for any reason or no reason, the Employee Ownership Plan and any shares or options issued thereunder shall be null and void and of no force and effect.   SECTION 3.9                 Fidelity Plan and SG Deferred Compensation Plan.   (a)           The parties acknowledge and agree that the IPO constitutes “Good Reason” as defined in the Fidelity Plan and, thus, all unvested amounts held in the Fidelity Plan for the account of Cowen Employees shall become fully vested upon the IPO. All vested amounts in such Cowen Employees’ deferral accounts as of the IPO Date under the Fidelity Plan, including those amounts that vest as described in the foregoing sentence, will be distributed by Cowen LLC to such Cowen Employees as soon as practicable, but in no event more than thirty (30) days, following the IPO Date; provided, however, that if any Cowen Employee previously elected to defer the payment of any amounts under the Fidelity Plan, then those amounts will be distributed by Cowen LLC at the time set forth in, and otherwise in accordance with, such Cowen Employee’s prior deferral election.   (b)           All amounts held in the SG Deferred Compensation Plan as of the IPO Date for the account of Cowen Employees who were Participants (as defined in the SG Deferred Compensation Plan) in the SG Deferred Compensation Plan prior to January 1, 2001 will be distributed by SG to such Cowen Employees (subject to Section 3.9(c)) as soon as practicable, but in no event more than four (4) weeks, following the IPO Date; provided, however, that if any such Cowen Employee previously elected to defer the payment of any amounts under the SG Deferred Compensation Plan, then those amounts will be distributed by SG at the time set forth in, and otherwise in accordance with, such Cowen Employee’s prior deferral election. All amounts related to Cowen Employees who became Participants (as defined in the SG Deferred Compensation Plan) in the SG Deferred Compensation Plan on or following January 1, 2001 will be distributed by SG to such Cowen Employees as soon as practicable, but in no event more than four (4) weeks, following the IPO Date.   (c)           Notwithstanding anything in this Section 3.9 to the contrary, Cowen Inc. shall act as a paying agent with respect to amounts distributed under the SG Deferred Compensation Plan, it being understood that SG shall (or shall cause the applicable SG Subsidiaries to) pay such amounts to Cowen Inc. and Cowen Inc. shall promptly pay such amounts to the applicable   8 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   Cowen Employees. Cowen Inc. shall, and shall cause its Subsidiaries to, cooperate reasonably and in good faith with SG with respect to the determination of amounts payable from the SG Deferred Compensation Plan to Cowen Employees.   SECTION 3.10               Employee Stock Purchase Plan. After the IPO Date, SG stock obtained pursuant to purchases made under the various Global Employee Share Ownership Offerings under the Société Générale International Group Saving Plan shall not be subject to the five-year holding period otherwise provided by that plan.   SECTION 3.11               SCIB Partnership.   (a)           If, immediately following the IPO, SGASH owns less than 33% of the outstanding common stock of Cowen Inc., then as soon as practicable after the IPO Date SG shall cause the SCIB Partnership to pay to each Cowen Employee listed on Schedule A hereto the dollar amount set forth next to such Cowen Employee’s name on Schedule A. Following the distribution of such amounts, none of the SCIB Partnership, SG or the SG Subsidiaries shall have any further obligations to any Cowen Employee (or Former Cowen Employees) under or with respect to the SCIB Partnership.   (b)           If, immediately following the IPO, SGASH owns 33% or more of the outstanding common stock of Cowen Inc., then the payments contemplated by Schedule A shall not be made and any awards granted to Cowen Employees prior to the IPO Date under the SCIB Partnership shall continue to vest and, as applicable, be paid in accordance with their terms as though the Separation had not occurred.   SECTION 3.12               Income Tax Deductions for Compensation Expense.   (a)           SGAI shall be entitled to claim all federal, state, local and foreign income Tax compensation deductions attributable to the payment of any amounts to Cowen Employees for services performed by such Cowen Employees prior to the IPO Date (an “SG Compensation Expense”). Such SG Compensation Expenses shall include but not be limited to all payments to be made to Cowen Employees pursuant to Sections 3.2, 3.4, 3.9 and 3.11 of this Agreement and all Cowen Employee bonuses accrued during the period beginning on January 1, 2006 and ending on the IPO Date, except to the extent such accrued bonus amounts are returned to SGASH pursuant to Section 3.3 hereof. Unless and until there has been a Final Determination to the contrary, neither Cowen Inc. nor any of its Subsidiaries shall claim a federal, state, local or foreign income Tax compensation deduction in respect of such payments. If Cowen Inc. or any Subsidiary thereof is responsible for making payments in satisfaction of the SG Compensation Expense, Cowen Inc. shall promptly notify SGAI in writing of such payment when made.   (b)           Cowen Inc. shall be entitled to claim all federal, state, local and foreign income Tax compensation deductions permitted by applicable law in respect of any amounts attributable to a vesting, exercise or other event giving rise to any inclusion of compensation income (a “Vesting Event”) by any Cowen Employee with respect to the stock of Cowen Inc. Unless and until there is a Final Determination to the contrary, neither SGAI nor any of its   9 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   subsidiaries shall claim a federal, state or local income tax deduction in respect of such amounts. If and to the extent any Cowen Employee in the U.S. or otherwise has rights with respect to SG Option Awards, following a Vesting Event, (i) SGAI or its Subsidiaries shall be entitled to claim all federal, state, local and foreign income tax deductions permitted by applicable law in respect of such vesting, exercise or other income inclusion arising in connection with such SG Option Awards, (ii) Cowen Inc. shall promptly notify SGAI in writing of such event (if such Vesting Event is within Cowen Inc.’s knowledge) and (iii) unless and until there is a Final Determination to the contrary, neither Cowen Inc. nor any of its Subsidiaries shall claim a federal, state, local or foreign income Tax compensation deduction in respect of any amounts in connection with any such amounts.   ARTICLE IV EMPLOYEE BENEFIT PLAN ADMINISTRATION   SECTION 4.1                 Employee Benefit Plan Matters. Except as otherwise provided in the Transition Services Agreement or as otherwise expressly provided herein, neither SG nor any SG Subsidiary shall have any responsibility for providing services to any Cowen Entity with respect to employees or Benefit Plan matters after the Separation Date.   ARTICLE V GENERAL   SECTION 5.1                 Audit and Information Rights; Indemnification.   (a)           Each of SG and Cowen Inc., and their duly authorized representatives, shall have the right to conduct reasonable audits with respect to all information required to be provided to it by the other party under this Agreement. The party conducting the audit (the “Auditing Party”) may adopt reasonable procedures and guidelines for conducting audits and the selection of audit representatives under this Section 5.1. The Auditing Party shall have the right to make copies of any records at its expense, subject to any restrictions imposed by applicable laws and to any confidentiality provisions set forth in the Separation Agreement, which are incorporated by reference herein. The party being audited shall provide the Auditing Party’s representatives with reasonable access during normal business hours to its operations, computer systems and paper and electronic files, and provide workspace to its representatives. After any audit is completed, the party being audited shall have the right to review a draft of the audit findings and to comment on those findings in writing within ten Business Days after receiving such draft.   (b)           The Auditing Party’s audit rights under this Section 5.1 shall include the right to audit, or participate in an audit facilitated by the party being audited and to require the other party to request any benefit providers and third parties with whom the party being audited has a relationship, or agents of such party, to agree to such an audit to the extent any such persons are affected by or addressed in this Agreement (collectively, the “Non-Audit Parties”). The party being audited shall, upon written request from the Auditing Party, provide an individual (at the Auditing Party’s expense) to supervise any audit of a Non-Audit Party. The Auditing Party shall be responsible for supplying, at the Auditing Party’s expense, additional personnel sufficient to   10 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   complete the audit in a reasonably timely manner. The responsibility of the party being audited shall be limited to providing, at the Auditing Party’s expense, a single individual at each audited site for purposes of facilitating the audit.   (c)           Upon the reasonable request of SG, Cowen Inc. shall provide SG with documentary support that it has complied with all employment withholding obligations in connection with payments made to Cowen Employees pursuant to this Agreement.   (d)           Except as otherwise specifically set forth in any provision of the Indemnification Agreement (including but not limited to the penultimate paragraph of Section 3.01 of the Indemnification Agreement) or of any other Principal Transaction Document, Cowen Inc. shall, to the fullest extent permitted by law, indemnify, defend and hold harmless each of the SG Indemnitees from and against all Liabilities to the extent such Liabilities relate to, arise out of or result from (i) the failure of Cowen Inc. or any Cowen Subsidiary to comply with all employment withholding obligations in connection with payments made by Cowen Inc. or any Cowen Subsidiary to Cowen Employees pursuant to this Agreement or (ii) Cowen Inc.’s failure to comply with its obligations as paying agent under Sections 3.2(c), 3.4(d) and 3.9(c) of this Agreement.   SECTION 5.2                 Notices.   (a)           Any notices given pursuant to this Agreement shall be made in accordance with the notice provisions of the Separation Agreement.   (b)           Cowen Inc. shall provide prompt written notice to SG informing of any change in circumstances with respect to a Cowen Employee or a Former Cowen Employee, including but not limited to the termination of a Cowen Employee’s employment, such that SG may continue to comply with its obligations under this Agreement. Such written notice shall include to the extent reasonably available, a current or forwarding address or similar contact information for such Cowen Employee or Former Cowen Employee.   SECTION 5.3                 No Third Party Beneficiaries. This Agreement is an agreement solely among parties hereto. Nothing in this Agreement, whether express or implied, confers upon any employee or former employee of any party, any participant or beneficiary under any Benefit Plan or any other person, any rights or remedies, including, but not limited to (i) any right to employment or recall; (ii) any right to continued employment or continued service for any specified period; or (iii) any right to claim any particular compensation, benefit or aggregation of benefits, or any kind or nature.   SECTION 5.4                 Facsimile Signatures. Each party acknowledges that it and the other parties may execute this Agreement by facsimile, stamp or mechanical signature. Each party expressly adopts and confirms each such facsimile, stamp or mechanical signature made in its respective name as if it were a manual signature, agrees that it shall not assert that any such signature is not adequate to bind such party to the same extent as if it were signed manually and agrees that at the reasonable request of the other party at any time it shall as promptly as reasonably practicable cause this Agreement to be manually executed (any such execution to be as of the date of the initial date thereof).   11 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   SECTION 5.5                 Further Assurances and Consents. In addition to the actions specifically provided elsewhere in this Agreement, each of the parties hereto will use reasonable commercial efforts to (i) execute and deliver such further instruments and documents and take such other actions as the other party may reasonably request in order to effectuate the purposes of this Agreement and carry out the terms hereof; and (ii) take or cause to be taken, all actions and do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable laws, regulations and agreements or otherwise to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, using its reasonable efforts to obtain any consent and approvals and to make any filings and applications necessary or desirable in order to consummate the transactions contemplated by this Agreement; provided that no party hereto shall be obligated to pay any consideration therefor (except for filing fees and other similar charges) to any third party from whom such consents, approvals and amendments are required or to take any action or omit to take any action if the taking or the omission to take action would be unreasonably burdensome to the party or the business thereof.   SECTION 5.6                 Assignability. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that no party hereto may assign its rights or delegate its obligations under this Agreement without the express prior written consent of the other parties hereto. Notwithstanding the foregoing, this Agreement shall be assignable in whole in connection with a merger or consolidation or the sale of all or substantially all of the Assets of a party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant party thereto by operation of law or pursuant to an agreement in form and substance reasonably satisfactory to the other party.   SECTION 5.7                 Third Party Consent. If the obligation of any party under this Agreement is dependent on the consent of a third party consent and such consent is withheld, the parties shall use reasonable commercial efforts to implement the applicable provisions of this Agreement to the fullest extent practicable. If any provision of this Agreement cannot be implemented due to the failure of a third party to consent, the parties shall negotiate in good faith to implement the provision in a mutually satisfactory manner, taking into account the original purposes of the provision in light of the Separation and communications to affected individuals.   SECTION 5.8                 Effect if Separation Does Not Occur. If the Separation does not occur, then all actions and events that are to be taken under this Agreement as of the Separation Date or otherwise in connection with the Separation, shall not be taken or occur except to the extent specifically provided by SG or an SG Subsidiary.   SECTION 5.9                 Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York, irrespective of the choice of laws principles of the State of New York, as to all matters, including matters of validity, construction, effect, enforceability, performance and remedies.   12 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   SECTION 5.10               Disputes. Any disputes with respect to matters arising under this Agreement shall be resolved in accordance with the dispute resolution procedures set forth in the Separation Agreement.   SECTION 5.11               Amendments. No provisions of this Agreement shall be deemed amended, supplemented or modified unless such amendment, supplement or modification is in writing and signed by an authorized representative of each of the parties.   SECTION 5.12               Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable provision to effect the original intent of the parties.   SECTION 5.13               Entire Agreement. Except as otherwise provided herein by reference to the Separation Agreement, this Agreement constitutes the entire agreement and understanding between the parties relating to the matters addressed herein and supersedes and takes the place of all other agreements and understandings, written or oral, of the parties relating to such matters.   SECTION 5.14               Counterparts; Headings; Interpretation. This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be as effective as delivery of an executed original of such counterpart to this Agreement. The Section headings herein are inserted for convenience only and are not to be construed as part of this Agreement. All provisions of this Agreement shall be interpreted so as to give effect to the intent of the parties hereto.   SECTION 5.15               Mutual Drafting. This Agreement shall be deemed to be the joint work product of the parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.   SECTION 5.16               Remedies. In the event of a breach by a party of its obligations under this Agreement, each other party, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Each party agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any provision of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it will waive the defense that a remedy at law would be adequate.   * * * * *   13 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their authorized representatives.       SOCIÉTÉ GÉNÉRALE           By:   /s/ Jean-Philippe Coulier       Name: Jean-Philippe Coulier     Title: Chief Operating Officer, Americas           SG AMERICAS, INC.           By:   /s/ Jean-Philippe Coulier       Name: Jean-Philippe Coulier     Title: Vice President           SG AMERICAS SECURITIES HOLDINGS, INC.           By:   /s/ Jean-Philippe Coulier       Name: Jean-Philippe Coulier     Title: President           COWEN AND COMPANY, LLC           By:   /s/ Christopher A. White       Name: Christopher A. White     Title: Chief Administrative Officer           COWEN GROUP, INC.           By:   /s/ Christopher A. White       Name: Christopher A. White     Title: Vice President     Employee Matters Agreement   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------

  -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   EMPLOYMENT AGREEMENT   AGREEMENT, dated as of November 22nd, 2006 (the "Effective Date"), by and between Integrated Alarm Services Group, Inc., a Delaware corporation (the "Company"), and Robert Heintz, an individual residing at 923 Woodview Road, Brielle, NJ 08730 (the "Executive").   WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders to enter into an employment agreement with the Executive, and the Executive is willing to serve as an employee of the Company, subject to the terms and conditions of this Agreement; and   WHEREAS, the Company and the Executive entered into an employment agreement, dated as of October 1, 2002 (the "Existing Employment Agreement"); and   WHEREAS, the Company and the Executive desire to provide for the continued employment of the Executive and to supersede the Existing Employment Agreement with this Agreement;   NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:   1. Employment and Duties.   (a) General. The Executive shall serve as Chief Operating Officer, Criticom International, reporting to the Chief Executive Officer (the "CEO") of the Company. The Executive shall have such duties and responsibilities, commensurate with the Executive's position, as may be assigned to the Executive from time to time by the Board of Directors (the "Board") or the CEO of the Company. The Executive shall perform any and all duties related to his position with the Company and shall be available to confer and consult with and advise the officers and directors of the Company at such times as the Company may require. The Executive's principal place of employment shall be Manasquan, New Jersey provided, however, that the Executive understands and agrees that he will be required to travel from time to time for business reasons.   (b) Exclusive Services. For so long as the Executive is employed by the Company, the Executive shall devote his full-time working time to his duties hereunder, shall faithfully serve the Company, shall in all respects conform to and comply with the lawful and good faith directions and instructions given to him by the CEO and shall use his best efforts to promote and serve the interests of the Company. Further, the Executive shall not, directly or indirectly, render services to any other person or organization without the consent of the Company or otherwise engage in activities that would interfere with the faithful performance of his duties hereunder.   2. Term of Employment. The Executive's employment under this Agreement shall commence as of the Effective Date and shall terminate on the earlier of (i) the first anniversary of the Effective Date and (ii) the termination of the Executive's employment under this Agreement; provided, however, that the term of the Executive's employment shall be automatically extended without further action of either party for additional one-year periods unless written notice of either party's intention not to extend has been given to the other party at least 90 days prior to the expiration of the then effective Term. The period from the Effective Date until the termination of the Executive's employment under this Agreement is referred to as the "Term".     --------------------------------------------------------------------------------   3. Compensation and Other Benefits. Subject to the provisions of this Agreement, the Company shall pay and provide the following compensation and other benefits to the Executive during the Term as compensation for services rendered hereunder:   (a) Base Salary. The Company shall pay to the Executive a salary (the "Base Salary") at the rate of $170,000 per annum, payable in substantially equal installments at such intervals as may be determined by the Company in accordance with its ordinary payroll practices as established from time to time.   (b) Bonus. In addition to the Base Salary, the Executive shall be eligible to earn for each calendar year ending during the Term an annual incentive bonus (the “Bonus”) based on the achievement of one or more performance goals, targets, measurements and other factors (collectively, the “Performance Goals”) established for such year by the Compensation Committee of the Board (the “Committee”). The Executive’s target annual bonus (the “Target Bonus”) and the applicable Performance Goals will be established by the Committee within 90 days of the first day of the year to which such Bonus relates. Payment of the Executive’s Bonus for any year will be based upon the achievement of the Performance Goals established by the Committee for that year (including, without limitation, the exercise of the Committee’s negative discretion under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”)). The actual bonus paid may be higher or lower than the Target Bonus for over- or under-achievement of the Performance Goals (including, without limitation, the exercise of the Committee’s negative discretion under Section 162(m) of the Code), as determined by the Committee. Subject to Section 4 hereof, a Bonus, if any, shall be payable by March 15th of the succeeding calendar year or as soon thereafter as may be administratively practicable.   (c) Company Car. Employee shall receive a leased car of his choice paid for by the Employer, at a cost of not more than $1,000 per month.   (d) Savings and Retirement Plans. The Executive shall be entitled to participate in all savings and retirement plans applicable generally to other senior executives of the Company, in accordance with the terms of the plans, as may be amended from time to time.   (e) Welfare Benefit Plans. The Executive and/or his family shall be eligible to participate in and shall receive all benefits under the Company's welfare benefit plans and programs applicable generally to other senior executives of the Company, in accordance with the terms of the plans, as may be amended from time to time. The Company shall include the Executive in its health insurance program available to the Company's executive officers and shall pay 100% of the premiums for such program.   (f) Expenses. The Company shall reimburse the Executive for reasonable travel and other business-related expenses incurred by the Executive in the fulfillment of his duties hereunder upon presentation of written documentation thereof, in accordance with the applicable expense reimbursement policies and procedures of the Company as in effect from time to time.     2 --------------------------------------------------------------------------------   (g) Paid Time Off. The Executive shall be entitled to 22 vacation days and 4 sick/personal days each year during the Term, which shall be referred to together as "paid time off." The extent to which unused paid time off from one year shall be carried forward to any later year shall be governed by the Company's paid time off policy in effect from time to time. Upon separation of employment, for any reason, paid time off accrued and not used shall be paid in accordance with the Company's paid time off policy then in effect, and the determination of the amount of paid time off accrued and not used shall be made by the Company in its sole discretion pursuant to such policy.   4. Termination of Employment.   (a) Termination for Cause; Resignation. (i) If, prior to the expiration of the Term, the Company terminates the Executive's employment for Cause, as defined in Section 4(a)(ii) hereof, or if the Executive resigns from his employment hereunder, the Executive shall only be entitled to payment of unpaid Base Salary through and including the date of termination or resignation and any other amounts or benefits required to be paid or provided by law or under any plan, program, policy or practice of the Company ("Other Accrued Compensation and Benefits"). The Company shall have no further obligation to compensate the Executive under any other provision of this Agreement or any other severance or salary continuation arrangement of the Company.   (ii)Termination for "Cause" shall mean termination of the Executive's employment because of:   (A) any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement;   (B) the willful and continued failure or refusal of the Executive to satisfactorily perform the duties reasonably required of him as an employee of the Company;   (C) the Executive's conviction of, or plea of nolo contendere to, (1) any felony or (2) another crime involving dishonesty or moral turpitude or which could reflect negatively upon the Company or any of its subsidiaries or affiliates (the "Company Group") or otherwise impair or impede its operations;   (D) the Executive's engaging in any misconduct, negligence, act of dishonesty, violence or threat of violence (including any violation of federal securities laws) that is injurious to the Company Group;   (E) the Executive's material breach of a written policy of the Company, the Company's Code of Ethics, or the rules of any governmental or regulatory body applicable to the Company;     3 --------------------------------------------------------------------------------   (F) the Executive's refusal to follow the lawful and good faith directions of the Board;   (G) the Executive's engaging in conduct that constitutes activity in competition with the Company Group; or   (I) any other willful misconduct by the Executive which is materially injurious to the financial condition, business, or reputation of the Company Group.   (b) Termination without Cause. (i) If, prior to the expiration of the Term, the Executive's employment is terminated by the Company without Cause, the Company (A) shall pay the Other Accrued Compensation and Benefits, if any, and (B) shall continue to pay the Executive the Base Salary at the rate in effect on the date the Executive's employment is terminated, for the period remaining in the Term on the day prior to the date the Executive's employment is terminated, in accordance with the Company's ordinary payroll practices. The Company shall have no further obligation to compensate the Executive under Section 4(c) or any other provision of this Agreement or any other severance or salary continuation arrangement of the Company.   (ii)The Company shall not be required to make the payments and provide the benefits provided for under Section 4(b)(i) unless the Executive executes and delivers to the Company a release substantially in the form attached as Exhibit A and the release has become effective and irrevocable in its entirety.   (iii)If, following a termination of employment without Cause, the Executive breaches the provisions of Sections 5 through 8 hereof, the Executive shall not be eligible, as of the date of such breach, for the payments described in Section 4(b)(i), and any and all obligations and agreements of the Company with respect to such payments shall thereupon cease. (c) Termination upon Change in Control.   (i) Upon a Change in Control during the Term, the Term shall automatically be extended for 1 year following the Change in Control.   (ii) In the event of the Executive's Involuntary Termination within 12 months after a Change in Control, provided such Change in Control occurs during the Term, (A) the Executive shall be eligible to receive a lump sum payment within 30 days of such termination equal to one times his Base Salary at the rate in effect immediately prior to such termination and (B) all stock options and warrants granted by the Company to the Executive under any plan prior to such termination shall vest, accelerate, and become immediately exercisable. The Company shall have no further obligation to compensate the Executive under Section 4(b)(i) or any other provision of this Agreement or any other severance or salary continuation arrangement of the Company. The Company shall not be required to make the payments and provide the benefits provided for under this Section 4(c)(ii) unless the Executive executes and delivers to the Company a release substantially in the form attached as Exhibit A and the release has become effective and irrevocable in its entirety.     4 --------------------------------------------------------------------------------   (iii) "Involuntary Termination" shall mean termination of the Executive's employment by the Company and its subsidiaries other than for Cause. The Executive shall be deemed to have incurred an Involuntary Termination if: (A) there is a Change in Control during the Term; and (B) within 12 months after such Change in Control, (1) the location of his principal place of employment is moved to a location that is more than 50 miles from the location of his principal place of employment immediately prior to such Change in Control, or (2) the Executive's Base Salary as in effect immediately prior to such Change in Control is reduced by more than 10%; and (C) he thereafter resigns from employment within 30 days of such change of location of principal place of employment or such reduction in Base Salary. Except as provided in this Section 4(c), resignation from employment for any reason shall not be considered an Involuntary Termination.   (iv) A "Change in Control" shall occur if:   (A) any "person" within the meaning of Section 14(d) of the Securities Exchange Act of 1934, as amended, and any successor provisions thereto is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities entitled to vote in the election of directors of the Company;   (B) during any twelve-month period (not including any period prior to the consummation of a Change in Control), individuals who at the beginning of such period constituted the Board and any new directors, whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least one-half of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof;   (C) there occurs a reorganization, merger, consolidation or other corporate transaction involving the Company (a "Transaction"), in each case with respect to which the stockholders of the Company immediately prior to such Transaction do not, immediately after the Transaction, own more than 50% of the combined voting power of the Company or another corporation resulting from such Transaction, in substantially the same proportion of ownership as prior to such Transaction; or   (D) all or substantially all of the assets of the Company are sold, liquidated or distributed.   (d) Termination Due to Death or Disability. The Executive's employment with the Company shall terminate automatically on the Executive's death. In the event of the Executive's disability, the Company shall be entitled to terminate his employment. In the event of termination of the Executive's employment by reason of Executive's death or disability, the Company shall pay to the Executive (or his estate, as applicable) the Executive's Base Salary through and including the date of termination. For purposes of this Agreement, "disability" shall have the meaning set forth in the Company's long-term disability plan.     5 --------------------------------------------------------------------------------   (e) Notice of Termination. Any termination of employment by the Company or the Executive shall be communicated by a written "Notice of Termination" to the other party hereto given in accordance with Section 22 of this Agreement. In the event of a termination by the Company for Cause, the Notice of Termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) specify the date of termination, which date shall not be more than 30 days after the giving of such notice. The failure by the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Company hereunder or preclude the Company from asserting such fact or circumstance in enforcing the Company's rights hereunder.   (f) Resignation from Directorships and Officerships. The termination of the Executive's employment for any reason will constitute the Executive's resignation from (i) any director, officer or employee position the Executive has with the Company and (ii) all fiduciary positions (including as a trustee) the Executive holds with respect to any employee benefit plans or trusts established by the Company. The Executive agrees that this Agreement shall serve as written notice of resignation in this circumstance; provided, however, that the Executive shall execute such other documents as may be required by the Company in connection with such resignation.   5. Confidentiality.   (a) Confidential Information. (i) The Executive agrees that he will not at any time, except with the prior written consent of the Company Group or, to the extent permitted pursuant to subsection 5(a)(ii), as required by law, directly or indirectly, reveal to any person, entity or other organization (other than any member of the Company Group or its respective employees, officers, directors, shareholders or agents) or use for the Executive's own benefit any information deemed to be confidential by any member of the Company Group ("Confidential Information") relating to the assets, liabilities, employees, goodwill, business or affairs of any member of the Company Group, including, without limitation, any information concerning past, present or prospective customers, manufacturing processes, marketing data, or other confidential information used by, or useful to, any member of the Company Group and known to the Executive by reason of the Executive's employment by, shareholdings in or other association with any member of the Company Group; provided that such Confidential Information does not include any information which is available to the general public or is generally available within the relevant business or industry other than as a result of the Executive's action. Confidential Information may be in any medium or form, including, without limitation, physical documents, computer files or disks, videotapes, audiotapes, and oral communications.   (ii)In the event that the Executive becomes legally compelled to disclose any Confidential Information, the Executive shall provide the Company with prompt written notice so that the Company may seek a protective order or other appropriate remedy. In the event that such protective order or other remedy is not obtained, the Executive shall furnish only that portion of such Confidential Information or take only such action as is legally required by binding order and shall exercise his reasonable efforts to obtain reliable assurance that confidential treatment shall be accorded any such Confidential Information. The Company shall promptly pay (upon receipt of invoices and any other documentation as may be requested by the Company) all reasonable expenses and fees incurred by the Executive, including attorneys' fees, in connection with his compliance with the immediately preceding sentence.     6 --------------------------------------------------------------------------------   (b)Confidentiality of Agreement. The Executive agrees that, except as may be required by applicable law or legal process, during the Term and thereafter, he shall not disclose the terms of this Agreement to any person or entity other than the Executive's accountants, financial advisors, attorneys or spouse, provided that such accountants, financial advisors, attorneys and spouse agree not to disclose the terms of this Agreement to any other person or entity.   (c)Exclusive Property. The Executive confirms that all Confidential Information is and shall remain the exclusive property of the Company Group. All business records, papers and documents kept or made by the Executive relating to the business of the Company Group shall be and remain the property of the Company Group. Upon the request and at the expense of the Company Group, the Executive shall promptly make all disclosures, execute all instruments and papers and perform all acts reasonably necessary to vest and confirm in the Company Group, fully and completely, all rights created or contemplated by this Section 5.   6. Noncompetition. The Executive agrees that, for a period commencing on the Effective Date and ending one year after termination of employment for any reason (the "Restricted Period"), the Executive shall not, without the prior written consent of the Company, directly or indirectly, and whether as principal, investor, employee, officer, director, manager, partner, consultant, agent or otherwise, alone or in association with any other person, firm, corporation or other business organization, carry on a Competing Business (as hereinafter defined) in any geographic area in which the Company Group has engaged in a Competing Business (including, without limitation, any area in which any customer of the Company Group may be located). For purposes of this Section 6, carrying on a "Competing Business" means to engage in the business of wholesale monitoring and related support services, financing solutions and products within the security alarm industry, and any other business engaged in by the Company within 12 months after termination of employment; provided, however, that nothing herein shall limit the Executive's right to own not more than 1% of any of the debt or equity securities of any business organization that is then filing reports with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended. In the event the Executive is employed at will by the Company Group for any period after the end of the Term, this Section 6 shall remain effective until the first anniversary of the date of the Executive's termination of employment.   7. Non-Solicitation. The Executive agrees that, during the Restricted Period, the Executive shall not, directly or indirectly, (a) interfere with or attempt to interfere with the relationship between any person who is, or was during the then most recent three-month period, an employee, officer, representative or agent of the Company Group and any member of the Company Group, or solicit, induce or attempt to solicit or induce any of them to leave the employ of any member of the Company Group or violate the terms of their respective contracts, or any employment arrangements, with such entities or (b) induce or attempt to induce any customer, client, supplier, licensee or other business relation of any member of the Company Group to cease doing business with any member of the Company Group, or in any way interfere with the relationship between any member of the Company Group and any customer, client, supplier, licensee or other business relation of any member of the Company Group. As used herein, the term "indirectly" shall include, without limitation, the Executive's permitting the use of the Executive's name by any competitor of any member of the Company Group to induce or interfere with any employee or business relationship of any member of the Company Group.     7 --------------------------------------------------------------------------------   8. Assignment of Developments.   (a) During the Executive’s employment, all Developments that are at any time made, reduced to practice, conceived or suggested by him, whether acting alone or in conjunction with others, shall be the sole and absolute property of the Company, free of any reserved or other rights of any kind on his part, and the Executive hereby irrevocably assigns, conveys and transfers any and all right, title and interest that he may have in such Developments to the Company Group. If such Developments were made, conceived or suggested by the Executive during or as a result of his employment relationship with the Company Group, the Executive shall promptly make full disclosure of any such Developments to the Company and, at the Company’s cost and expense, do all acts and things (including, among others, the execution and delivery under oath of patent and copyright applications and instruments of assignment) deemed by the Company to be necessary or desirable at any time in order to effect the full assignment to the Company of his right, title and interest, if any, to such Developments. The Executive acknowledges and agrees that any invention, concept, design or discovery that concretely relates to or is associated with the Executive’s work for the Company Group that is described in a patent application or is disclosed to a third party directly or indirectly by the Executive during the Restricted Period shall be the property of and owned by the Company, and such disclosure by patent application (except by way of a patent application filed by any member of the Company Group) or otherwise shall constitute a breach of Section 6 above.   “Developments” shall mean all data, discoveries, findings, reports, designs, inventions, improvements, methods, practices, techniques, developments, programs, concepts and ideas, whether or not patentable, relating to the present or planned activities, or the products and services of the Company Group.   (b) If a patent application or copyright registration is filed by the Executive or on the Executive's behalf during the Executive's employment with the Company or within 1 year after the Executive's leaving the Company's employ describing a Development within the scope of the Executive's work for the Company or which otherwise relates to a portion of the business of the Company of which the Executive had knowledge during the Executive's employment with the Company, it is to be conclusively presumed that the Development was conceived by the Executive during the period of such employment.   9. Certain Remedies.   (a) Forfeiture/Payment Obligations. In the event the Executive fails to comply with Sections 5 through 8, other than any isolated, insubstantial and inadvertent failure that is not in bad faith, the Executive agrees that he will:     8 --------------------------------------------------------------------------------   (i) forfeit any amounts not already paid and repay to the Company any amounts already paid pursuant to Section 4(b) or 4(c) of the Agreement;   (ii) forfeit all options, restricted stock and other equity based compensation awarded by the Company Group that have not vested or been exercised (in the case of options or awards with features similar to exercise) at the date of a determination by the Company that the Executive failed to comply with Sections 5 through 8 of the Agreement; and   (iii) pay to the Company Group the amount of all gain that the Executive realized within the 12 months before the date of a determination by the Company that the Executive failed to comply with Sections 5 through 8 from the exercise or vesting of any stock options, restricted stock or other equity based compensation awarded by the Company Group.   (b) Time for Payment. The Executive will pay to the Company amounts due under Section 9(a) within 10 days of a determination by the Company that the Executive failed to comply with Sections 5 through 8 of the Agreement. The obligations under Section 9(a) are full recourse obligations.   (c) Injunctive Relief. Without intending to limit the remedies available to the Company Group, including, but not limited to, those set forth in this Section 9, the Executive agrees that a breach of any of the covenants contained in Sections 5 through 8 of this Agreement may result in material and irreparable injury to the Company Group for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, any member of the Company Group shall be entitled to seek a temporary restraining order or a preliminary or permanent injunction, or both, without bond or other security, restraining the Executive from engaging in activities prohibited by the covenants contained in Sections 5 through 8 of this Agreement or such other relief as may be required specifically to enforce any of the covenants contained in this Agreement. Such injunctive relief in any court shall be available to the Company Group in lieu of, or prior to or pending determination in, any arbitration proceeding.   (d) Extension of Restricted Period. In addition to the remedies the Company may seek and obtain pursuant to this Section 9, the Restricted Period shall be extended by any and all periods during which the Executive shall be found by a court possessing personal jurisdiction over him to have been in violation of the covenants contained in Sections 5 through 8 of this Agreement.   10. Defense of Claims. The Executive agrees that, during the Term and for a period of two years after termination of the Executive's employment, upon request from the Company, the Executive will cooperate with the Company in the defense of any claims or actions that may be made by or against the Company that affect the Executive's prior areas of responsibility, except if the Executive's reasonable interests are adverse to the Company in such claim or action. The Company agrees to promptly reimburse the Executive for all of the Executive's reasonable travel and other direct expenses incurred, or to be reasonably incurred, to comply with the Executive's obligations under this Section 10.     9 --------------------------------------------------------------------------------   11. Nondisparagement. The Executive agrees that at no time during his employment by the Company or thereafter shall he make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, the reputation, business or character of any member of the Company Group or any of its respective directors, officers or employees.   12. Periods Following the Term. For the avoidance of doubt, the provisions of Sections 5 through 11 shall continue in effect following the expiration of the Term, including, without limitation, during any period that the Executive remains an employee-at-will of the Company.   13. Source of Payments. All payments provided under this Agreement, other than payments made pursuant to a plan which provides otherwise, shall be paid in cash from the general funds of the Company, and no special or separate fund shall be established, and no other segregation of assets shall be made, to assure payment. The Executive shall have no right, title or interest whatsoever in or to any investments which the Company may make to aid the Company in meeting its obligations hereunder. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company.   14. Nonassignability; Binding Agreement.   (a) By the Executive. This Agreement and any and all rights, duties, obligations or interests hereunder shall not be assignable or delegable by the Executive.   (b) By the Company. This Agreement and all of the Company's rights and obligations hereunder shall not be assignable by the Company except as incident to a reorganization, merger, consolidation, or transfer of all or substantially all of the Company's assets.   (c) Binding Effect. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, any successors to or assigns of the Company and the Executive's heirs and the personal representatives of the Executive's estate.   15. Withholding. Any payments made or benefits provided to the Executive under this Agreement shall be reduced by any applicable withholding taxes or other amounts required to be withheld by law or contract.   16. Amendment; Waiver. This Agreement may not be modified, amended or waived in any manner, except by an instrument in writing signed by both parties hereto. The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement.   17. Governing Law. All matters affecting this Agreement, including the validity thereof, are to be governed by, and interpreted and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State.     10 --------------------------------------------------------------------------------   18. Entire Agreement; Supersedes Previous Agreements. This Agreement contains the entire agreement and understanding of the parties hereto with respect to the matters covered herein including, without limitation, the Existing Employment Agreement, and supersedes all prior or contemporaneous negotiations, commitments, agreements and writings with respect to the subject matter hereof, all such other negotiations, commitments, agreements and writings shall have no further force or effect, and the parties to any such other negotiations, commitments, agreements or writings shall have no further rights or obligations thereunder.   19. Counterparts. This Agreement may be executed by either of the parties hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.   20. Headings. The headings of sections herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.   21. Section 409A Compliance. If any provision of this Agreement would, in the reasonable, good faith judgment of the Company, result or likely result in the imposition on the Executive or any other person of a penalty tax under Section 409A of the Code, the Company may reform this Agreement or any provision hereof, without the Executive’s consent, in the manner that the Company reasonably and in good faith determines to be necessary or advisable to avoid the imposition of such penalty tax (hereinafter “Section 409A Compliance”); provided, however, that any such reformation shall, to the maximum extent the Company reasonably and in good faith determines to be possible, retain the economic and tax benefits to the Executive hereunder while not materially increasing the cost to the Company of providing such benefits to the Executive. Except as provided for in the preceding sentence, the provisions of this Agreement may not be amended, supplemented, waived or changed orally, but only by a writing signed by the party as to whom enforcement of any such amendment, supplement, waiver or modification is sought and making specific reference to this Agreement.   22. Notices. All notices or communications hereunder shall be in writing (including electronic transmission) and shall be (as elected by the person giving the notice) hand delivered by messenger or courier service, electronically transmitted, or mailed by registered or certified mail (postage prepaid), return receipt requested, addressed as follows:   To the Company: Integrated Alarm Services Group, Inc. 99 Pine Street, 3rd Floor Albany, NY 12207 Attention: Charles May CEO Phone: 518-426-1515 Fax: 518-426-0953   With a copy to: Shearman & Sterling LLP 599 Lexington Avenue New York, NY 10022 Attention: Kenneth J. Laverriere Phone: 212-848-8172  Fax: 646-848-8172 To the Executive: Robert Heintz 923 Woodview Road Brielle, NJ 08730 Phone: 732-233-5412 Fax: 732-528-3903   All such notices shall be conclusively deemed to be received and shall be effective (a) on the date delivered if by personal delivery; or (b) on the date of transmission with confirmed answer back if by electronic transmission; or (c) on the date the return receipt is signed or delivery is refused or the date the notice is designated by the postal authorities as not deliverable, as the case may be, if mailed. 11 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its officer pursuant to the authority of its Board, and the Executive has executed this Agreement, as of the day and year first written above.   By: /s/ Charles T. May    Name: Charles T. May Title: Chief Executive Officer                                   THE EXECUTIVE                     /s/ Robert B. Heintz                     Robert B. Heintz   12 -------------------------------------------------------------------------------- EXHIBIT A RELEASE OF CLAIMS I, Robert Heintz, the undersigned, and Integrated Alarm Services Group, Inc. (the "Company") entered into an Employment Agreement, dated November 17, 2006, ("Agreement") and this Release of Claims is being delivered to the Company in consideration of amounts payable to me under the Agreement to which I am not otherwise entitled.   I agree that this Release of Claims becomes effective seven (7) days after I sign it, unless, prior to the end of that 7-day period, I have revoked this Release of Claims in the manner described below.   1. General Release. In consideration of the promises of the Company set forth in the Agreement, which includes compensation to which I would not otherwise be entitled, I, on behalf of myself, and my heirs, executors, administrators, successors, assigns, dependents, descendants and attorneys hereby knowingly, voluntarily, and willingly fully and forever release, discharge, and covenant not to sue the Company and its direct and indirect parents, subsidiaries, affiliates, and related companies, past and present, as well as each of its and their directors, officers, employees, agents of the foregoing, representatives, advisers, trustees, insurers, assigns, successors, and agents, past and present (collectively, hereinafter referred to as the "Released Parties"), of, from, and with respect to any claim, duty, obligation, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that any of them may possess arising from any omissions, acts, or facts that have occurred up until and including the date of this Release of Claims including:   ·   any and all claims relating to or arising from my employment relationship with the Company and the termination of either such relationship;   ·   any and all claims for wrongful discharge of employment; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; and defamation;   ·   any and all claims arising under the Employee Retirement Income Security Act of 1974, the Civil Rights Acts of 1866 and 1867, Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights and Women's Equity Act of 1991, Sections 1981 through 1988 of Title 42 of the United States Code, as amended, the Occupational Safety and Health Act of 1970, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Family and Medical Leave Act of 1993, the Worker Adjustment and Retraining Notification Act of 1988, the Vocational Rehabilitation Act of 1973, the Equal Pay Act of 1963, the Americans with Disabilities Act, the Fair Labor Standards Act, and the National Labor Relations Act, as amended, any other federal or state anti-discrimination law, or any local or municipal ordinance relating to discrimination in employment or human rights and the common law;     A-1 --------------------------------------------------------------------------------     ·   any and all claims for salary, bonus, severance pay, pension, paid time off pay, life insurance, health or medical insurance, or any other fringe benefits, other than the payments and benefits provided for in the Agreement;   ·   any and all claims arising out of any other laws and regulations relating to employment or employment discrimination; and   ·   any and all claims for attorneys' fees and costs.   2.  ADEA Release. In consideration of the promises of the Company set forth in the Agreement, I hereby release and discharge the Released Parties from any and all claims that I may have against the Released Parties arising under the U.S. Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder ("ADEA"). I understand that the ADEA is a federal statute that prohibits discrimination on the basis of age in employment, benefits, and benefit plans. I also understand that, by signing this Release of Claims, I am waiving all claims against any and all of the Released Parties.   3. Representations by Me. By signing this Release of Claims, I confirm the following:   ·   I am providing the release and discharge set forth in this Release of Claims in exchange for consideration in addition to anything of value to which I am already entitled.   ·   I was advised by the Company in writing to consult with an attorney of my choice prior to signing this Release of Claims and to have such attorney explain to me the terms of the Agreement and the Release of Claims including the terms relating to my release of claims arising under the ADEA.   ·   I have read the Agreement and this Release of Claims carefully and completely and understand each of them.   ·   I understand that I am not waiving any rights or claims provided under ADEA that may arise after I sign this Release of Claims.   4. Period to Consider and Revocation. I understand that I have twenty-one days in which to consider the terms of the Agreement and this Release of Claims. To the extent I sign the Agreement and this Release of Claims within less than twenty-one (21) days after its delivery to me, I acknowledge that my decision to execute the Agreement and this Release of Claims prior to the expiration of such twenty-one (21)-day period was entirely voluntary. For a period of seven days following the date I execute this Release of Claims, I have   A-2 --------------------------------------------------------------------------------   the right to revoke the release contained in Section 2 (the "Revocation Period"). The Revocation Period shall expire at 5:00 p.m. New York City time on the last day of the Revocation Period; provided, however, that, if such seventh day is not a business day, the Revocation Period shall extend to 5:00 p.m. on the next succeeding business day. No such revocation by me shall be effective unless it is in writing and signed by me and received by the Company prior to the expiration of the Revocation Period.   5.  Rights Not Released. I understand that, notwithstanding any of the foregoing, by signing this Release of Claims, I shall not release the Company from any of the indemnity rights I may have against the Company under its By-Laws or under the laws of the State of Delaware, or from any of the rights I may have against the Company pursuant to the Agreement.       ________________________ Robert B. Heintz DATE: ______________   STATE OF:   ) ) ss: COUNTY OF   ) On this ____ day of ________, 2006, before me personally came ___________________ to me known, and known to me to be the individual described in, and who executed the foregoing letter and duly acknowledged to me that he/she executed the same.   __________________ NOTARY PUBLIC   A-3 --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------

Exhibit 10.103 REAFFIRMATION AND RATIFICATION AGREEMENT April 25, 2006 Laurus Master Fund, Ltd. c/o Laurus Capital Management, LLC 825 Third Avenue New York, New York 10022 Ladies and Gentlemen: Reference is made to the (a) Subsidiary Guaranty, dated as of December 6, 2005 made by Path 1 Holdings, Inc., a Delaware corporation (“Holdings”) for the benefit of Laurus Master Fund, Ltd., a Cayman Islands company (“Laurus”) (as amended, modified and/or supplemented from time to time the “Subsidiary Guaranty”), (b) Master Security Agreement, dated as of December 6, 2005 made by Path 1 Network Technologies Inc., a Delaware corporation (the “Company”) and Holdings in favor of Laurus (as amended, modified or supplemented from time to time, the “Master Security Agreement”), (c) Stock Pledge Agreement, dated as of December 6, 2005 made by the Company and Holdings in favor of Laurus (as amended, modified or supplemented from time to time, the “Stock Pledge Agreement”) and (d) the Grant of Security Interests in Patent and Trademarks, dated as of December 6, 2005 made by the Company in favor of Laurus (as amended, modified or supplemented from time to time, the “IP Grant” and, together with the Subsidiary Guaranty, the Master Security Agreement and the Stock Pledge Agreement, the “Existing Security and Guaranty Agreements” and each, an “Existing Security and Guaranty Agreements”). To induce Laurus to provide additional secured lending financial accommodations to the Company evidenced by (i) that certain Secured Non-Convertible Revolving Note, dated the date hereof, made by the Company in favor of Laurus (as amended, modified or supplemented from time to time, the “2006 Laurus Revolving Note”), (ii) the Security Agreement, dated as of the date hereof between the Company and Laurus and referred to in the 2006 Laurus Revolving Note (as amended, modified or supplemented from time to time, the “2006 Laurus Security Agreement”), (iii) the Ancillary Agreements referred to in, and defined in, the 2006 Laurus Security Agreement (the agreements set forth in the preceding clauses (i) through (iii), inclusive, collectively, the “2006 Laurus Agreements”), each of the Company and Holdings hereby: (a) represents and warrants to Laurus that it has reviewed and approved the terms and provisions of each of the 2006 Laurus Agreements and the documents, instruments and agreements entered into in connection therewith; (b) acknowledges, ratifies and confirms that all indebtedness incurred by, and all other obligations and liabilities of, each of the Company and Holdings under each of the 2006 Laurus Agreements are (i) “Obligations” under, and as defined in the Subsidiary Guaranty, (ii) “Obligations” under, and as defined in, the Master Security Agreement and (iii) “Obligations” under, and as defined in, the Stock Pledge Agreement; -------------------------------------------------------------------------------- (c) acknowledges, ratifies and confirms that each of the 2006 Laurus Agreements are “Documents” under, and as defined in, each of the Subsidiary Guaranty, the Master Security Agreement and the Stock Pledge Agreement; (d) acknowledges, ratifies and confirms that all of the terms, conditions, representations and covenants contained in the Existing Security and Guaranty Agreements are in full force and effect and shall remain in full force and effect after giving effect to the execution and effectiveness of each of the 2006 Laurus Agreements; (e) represents and warrants that no offsets, counterclaims or defenses exist as of the date hereof with respect to any of the undersigned’s obligations under any Existing Security and Guaranty Agreement; and (f) acknowledges, ratifies and confirms the grant by each of the Company and Holdings of a security interest in the assets of (including the equity interests owned by) each of the Company and Holdings, respectively, as more specifically set forth in the Existing Security and Guaranty Agreements. [The remainder of this page is intentionally left blank]   2 -------------------------------------------------------------------------------- This letter agreement shall be governed by and construed in accordance with the laws of the State of New York.   Very truly yours, PATH 1 NETWORK TECHNOLOGIES INC. By:      Name:   Title:   Address:   PATH 1 HOLDINGS INC. By:      Name:   Title:   Address:     Acknowledged and Agreed to by: LAURUS MASTER FUND, LTD. By:        Name:   Title:   3

Exhibit 10.1   DATE:                  September 29, 2006   CHAN ALBERT YEE TAT AND LUMINOUS LED TECHNOLOGIES LIMITED (as Vendors)   AND   TECH TEAM DEVELOPMENT LIMITED (as Purchaser)   AND   MICHELLE SIU KWAN LAM AND JOSEPH SUI KEI LAM (as Guarantors)                                                                                                        SALE AND PURCHASE AGREEMENT FOR 49.6% INTEREST IN LIGHTSCAPE TECHNOLOGIES (MACAU) LIMITED                                                                                                                1     --------------------------------------------------------------------------------     THIS AGREEMENT is dated September 29, 2006   BETWEEN:   (1) CHAN ALBERT YEE TAT, holder of US passport No.702014445 of Level 25, Bank of China Tower, 1 Garden Road, Central, Hong Kong (“Albert Chan”), LUMINOUS LED TECHNOLOGIES LIMITED, a limited company incorporated in Hong Kong and having its registered office at Level 25, Bank of China Tower, 1 garden Road, Central, Hong Kong (“Luminous LED”) (Both Albert Chan and Luminous are collectively referred to as the “Vendors” and each a “Vendor”);   (2) TECH TEAM DEVELOPMENMT LIMITED, a company incorporated in Hong Kong and having its registered office at 16th Floor, Hang Seng Mongkok Building, 677 Nathan Road, Mongkok, Kowloon, Hong Kong (the “Purchaser”); and   (3) MICHELLE SIU KWAN LAM and JOSEPH SUI KEI LAM, holder of US Passport No. 701351369 and holder of Hong Kong Identity Card No. C486788(0) respectively and whose correspondence address is at Level 25, Bank of China Tower, 1 Garden Road, Central, Hong Kong (the “Guarantors”).   WHEREAS:   (A) Lightscape Technologies (Macau) Limited (the “Company”) is a company incorporated in the Macau with limited liability and has a registered share capital of MOP 25,000. The particulars of the Company is set out in Schedule 1.   (B) As at the date of this Agreement, Albert Chan is the registered owner on trust for Luminous LED of MOP 12,400 of the registered share capital of the Company, which is equivalent to 49.6% of the registered share capital of the Company.   (C) The Vendors have agreed to sell and the Purchaser has agreed to purchase the Sale Interest subject to and upon the terms and conditions of this Agreement.   (D) The Purchaser requires Michelle Siu Kwan Lam and Joseph Sui Kei Lam, who are related to or associated with the Vendors and who have requested the Purchaser to enter into this Agreement, as guarantors to give such covenants, undertakings and guarantee together with the Vendors as are set out herein as a condition to the Purchaser’s entry into this Agreement.   NOW IT IS HEREBY AGREED AS FOLLOWS:   1. INTERPRETATION   1.1 In this Agreement (including the Recitals and Schedules), unless the context otherwise requires or permits, the following words and expressions shall have the meanings ascribed to each of them respectively below:                  “Business Day”   a day (other than Saturday and days on which a tropical cyclone warning No. 8 or above or a “black rainstorm warning signal” is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m.) on which banks are open in Hong Kong and for general banking business;             2     --------------------------------------------------------------------------------       “Completion”   completion of the sale and purchase of the Sale Interest in accordance with the terms and conditions of this Agreement;       “Completion Date”   any date falling within three Business Days after all the conditions specified in Clause 3.1 have been fulfilled (or waived) or such other date as the Vendors and the Purchaser may agree in writing prior to Completion and where the context otherwise requires, the date of which Completion takes place;       “Consideration Shares”   1,200,000 new common shares (or such number of shares as may be reduced pursuant to Clause 4.3) of US$0.001 each in the share capital of GIS, to be issued and allotted to the Vendors as partial Consideration of the sale of the Sale Interest pursuant to Clause 4.3.;       “Encumbrance”   any mortgage, charge, pledge, lien (otherwise than arising by statute or operation of law), hypothecation or other encumbrance, priority or security interest, deferred purchase, title retention, leasing, sale-and-repurchase or sale-and-leaseback arrangement whatsoever over or in any property, assets or rights of whatsoever nature and includes any agreement for any of the same and “Encumber” shall be construed accordingly;       “Escrow Agent”   Clark Wilson LLP;       “Escrow Agreement”   an escrow agreement relating to the escrow of the Consideration Shares entered into among the Purchaser, the Vendors, and the Escrow Agent on the date of Completion;       “Guarantee Net Profit”   HK$20,000,000;       “Guarantee Period”   The twelve month period between 1 October 2006 to 30 September 2007 (both days inclusive);       “GIS”   Global Innovative Systems Inc., a company incorporated under the laws of the State of Nevada, the United States and the common shares of which are quoted on OTCBB;       “Group”   the Company and its subsidiaries and “member of the Group” shall be construed accordingly;       “HK$”   Hong Kong dollars;       “Hong Kong”   the Hong Kong Special Administrative Region of the PRC;       “Independent Accountants”   an independent firm of accountants which is acceptable to the Purchaser, appointed by the Vendors for the purpose of Clause 8;       “Macau”   the Macau Special Administrative Region of the PRC;     3     --------------------------------------------------------------------------------             “MOP”   Macau Pataca;       “Net Profit”   The aggregate net profit after taxation but before extraordinary items of the Group;       “Non-U.S. Shareholder Certificate”   the certificate to be executed by Albert Chan in substantially the form as set out in Schedule 4;       “OTCBB”   acronym for The OTC Bulletin Board, an electronic quotation system that displays real-time quotes, last-sale prices, and volume information over-the-counter securities that are not listed on The Nasdaq Stock Market or a national securities exchange in the US;       “PRC”   the People’s Republic of China;       “Purchaser Warranties”   representations, undertakings and warranties set out in Clause 7 and Schedule 3;       “Sale Interest”   MOP 12,400 in the registered capital of the Company, which shall be equivalent to 49.6% of the issued share capital of the Company upon Completion, to be sold by the Vendors to the Purchaser pursuant to this Agreement;       “Taxation”   all forms of taxation including overseas taxation and all forms of profits tax, interest tax, estate duty and stamp duty and all levies, imposts, duties, charges, fees, deductions and withholdings whatsoever charged or imposed by any statutory, governmental state, provincial, local government or municipal authority whatsoever and the expression “Tax” shall be construed accordingly;       “this Agreement”   this agreement for the sale and purchase of the Sale Interest, as amended from time to time;       “Vendors’ Warranties”   representations, undertakings and warranties set out in Clause 6 and Schedule 2;       “US”   the United States of America; and       “US$”   United States of America dollars.   1.2 The headings of this Agreement are inserted for convenience only and shall be ignored in construing this Agreement. Unless the context otherwise requires, references in this Agreement to the singular shall be deemed to include references to the plural and vice versa; and references to one gender shall include all genders and references to any person shall include an individual, firm, body corporate or unincorporate.   1.3 References to any statute or statutory provision shall include any statute or statutory provision which amends or replaces or has amended or replaced it and shall include any subordinate legislation made under the relevant statute.     4     --------------------------------------------------------------------------------     1.4 References in this Agreement to Clauses and Schedules are references to clauses of and schedules to this Agreement.   1.5 The Schedules and Recitals shall form part of this Agreement.   2. SALE AND PURCHASE OF THE SALE INTERESTS   2.1 Subject to and upon the terms and conditions of this Agreement, Albert Chan as legal owner and Luminous LED as beneficial owner shall sell and the Purchaser shall purchase, the Sale Interest free from all Encumbrances together with all rights now and hereafter attaching thereto including but not limited to the right to all dividends and other distribution which may be paid, declared or made in respect thereof at any time on or after the date of this Agreement.   2.2 The Vendors represent and warrant that there are no pre-emption rights and any other restrictions on the transfer in relation to the Sale Interest, whether conferred by the memorandum and articles of association of the Company or otherwise.   2.3 The Purchaser shall not be obliged to (but may) complete the purchase of any of the Sale Interest unless the sale and purchase of all the Sale Interest is completed simultaneously in accordance with this Agreement.   3. CONDITIONS   3.1 Completion is conditional upon:     (1) the Purchaser, Woo Yuen Yu, the Guarantors and Lightscape Holdings Ltd. have executed a cancellation deed for the sale and purchase agreement dated March 30, 2006 in respect of the sale and purchase of 6 shares of Lightscape Holdings Ltd.     (2) all necessary approvals, consents, authorizations and licenses in relation to the transactions contemplated under this Agreement, including but not limited to the approval from the relevant authorities in Macau having been obtained.     (3) GIS having received all of the regulatory, stockholder and other third party approvals and authorizations necessary to consummate the transactions contemplated hereunder;     (4) no event having occurred which suggests that there has been a breach of any of the Vendors’ Warranties that is material in the context of the sale and purchase of the Sale Interest; and     (5) the listing of the issued shares of GIS on OTCBB not being revoked or withdrawn, or, if applicable, suspended for more than ten (10) consecutive Business Days (excluding any suspension pending the clearance or issue of the announcement or circular of GIS in relation to the transactions contemplated under this Agreement)   3.2 The Vendors shall use its best endeavors to procure the fulfillment of the conditions set out in Clauses 3.1(2), (3) and (5) and, in particular, shall procure that all information and documents required by GIS pursuant to all applicable rules, codes and regulations whether in connection with the preparation of all announcement, circulars, reports, independent advice or otherwise are duly given to the Purchaser (or GIS), the Securities and Exchange Commission of the US and other relevant regulatory authorities. The Purchaser shall use its reasonable endeavors to procure the fulfillment of the conditions set out in Clauses 3.1(3).   5     --------------------------------------------------------------------------------     3.3 The Purchaser may at any time waive in writing any of the conditions set out in Clauses 3.1(2), (3) and (5) on such terms as it may in its absolute discretion consider appropriate. If any of the conditions set out in Clause 3.1 has not been fulfilled (or, as the case may be, waived by the Purchaser) on or before 12:00 noon on the Completion Date or such other date as the Purchaser may agree, this Agreement shall lapse and determine (other than Clauses 13, 17, 20 and 22 which shall continue to have full force and effect) and neither party hereto shall have any obligations and liabilities hereunder save for any antecedent breaches of the terms hereof.   3.4 The Vendors shall, forthwith upon the fulfillment of the conditions set out in Clauses 3.1(5), inform the Purchaser of that fact and provide such documents as the Purchaser may require evidencing the fulfillment of such conditions.   3.5 Subject to the receipt of the notification from the Vendors in accordance with Clause 3.3, the Purchaser shall confirm in writing to the Vendors that all the conditions set out in Clause 3.1 have either been fulfilled to the satisfaction of the Purchaser or waived by the Purchaser, as the case may be.   4. CONSIDERATION   4.1 The consideration for the sale and purchase of the Sale Interest shall be an aggregate amount of MOP12,400 plus US$960,000, which shall be satisfied by payment by the Purchaser to the Vendors of cash in the amount of MOP 12,400, plus the allotment and issue of the Consideration Shares by GIS to the Vendors, valued at US$0.80 per each Consideration Share.   4.2 The Consideration Shares shall be issued by GIS as validly authorized, fully paid and non-assessable and delivered by the Purchaser to the Escrow Agent upon Completion.   4.3 The Escrow Agent shall hold the Consideration Shares in escrow pursuant to the Escrow Agreement and only release the Consideration Shares subject to the following conditions:     (a) all of the Consideration Shares shall be released to Albert Chan as the representative of the Vendors upon the determination that the Net Profit of the Group for Guarantee Period as shown in the audited consolidated financial statements of the Group is not less than the Guaranteed Net Profit;     (b) in the event that the Net Profit of the Group for the Guarantee Period is less than the Guarantee Net Profit, the percentage of the Consideration Shares equaling to the percentage of the shortfall from the Guarantee Net Profit shall be released by the Escrow Agent not to the Vendors but to GIS for cancellation and the balance of the Consideration Shares shall be released to Albert Chan as the representative of the Vendors; and     (c) in the event that there is no Net Profit for the Guarantee Period, all of the Consideration Shares shall be released by the Escrow Agent not to the Vendors but to GIS for cancellation and the Purchaser shall be absolutely released from the obligation to pay the Consideration Shares.   4.4 Upon determination of the amount of the Consideration Shares to be released from escrow, the Purchaser shall co-ordinate with the Escrow Agent to arrange, within 30   6     --------------------------------------------------------------------------------   days, the issuance of such number of Consideration Shares so determined in favor of the Vendors.   4.5 The Consideration Shares to be issued and allotted to the Vendors for the Sale Interest pursuant to this Agreement shall rank pari passu among themselves and with all other common shares of GIS then in issue.   5. COMPLETION   5.1 Upon compliance with or fulfillment of all the conditions set out in Clause 3.1, Completion shall take place at the offices of the Purchaser or such other place as the parties shall determine at 4:00 p.m. on the Completion Date when all the acts and requirements set out in this Clause 5 shall be complied with (except that any of such acts and requirements may be waived by the party not in default of its obligations hereunder, PROVIDED THAT such waiver shall not prejudice any of the rights which it or any other party may have under this Agreement).   5.2 At Completion, the Vendors and/or the Guarantors shall deliver or procure the delivery to the Purchaser of all the following:     (1) copy, certified by a director of the Company as true and complete and that the resolutions therein are subsisting and have not been amended or revoked as at the Completion Date, of the resolutions in such form to the satisfaction of the Purchaser passed by the directors of the Company and its subsidiaries (as appropriate) approving the following matters:     (i) transfer of the Sale Interest to the Purchaser (or its nominee(s)) and the registration of such transfer subject to the relevant requirement under the laws of Macau;     (ii) if so required by the Purchaser, accepting the resignation of Chan Albert Yee Tat as a director of the Company and the appointment of such person in his place as the Purchaser may nominate by not less than three Business Days’ notice before Completion;     (2) valid documentation as required under the relevant laws in Macau for the transfer of the Sale Interest stipulated in the Agreement;     (3) such other documents as may be required to give to the Purchaser good title to the Sale Interest and to enable the Purchaser (or its nominee(s)) to become the registered owner thereof;     (4) a duly completed and signed Certificate of Non-U.S. Shareholder of Global Innovative Systems Inc. in the form attached hereto as Schedule 4;     (5) a direction to Albert Chan as trustee by Luminous LED as beneficial owner to terminate the trust and transfer all register and beneficial ownership in the Sale Interest to the Purchaser;     (6) a fully executed Escrow Agreement;     (7) a certificate issued by each of the Guarantors confirming that she/he is not aware of any event which is in breach or inconsistent with any of the Vendors’ Warranties;   5.3 Against compliance and fulfillment of all acts and the requirements set out in Clause 5.2, the Purchaser shall deliver to the Vendors:     7     --------------------------------------------------------------------------------       (1) payment for the Initial Consideration in the sum of MOP 12,400.00;     (2) copy, certified by a director of the Purchaser as true and complete, of the resolutions in such form to the satisfaction of the Vendors passed by the directors of the Purchaser approving this Agreement and other documents necessary for the purpose of effecting this transaction and authorizing a person or persons to execute the same (with seal, where appropriate) for and on its behalf;     (3) copy, certified by a director of GIS as true and complete, of the resolutions authorizing the issue and allotment of the Consideration Shares in accordance with the provisions of Clause 4 and enter the name of Alberta Chan (or his nominee(s)) as holder thereof on its register of members;     (4) a fully executed Escrow Agreement; and     (3) a certificate issued by the Purchaser confirming that it is not aware of any event which is in breach or inconsistent with any of the Purchaser Warranties   5.4 In the event that the Vendors shall fail to do anything required to be done by them under Clauses 5.2, without prejudice to any other right or remedy available to the Purchaser, the Purchaser may:     (1) defer Completion to a day not more than twenty-one (21) Business Days after the Completion Date (and so that provisions of this Clause 5.4(1) shall apply to Completion as so deferred); or     (2) proceed to Completion so far as practicable but without prejudice to the Purchaser’s right to the extent that the Vendors shall not have complied with its obligations hereunder; or     (3) rescind this Agreement (other than Clauses 13, 17, 20 and 22 which shall continue to have full force and effect) in which case none of the parties hereto shall have any claim of any nature whatsoever against any of the other parties under this Agreement (save for any rights and liabilities of the parties which have accrued prior to rescission).   5.5 In the event that the Purchaser shall fail to do anything required to be done by them under Clauses 5.3, without prejudice to any other right or remedy available to the Vendors, the Vendors may:     (1) defer Completion to a day not more than twenty-one (21) Business Days after the Completion Date (and so that provisions of this Clause 5.5(1) shall apply to Completion as so deferred); or     (2) proceed to Completion so far as practicable but without prejudice to the Vendors’ right to the extent that the Purchaser shall not have complied with its obligations hereunder; or     (3) rescind this Agreement (other than Clauses 13, 17, 20 and 22 which shall continue to have full force and effect) in which case none of the parties hereto shall have any claim of any nature whatsoever against any of the other parties under this Agreement (save for any rights and liabilities of the parties which have accrued prior to rescission).     8     --------------------------------------------------------------------------------     6. VENDORS’ WARRANTIES AND INDEMNITIES   6.1 Each of the Vendors and the Guarantors hereby represents, warrants and undertakes jointly and severally to the Purchaser and its successors and assigns that the Vendors’ Warranties are true and accurate in all material respects on the date of this Agreement and will continue to be so up to and including the Completion Date with reference to the facts and circumstances from time to time applying.   6.2 Each of the Vendors’ Warranties is without prejudice to any other Vendors’ Warranty and, except where expressly or otherwise stated, no provision in any Vendors’ Warranty shall govern or limit the extent or application of any other provision in any Vendors’ Warranty. Each of the Vendors and the Guarantors hereby agrees that the Purchaser shall treat each of the Vendors’ Warranties as a condition of this Agreement.   6.3 Each of the Vendors and the Guarantors hereby agrees jointly and severally to fully indemnify and keeps the Purchaser and its assigns fully indemnified on demand from and against any depletion of assets, all losses, costs and expenses (including legal expenses) which the Purchaser and its assigns may incur or sustain from or in consequence of any of the Vendors’ Warranties not being correct or fully complied with. This indemnity shall be without prejudice to any of the rights and remedies of the Purchaser and its assigns in relation to any such breach of Vendors’ Warranties and all such rights and remedies are hereby expressly reserved.   6.4 If it shall be found at any time after Completion that any of the Vendors’ Warranties is not true, correct and accurate or is not as represented, warranted or undertaken and:     (1) the effect thereof is that the value of some assets of the Group including, without limitation, the value of any asset stated in the Management Accounts being less than its value would have been had there been no such breach or the matter warranted were as warranted; or     (2) the Group has incurred or is under any liability or contingent liability which would not have been incurred if such matter were as represented or warranted or the relevant undertaking were performed; or     (3) the effect thereof is that the amount of a liability of the Group is higher than its amount would have been had there been no such breach or the matter warranted were as warranted,   then, without prejudice to any other provisions of this Agreement, each of the Vendors and the Guarantors shall jointly and severally indemnify the Purchaser on demand on a full indemnity basis, and holds it harmless from and against all liabilities, damages, costs, claims, reduction in net consolidated assets or increase in net consolidated liabilities and all reasonable expenses which the Purchaser may sustain, suffer, or incur as a result of any of the foregoing and each of the Vendors and the Guarantors shall jointly and severally pay to the Purchaser on demand the full amount of any such loss as aforesaid in immediately available funds.   6.5 The Vendors’ Warranties shall survive Completion and the rights and remedies of the Purchaser in respect of any breach of the Vendors’ Warranties shall not be affected by Completion or by the Purchaser rescinding, or failing to rescind this Agreement, or failing to exercise or delaying the exercise of any right or remedy, or by any other event or matter whatsoever, except a specific and duly authorized written waiver or release and no single or partial exercise of any right or remedy shall preclude any further or other exercise.     9     --------------------------------------------------------------------------------     6.6 Each of the Guarantors undertakes in relation to any Vendors’ Warranty which refers to the knowledge, awareness, information or belief of each of the Guarantors that it/he has made due and careful enquiry into the subject matter of that Vendors’ Warranty and that it/he does not have the knowledge, awareness, information or belief that the subject matter of that Vendors’ Warranty may not be correct, complete or accurate.   6.7 The aggregate amount of the liability of the Vendors and the Guarantors in respect of any claim for breach of any of the Vendors’ Warranties or to indemnify as aforesaid or shall not exceed the aggregate amount of the consideration payable pursuant to Clause 4 (or the equivalent thereof).   6.8 The Purchaser shall reimburse to the Vendors and the Guarantors an amount equal to any sum paid by any one of the Vendors or the Guarantors in respect of a claim under the Vendors’ Warranties or to be indemnified as aforesaid which is subsequently recovered or paid to the Purchaser or the Company by a third party.   7. PURCHASER WARRANTIES   7.1 Subject to Clause 7.7, the Purchaser represents, warrants and undertakes to the Vendors and the Guarantors and their respective successors and assigns that the Purchaser Warranties are true and accurate in all material aspects on the date of this Agreement and will continue to be so on up to and including the Completion Date with reference to the facts and circumstances from time to time applying.   7.2 The Purchaser agrees that the Vendors and the Guarantors may treat each of the Purchaser Warranties as a condition of this Agreement.   7.3 The Purchaser shall indemnify and keep fully and effectively indemnified the Vendors and the Guarantors on demand from and against all losses, costs and expenses which may be incurred by them or any of them in connection with any breach of any of the Purchaser Warranties or their successfully enforcing any claim for any such breach.   7.4 The Purchaser shall be under no liability in respect of a breach of any of the Purchaser Warranties or to indemnify pursuant to this Agreement unless the Purchaser shall have received written notice from the Vendors or the Guarantors prior to the date falling on the first anniversary of the Completion Date in respect of the Purchaser Warranties or the indemnity as aforesaid giving full details of the relevant claim and any such claim shall (if not previously satisfied, settled or withdrawn) be deemed to have been waived at the expiration of three (3) months after the first anniversary of the Completion Date unless proceedings in respect thereof shall then have been commenced against the Purchaser.   7.5 The indemnity provided for under Clause 7.4 is without prejudice to any other rights and remedies of the Vendors or the Guarantors in relation to any breach of any of the Purchaser Warranties and all other rights and remedies are expressly reserved to the Vendors and the Guarantors.   7.6 Each of the Purchaser Warranties is without prejudice to any other Purchaser Warranty or other agreements or indemnities entered into between the parties or any of them and, except where expressly stated otherwise, no provision contained in this Agreement or other agreements or indemnities shall govern or limit the extent or application of any other provision of this Agreement or such other agreements.   7.7 All of the Purchaser Warranties are deemed to be qualified by the Purchaser’s filings with the Securities and Exchange Commission of the US published up to the date of this Agreement.     10     --------------------------------------------------------------------------------     7.8 The Purchaser Warranties shall survive Completion insofar as the same are not fully performed on Completion.   7.9 The Purchaser undertakes to allocate all business in relation to lighting technology and lighting consultancy, other than those handled by Beijing Illumination (Hong Kong) Limited and its group companies, to the Company or its subsidiary provided that all supply of light sourcing equipment products and ancillary products required for the business of the Group must first be sourced from Beijing Illumination (Hong Kong) Limited and its group companies.   8. PROFIT GUARANTEE   8.1 In consideration of the Purchaser’s agreement to enter into this Agreement, each of the Vendors and the Guarantors hereby irrevocably and unconditionally guarantees jointly and severally to the Purchaser that the Net Profit for the Guarantee Period as shown in the audited consolidated financial statements of the Group ending such date shall not be less than the Guaranteed Net Profit. If the Net Profit is less than the Guaranteed Net Profit, then the Vendors and the Guarantors shall jointly and severally pay to the Purchaser in cash within fourteen (14) calendar days after the delivery of the audited consolidated financial statements of the Group aforesaid an amount calculated as follows:     Amount payable to the Purchaser = (Guaranteed Net Profit – Net Profit) x 40%   PROVIDED THAT the aforesaid amount shall be rounded up to the nearest whole dollar.   8.2 The Vendors undertake to procure that the audited consolidated financial statements of the Group shall be prepared by the Company and audited by the Independent Accountants in accordance with the generally acceptable accounting practice, standards and principles of Hong Kong in respect of the twelve months referred to in Clause 8.1, together with any notes, reports or statements included therein or annexed thereto, a copy of which shall be delivered to the Purchaser for review by not later than two (2) months following the balance sheet date of the relevant period.   9. COMPLIANCE WITH US SECURITIES LEGISLATION   9.1 The Vendors acknowledge and agree that the Consideration Shares to be issued and allotted by GIS have not been registered under the United States Securities Act of 1933 (as amended) (the “Securities Act”) or any other applicable securities laws and that such securities will be issued and allotted pursuant to safe harbor provisions relating to the prospectus and registration requirements set forth in Regulation S of the Securities Act the availability of which is predicated in part on the Vendors’ representations as contained herein and in the Non-U.S. Shareholder Certificate. The Vendors agree to abide by all applicable resale restrictions and hold periods imposed by all applicable securities legislation. The share certificate(s) representing the Consideration Shares issued and allotted on Completion will be endorsed with the following legend pursuant to the Securities Act in order to reflect the fact that the Consideration Shares will be issued and allotted to the Vendors pursuant to such safe harbor provisions relating to the prospectus and registration requirements of the Securities Act:   “THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).     11     --------------------------------------------------------------------------------     NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN EACH CASE CONFIRMED BY AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE SECURITIES ACT.”   9.2 The Vendors agree that they may, if applicable, exchange the certificate(s) representing the Consideration Shares by delivering such certificate(s) to GIS duly executed and endorsed in blank (or accompanied by duly executed stock powers duly endorsed in blank), in each case in proper form for transfer, with signatures medallion guaranteed, and, if applicable, with all stock transfer and any other required documentary stamps affixed thereto and with appropriate instructions to allow the transfer agent to issue a certificate for the Consideration Shares to the holder thereof.   9.3 The Vendors further acknowledge that the Consideration Shares issued pursuant to the terms and conditions set forth in the Agreement will be issued as “restricted securities” as defined by Rule 144 promulgated pursuant to the Securities Act and will have such hold periods as are required under applicable securities laws of the US and as a result may not be sold, transferred or otherwise disposed, except pursuant to an effective registration statement under the Securities Act, or unless, in the opinion of the GIS’s counsel, such transfer or other disposition is made pursuant to an effective registration statement under the Securities Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in each case only in accordance with all applicable securities laws.   9.4 The Vendors represent that the Vendors are acquiring the Consideration Shares for the Vendors’ own account, for investment purposes only and not with a view to, or for sale in connection with, a distribution, as that term is used in Section 2(11) of the Securities Act, in a manner which would require registration under the Securities Act or any state securities laws.   9.5 The Vendors acknowledge that they are able to protect their interests in connection with the acquisition of the Consideration Shares and can bear the economic risk of investment in such securities without producing a material adverse change in Vendors’ financial condition. The Vendors otherwise have such knowledge and experience in financial or business matters that the Vendors are capable of evaluating the merits and risks of the investment in the Consideration Shares.   9.6 The Vendors represent, warrant and covenant that they are not acquiring the Consideration Shares as part of a group within the meaning of Section 13(d)(3) of the Exchange Act and the Vendors have not agreed to act with any other person for the purpose of acquiring, holding, voting or disposing of the Consideration Shares   12     --------------------------------------------------------------------------------   purchased hereunder for purposes of Section 13(d) under the Exchange Act, and the Vendors are acting independently with respect to its investment in the Consideration Shares.     10. RESTRICTIONS ON VENDORS AND GUARANTORS   10.1 Each of the Vendors and the Guarantors undertakes to the Purchaser that it/he/she shall not without the prior written consent of the Purchaser for a period of three (3) years after Completion either solely or jointly with or on behalf of any other person, firm, company, trust or otherwise whether as director, shareholder, employee, partner, agent or otherwise:     (a) carry on or be engaged or interested directly or indirectly in any capacity (except as the owner of shares or securities listed or quoted or dealt in on any stock exchange or securities market held by way of investment only) in any business which shall be in competition within Hong Kong and the PRC with the Company or any of its subsidiaries in the carrying on the business of lighting technology and lighting consultancy;     (b) solicit or entice or Endeavour to solicit or entice away from the Company or any of its subsidiaries any employee, officer, manager, consultant (including employees who are directors) of the Company or any of its subsidiaries or any persons whose services are otherwise made available to the Company or any of its subsidiaries on a full-time or substantially full-time basis;     (c) deal with, canvass, solicit or approach or cause to be dealt with, canvassed or solicited or approached for business in respect of any trade or business carried on or service provided by the Company or any of its subsidiaries any person, firm or company who at Completion or within two years prior to Completion was a customer, supplier, client, representative, agent of or in the habit of dealing under contract with the Company or any of its subsidiaries;   10.2 Each of the Vendors and the Guarantors further undertakes to the Purchasers that:     (a) it/he/she will not at any time hereafter make use of or disclose or divulge to any person other than to officers or employees of the Company whose province it is to know the same any information relating to the Company or any of its subsidiaries other than any information properly available to the public or disclosed or divulged pursuant to an order of a court of competent jurisdiction;     (b) it/he/she will not at any time hereafter in relation to any trade, business or company use a name including the word or symbol “Lightscape“ or its Chinese equivalent or any similar word or symbol in such a way as to be capable of or likely to be confused with the name of the Company or any subsidiary and shall use all reasonable endeavors to procure that no such name shall be used by any person, firm or company with which it is/they are connected; and     (c) it/he/she shall not do anything which might prejudice the goodwill of the Company or any of its subsidiaries.   10.3 Each and every obligation under this Clause 10 shall be treated as a separate obligation and shall be severally enforceable as such and in the event of any obligation or obligations being or becoming unenforceable in whole or in part such   13     --------------------------------------------------------------------------------   part or parts as are unenforceable shall be deleted from this Clause 10 and any such deletion shall not affect the enforceability of all such parts of this Clause 10 as remain not so deleted.   10.4 The restrictions contained in this Clause 10 are considered reasonable by the parties hereto but in the event that any such restriction shall be found to be void but would be valid if some part thereof were deleted or the area of operation or the period of application reduced such restriction shall apply with such modification as may be necessary to make it valid and effective.   11. FURTHER ASSURANCE   Each party shall execute, do and perform or procure to be executed, done and performed by other necessary parties all such further acts, agreements, assignments, assurances, deeds and documents within its powers to give effect to this Agreement and all transactions contemplated hereunder.   12. GUARANTEES   12.1 The Guarantors hereby irrevocably and unconditionally guarantees to the Purchaser jointly and severally the due and punctual performance of the Vendors of their obligations under this Agreement and undertakes to indemnify and keep effectively indemnified the Purchaser (if necessary by payment of cash on first demand) jointly and severally against all liabilities, losses, damages, costs and expenses stipulated under this Agreement or otherwise which the Purchaser may suffer or incur in connection with any default or delay on the part of the Vendors in the performance or any such obligations.   12.2 The obligations and liabilities of the Guarantors shall be continuing obligations and shall not be satisfied, discharged or affected by an intermediate payment or any change in the constitution or control of, or the insolvency of or any bankruptcy, winding up or analogous proceedings relating to any of the parties to this Agreement.   12.3 The liability of the Guarantors hereunder shall be unaffected by any arrangement which the Purchaser may make with the Vendors or with any other person which (but for this provision) might operate to diminish or discharge the liability of or otherwise provide a defence to a surety. Without prejudice to the generality of the foregoing, the Purchaser is to be at liberty at any time and without reference to the Guarantors to give time for payment or grant any other indulgence and to give up, deal with, vary, exchange or abstain from perfecting or enforcing any other securities or guarantees held by the Guarantors at any time and to discharge any party thereto and to realize such securities or guarantees, as the Purchaser thinks fit and to compound with, accept compositions from and make any other arrangements with the Vendors without affecting the liability of the Guarantors hereunder.   12.4 As a separate and independent stipulation, it is hereby agreed by the Guarantors that any obligation and undertaking by the Guarantors under this Clause 12 which may not be enforceable against the Guarantors on the footing of a guarantee, whether by reason of any legal limitation (other than any limitation imposed by this Agreement), disability or incapacity on or of the Vendors or any other fact or circumstance whether or not known to the Purchaser shall nevertheless be enforceable against the Guarantors as the sole and principal obligor in respect thereof.   12.5 Without prejudice to the other provisions of this Agreement, the obligations and undertakings expressed to be assumed by or imposed on the Guarantors under this Agreement shall remain in force so long as the Vendors shall have any liability or obligation to the Purchaser under this Agreement and until all such liabilities and obligations have been discharged in full.   14     --------------------------------------------------------------------------------     12.6 Each of the Guarantors hereby waives any right to require a proceeding first against the Vendors or any other person.   12.7 Each of every obligation, covenant, representation, warranty and undertaking of the Guarantors provided herein shall be the joint and several obligations, covenants, representations, warranties and undertakings of each of the Guarantors and the Purchaser shall be at liberty to release, compound with or otherwise vary or agree to vary the liability of, or to grant time or other indulgence, or make other arrangements with any one of the Guarantors without the consent of or notice to the others and without prejudicing, affecting the right, remedy and power of the Purchaser, against the others.   12.8 The Purchaser shall use its best endeavors to obtain and maintain a listing for all the Shares issued any stock exchange or securities market on which the securities are listed or quoted or dealt in within 18 months following Completion.   13. CONFIDENTIALITY AND ANNOUNCEMENTS   13.1 Each of the parties hereto undertakes to the others that it/he will not, at any time after the date of this Agreement, divulge or communicate to any person other than to its professional advisers, or when required by law, or to its respective officers or employees whose province it is to know the same any confidential information concerning the business, accounts, finance or contractual arrangements or other dealings, transactions or affairs of any of the others which may be within or may come to its knowledge and it shall use its best endeavors to prevent the publication or disclosure of any such confidential information concerning such matters.   13.2 No public announcement or communication of any kind shall be made in respect of the subject matter of this Agreement unless specifically agreed between the parties hereto or unless an announcement is required pursuant to the applicable law and the regulations or the requirements of the Securities and Exchange Commission of the US or any other regulatory body or authority. Any announcement by any party hereto required to be made pursuant to any relevant law or regulation or the requirements of the Securities and Exchange Commission of the US or any other regulatory body or authority shall be issued only after such prior consultation with the other party as is reasonably practicable in the circumstances.   14. TIME AND WAIVER   Time shall in every respect be of the essence of this Agreement but no failure on the part of any party hereto to exercise, and no delay on its part in exercising any right hereunder shall operate as a waiver thereof, nor will any single or partial exercise of any right under this Agreement preclude any other or further exercise of it or the exercise of any other right or prejudice or affect any right against any other parties hereto under the same liability, whether joint, several or otherwise. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law. The parties shall then use all reasonable endeavors to replace the invalid or unenforceable provisions by a valid and enforceable substitute provision the effect of which is as close as possible to the intended effect of the invalid and unenforceable provision.   15. INVALIDITY   If at any time any one or more of the provisions of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the laws of any relevant jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Agreement in that jurisdiction nor the legality, validity or enforceability of   15     --------------------------------------------------------------------------------   such provision under the laws of any other jurisdictions shall in any way be affected or impaired thereby.   16. AMENDMENTS   This Agreement shall not be amended, supplemented or modified except by instruments in writing signed by all parties hereto.   17. NOTICES   17.1 Any notice claim, demand, court process, document or other communication to be given under this Agreement (collectively “communication” in this Clause 17) shall be in writing in the English language and may be served or given personally or sent to the telex or facsimile numbers (if any) of the relevant party and marked for the attention and/or copied to such other person as specified in Clause 17.5.   17.2 A change of address or telex or facsimile number of the person to whom a communication is to be addressed or copied pursuant to this Agreement shall not be effective until five (5) days after a written notice of change has been served in accordance with the provisions of this Clause 17 on all other parties to this Agreement with specific reference in such notice that such change is for the purposes of this Agreement.   17.3 A party may not designate a non Hong Kong address for the service of communications to it.   17.4 All communications shall be served by the following means and the addressee of a communication shall be deemed to have received the same within the time stated adjacent to the relevant means of despatch:     Means of despatch Time of deemed receipt     Local mail or courier 24 hours     Telex on despatch   Facsimile on despatch   Air courier/speedpost 3 days     Airmail 5 days     17.5 The initial addresses and facsimile numbers of the parties for the service of communications, the person for whose attention such communications are to be marked and the person to whom a communication is to be copied are as follows:     To the Vendors and the Guarantors:   Address: Level 25, Bank of China Tower, 1 Garden Road, Central,   Hong Kong     Facsimile: (852) 2251 8552     To the Purchaser: Name: Tech Team Development Limited   Address:            16/F., Hang Seng Mongkok Building, 677 Nathan Road, Mongkok, Kowloon, Hong Kong   Facsimile: (852) 2546 6878     Attention: Board of Directors   17.6 A communication served in accordance with this Clause 17 shall be deemed sufficiently served and in proving service and/or receipt of a communication it shall be sufficient to prove that such communication was left at the addressee’s address or that the envelope containing such communication was properly addressed and posted   16     --------------------------------------------------------------------------------   or despatched to the addressee's address or that the communication was properly transmitted by telex, facsimile or cable to the addressee. In the case of communication by telex, such communication shall be deemed properly transmitted upon the receipt by the machine sending the telex the telex answerback of the addressee; in the case of facsimile transmission, such transmission shall be deemed properly transmitted on receipt of a report of satisfactory transmission printed out by the sending machine.   17.7 Nothing in this Clause 17 shall preclude the service of communication or the proof of such service by any mode permitted by law.   18. ASSIGNMENT   This Agreement shall be binding upon and enure for the benefit of each party’s successors or assigns and, none of the rights of the parties under this Agreement may be assigned or transferred.   19. ENTIRE AGREEMENT   This Agreement (together with any documents referred to herein) constitutes the entire agreement between the parties hereto with respect to the matters dealt with herein and supersedes any previous agreements, arrangements, statements, understandings or transactions between the parties hereto in relation to the matters hereof.   20. COSTS   Each of the Vendors and the Purchaser shall bear his/her/its own costs and expenses (including legal fees) incurred in connection with the preparation, negotiation, execution and performance of this Agreement and all documents incidental or relating to Completion.   21. COUNTERPART   This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of parties hereto may execute this Agreement by signing any such counterparts.   22. GOVERNING LAW, JURISDICTION AND PROCESS AGENTS   22.1 This Agreement shall be governed by and construed in accordance with the laws of Hong Kong.   22.2 The parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of the courts of Hong Kong.   22.3 The Purchaser hereby irrevocably appoints Mr. Bondy Tan, holder of Hong Kong Permanent Identity Card No. D 500769 (1)) and whose correspondence address is at 16/F., Hang Seng Mongkok Building, 677 Nathan Road, Mongkok, Kowloon, Hong Kong as its service agent to accept service or process out of the courts of the Hong Kong in connection with this Agreement. Such appointment cannot be revoked and the Purchaser hereby confirms that any process, writ of action or summonses out of the courts of Hong Kong served either personally on or sent by post (postal prepaid) to the service agent referred to in this Clause 22.3 at the then current address of such service agent shall be and shall be deemed to be served on the Purchaser and that the failure of the service agent to give any notice of such service of process to the Purchaser shall not impair or affect the validity of such service or of any judgment based thereon.   17     --------------------------------------------------------------------------------     22.4 The Vendors hereby irrevocably appoint Mr. Joseph Sui Kei Lam, one of the Guarantors and whose correspondence address is at Level 25, Bank of China Tower, 1 Garden Road, Central, Hong Kong as their service agent to accept service or process out of the courts of the Hong Kong in connection with this Agreement. Such appointment cannot be revoked and the Vendors hereby confirm that any process, writ of action or summonses out of the courts of Hong Kong served either personally on or sent by post (postal prepaid) to the service agent referred to in this Clause 22.4 at the then current address of such service agent shall be and shall be deemed to be served on the Vendors and that the failure of the service agent to give any notice of such service of process to the Vendors shall not impair or affect the validity of such service or of any judgment based thereon.   [THE BALANCE OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]     18     --------------------------------------------------------------------------------       SCHEDULE 1   DETAILS OF THE COMPANY   Name of Company   : LIGHTSCAPE TECHNOLOGIES (MACAU) LIMITED     Date of Incorporation   : February 6, 2006   Place of Incorporation   : Macau   Company Number   : 23525 SO   Registered Office   :   Rua de Pequim, n 126, Centro Commercial I Tak, 5 andarE, em Macau     Existing company secretary : Not yet appointed   Registered share capital : MOP25,000             Existing owners:     Names of owners   Equity Percentage   Bondy Tan holds on trust for Tech Team Investment Limited   MOP12,600 50.4%         Albert Chan holds on trust for Luminous LED Technologies Limited   MOP12,400 49.6%         Directors: : Bondy Tan and Albert Chan           Auditors : Not yet appointed     Financial year end : March 31     Principal activities : LED lighting effect projects       19     --------------------------------------------------------------------------------     SCHEDULE 2   VENDORS’ WARRANTIES   l. Recitals   The matters stated in the Recitals to this Agreement are true and correct in all material respects.   2. The Vendors, the Guarantors and the Company   2.1 Each of the Vendors and the Guarantors has the full power to enter into and perform this Agreement and this Agreement will, when executed, constitute binding obligations on each of them in accordance with its terms.   2.2 There is no outstanding indebtedness or other liability (actual or contingent) owing by any member of the Group to the Vendors or the Guarantors, any director of a member of the Group or any person connected with the Vendors or the Guarantors nor is there any indebtedness owing to a member of the Group by any such person.   2.3 The entire issued share capital of the Company is as set out in Recital (A) and the Sale Interest are issued fully paid, registered under the name of Alberta Chan and are beneficially owned by Luminous LED free from all Encumbrances and the same are freely transferable by the Vendors without the consent, approval, permission, license or concurrence of any third party.   3. General   All information contained in this Agreement or in the documents referred to herein and therein and all other information concerning the Group and/or any part or parts of its business operations assets and liabilities (actual or contingent) supplied in the course of the negotiations leading to this Agreement to the Purchaser or its agents was when given true, complete and accurate in all material respects and there is no fact or matter which has not been disclosed which renders any such information or documents untrue, inaccurate or misleading in any material respect at the date of this Agreement or which if disclosed might reasonable be expected to influence adversely the Purchaser’s decision to purchase the Sale Interest on the terms of this Agreement.   20     --------------------------------------------------------------------------------     SCHEDULE 3   PURCHASER WARRANTIES     1. The Purchaser has been duly incorporated and is validly existing under the laws of its place of incorporation (namely, Hong Kong) and has full power, authority and legal right to own its assets and carry on its business.   2. The Consideration Shares shall, upon issue, rank pari passu among themselves and with all other common shares of the Purchaser then in issue and are free from all Encumbrances.   3. All information contained in this Agreement or in the documents referred to herein and therein and all other information concerning the Purchaser and/or any part or parts of its business operations assets and liabilities (actual or contingent) supplied in the course of the negotiations leading to this Agreement to the Vendors or its agents was when given true, complete and accurate in all material respects and there is no fact or matter which has not been disclosed which renders any such information or documents untrue, inaccurate or misleading in any material respect at the date of this Agreement or which if disclosed might reasonable be expected to influence adversely the Vendors’ decision to accept the Consideration Shares on the terms of this Agreement.                                     21     --------------------------------------------------------------------------------     SCHEDULE 4   CERTIFICATE OF NON-U.S. SHAREHOLDER   OF   GLOBAL INNOVATIVE SYSTEMS INC.   In connection with the issuance of 1,200,000 shares of common stock (“Pubco Common Stock”) of Global Innovative Systems Inc., a Nevada corporation (“Pubco”), to the undersigned pursuant to the Sale and Purchase Agreement dated __ September 2006 (the “Agreement”), between the Purchaser, the undersigned and the Guarantors (as defined in the Agreement), I hereby agree, represent and warrant (where applicable) that:   1. I am not a “U.S. Person” as such term is defined by Rule 902 of Regulation S under the United States Securities Act of 1933, as amended (“Securities Act”) (the definition of which includes, but is not limited to, an individual resident in the United States of America (“U.S.”) and an estate or trust of which any executor or administrator or trust, respectively is a U.S. Person and any partnership or corporation organized or incorporated under the laws of the U.S.);   2. I will not, during the period commencing on the purchase date of the Pubco Common Stock (“Purchase Date”) and ending one year after the Purchase Date (the “Distribution Compliance Period”), offer, sell, pledge or otherwise transfer any or all shares of the Pubco Common Stock in the U.S., its territories or possessions, or to a U.S. Person or for the account or benefit of a U.S. Person (other than distributors), other than in accordance with Rules 903 or 904 of Regulation S under the Securities Act, pursuant to registration under the Securities Act or an available exemption therefrom and, in any case, in accordance with applicable state and foreign securities laws;   3. Neither I, any of my affiliates, nor any person acting on my or their behalf has engaged, or will engage, in any Directed Selling Efforts (as defined in Regulation S) with respect to the Pubco Common Stock or any distribution, as that term is used in the definition of Distributor in Regulation S under the Securities Act, with respect to the Pubco Common Stock;   4. Neither I, any of my affiliates, nor any person acting on my or their behalf has undertaken or carried out any activity for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the U. S., its territories or possessions, for any of the Pubco Common Stock;   5. If I offer and sell any shares of the Pubco Common Stock during the Distribution Compliance Period, then I will do so only (a) in accordance with the provisions of Regulation S, (b) pursuant to registration of the Pubco Common Stock under the Securities Act, or (c) pursuant to an available exemption from the registration requirements of the Securities Act. I will not engage in any hedging transactions involving the shares of Pubco Common Stock unless such hedging transaction is conducted in compliance with the Securities Act;     22     --------------------------------------------------------------------------------       6. The transactions contemplated by the Agreement (a) have not been prearranged with a purchaser located in the U.S., its territories or possessions, or who is a U.S. person, and (b) are not part of a plan or scheme to evade the registration provisions of the Securities Act;   7. I am not part of a group that has been formed principally for the purpose of investing in securities not registered under the Securities Act;   8. I have not undertaken, and will have no obligation, to register any of the Pubco Common Stock under the Securities Act;   9. Pubco is entitled to rely on the acknowledgements, agreements, representations and warranties and the statements and answers of me contained in the Agreement and this Certificate, and I will hold harmless Pubco from any loss or damage either one may suffer as a result of any such acknowledgements, agreements, representations and/or warranties made by me not being true and correct;   10. I have been advised to consult my own legal, tax and other advisors with respect to the merits and risks of an investment in the Pubco Common Stock and, with respect to applicable resale restrictions, am solely responsible (and Pubco is not in any way responsible) for compliance with applicable resale restrictions;   11. I acknowledge that the Pubco Common Stock is not listed on any other stock exchange or automated dealer quotation system and no representation has been made to me that the Pubco Common Stock will become listed on any other stock exchange or automated dealer quotation system, except that currently certain market makers make market in the common shares of Pubco on the OTCBB (as defined in the Agreement);   12. At the time of the origination of contact concerning the purchase of the Pubco Common Stock, and at the date of execution and delivery of the Sale and Purchase Agreement relating thereto, I, and any person acting on my behalf, was and am outside the U.S., its territories and possessions when receiving and executing the Agreement and am acquiring the Pubco Common Stocks as principal for my own account, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalization thereof, in whole or in part, and no other person has a direct or indirect beneficial interest in the Pubco Common Stocks;   13. I acknowledge that neither the Securities Exchange Commission of the U.S. nor any other securities commission or similar regulatory authority has reviewed or passed on the merits of the Pubco Common Stock;   14. I acknowledge that the Pubco Common Stock is not being acquired, directly or indirectly, for the account or benefit of a U.S. Person or a person in the U.S.;       23     --------------------------------------------------------------------------------       15. I acknowledge and agree that Pubco shall refuse to register any transfer of Pubco Common Stocks not made in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration under the Securities Act; and   16. I understand and agree that the Pubco Common Stocks will bear the following legend:   “NONE OF THE SHARES OF COMMON STOCK OF THE COMPANY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN EACH CASE CONFIRMED BY AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ONLY IN ACCORDANCE WITH APPLICABLE STATE AND PROVINCIAL SECURITIES LAWS. HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”   IN WITNESS WHEREOF, I have executed this Certificate of Non-U.S. Shareholder.         ____________________ By: CHAN ALBERT YEE TAT     Date: _________________, 2006     24     --------------------------------------------------------------------------------     IN WITNESS whereof this Agreement has been duly executed by all parties hereto the day and year first above written.   THE VENDORS     SIGNED, SEALED AND DELIVERED )   by LUMINOUS LED TECHNOLOGIES )   limited ) /s/ signed and sealed in the presence of:           SIGNED by )     )   CHAN ALBERT YEE TAT ) /s/ Chan Albert Yee Tat   )   in the presence of: )         THE PURCHASER   SIGNED by )     )   for and on behalf of )     )   tech team DEVELOPMENT ) /s/ signed and sealed limited )     )   in the presence of: )         THE GUARANTORS     SIGNED, SEALED AND DELIVERED )   by Michelle Siu Kwan LAM ) /s/ Michelle Siu Kwan Lam in the presence of: )         SIGNED, SEALED AND DELIVERED )   by Joseph Sui Kei LAM ) /s/ Joseph Sui Kei Lam in the presence of:         25        

  Exhibit 10.2 EMPLOYMENT AGREEMENT      This Agreement is made as of the 1st day of December, 2005, between TTM TECHNOLOGIES, INC., a Delaware corporation (the “Company”), and KENTON K. ALDER (the “Executive”). Preliminary Statements:      A. The Executive serves as President and Chief Executive Officer of the Company.      B. The Company wishes to continue to retain the services of the Executive as President and Chief Executive Officer of the Company, on the terms and subject to the conditions hereinafter set forth.      C. The Executive is willing to make his services available to the Company, on the terms and subject to the conditions hereinafter set forth. Agreement:      NOW THEREFORE, in consideration of (i) the Executive’s employment and continued employment with the Company, (ii) the compensation paid to the Executive and the benefits provided to the Executive in connection with such employment, and (iii) the Executive’s use of the equipment, supplies, facilities and other resources of the Company and its Subsidiaries and Affiliates, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:      1. Interpretation of this Agreement.           (a) Defined Terms. As used herein, the following terms when used in this Agreement have the meanings set forth below:           “Affiliate” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended.           “Base Salary” shall have the meaning given to it under §2(b) below.           “Board” means the Board of Directors of the Company.           “Cause” means any of the following: (i) the indictment of the Executive or the Executive’s conviction of, or entry of a plea of no contest with respect to, any felony or any crime involving moral turpitude; (ii) the commission by the Executive of any other material act of fraud or intentional dishonesty with respect to the Company or any of its Subsidiaries or Affiliates; (iii) a material breach by the Executive of his fiduciary duties to the Company or any of its Subsidiaries. including the commission by the Executive of an act of fraud or embezzlement against the Company or any of its Subsidiaries or Affiliates; (iv) failure by the Executive to perform in a material manner his properly assigned duties after at least one written warning specifically advising him of such failure and providing him with l0 days to resume performance in accordance with his assigned duties; (v) any breach by the Executive of any of the material terms of (A) this Agreement (including without limitation §§3, 4, 5, 6 or 7 hereof), or (B) any other agreement between the Company and the Executive; (vi) the association, directly or indirectly, of the Executive, for his profit or financial benefit, with any person, firm, partnership, association, entity or corporation that competes, in any material way, with the Company; (vii) the disclosing or using of any material Company Information at any time by the Executive; or (viii) any material breach of a Company policy. Notwithstanding any provision of this Agreement which may be to the contrary, (x) the Executive will not be deemed to have been terminated for Cause unless and until there is delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of   --------------------------------------------------------------------------------   the Board (excluding the Executive if he is a member of the Board) at a meeting of the Board (after reasonable notice to the Executive and an opportunity for the Executive to be heard before the Board), finding that in the opinion of the Board the Executive was guilty of conduct set forth above in the preceding sentence and specifying the particulars thereof in reasonable detail and (y) if the Company so requests in the notice referred to in the immediately preceding parenthetical phrase, the Executive shall not enter upon the premises of the Company or any of its Subsidiaries or Affiliates unless and until the Board shall have determined not to terminate the Executive’s employment for Cause (and during such period the Executive shall continue to be entitled to receive his compensation and benefits hereunder).           “Change in Control” means the consummation of any of the following transactions:           (i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state of the Company’s incorporation or a transaction in which 50% or more of the surviving entity’s outstanding voting stock following the transaction is held by holders who held 50% or more of the Company’s outstanding voting stock prior to such transaction; or           (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company; or           (iii) any reverse merger in which the Company is the surviving entity, but in which 50% or more of the Company’s outstanding voting stock is transferred to holders different from those who held the stock immediately prior to such merger; or           (iv) the acquisition by any person (or entity), directly or indirectly, of 50% or more of the combined voting power of the outstanding shares of Common Stock.           “Common Stock” means the Company’s authorized common stock, no par value.           “Company” shall have the meaning given to it in the first sentence of this Agreement.           “Company Information” means Confidential Information and Trade Secrets.           “Confidential Information” means confidential data and confidential information relating to the business of the Company or any of its Subsidiaries or Affiliates (which does not rise to the status of a Trade Secret under applicable law) which is or has been disclosed to the Executive or of which the Executive became aware as a consequence of or through his employment with the Company and which has economic value, actual or potential, to the Company or any of its Subsidiaries or Affiliates and is not generally known to the competitors of the Company or any of its Subsidiaries or Affiliates. Confidential Information does not include any data or information that (i) is publicly disclosed by law or in response to an order of a court of competent jurisdiction or governmental agency, (ii) becomes publicly available through no fault of the Executive, (iii) becomes known to the Executive from a source outside the scope of his employment with the Company and its Subsidiaries not known to the Executive to be bound by a confidentiality agreement with respect to such information or (iv) has been published in a form generally available to the public prior to the date the Executive proposes to disclose or use such information. Information will not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.           “Disability” means the Executive becomes incapacitated due to physical or mental illness and, in the good faith determination of the Board, is unable to perform his assigned duties and responsibilities and such condition continues, or, in the opinion of a physician selected by the Board, is reasonably likely to continue, for six consecutive months or for periods aggregating six months during any twelve-month period.   --------------------------------------------------------------------------------             “Employment Period” shall have the meaning given to it in §2(a) below.           “Executive” shall have the meaning given to it in the first sentence of this Agreement.           “Good Reason” means, without the Executive’s express written consent, (i) a materially adverse alteration in the nature or status of the Executive’s responsibilities (excluding any isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company within 14 days of receipt of written notice thereof from the Executive), (ii) a reduction by the Company in the Executive’s annual base salary without the Executive’s consent, (iii) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by him under any of the Company’s retirement, life insurance, medical, dental, accident or disability plans in which he is participating as of the date of this Agreement (or, in the event of the Executive’s resignation at any time following the occurrence of a Change in Control, as of the time immediately preceding such Change in Control), or the taking of any action by the Company which would directly or indirectly materially reduce such benefits, taken as a whole or (iv) a breach by the Company of any of the material terms of this Agreement (excluding any breach that is remedied by the Company within 14 days of receipt of written notice thereof from the Executive).           “Notice of Termination” shall have the meaning given to it in §2(a) below.           “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity (or any department, agency or political subdivision thereof).           “Severance Period” means the period for which the Company is required to make payments under §2(d) below.           “Subsidiary” when used with respect to any Person means any other Person, whether incorporated or unincorporated, of which (i) more than 50% of the securities or other ownership interests or (ii) securities or other interests having by their terms ordinary voting power to elect more than 50% of the board of directors or others performing similar functions with respect to such corporation or other organization, is directly owned or controlled by such Person or by any one or more of its Subsidiaries.           “Termination Date” shall have the meaning given to it in §2(a) below.           “Trade Secrets” means information of the Company or any of its Subsidiaries or Affiliates including, but not limited to, technical or nontechnical data, formulas, patterns, compilations, programs, financial data, financial plans, product or service plans or lists of actual or potential customers or suppliers which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.           (b) Interpretation. The words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole, as the same from time to time may be amended or supplemented and not any particular section, paragraph, subparagraph or clause contained in this Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in masculine, feminine or neuter gender shall include the masculine, feminine and the neuter.      2. Employment.           (a) Duration. The Company agrees to employ the Executive and the Executive accepts such employment for the period beginning on the date hereof and ending on the third anniversary of the date hereof, unless sooner terminated as hereinafter set forth; provided, however, that the term of   --------------------------------------------------------------------------------   this Agreement automatically shall be renewed for one additional year effective as of each anniversary of the date hereof beginning with the third anniversary, unless either the Company or the Executive provides written notice to the other that the term of this Agreement shall terminate on the upcoming anniversary of the date hereof, provided such notice is received by the receiving party not less than ninety (90) days prior to the intended date of termination and provided further that the Company shall not be entitled to deliver to the Executive such notice within sixty (60) days prior to a Change in Control. If this Agreement is terminated prior to the third anniversary of the date hereof (or any automatic renewal period), the Executive’s employment shall end on (i) the date specified in a Notice of Termination given by the Executive in connection with his resignation (which, (A) in the case of resignation for Good Reason shall be not less than 30 days from the date such Notice of Termination is given and (B) in the case of resignation for any other reason, shall not be less than 90 days from the date such Notice of Termination is given), (iii) the date on which the Executive’s employment is terminated for Cause, (iv) the date specified in a Notice of Termination given by the Company at any time stating that the Board has determined that the Executive shall be terminated without Cause (termination pursuant to this clause (iv) is sometimes referred to in this Agreement as “termination without Cause”), (v) the date of the Executive’s death, or (vi) the date specified in a Notice of Termination given by the Company in connection with a termination of the Executive’s employment by reason of his Disability; For purposes of this Agreement, the term “Employment Period” shall mean such period of employment and the term “Termination Date” shall mean the date on which the Executive’s employment with the Company is terminated for any reason. Subject to the last sentence contained in the definition of “Cause,” above, any purported termination of the Executive’s employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with §8 below, which notice shall indicate the specific termination provision in this §2(a) relied upon (and, in the case of the Executive’s resignation for Good Reason, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment for Good Reason) (a “Notice of Termination”).           (b) Salary and Benefits. During the Employment Period, in consideration for the Executive agreeing to devote his full business time and attention to the affairs of the Company, the Company will pay the Executive a base salary at the rate of $350,000 per annum or at such higher rate as the Board designates in its sole discretion from time to time (“Base Salary”), payable in installments consistent with the Company’s normal payroll schedule, subject to applicable withholding and other taxes. In addition to the Base Salary payable to Executive pursuant to this §2(b), the Executive will be entitled to the following benefits during the Employment Period:           (i) the Executive will be entitled to participate in all medical and hospitalization, group life insurance, and any and all other fringe benefit plans as are from time to time provided by the Company to its executives;           (ii) the Executive will be entitled to a maximum of four weeks paid vacation each year (paid an Executive’s base salary), accrued up to a maximum cap of 320 hours, after which Executive shall not accrue any additional vacation until Executive takes vacation; provided, however, that in no event may a vacation be taken at a time when to do so could, in the reasonable judgment of the Chairman of the Board, adversely affect the business of the Company and its Subsidiaries; and           (iii) the Executive will be entitled to reimbursement for reasonable business expenses (excluding commuting expenses) incurred by the Executive (subject to submission of appropriate substantiation by the Executive). The Executive’s accrual of or participation in plans providing for benefits will cease on the Termination Date, and the Executive will be entitled to accrued benefits pursuant to such plans only as provided in such plans or as required by law; provided, however, that the Executive will receive, in addition to his severance pay pursuant to §2(d) below, the amount of any accrued benefits in respect of vacation, holiday, sick leave, or other leave unused as of the Termination Date.   --------------------------------------------------------------------------------             (c) Services. During the Employment Period, the Executive will serve as the President and Chief Executive Officer of the Company and shall have the normal duties, responsibilities and authority of such office, subject to the power of the Chairman of the Board to reasonably expand or reasonably limit such duties, responsibilities and authority and to override actions of the Executive. The Executive shall serve on the Board for so long as the Executive is President and Chief Executive Officer of the Company. The Executive will devote his best efforts and substantially all of his business time and attention (except for vacation periods and reasonable periods of illness or other incapacity) to the business of the Company and its Subsidiaries, and shall perform the duties and carry out the responsibilities assigned to him, to the best of his ability, in a diligent, trustworthy, businesslike and efficient manner for the purpose of advancing the business of the Company and its Subsidiaries. The Executive shall use his best efforts to comply with all material applicable laws, rules and regulations relating to the conduct and operation of the business of the Company and its Subsidiaries and will comply with all material policies and procedures adopted by the Board, as in effect from time to time, to govern the operations of the Company and its Subsidiaries.           (d) Severance Pay.           (i) In the event that the Executive’s employment is terminated (A) by the Company without Cause at any time other than in connection with a Change in Control as described in §2(d)(ii), or (B) by the Executive for Good Reason at any time other than in connection with a Change in Control as described in §2(d)(ii), the Company shall pay to the Executive, as severance pay, all amounts due to the Executive as Base Salary pursuant to §2(b) above for the period beginning on the Termination Date and ending 18 months thereafter, in installments on the payment dates on which such Base Salary would have been paid if the Employment Period had continued for such period and, as of the date of the last such payment, the Company will have no further obligation to the Executive.           (ii) In the event that the Executive’s employment is terminated (A) by the Company without Cause within 60 days prior to, or within one year after, the occurrence of a Change in Control, or (B) by the Executive for Good Reason within 60 days prior to, or within one year after, the occurrence of a Change in Control, the Company shall pay to the Executive, as severance pay, all amounts due to the Executive as Base Salary pursuant to §2(b) above for the period beginning on the Termination Date and ending 18 months thereafter, in installments on the payment dates on which such Base Salary would have been paid if the Employment Period had continued for such period and, as of the date of the last such payment, the Company will have no further obligation to the Executive.           (iii) In the event of a Change in Control as described in §2(d)(ii), if any Company stock options held by the Executive are assumed by the surviving entity in connection with such Change in Control, the vesting of any and all such assumed options held by the Executive shall be accelerated so that all unexpired options then held by the Executive shall be fully vested and exercisable immediately upon such termination.           (iv) In no event shall termination of the Executive’s employment for any other reason (including upon or following the expiration of this Agreement on the third anniversary hereof or any extension date) entitle the Executive to severance pay or benefits from the Company or any of its Subsidiaries or Affiliates.           (iv) The Executive’s right to receive, and the Company’s obligation to pay and provide, any of the payments and benefits provided for in this §2(d) shall be subject to (A) the Executive’s compliance with, and observance of, all of the Executive’s obligations under this Agreement that continue beyond the Termination Date and (B) the Executive’s execution, delivery and non-revocation of, and performance under, a release in favor of the Company and its Affiliates and Subsidiaries in the form attached hereto as Exhibit A (as such form may be modified   --------------------------------------------------------------------------------   by the Company so as to comply with all applicable laws as then in effect) within thirty (30) days of the Termination Date.           (e) Incentive Compensation. During the Employment Period, the Executive shall be entitled to receive incentive compensation with respect to each fiscal year of the Company pursuant to the terms of the Company’s annual incentive compensation plan, as approved, in good faith, by the Board.      3. Nondisclosure. During the Employment Period and during the periods described in the last sentence of this §3, the Executive (a) will receive and hold all Company Information in trust and in strictest confidence, (b) will use commercially reasonable efforts to protect the Company Information from disclosure, and (c) except as required by the Executive’s duties in the course of his employment by the Company, will not, directly or indirectly, use, disseminate or otherwise disclose any Company Information to any third party without the prior written consent of the Company, which may be withheld in the Company’s absolute discretion. The provisions of this §3 shall survive the termination of the Executive’s employment with respect to Confidential Information, for so long as any such information remains confidential through no breach of these obligations by Executive or until it becomes known by the general public, and with respect to Trade Secrets, for so long as any such information qualifies as a Trade Secret under applicable law.      4. Books and Records. All books, records, reports, writings, notes, notebooks, computer programs, sketches, drawings, blueprints, prototypes, formulas, photographs, negatives, models, equipment, chemicals, reproductions, proposals, flow sheets, supply contracts, customer lists and other documents and/or things relating in any manner to the business of the Company (including but not limited to any of the same embodying or relating to any Company Information), whether prepared by the Executive or otherwise coming into the Executive’s possession, shall be the exclusive property of the Company and shall not be copied, duplicated, replicated, transformed, modified or removed from the premises of the Company except pursuant to the business of the Company and its Subsidiaries and shall be returned immediately to the Company on termination of the Executive’s employment hereunder or on the Company’s request at any time.      5. Inventions and Patents. Subject to California Labor Code Section 2870, et seq., the Executive agrees that all inventions, innovations or improvements in the Company’s (or any of its Subsidiaries’) method of conducting its business (including new contributions, improvements, ideas and discoveries, whether patentable or not) conceived or made by him during his employment with the Company, solely or jointly with others belong to the Company, provided that this section shall not apply to an invention that the Executive developed entirely on his own time without using the Company’s equipment, supplies, facilities, or trade secret information, except for those inventions that either: (i) relate at the time of conception or reduction to practice of the invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company; or (ii) result from any work performed by the Executive for the Company. Further, the Executive will promptly disclose such inventions, innovations or improvements (whether made solely by Executive or jointly with others during the term of his employment) to the Board and shall perform all actions reasonably requested by the Board to establish and confirm the Company’s ownership of said inventions, innovations or improvements, including, but not limited to the execution of assignments and/or patent applications.      6. Other Businesses. During the Employment Period, the Executive shall not, except with the express consent of the Board (which may be withheld in the Board’s absolute discretion), become engaged in, render services for, or permit his name to be used in connection with, any business other than the business of the Company and its Subsidiaries and Affiliates nor shall the Executive serve on the board of directors of any other business, trade association, organization or entity (whether public or private) provided, however, that this sentence shall not prohibit the Executive from serving as a member of the board of directors of Innovar, Inc. (“Innovar”) (or any successor thereto), so long as the Executive’s activities as a director of Innovar (or any such successor) do not, in the reasonable judgment of the Board, adversely affect the business of the Company and its Subsidiaries.   --------------------------------------------------------------------------------        7. Non-Competition; Nonsolicitation and Noninterference.           (a) Non-Competition. The Executive acknowledges that there is a worldwide market for the products of the Company and its Subsidiaries, that the Company and its Subsidiaries engage in one or more facets of their respective businesses throughout the world, and that the Company and its Subsidiaries compete with other Persons in the business of the Company and its Subsidiaries located in jurisdictions throughout the world, including, without limitation, the territorial United States. During the Employment Period and for a period of 12 months thereafter or the Severance Period, whichever is longer, the Executive agrees that he will not, directly or indirectly, engage in or have any interest in any sole proprietorship, partnership, corporation, limited liability company or business or any other Person (other than the Company and its Subsidiaries), whether as an employee, officer, director, partner, agent, security holder, consultant or otherwise, that directly or indirectly is engaged in any business in which the Company or any of its Subsidiaries is then engaged, in the territorial United States; provided, however, that (i) the provisions of this §7(a) shall not apply in the event that the Employment Period is terminated by reason of the expiration of this Agreement on the third anniversary hereof or any extension date agreed to by the Executive and the Company, and (ii) nothing herein shall be deemed to prevent the Executive from acquiring through market purchases and owning, solely as an investment, less than one percent in the aggregate of the equity securities of any class of any issuer whose shares are registered under Section 12(b) or 12(g) of the Securities Exchange Act, and are listed or admitted for trading on any United States national securities exchange or are quoted on the National Association of Securities Dealers Automated Quotations System, or any similar system of automated dissemination of quotations of securities prices in common use, so long as he is not a member of any “control group” (within the meaning of the rules and regulations of the United States Securities and Exchange Commission).           (b) Nonsolicitation. During the Employment Period and for a period of 12 months thereafter or the Severance Period, whichever is longer, the Executive will not, directly or indirectly, (i) solicit for employment or employ or engage as an agent or independent contractor (or attempt to solicit for employment or employ or engage as an agent or independent contractor), for himself or on behalf of any Person (other than the Company or any of its Subsidiaries), any employee, agent or independent contractor of the Company or any of its Subsidiaries or any Person who was an employee, agent or independent contractor of the Company or any of its Subsidiaries at any time during the one-year period preceding the later of (A) the date of this Agreement and (B) the date of such solicitation, employment, engagement or attempted solicitation, employment or engagement, (ii) encourage any such employee to leave his or her employment with the Company or any of its Subsidiaries or (iii) encourage any such agent or independent contractor to terminate his, her or its engagement with the Company or any of its Subsidiaries.           (c) Noninterference. During the Employment Period and for a period of 12 months thereafter or the Severance Period, whichever is longer, the Executive will not induce or attempt to induce any customer, licensee, licensor or other business relation of the Company or any of its Subsidiaries or Affiliates to cease doing business with them, or in any way interfere with the relationship between such customer, licensee, licensor or other business relation of the Company or any of its Subsidiaries or Affiliates.           (d) Reasonableness. The Executive acknowledges and agrees that the covenants provided for in this §7 are reasonable and necessary in terms of time, area and line of business to protect the legitimate business interests of the Company and its Subsidiaries, which include their respective interests in protecting their (i) valuable confidential business information, (ii) substantial relationships with customers throughout such geographical area and (iii) customer goodwill associated with their ongoing business. To the extent that any of the covenants provided for in this §7 may later be deemed by a court to be too broad to be enforced with respect to its duration or with respect to any particular activity or geographic area, the court making such determination shall have the power to reduce the duration or scope of the provision, and to add or delete specific words or phrases to or from the provision. The provision as modified shall then be enforced. Further, to the extent a court issues an   --------------------------------------------------------------------------------   injunctive relief under this Section 9 of the Agreement, the covenant shall be extended by the period of time from the date of the violation of the covenants herein until the issuance of the injunctive relief.           8. Notices. All notices, requests, demands, claims and other communications hereunder will be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly given if (and then five business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:           If to the Executive: Kenton K. Alder 3080 North 1400 East North Logan, UT 84341 Fax: (435) 752-2260           If to the Company: TTM Technologies, Inc. 2630 South Harbor Boulevard Santa Ana, CA 92704 Attention: Chief Financial Officer Tel: (714) 327-3000 Fax: (714) 241-1668           With copies to: Greenberg Traurig, LLP 2375 E. Camelback Road, Suite 700 Phoenix, AZ 85016 Attention: Michael L. Kaplan, Esq. Tel: (602) 445-8000 Fax: (602) 445-8100 email: [email protected] Either party hereto may send any notice, request, demand, claim or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Either party hereto may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth.      9. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.      10. Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.   --------------------------------------------------------------------------------        11. Counterparts. This Agreement may be executed on separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. Any telecopied signature shall be deemed a manually executed and delivered original.      12. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by the Executive and the Company and their respective successors and assigns (and, in the case of the Executive, heirs and personal representatives), except that Executive may not assign any of his rights or delegate any of his obligations hereunder.      13. Damages. Nothing contained herein shall be construed to prevent either party hereto from seeking and recovering from the other damages sustained by either or both of them as a result of its or his breach of any term or provision of this Agreement. In the event that either party hereto brings suit for the collection of any damages resulting from, or for the injunction of any action constituting, a breach of any of the terms or provisions of this Agreement, then the party found to be at fault shall pay all reasonable costs, fees (including reasonable attorneys’ fees) and expenses of the other party.      14. Equitable Remedies. The Executive acknowledges and agrees that the Company would not have an adequate remedy at law in the event any of the provisions of §§3, 4, 5, 6 and 7 of this Agreement are not performed in accordance with their specific terms or are breached. Accordingly, the Executive agrees that the Company shall be entitled to an injunction or injunctions to prevent breaches of §§3, 4, 5, 6 and 7 of this Agreement and to enforce specifically the terms and provisions thereof in any action instituted in any court of competent jurisdiction, in addition to any other remedies that may be available to it.      15. Choice of Law. This Agreement shall be governed and construed in accordance with the laws of the State of California without regard to conflicts of laws principles thereof and all questions concerning the validity and construction hereof shall be determined in accordance with the laws of said state. By execution and delivery of this Agreement, each party irrevocably submits to the personal and non-exclusive jurisdiction of any federal or state court of competent jurisdiction located in the City of Santa Ana, Orange County, State of California, for himself or itself to enforce this Agreement. Each party agrees that venue would be proper in any of such courts, and hereby waives any objection that any such court is an improper or inconvenient forum for the resolution of any such action. The parties further agree that the mailing by certified or registered mail, return receipt requested, to the addresses specified for notice in this Agreement, of any process or summons required by any such court shall constitute valid and lawful service of process against them, without the necessity for service by any other means provided by statute or rule of court. Notwithstanding the foregoing, the request by the Company for preliminary or permanent injunctive relief, whether prohibitive or mandatory, may be adjudicated in any jurisdiction where the Executive is subject to personal jurisdiction and where venue is proper.      16. Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.      17. Amendments and Waivers. No provision of this Agreement may be amended or waived without the prior written consent of the parties hereto.      18. Business Days. Whenever the terms of this Agreement call for the performance of a specific act on a specified date, which date falls on a Saturday, Sunday or legal holiday, the date for the performance of such act shall be postponed to the next succeeding regular business day following such Saturday, Sunday or legal holiday.      19. No Third Party Beneficiary. Except for the parties to this Agreement and their respective successors and assigns, nothing expressed or implied in this Agreement is intended, or will be construed, to confer upon or give any person other than the parties hereto and their respective successors and assigns any rights or remedies under or by reason of this Agreement.   --------------------------------------------------------------------------------        20. Survival. Sections 3, 4 and 5, 7 through 19 (inclusive), this §20 and §21 shall survive and continue in full force and in accordance with their terms notwithstanding any termination of the Employment Period.      21. Dispute Resolution. If the parties should have a material dispute arising out of or relating to this Agreement or the parties’ respective rights and duties hereunder, then the parties will resolve such dispute in the following manner: (a) either party may at any time deliver to the other a written dispute notice setting forth a brief description of the issue for which such notice initiates the dispute resolution mechanism contemplated by this §21, (b) during the 30 day period following the delivery of the notice described in clause (a) above, appropriate representatives of the various parties will meet and seek to resolve the disputed issue through negotiation, (c) if representatives of the parties are unable to resolve the disputed issue through negotiation, then within 10 days after the period described in clause (b) above, the parties will refer the issue (to the exclusion of a court of law) to final and binding arbitration in Santa Ana, California in accordance with the then existing rules (the “Rules”) of the American Arbitration Association (“AAA”), and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof; provided, however, that the law applicable to any controversy shall be the law of the State of California, regardless of principles of conflicts of laws. In any arbitration pursuant to this Agreement, (x) discovery shall be allowed and governed by the California Code of Civil Procedure and (y) the award or decision shall be rendered by a majority of the members of a Board of Arbitration consisting of three members, one of whom shall be appointed by the Executive, one of whom shall be appointed by the Company and the third of whom shall be the chairman of the panel and be appointed by mutual agreement of said two party-appointed arbitrators. In the event of failure of said two arbitrators to agree within 30 days after the commencement of the arbitration proceeding upon the appointment of the third arbitrator, the third arbitrator shall be appointed by the AAA in accordance with the Rules. In the event that either party shall fail to appoint an arbitrator within 10 days after the commencement of the arbitration proceedings, such arbitrator and the third arbitrator shall be appointed by the AAA in accordance with the Rules. Nothing set forth above shall be interpreted to prevent the parties from agreeing in writing to submit any dispute to a single arbitrator in lieu of a three member Board of Arbitration. Upon the completion of the selection of the Board of Arbitration (or if the parties agree otherwise in writing, a single arbitrator), an award or decision shall be rendered within no more than 30 days. Notwithstanding the foregoing, the request by either party for preliminary or permanent injunctive relief, whether prohibitive or mandatory, shall not be subject to arbitration and may be adjudicated only by the courts permitted under §15 above. SIGNATURES APPEAR ON FOLLOWING PAGE   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year above written.                   TTM TECHNOLOGIES, INC.                                 By:   /s/   Robert E. Klatell                       Robert E. Klatell             Chairman of the Board                                   /s/ Kenton K. Alder           KENTON K. ALDER  

EXHIBIT 10.1   FIRST AMENDMENT TO REVOLVING CREDIT AND GUARANTY AGREEMENT   THIS FIRST AMENDMENT TO REVOLVING CREDIT AND GUARANTY AGREEMENT (this “Amendment”) is dated as of September 23, 2005 and is entered into by and among NEWPAGE CORPORATION, a Delaware corporation (the “Borrower”), NEWPAGE HOLDING CORPORATION, a Delaware corporation (“Holdings”), CERTAIN FINANCIAL INSTITUTIONS listed on the signature pages hereto (the “Lenders”), GOLDMAN SACHS CREDIT PARTNERS L.P. (“GSCP”), as Joint Lead Arranger, Joint Bookrunner and Co-Syndication Agent, UBS SECURITIES LLC, as Joint Lead Arranger, Joint Bookrunner and Co-Syndication Agent, WACHOVIA CAPITAL MARKETS, LLC, as Co-Syndication Agent, BANK OF AMERICA, N.A., as Documentation Agent, JPMORGAN CHASE BANK, N.A., as Collateral Agent (“Collateral Agent”), and GSCP, as Administrative Agent (“Administrative Agent”) and, for purposes of Section IV hereof, the CREDIT SUPPORT PARTIES listed on the signature papers hereto, and is made with reference to that certain REVOLVING CREDIT AND GUARANTY AGREEMENT dated as of May 2, 2005 (as amended through the date hereof, the “Credit Agreement”) by and among Borrower, Holdings, the subsidiaries of Borrower named therein, Lenders, Co-Syndication Agents, Documentation Agent, Collateral Agent and Administrative Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement after giving effect to this Amendment.   RECITALS   WHEREAS, the Credit Parties have requested that Requisite Lenders agree to amend certain provisions of the Credit Agreement as provided for herein; and   WHEREAS, subject to certain conditions, Requisite Lenders are willing to agree to such amendment relating to the Credit Agreement.   NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:   SECTION I.    AMENDMENTS TO CREDIT AGREEMENT   1.1                               Amendments.   A.    Section 1.1 of the Credit Agreement is hereby amended by amending and restating the definition of “Issuing Bank” in its entirety as follows:   “Issuing Bank” means (i) JP Morgan Chase Bank, N.A., with respect to any Letter of Credit issued hereunder by JP Morgan Chase Bank, N.A. and (ii) Wachovia Bank, National Association, with respect to any Letter of Credit issued hereunder by Wachovia Bank, National Association, in each case together with its respective successors and assigns in such capacity. References to the “Issuing Bank” under this Agreement or any other Credit Document shall mean either or both of JP Morgan Chase Bank, N.A. and Wachovia Bank, National Association, as applicable.   --------------------------------------------------------------------------------   B.    Section 1.1 of the Credit Agreement is hereby further amended by amending and restating the definition of “Swing Line Lender” in its entirety as follows:   “Swing Line Lender” means Wachovia Bank, National Association, in its capacity as Swing Line Lender hereunder, together with its permitted successors and assigns in such capacity.   C.    Section 1.1 of the Credit Agreement is hereby further amended by amending and restating the definition of “Swing Line Sublimit” in its entirety as follows:   “Swing Line Sublimit” means the lesser of (i) $25,000,000, and (ii) the aggregate unused amount of Revolving Commitments then in effect.   D.    Section 2.3(b)(ii) of the Credit Agreement is hereby amended by amending and restating the first sentence in its entirety and adding a new second sentence thereafter as follows:   (ii)                                  Whenever NewPageCo desires that Swing Line Lender make a Swing Line Loan, NewPageCo shall deliver to Swing Line Lender and Administrative Agent a Funding Notice no later than 12:00 p.m. (New York City time) on the proposed Credit Date. Unless Swing Line Lender has received notice from the Administrative Agent to the contrary, Swing Line Lender shall be entitled to rely on any certification from NewPageCo contained in any Funding Notice to the effect that the conditions precedent to the issuance of any requested Swing Line Loan have been satisfied in full, including, without limitation, that after giving effect to the making of such Swing Line Loan, the Total Utilization of Revolving Commitments would not exceed the lesser of (1) the Revolving Commitments then in effect and (2) the Borrowing Base then in effect.   E.    Section 2.3(b)(iii) of the Credit Agreement is hereby amended by amending and restating the first sentence in its entirety as follows:   Unless Swing Line Lender has received notice from Administrative Agent that the conditions precedent to the making of any requested Swing Line Loan have not been satisfied in full, then Swing Line Lender shall make the amount of its Swing Line Loan available to Administrative Agent by no later than 2:00 p.m. (New York City time) on the applicable Credit Date by wire transfer of same day funds in Dollars, at Administrative Agent’s Principal Office.   F.    Section 2.3(b) of the Credit Agreement is hereby amended by adding a new paragraph (vii) immediately after paragraph (vi) as follows:   (vii)                           Upon the request by Swing Line Lender to have a Revolving Loan made for the purpose of repaying any Refunded Swing Line Loan pursuant to the immediately preceding paragraph (iv) or the request by Swing Line Lender to have Lender purchase a participation in any unpaid Swing Line Loans pursuant to the immediately preceding paragraph (v), unless Swing Line Lender has received notice from the Administrative Agent that the conditions precedent under Section 3.2 were not satisfied in full at the time   2 --------------------------------------------------------------------------------   that the Swing Line Loan was made to NewPageCo to which such Refunded Swing Line Loan relates or to which such participation in any unpaid Swing Line Loans relates, Swing Line Lender shall be deemed to have satisfied the condition of possessing a good faith belief that all conditions precedent under Section 3.2 have been satisfied for purposes of the immediately preceding paragraph (vi).   G.    Section 2.4(a) of the Credit Agreement is hereby amended to add the following sentence at the end thereof:   NewPageCo shall have the right to select the Issuing Bank for each Letter of Credit it requests.   H.    Section 2.4(b) of the Credit Agreement is hereby amended to add the following sentence at the end thereof:   Unless the Issuing Bank has received notice from the Administrative Agent to the contrary, the Issuing Bank shall be entitled to rely on any certification from NewPageCo contained in any Issuance Notice to the effect that the conditions precedent to the issuance of any requested Letter of Credit have been satisfied in full, including, without limitation, that after giving effect to such issuance, the Total Utilization of Revolving Commitments would not exceed the lesser of (1) the Revolving Commitments then in effect and (2) the Borrowing Base then in effect.   I.    Section 2.7(b) of the Credit Agreement is hereby amended by amending and restating the second sentence contained therein in its entirety as follows:   The Register, as in effect at the close of business on the preceding Business Day, shall be available for inspection by NewPageCo, any Lender or any Issuing Bank at any reasonable time and from time to time upon reasonable prior notice.   J.    Section 3.2(a)(i)of the Credit Agreement is hereby deleted and replaced with a new paragraph (i) as follows:   (i)                                     Administrative Agent shall have received a fully executed and delivered Funding Notice or Issuance Notice, as the case may be, and (A) in the case of any Swing Line Loan, Swing Line Lender shall also have received such fully executed and delivered Funding Notice with respect to such Swing Line Loan and (B) in the case of any Letter of Credit, the applicable Issuing Bank shall also have received such fully executed and delivered Issuance Notice with respect to the issuance of such Letter of Credit;   K.    Section 9 of the Credit Agreement is hereby amended by adding a new Section 9.3 to read as follows:   9.3.                              Appointment of Collateral Agent as “Fondé de Pouvoir”. Without prejudice to the foregoing, each Secured Party hereby irrevocably appoints and authorizes JPMorgan Chase Bank, N.A. (and any successor acting as Collateral Agent) to act as the person holding the power of attorney (fondé de pouvoir) (in such capacity “Attorney”) of the Secured Parties as contemplated under Article 2692 of the Civil Code of Quebec, and   3 --------------------------------------------------------------------------------   to enter into, to take and to hold on their behalf, and for their benefit, any hypothec, and to exercise such powers and duties which are conferred upon the Attorney under any hypothec. Moreover, without prejudice to such appointment and authorization to act as the person holding the power of attorney as aforesaid, each Secured Party hereby irrevocably appoints and authorizes JPMorgan Chase Bank, N.A. (and any successor acting as Collateral Agent) (in such capacity, the “Custodian”) to act as agent and custodian for and on behalf of the Secured Parties to hold and to be the sole registered holder of any bond which may be issued under any hypothec, the whole notwithstanding Section 32 of the Act respecting the special powers of legal persons (Quebec) or any other applicable law. In this respect: (i) the Custodian shall keep a record indicating the names and addresses of, and the pro rata portion of the obligations and indebtedness secured by any pledge of any such bond and owing to each Secured Party, and (ii) each Secured Party will be entitled to the benefits of any charged property covered by any hypothec and will participate in the proceeds of realization of any such charged property, the whole in accordance with the terms hereof. Each of the Attorney and the Custodian shall: (a) have the sole and exclusive right and authority to exercise, except as may be otherwise specifically restricted by the terms hereof, all rights and remedies given to the Attorney and the Custodian (as applicable) pursuant to any hypothec, bond, pledge, applicable laws or otherwise, (b) benefit from and be subject to all provisions hereof with respect to the Collateral Agent mutatis mutandis, including, without limitation, all such provisions with respect to the liability or responsibility to and indemnification by the Secured Parties, and (c) be entitled to delegate from time to time any of its powers or duties under any hypothec, bond, or pledge on such terms and conditions as it may determine from time to time. Any person who becomes a Secured Party shall be deemed to have consented to and confirmed: (i) the Attorney as the person holding the power of attorney as aforesaid and to have ratified, as of the date it becomes a Secured Party, all actions taken by the Attorney in such capacity, and (ii) the Custodian as the agent and custodian as aforesaid and to have ratified, as of the date it becomes a Secured Party, all actions taken by the Custodian in such capacity.   L.    Section 10.3(a) of the Credit Agreement is hereby amended by amending and restating the last sentence contained therein in its entirety as follows:   Anything contained herein to the contrary notwithstanding, neither Administrative Agent nor Swing Line Lender shall have any liability arising from confirmations of the amount of outstanding Loans or the component amounts thereof and neither Administrative Agent nor any Issuing Bank shall have any liability arising from confirmations of the amount of the Letter of Credit Usage or the component amounts thereof.   M.    Section 10.7 is hereby amended by (i) amending the title to such Section to read “Successor Administrative Agent” and (ii) deleting the last two sentences contained therein.   N.    Section 11.5(c)(iii) of the Credit Agreement is hereby deleted and replaced with a new paragraph (iii) as follows:   4 --------------------------------------------------------------------------------   (iii)                               amend, modify, terminate or waive any obligation of Lenders relating to the purchase of participations in Letters of Credit as provided in Section 2.4(e) or any other provision relating to Letter of Credit Usage or Letters of Credit without the written consent of Administrative Agent and of Issuing Bank;   SECTION II.    CONDITIONS TO EFFECTIVENESS   This Amendment shall become effective as of the date hereof only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the “First Amendment Effective Date”):   A.    Execution. Administrative Agent shall have received a counterpart signature page of this Amendment duly executed by each of the Credit Parties and Requisite Lenders.   B.    Necessary Consents. Each Credit Party shall have obtained all material consents necessary or advisable in connection with the transactions contemplated by this Amendment.   C.    Other Documents. Administrative Agent and Lenders shall have received such other documents, information or agreements regarding Credit Parties as Administrative Agent or Collateral Agent may reasonably request, including, without limitation, the issuance of a new Swing Line Note payable to the order of Wachovia Bank, National Association in the original principal amount of $25,000,000 to replace the existing Swing Line Note payable to the order of GSCP in the original principal amount of $15,000,000.   SECTION III.    REPRESENTATIONS AND WARRANTIES   In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, each Credit Party which is a party hereto represents and warrants to each Lender that the following statements are true and correct in all material respects:   A.    Corporate Power and Authority. Each Credit Party, which is party hereto, has all requisite power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the “Amended Agreement”) and the other Credit Documents.   B.    Authorization of Agreements. The execution and delivery of this Amendment and the performance of the Amended Agreement and the other Credit Documents have been duly authorized by all necessary action on the part of each Credit Party.   C.    No Conflict. The execution and delivery by each Credit Party of this Amendment and the performance by each Credit Party of the Amended Agreement and the other Credit Documents do not and will not (i) violate (A) any provision of any law,   5 --------------------------------------------------------------------------------   statute, rule or regulation, or of the certificate or articles of incorporation or partnership agreement, other constitutive documents or by-laws of Holdings, Borrower or any Credit Party or (B) any applicable order of any court or any rule, regulation or order of any Governmental Authority, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any Contractual Obligation of the applicable Credit Party, where any such conflict, violation, breach or default referred to in clause (i) or (ii) of this Section III.C., could reasonably be expected to have a Material Adverse Effect, (iii) except as permitted under the Amended Agreement, result in or require the creation or imposition of any Lien upon any of the properties or assets of each Credit Party (other than any Liens created under any of the Credit Documents in favor of Administrative Agent on behalf of Lenders), or (iv) require any approval of stockholders or partners or any approval or consent of any Person under any Contractual Obligation of each Credit Party, except for such approvals or consents which will be obtained on or before the First Amendment Effective Date and except for any such approvals or consents the failure of which to obtain will not have a Material Adverse Effect.   D.    Governmental Consents. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the execution and delivery by each Credit Party of this Amendment and the performance by Borrower and Holdings of the Amended Agreement and the other Credit Documents, except for such actions, consents and approvals the failure to obtain or make could not reasonably be expected to result in a Material Adverse Effect or which have been obtained and are in full force and effect.   E.    Binding Obligation. This Amendment and the Amended Agreement have been duly executed and delivered by each of the Credit Parties party thereto and each constitutes a legal, valid and binding obligation of such Credit Party to the extent a party thereto, enforceable against such Credit Party in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors’ rights generally and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).   F.    Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Amended Agreement are and will be true and correct in all material respects on and as of the First Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true and correct in all material respects on and as of such earlier date.   G.    Absence of Default. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Default.   6 --------------------------------------------------------------------------------   SECTION IV.    ACKNOWLEDGMENT AND CONSENT   Each Domestic Subsidiary listed on the signature pages hereto and Holdings are referred to herein as a “Credit Support Party” and collectively as the “Credit Support Parties”, and the Credit Documents to which they are a party are collectively referred to herein as the “Credit Support Documents”.   Each Credit Support Party hereby acknowledges that it has reviewed the terms and provisions of the Credit Agreement and this Amendment and consents to the amendment of the Credit Agreement effected pursuant to this Amendment. Each Credit Support Party hereby confirms that each Credit Support Document to which it is a party or otherwise bound and all Collateral encumbered thereby will continue to guarantee or secure, as the case may be, to the fullest extent possible in accordance with the Credit Support Documents the payment and performance of all “Obligations” under each of the Credit Support Documents to which is a party (in each case as such terms are defined in the applicable Credit Support Document).   Each Credit Support Party acknowledges and agrees that any of the Credit Support Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Amendment. Each Credit Support Party represents and warrants that all representations and warranties contained in the Amended Agreement and the Credit Support Documents to which it is a party or otherwise bound are true and correct in all material respects on and as of the First Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true and correct in all material respects on and as of such earlier date.   Each Credit Support Party acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Amendment, such Credit Support Party is not required by the terms of the Credit Agreement or any other Credit Support Document to consent to the amendments to the Credit Agreement effected pursuant to this Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other Credit Support Document shall be deemed to require the consent of such Credit Support Party to any future amendments to the Credit Agreement.   SECTION V.    MISCELLANEOUS   A.    Reference to and Effect on the Credit Agreement and the Other Credit Documents.   (i)     On and after the First Amendment Effective Date, each reference in the Credit Agreement to “this Amendment”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement, and each reference in the other Credit Documents 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 Amendment.   7 --------------------------------------------------------------------------------   (ii)     Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed.   (iii)     The execution, delivery and performance of this Amendment shall not constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of any Agent or Lender under, the Credit Agreement or any of the other Credit Documents.   B.    Headings. Section and Subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.   C.    Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.   D.    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 and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.   [Remainder of this page intentionally left blank.]   8 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.       NEWPAGE CORPORATION                 By: /s/ Linda Sheffield         Name: Linda Sheffield       Title: Treasurer                 NEWPAGE HOLDING CORPORATION                 By: /s/ Linda Sheffield         Name: Linda Sheffield       Title: Treasurer                 CHILLICOTHE PAPER INC.     WICKLIFFE PAPER COMPANY                 By: /s/ Linda Sheffield         Name: Linda Sheffield       Title: Treasurer                 ESCANABA PAPER COMPANY     LUKE PAPER COMPANY     RUMFORD PAPER COMPANY     NEWPAGE ENERGY SERVICES LLC     UPLAND RESOURCES, INC.                 By: /s/ Peter H. Vogel, Jr.         Name: Peter H. Vogel, Jr.       Title: President & CEO                 RUMFORD COGENERATION, INC.     RUMFORD FALLS POWER COMPANY                 By: /s/ Peter H. Vogel, Jr.         Name: Peter H. Vogel, Jr.       Title: President & CEO   --------------------------------------------------------------------------------       GOLDMAN SACHS CREDIT PARTNERS L.P.,     as Administrative Agent, Joint Lead Arranger, Joint Bookrunner, Co-Syndication Agent, and a Lender                 By: /s/ Robert Schatzman          Robert Schatzman        Authorized Signatory                       JPMORGAN CHASE BANK, N.A.       as Collateral Agent, an Issuing Bank and a Lender                       By: /s/ Peter S. Predun           Name: Peter S. Predun         Title: Vice President                       UBS SECURITIES LLC,       as Joint Lead Arranger, Joint Bookrunner and Co-Syndication Agent                         By: /s/ Daniel W. Ladd III           Name: Daniel W. Ladd III         Title: Managing Director                     By: /s/ Francisco Pinto-Leite           Name: Francisco Pinto-Leite         Title: Director and Counsel           Region Americas Legal                               WACHOVIA BANK, NATIONAL ASSOCIATION, as an Issuing Bank, Swingline Lender and a Lender                                 By: /s/ Thomas Grabosky           Name: Thomas Grabosky         Title: Director   --------------------------------------------------------------------------------         WACHOVIA CAPITAL MARKETS, LLC,       as Co-Syndication Agent                                  By: /s/ Thomas Grabosky           Name: Thomas Grabosky         Title: Director                           BANK OF AMERICA, N.A.,       as Documentation Agent and as a Lender                                  By: /s/ Jang S. Kim           Name: Jang S. Kim         Title: Vice President                         LENDERS:         UBS LOAN FINANCE LLC,           as a Lender                         By: /s/ Wilfred V. Saint               Name: Wilfred V. Saint             Title: Director               Banking Products               Services, US                                           By: /s/ Joselin Fernandes               Name: Joselin Fernandes             Title: Associate Director               Banking Products               Services, US                                     WELLS FARGO FOOTHILL, LLC                                     By: /s/ Eunnie Kim         Name: Eunnie Kim         Title: Vice President   --------------------------------------------------------------------------------       GE CAPITAL                 By: /s/ James Miller         Name: James Miller       Title: Duly Authorized Signatory                         THE CIT GROUP/BUSINESS CREDIT, INC.                 By: /s/ Evelyn Kusold         Name: Evelyn Kusold       Title: AVP                         FARM CREDIT SERVICES OF MISSOURI, PCA                 By: /s/ Lee Fuchs         Name: Lee Fuchs       Title: Vice President, Capital Markets                         ISRAEL DISCOUNT BANK OF NEW YORK                 By: /s/ Ron Bongiovanni         Name: Ron Bongiovanni       Title: Senior Vice President             By: /s/ Andy Balta         Name: Andy Balta       Title: Vice President                         SIEMENS FINANCIAL SERVICES, INC.                 By: /s/ Frank Amodio         Name: Frank Amodio       Title: Vice President - Credit   --------------------------------------------------------------------------------       LASALLE BUSINESS CREDIT, LLC                 By: /s/ Steven Friedlander         Name: Steven Friedlander       Title: SVP                     NATIONAL CITY BANK                 By: /s/ Jack Koch         Name: Jack Koch       Title: Account Officer                     SENIOR DEBT PORTFOLIO     By: Boston Management and Research        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President                     EATON VANCE SENION INCOME TRUST     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President                     EATON VANCE INSTITUTIONAL SENIOR LOAN FUND     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President   --------------------------------------------------------------------------------       EATON VANCE CDO III, LTD.     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President                     COSTANTINUS EATON VANCE CDO V, LTD.     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthoff         Name: Michael B. Botthof       Title: Vice President                     EATON VANCE CDO VI, LTD.     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President                     GRAYSON & CO.     By: Boston Management and Research        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President                     BIG SKY SENIOR LOAN FUND, LTD.     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President   --------------------------------------------------------------------------------       THE NORINCHUKIN BANK, NEW YORK BRANCH     Through State Street Bank and Trust Company, N.A. as Fiduciary Custodian     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President                     BIG SKY III SENIOR LOAN TRUST     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President                         EATON VANCE     VT FLOATING-RATE INCOME FUND     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President                     EATON VANCE     LIMITED DURATION INCOME FUND     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President   --------------------------------------------------------------------------------       EATON VANCE     SENIOR FLOATING-RATE TRUST     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President                     EATON VANCE FLOATING-RATE     INCOME TRUST     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President                     EATON VANCE SHORT DURATION     DIVERSIFIED INCOME FUND     By: Eaton Vance Management        As Investment Advisor                 By: /s/ Michael B. Botthof         Name: Michael B. Botthof       Title: Vice President   --------------------------------------------------------------------------------

Exhibit 10.1   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Grantee: Grant Date:     Address: Expiration Date:         Number of Shares: Exercise Price:       Incentive Option Number:   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- INCENTIVE STOCK OPTION AGREEMENT           This Incentive Stock Option Agreement ("Agreement") is made as of the grant date set forth above between WOLVERINE WORLD WIDE, INC., a Delaware corporation ("Wolverine"), and the grantee named above ("Grantee").           The Wolverine World Wide, Inc. Stock Incentive Plan (the "Plan") is administered by the Compensation Committee of Wolverine's Board of Directors (the "Committee"). The Committee has determined that Grantee is eligible to participate in the Plan. The Committee has granted stock options to Grantee, subject to the terms and conditions contained in this Agreement and in the Plan.           The Grantee acknowledges receipt of a copy of the Plan and the Plan Description and accepts this option subject to all of the terms, conditions and provisions of the Plan, and subject to the following further conditions.           1.          Grant. Wolverine grants to Grantee an option to purchase shares of Wolverine's common stock, $1 par value, as set forth above. This option is an incentive stock option as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended. If the aggregate fair market value (determined at the time of grant) of the stock with respect to which incentive stock options are exercisable for the first time by Grantee during any calendar year exceeds $100,000, taking into account options under the Plan and all other stock option plans of Wolverine, options exceeding the $100,000 limitation shall be considered nonqualified stock options.           2.          Term and Delayed Vesting. The right to exercise this option shall commence on the Grant Date shown above and shall terminate on the Expiration Date shown above, unless earlier terminated under the Plan by reason of termination of employment. Grantee's right to exercise this option shall vest at the rate of one-third per year, as follows: one-third of the shares optioned under this Agreement shall vest at the end of the first, second, and third years following the date of this Agreement, respectively. The Committee may, in its sole discretion, accelerate the vesting of the option at any time before full vesting; provided, however, that if any such acceleration would cause a portion of the option not to qualify as an incentive stock option, the Committee may divide the option and stock issued upon exercise into incentive stock option shares and nonqualified option shares.           3.          Registration and Listing. The stock options granted under this Agreement a conditional upon (a) the effective registration or exemption of the Plan and the options granted under the Plan and the stock to be received upon exercise of options pursuant to the Plan under the Securities Act of 1933 and applicable state or foreign securities laws, and (b) the effective listing of the stock on the New York Stock Exchange and the Pacific Exchange.           4.          Exercise. Grantee shall exercise this option by giving Wolverine a written notice of the exercise of this option in the form of Exhibit A hereto. The notice shall set forth the number of shares to be purchased. The notice shall be effective when received by the Chief Financial Officer at Wolverine's main office, accompanied by full payment (as set forth below) of the option price. Wolverine will deliver to Grantee a certificate or certificates for such shares: provided, however, that the time of delivery may be postponed for such period as may be required for Wolverine with reasonable -------------------------------------------------------------------------------- diligence to comply with any registration requirements under the Securities Act of 1933, the Securities Exchange Act of 1934, any requirements under any other law or regulation applicable to the issuance, listing or transfer of such shares, or any agreement or regulation of the New York Stock Exchange and the Pacific Exchange. If Grantee fails to accept delivery of and pay for all or any part of the number of shares specified in the notice upon tender or delivery of the shares, Grantee's right to exercise the option with respect to such undelivered shares shall terminate.           5.          Payment by Grantee. When exercising this stock option, Grantee shall pay Wolverine in cash or, if the Committee consents, in previously owned shares of Wolverine's common stock or other consideration substantially equivalent to cash. The Committee, in its discretion, may permit payment of all or a portion of the exercise price in the form of a promissory note or installments according to terms approved by the Committee. The Committee may require security acceptable to the Committee.           6.          Transferability. The Plan provides that this option is generally not transferable by Grantee except by will or according to the laws of descent and distribution, and is exercisable during Grantee's lifetime only by Grantee or Grantee's guardian or legal representative. Wolverine may, in the event it deems the same desirable to assure compliance with applicable federal and state securities laws, place an appropriate restrictive legend upon any certificate representing shares issued pursuant to the exercise of this option, and may also issue appropriate stop transfer instructions to its transfer agent with respect to such shares.           7.          Termination of Employment or Officer Status. This option shall terminate at the times provided in the Plan after the death or termination of the employment or officer status of the Grantee with Wolverine or any of its Subsidiaries, except as otherwise set forth in this Section. Notwithstanding any provisions contained in the Plan, a portion of this option shall vest and be immediately exercisable upon the following events resulting in termination of employment or officer status: (a) death; (b) disability (as defined in Wolverine's Long-Term Disability Plan); or (c) voluntary termination by a Participant of all employment and/or officer status with Wolverine and its subsidiaries after the Participant has attained (i) 50 years of age and seven years of service (as an employee and/or officer of Wolverine or its Subsidiaries); (ii) 62 years of age; or (iii) such other age or years of service as may be determined by the Committee in its sole discretion (collectively any of (a), (b), or (c) shall be an "Acceleration Event"). Upon the occurrence of an Acceleration Event, the percentage of this option that shall vest and be immediately exercisable shall be determined by dividing the number of full calendar months between the date of this Agreement and the date of the Acceleration Event by 12 and in no event may the percentage accelerated exceed 100%. For example, if a stock option grant occurs on February 15 of a given year and the Acceleration Event occurs on November 15 of such year, 66.67% of the option would be accelerated (8 full calendar months divided by 12) upon the occurrence of the Acceleration Event.           8.          Acceleration. This option shall be immediately exercisable in the event of any Change in Control in Wolverine. "Change in Control" is defined in the Plan.           9.          Stockholder Rights. Grantee shall have no rights as a stockholder with respect to any shares covered by this option until the date of issuance of a stock certificate to the Grantee for such shares.           10.          Employment by Wolverine. The grant of this option shall not impose upon Wolverine or any subsidiary any obligation to retain Grantee in its employ for any given period or upon any specific terms of employment. Wolverine or any subsidiary may at any time dismiss Grantee from employment, free from any liability or claim under the Plan, unless otherwise expressly provided in any written agreement with Grantee. --------------------------------------------------------------------------------           11.          Certifications. Grantee acknowledges that he or she has been furnished and has read the most recent Annual Report to Stockholders of Wolverine and the Plan Description relating to the Plan. Grantee hereby represents and warrants that Grantee is acquiring the option granted under this Agreement for Grantee's own account and investment and without any intent to resell or distribute the shares upon exercise of the option. Grantee shall not resell or distribute the shares received upon exercise of the option except in compliance with such conditions as Wolverine may reasonably specify to ensure compliance with federal and state securities laws.           12.          Effective Date. This option shall be effective as of the date set forth at the top of this Agreement.           13.          Amendment. This option shall not be modified except in a writing executed by the parties hereto.           14.          Notice of Disqualifying Disposition. Grantee agrees to notify Wolverine if Grantee sells shares acquired through the proper exercise of this option within two years of the date of this option or within one year of the exercise of this option to enable Wolverine to claim the deduction to which it will thereby become entitled.           15.           Agreement Controls. The Plan is incorporated in this Agreement by reference. Capitalized terms not defined in this Agreement shall have those meanings provided in the Plan. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the provisions of this Agreement shall control.           16.          Corporate Changes. In the event of any stock dividend, stock split or other increase or reduction in the number of shares of Common Stock outstanding, the number and class of shares covered by this option, and the exercise price, are subject to adjustment as provided in the Plan.           17.          Administration. The Committee has full power and authority to interpret the provisions of the Plan, to supervise the administration of the Plan and to adopt forms and procedures for the administration of the Plan, except as limited by the Plan or as may be necessary to assure that the Plan provides performance-based Compensation under Section 162(m) of the Code. All determinations made by the Committee shall be final and conclusive.           18.          Illegality. The Grantee will not exercise this option, and Wolverine will not be obligated to issue any shares to the Grantee under this option, if the exercise thereof or the issuance of such shares shall constitute a violation by the Grantee or Wolverine of any provisions of any law, order or regulation of any governmental authority.   WOLVERINE WORLD WIDE, INC.           By /s/ Stephen L. Gulis Jr. --------------------------------------------------------------------------------     Stephen L. Gulis Jr. Executive Vice President and Chief Financial Officer       Grantee:         --------------------------------------------------------------------------------     Signature     --------------------------------------------------------------------------------     Print name

-------------------------------------------------------------------------------- --------------------------------------------------------------------------------   Exhibit 10.13 BERRY PETROLEUM COMPANY   NON-EMPLOYEE DIRECTOR  DEFERRED STOCK AND COMPENSATION PLAN   (as amended effective January 1, 2006)         Section 1. Establishment of Plan; Purpose.  The Berry Petroleum Company Non-Employee Director Deferred Stock and Compensation Plan (the “Plan”) is hereby established to permit Eligible Directors, in recognition of their contributions to the Company (a) to receive Shares in lieu of Compensation and (b) to defer recognition of their Compensation in the manner described below. The Plan is intended to enable the Company to attract, retain and motivate qualified directors and to enhance the long-term mutuality of interest between Directors and stockholders of the Company.   Section 2. Definitions.  When used in this Plan, the following terms shall have the definitions set forth in this Section:   2.1. “Accounts” shall mean an Eligible Director’s Stock Unit Account and Interest Account.   2.2. “Board of Directors” shall mean the Board of Directors of the Company.   2.3. “Committee” shall mean the Compensation Committee of the Board of Directors or such other committee of the Board as the Board shall designate from time to time.   2.4. “Company” shall mean Berry Petroleum Company, a Delaware corporation.   2.5. “Compensation” shall mean (a) the fee earned by an Eligible Director for service as a Director; (b) the fee, if any, earned by an Eligible Director for service as a member of a committee of the Board of Directors; and (c) the fee earned by an Eligible Director for (i) attendance at meetings of the Board of Directors and (ii) attendance at meetings of committees. All Compensation earned by an Eligible Director for the services identified in subsections (a), (b) and (c) above, shall be deemed earned by an Eligible Director and credited to the designated Accounts on the last trading day of the fiscal quarter in which such service was provided.   2.6. “Director” shall mean any member of the Board of Directors, whether or not such member is an Eligible Director.   2.7. “Effective Date” shall mean the date on which the Plan is approved by the stockholders of the Company.   2.8. “Eligible Director” shall mean a member of the Board of Directors who is not an employee of the Company.   2.9. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.   2.10. “Fair Market Value” shall mean the closing price or the last sale (as reported by the New York Stock Exchange) of a Share on the last trading day of the fiscal quarter as required by Section 5.4(a) or any other reasonable basis using actual transactions of such Shares as reported and as shall be consistently applied by the Committee.   2.11. “Interest Account” shall mean the bookkeeping account established to record the interests of an Eligible Director with respect to deferred Compensation that is not allocated to Units in a Stock Unit Account.   2.12. “Shares” shall mean shares of Stock.   2.13. “Stock” shall mean the Class A Common Stock of the Company.   2.14. “Stock Unit Account” shall mean a bookkeeping account established to record the interests of an Eligible Director who has elected to have deferred Compensation credited as Units in this Account.   2.15. “Unit” shall mean a contractual obligation of the Company to deliver a Share based on the Fair Market Value of a Share to an Eligible Director or the beneficiary or estate of such Eligible Director as provided herein.     1 -------------------------------------------------------------------------------- Exhibit 10.13              Section 3. Administration. The Plan shall be administered by the Committee; provided, however, that the Plan shall be administered such that any Director participating in the Plan shall continue to be deemed to be a “disinterested person” under Rule 16b-3 of the Securities and Exchange Commission under the Exchange Act (“Rule 16b-3”), as such Rule is in effect on the Effective Date of the Plan and as it may be subsequently amended, for purposes of such Director’s ability to serve on any committee charged with administering any of the Company’s stock-based incentive plans for executive officers intended to qualify for the exemptive relief available under Rule 16b-3.   Section 4. Shares Authorized for Issuance.   4.1. Maximum Number of Shares. The aggregate number of Shares which may be issued to Eligible Directors under the Plan shall not exceed Two Hundred Fifty Thousand (250,000) Shares, subject to adjustment as provided in Section 4.2 below. If any Unit is forfeited without a distribution of Shares, the Shares otherwise subject to such Unit shall again be available hereunder.   4.2. Adjustment for Corporate Transactions. If the outstanding Stock is increased, decreased, changed into or exchanged for a different number or kind of shares of the Company through reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split, an appropriate and proportionate adjustment shall be made in the number or kind of shares which may be issued in the aggregate under this Plan and the number of Units that have been, or may be, issued under this Plan; provided, however, that no such adjustment need be made if, upon the advice of counsel, the Committee determines that such adjustment may result in the receipt of federally taxable income to holders of Stock or other classes of the Company’s equity securities. The nature and extent of such adjustments shall be determined by the Committee in its sole discretion, and any such determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Stock shall be issued under this Plan pursuant to any such adjustment.   Section 5. Deferred Compensation Program.   5.1. Election to Defer. On or before December 31 of any calendar year, an Eligible 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, in whole or in part, to a Stock Unit Account or an Interest Account. Any person who shall become an Eligible Director during any calendar year may elect, not later than the 30th day after his term as a Director begins, to defer payment of all or any part of his Compensation payable for the portion of such calendar year following such election. In the year in which this Plan is first implemented, any Eligible Director may elect, not later than the 30th day after the Effective Date, to defer payment of all or any part of his Compensation payable for the portion of such calendar year following the Effective Date.   5.2. Method of Election. A deferral election shall be made by written notice filed with the Corporate Secretary of the Company. Such election shall continue in effect (including with respect to Compensation payable for subsequent calendar years) unless and until the Eligible Director revokes or modifies such election by written notice filed with the Corporate Secretary. Any such revocation or modification of a deferral election shall become effective as of December 31 of the year in which such notice is given and only with respect to Compensation payable in respect of the calendar year following the year in which such revocation or modification is made; provided however that if the effect of such revocation or modification of a deferral election is to change the amount of deferred Compensation that would otherwise have been credited to the Stock Unit Account, such notice shall in no event become effective earlier than six (6) months after it is received by the Corporate Secretary. This means that notice must be received by the Corporate Secretary by July 1 to be effective for the following year. Amounts credited to the Eligible Director’s Stock Unit Account prior to the effective date of any such revocation or modification of a deferral election shall not be affected by such revocation or modification and shall be credited and distributed only in accordance with the deferral election in place prior to such revocation and modification and otherwise in accordance with the applicable terms of the Plan. An Eligible Director who has revoked an election to participate in the Plan may file a new election to defer Compensation with respect to services rendered in the calendar year following the year in which such new election is filed with the Corporate Secretary of the Company.   5.3. Investment Election. At the time an Eligible Director elects to defer receipt of Compensation pursuant to Section 5.1, the Eligible Director shall also designate in writing the portion of such Compensation, stated as a whole percentage, to be credited to the Interest Account and the portion to be credited to the Stock Unit Account. If an Eligible Director fails to designate the allocation between the two Accounts, 100% of such Compensation shall be credited to the Interest Account. By written notice to the Corporate Secretary, an Eligible Director may change the investment election and the manner in which Compensation is allocated among the Accounts but only with respect to services to be rendered in the calendar year following the year in which such new investment election is filed with the Corporate Secretary, provided that any such election shall only be effective with respect to Compensation payable six (6) months after such new investment election is received by the Corporate Secretary.   5.4. Interest Account.   a. Any Compensation allocated to an Eligible Director’s Interest Account shall be deemed earned and credited to the Interest Account as of the last trading day of the fiscal quarter in which the service was provided for which such compensation amount would have been paid to the Eligible Director.   b. Any amounts credited to the Interest Account shall be credited with interest at the annual rate for the 3-month treasury bill as of the last trading day of the fiscal quarter as quoted in the Wall Street Journal, times 3/12.   2 -------------------------------------------------------------------------------- Exhibit 10.13   5.5. Stock Unit Account.   a. Any Compensation allocated to an Eligible Director’s Stock Unit Account shall be deemed earned and credited to Units in the Stock Unit Account as of the last trading day of the fiscal quarter in which the service was provided for which such compensation amount would have been paid to the Eligible Director.   b. The number of Units allocated to the Eligible Director’s Stock Unit Account pursuant to subsection (a) above shall be equal to the quotient of (i) the aggregate Compensation allocated to the Stock Unit Account as of the last trading day of the fiscal quarter divided by (ii) the Fair Market Value on the last trading day of such quarter. Fractional Units shall be credited, but shall be rounded to the nearest hundredth percentile, with amounts equal to or greater than .005 rounded up and amounts less than .005 rounded down.   5.6. Dividend Equivalents.     a. An Eligible Director who has elected to defer Compensation to a Stock Unit Account shall have no rights as a stockholder of the Company with respect to any Units until Shares are distributed and delivered to the Eligible Director.   b. Notwithstanding the provisions of subsection (a), each Eligible Director who has allocated Compensation to a Stock Unit Account shall have the right to receive an amount equal to the dividend per Share declared by the Company on the applicable dividend payment date (which, in the case of any dividend distributable in property other than Shares, shall be the per Share value of such dividend, as determined by the Company for purposes of income tax reporting) times the number of Units held by such Eligible Director in his Stock Unit Account (a “Dividend Equivalent”).   c. Dividend Equivalents shall be treated as reinvested in an additional number of Units and credited to the Eligible Director’s Stock Unit Account.   d. The additional number of Units to be credited to the Eligible Director’s Stock Unit Account pursuant to (c) (iii) shall be determined by dividing (i) the product of (A) the number of Units in the Eligible Director’s Stock Unit Account on the date the dividend is declared, and (B) the amount of any cash dividend declared by the Company on a Share (or, in the case of any dividend distributable in property other than Shares, the per share value of such dividend, as determined by the Company for purposes of income tax reporting), by (ii) the Fair Market Value on the last trading day of the fiscal quarter in which the dividend is declared.   e. Notwithstanding the date used for purposes of determining the number of additional Units as provided in subsection (d) above, the additional Units to be credited for Dividend Equivalents shall be deemed earned and credited to the Eligible Director’s Stock Unit Account on the last trading day of the fiscal quarter in which such dividend is declared.   f. In the event of any stock split, stock dividend, recapitalization, reorganization or other corporate transaction affecting the capital structure of the Company, the Committee shall make such adjustments to the number of Units credited to each Eligible Director’s Stock Unit Account as the Committee shall deem necessary or appropriate to prevent the dilution or enlargement of such Eligible Director’s rights and such adjustment shall be made and effective as of the last day of the fiscal quarter in which such corporate transaction has occurred.   5.7. Distribution Election.   a. At the time an Eligible Director makes a deferral election pursuant to Section 5.1, the Eligible Director shall also file with the Corporate Secretary a written election (a “Distribution Election”).   b. The distribution from the Stock Unit Account shall be made in Shares and the distribution from the Interest Account shall be made in cash. The Distribution Election shall specify that such distribution shall commence, at the election of the Eligible Director, as soon as practicable following the first business day of the calendar month following the date the Eligible Director ceases to be a Director or on the first business day following the calendar year in which the Eligible Director ceases to be a Director.   c. Such distribution shall be in one lump sum payment or in such number of annual installments (not to exceed ten (10)) as the Eligible Director may designate on the Distribution Election. The amount of any installment payment shall be determined by multiplying the amount credited to the Accounts of an Eligible Director immediately prior to the distribution by a fraction, the numerator of which is one and the denominator of which is the number of installments (including the current installment) remaining to be paid.   d. An Eligible Director may at any time prior to the time at which the Eligible Director ceases to be a Director, and from time to time, change any Distribution Election applicable to his Accounts, provided that no election to change the timing of any final distribution shall be effective unless (i) it is made in writing and received by the Corporate Secretary at least one (1) year prior to the time at which the Eligible Director ceases to be a director and (ii) the start date of any installment distribution or lump sum payment is delayed at least five years.   3 -------------------------------------------------------------------------------- Exhibit 10.13             5.8. Unforeseeable Emergency Withdrawal   Any Eligible Director may, after submission of a written request to the Corporate Secretary and such written evidence of the Eligible Director’s financial condition as the Committee may reasonably request, withdraw from his Interest Account (but not from his Stock Unit Account) up to such amount as the Committee shall determine to be necessary to alleviate the Eligible Director’s unforeseeable emergency plus applicable taxes as a result of the distribution. Withdrawals will only be approved for a severe financial hardship to the Eligible Director resulting from an illness or accident of the Eligible Director, his or her spouse or dependent (as defined in IRC § 409A (a) (2) (B) (ii).              5.9. Timing and Form of Distributions.   a. Any distribution to be made hereunder, whether in the form of a lump sum payment or installments, following the termination of an Eligible Director’s service as a Director shall commence in accordance with the Distribution Election made by the Eligible Director pursuant to Section 5.7.   b. If an Eligible Director fails to specify in accordance with Section 5.7 a commencement date for a distribution or whether such distribution shall be made in a lump sum payment or a number of installments, such distribution shall be made in a lump sum payment and commence on the first business day of the month immediately following the date on which the Eligible Director ceases to be a Director. In the case of any distribution being made in annual installments, each installment after the first installment shall be paid on the first business day of each subsequent calendar year, or as soon as practical thereafter, until the entire amount subject to such Distribution Election shall have been paid.       Section 6. Unfunded Status. The Company shall be under no obligation to establish a fund or reserve in order to pay the benefits under the Plan. A Unit represents a contractual obligation of the Company to deliver Shares to an Eligible Director as provided herein. The Company has not segregated or earmarked any Shares or any of the Company’s assets for the benefit of an Eligible Director or his beneficiary or estate, and the Plan does not, and shall not be construed to, require the Company to do so. The Eligible Director and his beneficiary or estate shall have only an unsecured, contractual right against the Company with respect to any Units granted or amounts credited to an Eligible Director’s Accounts hereunder, and such right shall not be deemed superior to the right of any other creditor. Units shall not be deemed to constitute options or rights to purchase Stock.      Section 7. Amendment and Termination. The Plan may be amended at any time by the Committee or the Board of Directors. Any modification of any of the terms and provisions of the Plan, including this Section, shall not be made more than once every six (6) months. The Plan shall terminate on May 31, 2008. Unless the Board otherwise specifies at the time of such termination, the termination of the Plan will not result in the premature distribution of the amounts credited to an Eligible Director’s Accounts.   Section 8. General Provisions.   8.1. No Right to Serve as a Director. This Plan shall not impose any obligations on the Company to retain any Eligible Director as a Director nor shall it impose any obligation on the part of any Eligible Director to remain as a Director of the Company.   8.2. Rights of a Terminated Director. Notwithstanding the fact that an Eligible Director ceases to be a director during any fiscal quarter, the Eligible Director’s Accounts shall be credited, on the last trading day of the fiscal quarter, with all Compensation and Dividend Equivalents earned as of the last business day he served as an Eligible Director.   8.3. Construction of the Plan. The validity, construction, interpretation, administration and effect of the Plan and the rights relating to the Plan, shall be determined solely in accordance with the laws of the State of Delaware.   8.4. No Right to Particular Assets. Nothing contained in this Plan and no action taken pursuant to this Plan shall create or be construed to create a trust of any kind or any fiduciary relationship between the Company and any Eligible Director, the executor, administrator or other personal representative or designated beneficiary of such Eligible Director, or any other persons. Any reserves that may be established by the Company in connection with Units granted under this Plan shall continue to be treated as the assets of the Company for federal income tax purposes and remain subject to the claims of the Company’s creditors. To the extent that any Eligible Director or the executor, administrator, or other personal representative of such Eligible Director, acquires a right to receive any payment from the Company pursuant to this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company.   8.5. Severability of Provisions. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provision had not been included.   8.6. Incapacity. Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of receipting therefore shall be deemed paid when paid to such person’s guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge any liability or obligation of the Board of Directors, the Company and all other parties with respect thereto.   8.7. Headings and Captions. The headings and captions herein are provided for reference and convenience only, shall not be considered part of this Plan, and shall not be employed in the construction of this Plan. 4 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------

Exhibit 10.1 EXECUTION COPY $175,000,000 AGGREGATE PRINCIPAL AMOUNT SCHOOL SPECIALTY, INC. 3.75% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2026 Purchase Agreement dated November 16, 2006 Purchase Agreement November 16, 2006 BANC OF AMERICA SECURITIES LLC 9 West 57th Street New York, New York  10019 Ladies and Gentlemen: School Specialty, Inc., a Wisconsin corporation (the “Company”), proposes to issue and sell to the purchasers named in Schedule A (the “Initial Purchasers”) $175,000,000 in aggregate principal amount of its 3.75% Convertible Subordinated Debentures due 2026 (the “Firm Debentures”).  In addition, the Company has granted to the Initial Purchasers an option to purchase up to an additional $25,000,000 in aggregate principal amount of its 3.75% Convertible Subordinated Debentures due 2026 (the “Optional Debentures” and, together with the Firm Debentures, the “Debentures”). Banc of America Securities LLC (“BAS”) has agreed to act as representative of the several Initial Purchasers (in such capacity, the “Representatives”) in connection with the offering and sale of the Debentures.  To the extent that there are no additional Initial Purchasers listed on Schedule I other than you, the terms Representatives and Initial Purchasers as used herein shall mean you, as Initial Purchasers. The terms Representatives and Initial Purchasers shall mean either the singular or plural as the context requires. The Debentures will be convertible on the terms, and subject to the conditions, set forth in the Indenture (as defined below).  As used herein, “Conversion Shares” means the shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”), if any, to be received by the holders of the Debentures upon conversion of the Debentures pursuant to the terms of the Debentures. The Debentures will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission (the “Commission”) thereunder (the “Securities Act”), in reliance upon an exemption therefrom. Holders of the Debentures (including the Initial Purchasers and their direct and indirect transferees) will be entitled to the benefits of a Resale Registration Rights Agreement, dated the Closing Date, between the Company and the Initial Purchasers (the “Registration Rights Agreement”), pursuant to which the Company will agree to file with the Commission a shelf registration statement pursuant to Rule 415 under the Securities Act (the “Registration Statement”) covering the resale of the Debentures and the Conversion Shares.  This Agreement, the Indenture, the Debentures and the Registration Rights Agreement are referred to herein collectively as the “Operative Documents.” The Company understands that the Initial Purchasers propose to make an offering of the Debentures on the terms and in the manner set forth herein and in the Final Offering Memorandum (as defined below) and agrees that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Debentures to purchasers (the “Subsequent Purchasers”) at any time after the date of this Agreement. The Company has prepared an offering memorandum, dated the date hereof, setting forth information concerning the Company, the Debentures, the Registration Rights Agreement and the Common Stock, in form and substance reasonably satisfactory to the Initial Purchasers.  As used in this Agreement, “Offering Memorandum” means, collectively, the Preliminary Offering Memorandum dated as of November 15, 2006 (the “Preliminary Offering Memorandum”) and the offering memorandum dated the date hereof (the “Final Offering Memorandum”), each as then amended or supplemented by the Company.  As used herein, each of the terms “Offering Memorandum”, “Preliminary Offering Memorandum” and “Final Offering Memorandum” shall include in each case the documents incorporated or deemed to be incorporated by reference therein. The Company hereby confirms its agreements with the Initial Purchasers as follows: Section 1. Representations and Warranties of the Company. The Company hereby represents, warrants and covenants to each Initial Purchaser as follows: (a) No Registration.  Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 6 and their compliance with the agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Debentures to the Initial Purchasers, the offer, resale and delivery of the Debentures by the Initial Purchasers and the conversion of the Debentures into Conversion Shares, in each case in the manner contemplated by this Agreement, the Indenture and the Offering Memorandum, to register the Debentures or the Conversion Shares under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”). (b) No Integration.  None of the Company or any of its subsidiaries has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any “security” (as defined in the Securities Act) that is or will be integrated with the sale of the Debentures or the Conversion Shares in a manner that would require registration under the Securities Act of the Debentures or the Conversion Shares. (c) Rule 144A.  No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Debentures are listed on any national securities exchange registered under Section 6 of the Exchange Act, or quoted on an automated inter-dealer quotation system. (d) Exclusive Agreement.  In the past six months, the Company has not paid or agreed to pay to any person any compensation for soliciting another person to purchase any securities of the Company (except as contemplated in this Agreement). (e) Offering Memoranda.  The Company hereby confirms that it has authorized the use of the Disclosure Package, including the Preliminary Offering Memorandum, and the Final Offering Memorandum in connection with the offer and sale of the Debentures by the Initial Purchasers.  Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Disclosure Package or the Final Offering Memorandum complied or will comply when it is filed in all material respects with the Exchange Act and the rules and regulations of the Commission thereunder.  The Preliminary Offering Memorandum, at the date thereof, did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  At the date of this Agreement, the Closing Date and on any Subsequent Closing Date, the Final Offering Memorandum did not and will not (and any amendment or supplement thereto, at the date thereof, at the Closing Date and on any Subsequent Closing Date, will not) contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty as to information contained in or omitted from the Preliminary Offering Memorandum or the Final Offering Memorandum in reliance upon and in conformity with written information furnished to the Company by or on the behalf of the Initial Purchasers specifically for inclusion therein, it being understood and agreed that the only such information furnished by or on behalf of the Initial Purchasers consists of the information described as such in Section 8 hereof. (f) Disclosure Package.  The term “Disclosure Package” shall mean (i) the Preliminary Offering Memorandum, as amended or supplemented, (ii) the issuer free writing prospectuses (each, an “Issuer Free Writing Prospectus”), if any, identified in Schedule C hereto, (iii) any other free writing prospectus that the parties hereto shall hereafter expressly agree in writing to treat as part of the Disclosure Package, and (iv) the Final Term Sheet (as defined herein), which shall also be identified in Schedule C hereto.  As of 8:00 am (Eastern time) on the date immediately following the date of this Agreement (the “Execution Time”), the Disclosure Package did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  The preceding sentence does not apply to information contained in or omitted from the Disclosure Package in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Initial Purchasers specifically for inclusion therein, it being understood and agreed that the only such information furnished by or on behalf of the Initial Purchasers consists of the information described as such in Section 8 hereof. (g) Company Not Ineligible Issuer.  (i) At the time of the Preliminary Offering Memorandum and (ii) as of the date of the execution and delivery of this Agreement (with such date being used as the determination date for purposes of the clause (ii)), the Company was not and is not an Ineligible Issuer (as defined in Rule 405 of the Securities Act). (h) Issuer Free Writing Prospectuses.  Neither any Issuer Free Writing Prospectus nor the Final Term Sheet includes any information that conflicts with the information contained in the Offering Memorandum, including any document incorporated by reference therein that has not been superseded or modified.  The preceding sentence does not apply to information contained in or omitted from any Issuer Free Writing Prospectus in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Initial Purchasers specifically for inclusion therein, it being understood and agreed that the only such information furnished by or on behalf of the Initial Purchasers consists of the information described as such in Section 8 hereof. (i) Statements in Offering Memorandum.  The statements incorporated by reference in each of the Disclosure Package and the Final Offering Memorandum under the heading “Legal Proceedings” insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are accurate and fair summaries in all material respects of such legal matters, agreements, documents or proceedings. (j) Tax Statements in Offering Memorandum.  The statements set forth in each of the Disclosure Package and the Final Offering Memorandum under the caption “Material U.S. Federal Income Tax Considerations” insofar as such statements purport to summarize matters of United States federal income tax laws or legal conclusions with respect thereto, and subject to the limitations, qualifications and assumptions set forth therein, fairly summarize in all material respects the matters set forth therein. (k) Offering Materials Furnished to Initial Purchasers.  The Company has delivered to the Representatives copies of the materials contained in the Disclosure Package and the Final Offering Memorandum, each as amended or supplemented, in such quantities and at such places as the Representatives have reasonably requested for each of the Initial Purchasers. (l) Authorization of the Purchase Agreement.  This Agreement has been duly authorized, executed and delivered by the Company and assuming that it has been duly authorized, executed and delivered by the Initial Purchasers, and is a valid and binding agreement of, the Company. (m) Authorization of the Indenture.  The Indenture has been duly authorized by the Company and, upon the effectiveness of the Registration Statement, will be qualified under the Trust Indenture Act; on the Closing Date, the Indenture will have been duly executed and delivered by the Company and, assuming due authorization, execution and delivery thereof by the Trustee, will constitute a legally valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles; and the Indenture conforms in all material respects to the description thereof contained in the Final Offering Memorandum. (n) Authorization of the Debentures.  The Debentures have been duly authorized by the Company; when the Debentures are executed, authenticated and issued in accordance with the terms of the Indenture and delivered to and paid for by the Initial Purchasers pursuant to this Agreement on the Closing Date or any Subsequent Closing Date, as the case may be (assuming due authentication of the Debentures by the Trustee), such Debentures will constitute legally valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles; and the Debentures will conform in all material respects to the description thereof contained in the Final Offering Memorandum. (o) Authorization of the Conversion Shares.  The shares of Common Stock initially issuable upon conversion of the Debentures have been duly authorized and reserved and, when issued upon conversion of the Debentures in accordance with the terms of the Debentures, will be validly issued, fully paid and non-assessable (except to the extent provided under former Section 180.0622(2)(b) of the Wisconsin Business Corporation Law and predecessor and successor statutes, and judicial interpretations thereof with respect to obligations incurred by the Company prior to June 14, 2006), and the issuance of such shares will not be subject to any preemptive or similar rights. (p) Authorization of the Registration Rights Agreement.  The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and assuming that it has been duly authorized, executed and delivered by the Initial Purchasers, is a valid and binding agreement of, the Company, enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (q) No Material Adverse Change.  Except as otherwise disclosed in the Disclosure Package (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), subsequent to the respective dates as of which information is given in the Disclosure Package: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, properties, operations or prospects, of the Company and its subsidiaries, considered as one entity (a “Material Adverse Change”); (ii) the Company and its subsidiaries, considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, nor entered into any material transaction or agreement; and (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company or, except for dividends paid to the Company or other subsidiaries, any of its subsidiaries on any class of capital stock or repurchase or redemption by the Company or any of its subsidiaries of any class of capital stock. (r) Independent Accountants.  Deloitte & Touche LLP, which has expressed its opinion with respect to the financial statements (which term as used in this Agreement includes the related notes thereto) included or incorporated by reference in the Disclosure Package and the Final Offering Memorandum, is an independent registered public accounting firm with respect to the Company, as required by the Securities Act and the Exchange Act and the applicable published rules and regulations thereunder. (s) Preparation of the Financial Statements.  The financial statements included or incorporated by reference in the Disclosure Package and the Final Offering Memorandum present fairly in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified.  Such financial statements comply as to form with the applicable accounting requirements of Regulation S-X and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto or otherwise stated in the Offering Memorandum.  The financial data set forth in each of the Preliminary Offering Memorandum and the Final Offering Memorandum under the captions “Summary—Summary Historical Consolidated Financial Data” and “Capitalization” fairly present in all material respects the information set forth therein on a basis consistent with that of the audited financial statements incorporated by reference in the Preliminary Offering Memorandum and the Final Offering Memorandum.  The Company’s ratios of earnings to fixed charges set forth in each of the Preliminary Offering Memorandum and the Final Offering Memorandum have been calculated in compliance with Item 503(d) of Regulation S-K under the Securities Act. (t) Incorporation and Good Standing of the Company and its Subsidiaries.  Each of the Company and its subsidiaries has been duly incorporated and is validly existing as a corporation in active status or good standing, as the case may be, under the laws of the jurisdiction of its incorporation and has corporate power and authority to own or lease, as the case may be, and operate its properties and to conduct its business as described in the Disclosure Package and Final Offering Memorandum and, in the case of the Company, to enter into and perform its obligations under this Agreement.  Each of the Company and its subsidiaries is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, reasonably be expected to result in a material adverse effect on the condition, financial or otherwise, or on the earnings, business, properties, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company and its subsidiaries, considered as one entity (a “Material Adverse Effect”).  All of the issued and outstanding shares of capital stock of each subsidiary have been duly authorized and validly issued, are fully paid and nonassessable (except to the extent provided under former Section 180.0622(2)(b) of the Wisconsin Business Corporation Law and predecessor and successor statutes and judicial interpretations thereof with respect to obligations incurred by the Company prior to June 14, 2006) and are owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim (except for such security interests, mortgages, pledges, liens or encumbrances granted, made or existing under or in connection with the Company’s Credit Agreement or such as would not have a Material Adverse Effect).  The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended April 29, 2006. (u) Capitalization and Other Capital Stock Matters.  The authorized, issued and outstanding capital stock of the Company is as set forth in the each of the Disclosure Package and Final Offering Memorandum under the caption “Capitalization” (other than for subsequent issuances, if any, pursuant to employee benefit plans described in the Disclosure Package and the Final Offering Memorandum or upon exercise of outstanding options described in the Disclosure Package and the Final Offering Memorandum, as the case may be).  The Common Stock (including the Conversion Shares) conforms in all material respects to the description thereof contained in each of the Disclosure Package and the Final Offering Memorandum.  All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable (except to the extent provided under former Section 180.0622(2)(b) of the Wisconsin Business Corporation Law and predecessor and successor statutes and judicial interpretations thereof with respect to obligations incurred by the Company prior to June 14, 2006) and have been issued in compliance with federal and state securities laws.  None of the outstanding shares of Common Stock were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company.  There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company or any of its subsidiaries other than those described in the Disclosure Package and the Final Offering Memorandum.  The description of the Company’s stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, set forth or incorporated by reference in each of the Disclosure Package and the Final Offering Memorandum accurately and fairly presents and summarizes in all material respects such plans, arrangements, options and rights. (v) Stock Option Awards.  All stock option awards granted by the Company (other than any awards assumed by the Company in connection with any corporate transaction) have been appropriately authorized by the board of directors of the Company or a duly authorized committee thereof; all stock options granted to employees in the United States reflect the fair market value of the Company’s capital stock as determined under Section 409A of the Internal Revenue Code of 1986, as amended from time to time (the “Code”), and the rules and regulations promulgated thereunder, or any successor statute, rules and regulations thereto, on the date the option was granted (within the meaning of United States Treasury Regulation §1.421-1(c)); no stock option awards granted by the Company (other than any awards assumed by the Company in connection with any corporate transaction) have been retroactively granted, or the exercise or purchase price of any stock option award determined retroactively; there is no action, suit, proceeding, formal inquiry or formal investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company in connection with any stock option awards granted by the Company. (w) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required.  Neither the Company nor any of its subsidiaries is (i) in violation of its charter or by-laws, (ii) is (or, with the giving of notice or lapse of time, would be) in default (“Default”) under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound or to which any of the property or assets of the Company or any of its subsidiaries is subject (each, an “Existing Instrument”), (iii) is in Default under the $350.0 million Amended and Restated Credit Agreement dated February 1, 2006 by and among the Company, certain subsidiaries and affiliates of the Company, Bank of America, N.A. as Administrative Agent and Collateral Agent and the lenders thereto (the “Credit Agreement”), the Company and New School, Inc.’s Receivables Purchase Agreement dated as of November 22, 2000, as amended (the “Receivables Facility”) or the Company’s 3.75% Convertible Subordinated Notes due 2023 (the “2003 Notes”) or (iv) is in violation of any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or such subsidiary or any of its properties, as applicable, except with respect to clauses (ii) and (iv) only, for such Defaults or violations as would not, individually or in the aggregate, have a Material Adverse Effect. The Company’s execution, delivery and performance of the Operative Documents and consummation of the transactions contemplated thereby and by the Disclosure Package and the Final Offering Memorandum (i) have been duly authorized by all necessary corporate action and will not result in any violation of the charter or by-laws of the Company or any subsidiary, (ii) will not conflict with or constitute a breach of, or Default or a Debt Repayment Triggering Event (as defined below)(except pursuant to restrictions contained within the Credit Agreement for prepayment of Debentures in cash) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, or require the consent of any other party to, any Existing Instrument and (iii) will not result in any violation of any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having  jurisdiction over the Company or any of its subsidiaries or any of its or their properties. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency is required for the Company’s execution, delivery and performance of the Operative Documents and consummation of the transactions contemplated thereby and by the Disclosure Package and the Final Offering Memorandum, except (i) with respect to the transactions contemplated by the Registration Rights Agreement, as may be required under the Securities Act, the Trust Indenture Act and the rules and regulations promulgated thereunder and (ii) such as have been obtained or made by the Company and are in full force and effect under the Securities Act, applicable state securities or blue sky laws and from the NASD.  As used herein, a “Debt Repayment Triggering Event” means any event or condition which gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right  to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries. (x) No Stamp or Transfer Taxes.  There are no stamp or other issuance or transfer taxes or duties or other similar fees or charges required to be paid in connection with the execution and delivery of this Agreement or the issuance or sale by the Company of the Securities or upon the issuance of Common Stock upon the conversion thereof. (y) No Material Actions or Proceedings.  Except as otherwise disclosed in the Disclosure Package, there are no legal or governmental actions, suits or proceedings pending or, to the Company’s knowledge, threatened (i) against or affecting the Company or any of its subsidiaries, (ii) which has as the subject thereof any officer or director of, or property owned or leased by, the Company or any of its subsidiaries or (iii) relating to environmental or discrimination matters, where in any such case (A) there is a reasonable possibility that such action, suit or proceeding might be determined adversely to the Company or such subsidiary and (B) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to have a Material Adverse Effect or adversely affect the consummation of the transactions contemplated by this Agreement. (z) Labor Matters.  No labor problem or dispute with the employees of the Company or any of its subsidiaries exists or, to the Company’s knowledge, is threatened or imminent and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or its subsidiaries’ principal suppliers, contractors or customers, that could have a Material Adverse Effect. (aa) Intellectual Property Rights.  The Company and its subsidiaries own, possess, license or have other rights to use, all material patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property (collectively, the “Intellectual Property”) reasonably necessary for the conduct of the Company’s business as now conducted or as proposed in each of the Disclosure Package and the Final Offering Memorandum to be conducted.  Except as set forth in the Disclosure Package and the Final Offering Memorandum under the caption “Business—Intellectual Property,” (a) to the Company’s knowledge, there is no material infringement by third parties of any such Intellectual Property owned by or exclusively licensed to the Company; (b) there is no pending or, to the Company’s best knowledge, threatened action, suit, proceeding or claim by others challenging the Company’s rights in or to any material Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim (c) to the Company’s knowledge, there is no pending or threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; and (d) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company’s business as now conducted infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim. (bb) All Necessary Permits, etc.  Except as otherwise disclosed in the Disclosure Package, the Company and each subsidiary possess such valid and current licenses, certificates, authorizations or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses, and neither the Company nor any subsidiary has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect. (cc) Title to Properties.  The Company and each of its subsidiaries has good and marketable title to all the properties and assets reflected as owned by each of them in the financial statements included or incorporated by reference in the Disclosure Package and the Final Offering Memorandum, in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except (i) such as do not, singly or in the aggregate, materially and adversely affect the value of such property and do not, singly or in the aggregate, materially interfere with the use made or proposed to be made of such property by the Company or such subsidiary, (ii) liens for current taxes not yet due and payable and (iii) liens securing debt which is reflected in the Company’s financial statements.  The real property, improvements, equipment and personal property held under lease by the Company or any subsidiary are held under valid and enforceable leases, with such exceptions as are not material and do not, singly or in the aggregate, materially interfere with the use made or proposed to be made of such real property, improvements, equipment or personal property by the Company or such subsidiary. (dd) Tax Law Compliance.  The Company and its subsidiaries have filed all necessary federal, state, local and foreign income and franchise tax returns in a timely manner and have paid all taxes required to be paid by any of them and, if due and payable, any related or similar assessment, fine or penalty levied against any of them, except for any taxes, assessments, fines or penalties such as are not yet due, or are being contested in good faith and by appropriate proceedings or where the failure to make such filings or pay such taxes would not have a Material Adverse Effect.  The Company has made appropriate provisions as required by GAAP in the financial statements included or incorporated by reference in the Disclosure Package and the Final Offering Memorandum in respect of all federal, state and foreign income and franchise taxes for all current or prior periods as to which the tax liability of the Company or any of its subsidiaries has not been finally determined. (ee) Company Not an “Investment Company”.  The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the “Investment Company Act”).  The Company is not, and, after receipt of payment for the Debentures and application of the proceeds as described under “Use of Proceeds” in each of the Preliminary Offering Memorandum and the Final Offering Memorandum will not be, required to register as an “investment company” within the meaning of the Investment Company Act and will conduct its business in a manner so that it will not become subject to the Investment Company Act. (ff) Compliance with Reporting Requirements.  The Company is subject to and in full compliance with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. (gg) Insurance.  Each of the Company and its subsidiaries are insured by recognized, financially sound and reputable institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company and its subsidiaries against theft, damage, destruction, acts of terrorism or vandalism and earthquakes.  All policies of insurance and fidelity or surety bonds insuring the Company or any of its subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; the Company and its subsidiaries are in compliance with the terms of such policies and instruments in all material respects; and there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for.  The Company has no reason to believe that it or any subsidiary will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not have a Material Adverse Effect. (hh) No Restriction on Distributions.  No subsidiary of the Company, other than New School, Inc. is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated by the Disclosure Package and the Final Offering Memorandum. (ii) No Price Stabilization or Manipulation.  The Company has not taken and will not take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Debentures.  The Company acknowledges that the Initial Purchasers may engage in passive market making transactions in the Common Stock on the Nasdaq Global Select Market in accordance with Regulation M under the Exchange Act.  The Initial Purchasers acknowledge that the Company is conducting a stock repurchase program as contemplated by the Offering Memorandum. (jj) Related Party Transactions.  There are no business relationships or related-party transactions involving the Company or any subsidiary or any other person required to be described in the Preliminary Offering Memorandum and the Final Offering Memorandum that have not been described as required. (kk) No General Solicitation.  None of the Company or any of its affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act (“Regulation D”)), has, directly or through an agent, engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offering of the Debentures or the Conversion Shares under the Securities Act or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; the Company has not entered into any contractual arrangement with respect to the distribution of the Debentures or the Conversion Shares except for this Agreement, and the Company will not enter into any such arrangement except for the Registration Rights Agreement and as may be contemplated thereby. (ll) Compliance with Environmental Laws.  Except as described in the Disclosure Package and the Final Offering Memorandum or as would not, individually or in the aggregate, be reasonably likely to result in a Material Adverse Change: (i) neither the Company nor or any of its subsidiaries is in violation of any federal, state, local or foreign law or regulation relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, “Materials of Environmental Concern”), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, “Environmental Laws”), which violation includes, without limitation, noncompliance with any permits or other governmental authorizations required for the operation of the business of the Company or its subsidiaries under applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has the Company or any of its subsidiaries received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of its subsidiaries is in violation of any Environmental Law; (ii) there is no claim, action or cause of action filed with a court or governmental authority, no investigation with respect to which the Company has received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys’ fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company or any of its subsidiaries, now or in the past (collectively, “Environmental Claims”), pending or, to the Company’s knowledge, threatened against the Company or any of its respective subsidiaries or any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed either contractually or by operation of law; and (iii) to the Company’s knowledge, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that would result in a violation of any Environmental Law or form the basis of a potential Environmental Claim against the Company or any of its subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed either contractually or by operation of law except as would not, individually or in the aggregate, have a Material Adverse Effect. (mm) ERISA Compliance.  The Company and its subsidiaries and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, “ERISA,” and which term, as used herein, includes the regulations and published interpretations thereunder) established or maintained by the Company, its subsidiaries or their “ERISA Affiliates” (as defined below) are in compliance in all material respects with ERISA except as described in the Disclosure Package and the Final Offering Memorandum or as would not be reasonably likely to result in a Material Adverse Change.  “ERISA Affiliate” means, with respect to the Company or a subsidiary, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, (as amended, the “Code,” which term, as used herein, includes the regulations and published interpretations thereunder of which the Company or such subsidiary is a member.  No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates except as described in the Offering Memorandum or as would not be reasonably likely to result in a Material Adverse Change.  No “employee benefit plan” established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA).  Except as described in the Offering Memorandum or as would not be reasonably likely to result in a Material Adverse Change, neither the Company, its subsidiaries nor any of their ERISA Affiliates has incurred or reasonably expects to incur any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code.  Each “employee benefit plan” established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates that is intended to be qualified under Section 401 of the Code is so qualified and, to the Company’s knowledge, nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification except as described in the Disclosure Package and the Final Offering Memorandum or as would not be reasonably likely to result in a Material Adverse Change. (nn) No Outstanding Loans or Other Indebtedness.  There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of the members of any of their families, except as disclosed in the Disclosure Package and the Final Offering Memorandum. (oo) Sarbanes-Oxley Compliance.  There is and has been no failure on the part of the Company and any of the Company’s directors or officers, in their capacities as such, to comply in all material respects with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”), including Section 402 related to loans and Sections 302 and 906 related to certifications. (pp) Internal Controls and Procedures.  The Company maintains (i) effective internal control over financial reporting as defined in Rule 13a-15 and Rule 15d-15 under the Securities Exchange Act of 1934, as amended, and (ii) a system of internal accounting controls sufficient to provide reasonable assurance that (A) transactions are executed in accordance with management’s general or specific authorizations; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (qq) No Material Weakness in Internal Controls.  Since the end of the Company’s most recent audited fiscal year, there has been (i) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (ii) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. (rr) PORTAL.  The Company has been advised by the NASD’s PORTAL Market that the Debentures have been designated PORTAL eligible securities in accordance with the rules and regulations of the NASD. Any certificate signed by an officer of the Company and delivered to the Representatives or to counsel for the Initial Purchasers shall be deemed to be a representation and warranty by the Company to each Initial Purchaser as to the matters set forth therein. Section 2. Purchase, Sale and Delivery of the Debentures. (a) The Firm Debentures.  The Company agrees to issue and sell to the several Initial Purchasers the Firm Debentures upon the terms herein set forth.  On the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Initial Purchasers agree, severally and not jointly, to purchase from the Company the respective principal amount of Firm Debentures set forth opposite their names on Schedule A at a purchase price of 97.625% of the aggregate principal amount thereof. (b) The Closing Date.  Delivery of the Firm Debentures to be purchased by the Initial Purchasers and payment therefor shall be made at the offices of Fried, Frank, Harris, Shriver & Jacobson LLP, One New York Plaza, New York, New York 10004  (or such other place as may be agreed to by the Company and the Representatives) at 9:00 a.m. New York City time, on November 22, 2006, or such other time and date as shall be mutually agreed by the Representatives and the Company (the time and date of such closing are called the “Closing Date”). (c) The Optional Debentures; any Subsequent Closing Date.  In addition, on the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Company hereby grants an option to the several Initial Purchasers to purchase, severally and not jointly, up to $25,000,000 aggregate principal amount of Optional Debentures from the Company at the same price as the purchase price to be paid by the Initial Purchasers for the Firm Debentures.  The option granted hereunder may be exercised at any time and from time to time upon notice by the Representatives to the Company, which notice may be given at any time within 13 days from the date of this Agreement.  Such notice shall set forth (i) the amount (which shall be an integral multiple of $1,000 in aggregate principal amount) of Optional Debentures as to which the Initial Purchasers are exercising the option, (ii) the names and denominations in which the Optional Debentures are to be registered and (iii) the time, date and place at which such Debentures will be delivered (which time and date may be simultaneous with, but not earlier than, the Closing Date; and in such case the term “Closing Date” shall refer to the time and date of delivery of the Firm Debentures and the Optional Debentures).  Such time and date of delivery, if subsequent to the Closing Date, is called a “Subsequent Closing Date” and shall be determined by the Representatives.  Such date may be the same as the Closing Date but not earlier than the Closing Date nor later than 10 business days after the date of such notice.  If any Optional Debentures are to be purchased, each Initial Purchaser agrees, severally and not jointly, to purchase the principal amount of Optional Debentures (subject to such adjustments to eliminate fractional amount as the Representatives may determine) that bears the same proportion to the total principal amount of Optional Debentures to be purchased as the principal amount of Firm Debentures set forth on Schedule A opposite the name of such Initial Purchaser bears to the total principal amount of Firm Debentures. (d) Payment for the Debentures.  Payment for the Debentures shall be made at the Closing Date (and, if applicable, at any Subsequent Closing Date) by wire transfer of immediately available funds to the order of the Company. It is understood that the Representatives have been authorized, for their own account and the accounts of the several Initial Purchasers, to accept delivery of and receipt for, and make payment of the purchase price for, the Firm Debentures and any Optional Debentures the Initial Purchasers have agreed to purchase.  BAS, individually and not as the Representative of the Initial Purchasers, may (but shall not be obligated to) make payment for any Debentures to be purchased by any Initial Purchaser whose funds shall not have been received by the Representatives by the Closing Date or any Subsequent Closing Date, as the case may be, for the account of such Initial Purchaser, but any such payment shall not relieve such Initial Purchaser from any of its obligations under this Agreement. (e) Delivery of the Debentures.  The Company shall deliver, or cause to be delivered, to the Representatives for the accounts of the several Initial Purchasers the Firm Debentures at the Closing Date, against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor.  The Company shall also deliver, or cause to be delivered, to the Representatives for the accounts of the several Initial Purchasers, the Optional Debentures the Initial Purchasers have agreed to purchase at the Closing Date or any Subsequent Closing Date, as the case may be, against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor.  Delivery of the Debentures shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct.  Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Initial Purchasers. Section 3. Covenants of the Company.  The Company covenants and agrees with each Initial Purchaser as follows: (a) Representatives’ Review of Proposed Amendments and Supplements.  During the period beginning on the date hereof and ending on the date of the completion of the resale of the Debentures by the Initial Purchasers (as notified by the Initial Purchasers to the Company), prior to amending or supplementing the Disclosure Package or the Final Offering Memorandum, the Company shall furnish to the Representatives for review a copy of each such proposed amendment or supplement, and the Company shall not print, use or distribute such proposed amendment or supplement to which the Representatives reasonably object. (b) Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters.  If, at any time prior to the completion of the resale of the Debentures by the Initial Purchasers (as notified by the Initial Purchasers to the Company), any event or development shall occur or condition exist as a result of which it is necessary to amend or supplement the Disclosure Package or the Final Offering Memorandum in order that the Disclosure Package or the Final Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading, or if in the opinion of the Representatives or counsel for the Initial Purchasers it is otherwise necessary to amend or supplement the Disclosure Package or the Final Offering Memorandum to comply with law, the Company shall promptly notify the Initial Purchasers and prepare, subject to Section 3(a) and Section 3(c) hereof, such amendment or supplement as may be necessary to correct such untrue statement or omission. (c) Final Term Sheet.  The Company will prepare a final term sheet containing solely a description of the Debentures, including the price at which the Debentures are to be sold, in a form approved by the Representatives (the “Final Term Sheet”). (d) Permitted Free Writing Prospectuses.  The Company represents that it has not made, and agrees that, unless it obtains the prior written consent of the Representatives, it will not make, any offer relating to the Debentures that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus” (as defined in Rule 405 of the Securities Act); provided that the prior written consent of the Representatives hereto shall be deemed to have been given in respect of the Free Writing Prospectuses included in Schedule C hereto.  Any such free writing prospectus consented to by the Representatives is hereinafter referred to as a “Permitted Free Writing Prospectus”.  The Company agrees that it has treated and will treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus. (e) Copies of Offering Memorandum.  The Company agrees to furnish to the Representatives, without charge, until the earlier of nine months after the date hereof or the completion of the resale of the Debentures by the Initial Purchasers (as notified by the Initial Purchasers to the Company) as many copies of the Preliminary Offering Memorandum and the Final Offering Memorandum and any amendments and supplements thereto and the Disclosure Package as the Representatives may request. (f) Blue Sky Compliance.  The Company shall cooperate with the Representatives and counsel for the Initial Purchasers, as the Initial Purchasers may reasonably request from time to time, to qualify or register the Debentures for sale under (or obtain exemptions from the application of) the state securities or blue sky laws of those jurisdictions designated by the Representatives, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Debentures.  The Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign corporation.  The Company will advise the Representatives promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Debentures for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its reasonable best efforts to obtain the withdrawal thereof as soon as reasonably practicable. (g) Rule 144A Information.  For so long as any of the Debentures are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Company shall provide to any holder of the Debentures or to any prospective purchaser of the Debentures designated by any holder, upon request of such holder or prospective purchaser, information required to be provided by Rule 144A(d)(4) of the Securities Act if, at the time of such request, the Company is not subject to the reporting requirements under Section 13 or 15(d) of the Exchange Act. (h) Compliance with Securities Law.  The Company will comply with all applicable securities and other laws, rules and regulations, including, without limitation, the Sarbanes-Oxley Act, and use its reasonable best efforts to cause the Company’s directors and officers, in their capacities as such, to comply with such laws, rules and regulations, including, without limitation, the provisions of the Sarbanes Oxley Act. (i) Legends.  Each of the Debentures will bear, to the extent applicable, the legend contained in “Transfer Restrictions” in the Final Offering Memorandum for the time period and upon the other terms stated therein. (j) Written Information Concerning the Offering.  Without the prior written consent of the Representatives, the Company will not give to any prospective purchaser of the Debentures or any other person not in its employ any written information concerning the offering of the Debentures other than the Disclosure Package, the Final Offering Memorandum or any other offering materials prepared by or with the prior consent of the Representatives (k) No General Solicitation.  Except following the effectiveness of the Registration Statement (as defined in the Registration Rights Agreement), the Company will not, and will cause its subsidiaries not to, solicit any offer to buy or offer to sell the Debentures by means of any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. (l) No Integration.  The Company will not, and will cause its subsidiaries not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any “security” (as defined in the Securities Act) in a transaction that could be integrated with the sale of the Debentures in a manner that would require the registration under the Securities Act of the Debentures. (m) Information to Publishers.  Any information provided by the Company to publishers of publicly available databases about the terms of the Securities shall include a statement that the Securities have not been registered under the Act and are subject to restrictions under Rule 144A of the Act. (n) DTC.  The Company will cooperate with the Representatives and use its reasonable best efforts to permit the Securities to be eligible for clearance and settlement through The Depository Trust Company. (o) Rule 144 Tolling.  During the period of two years after the later of the Closing Date or the Subsequent Closing Date, the Company will not, and will not permit any of its “affiliates” (as defined in Rule 144 under the Securities Act) to, resell any of the Debentures which constitute “restricted securities” under Rule 144 that have been reacquired by any of them. (p) Use of Proceeds.  The Company shall apply the net proceeds from the sale of the Debentures sold by it in the manner described under the caption “Use of Proceeds” in each of the Disclosure Package and the Final Offering Memorandum. (q) Transfer Agent.  The Company shall engage and maintain, at its expense, a registrar and transfer agent for the Common Stock. (r) Available Conversion Shares.  The Company will reserve and keep available at all times, free of pre-emptive rights, the full number of Conversion Shares. (s) Conversion Price.  Between the date hereof and the Closing Date, the Company will not do or authorize any act or thing that would result in an adjustment of the conversion price. (t) Company to Provide Interim Financial Statements and Other Information.  If available prior to the Closing Date, the Company will furnish the Initial Purchasers, as soon as they have been prepared by or are available to the Company, a copy of any unaudited interim financial statements of the Company for any fiscal period ending subsequent to the period covered by the most recent financial statements appearing in the Final Offering Memorandum. (u) Company to Provide Copy of the Offering Memorandum in Form That May be Downloaded from the Internet.  The Company shall cause to be prepared and delivered, at its expense, within one business day from the effective date of this Agreement, to BAS an “electronic Final Offering Memorandum” to be used by BAS in connection with the offering and sale of the Debentures.  As used herein, the term “electronic Offering Memorandum” means a form of Final Offering Memorandum, and any amendment or supplement thereto, that meets each of the following conditions: (i) it shall be encoded in an electronic format, satisfactory to BAS, that may be transmitted electronically by BAS to offerees and purchasers of the Debentures for at least the period in which the Initial Purchasers are distributing the Debentures; (ii) it shall disclose the same information as the paper Final Offering Memorandum, except to the extent that graphic and image material cannot be disseminated electronically, in which case such graphic and image material shall be replaced in the electronic Final Offering Memorandum with a fair and accurate narrative description or tabular representation of such material, as appropriate; and (iii) it shall be in or convertible into a paper format or an electronic format, satisfactory to BAS, that will allow investors to store and have continuously ready access to the Final Offering Memorandum at any future time, without charge to investors (other than any fee charged for subscription to the Internet as a whole and for on-line time). (v) Agreement Not to Offer or Sell Additional Securities.  During the period commencing on the date hereof and ending on the 90th day following the date of the Final Offering Memorandum, the Company will not, without the prior written consent of BAS (which consent may be withheld at the sole discretion of BAS), directly or indirectly, sell, offer, contract or grant any option to sell, pledge, transfer or establish an open “put equivalent position” or liquidate or decrease a “call equivalent position”  within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or transfer (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition of), or announce the offering of, or file any registration statement under the Securities Act in respect of, any shares of Common Stock (other than with respect to the exercise of options outstanding prior to the date hereof), options or warrants to acquire shares of the Common Stock or securities exchangeable or exercisable for or convertible into shares of Common Stock (other than as contemplated by this Agreement with respect to the Debentures); provided, however, that the Company may issue shares of its Common Stock or options to purchase its Common Stock, or shares of its Common Stock upon exercise of options, pursuant to any stock option, stock bonus or other stock plan or arrangement described in the Disclosure Package or the Final Offering Memorandum, provided, however, that to the extent such shares, options or shares issued upon exercise of such options are issued to a director or executive officer of the Company, such director or executive officer agrees in writing not to sell, offer, dispose of or otherwise transfer any such shares or options during such 90 day period without the prior written consent of BAS (which consent may be withheld at the sole discretion of the BAS).  Notwithstanding the foregoing, if (x) during the last 17 days of the 90-day restricted period the Company issues an earnings release or material news or a material event relating to the Company occurs, or (y) prior to the expiration of the 90-day restricted period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the 90-day period, the restrictions imposed in this clause shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.  The Company will provide the Representatives and each individual subject to the restricted period pursuant to the lock-up letters described in Section 5(h) with prior notice of any such announcement that gives rise to an extension of the restricted period. (w) Future Reports to Shareholders.  To the extent not available on Edgar, to furnish to its shareholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, shareholders’ equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), to make available to its shareholders consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail. (x) Future Reports to the Representatives.  To the extent not available on Edgar, during the period of five years after the Closing Date the Company will furnish to the Representatives at 9 West 57th Street, New York, NY 10022 (i) as soon as practicable after the end of each fiscal year, copies of the annual report of the Company containing the balance sheet of the Company as of the close of such fiscal year and statements of income, shareholders’ equity and cash flows for the year then ended and the opinion thereon of the Company’s independent public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company with the Commission, the NASD or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company mailed generally to holders of its capital stock. (y) Investment Limitation.  The Company shall not invest or otherwise use the proceeds received by the Company from its sale of the Debentures in such a manner as would require the Company or any of its subsidiaries to register as an investment company under the Investment Company Act. (z) No Manipulation of Price.  The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, under the Exchange Act or otherwise, the stabilization or manipulation of the price of any securities of the Company to facilitate the sale or resale of the Debentures. (aa) Lock-Up Agreements.  The Company will enforce all agreements between the Company and any of its security holders to be entered into pursuant to this agreement that prohibit the sale, transfer, assignment, pledge or hypothecation of any of the Company’s securities.  In addition, the Company will direct the transfer agent to place stop transfer restrictions upon any such securities of the Company that are bound by such “lock-up” agreements for the duration of the periods contemplated in such agreements. Section 4. Payment of Expenses. The Company agrees to pay all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including without limitation (i) all expenses incident to the issuance and delivery of the Debentures (including all printing and engraving costs), (ii) all fees and expenses of the Trustee under the Indenture, (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Debentures to the Initial Purchasers, (iv) all fees and expenses of the Company’s counsel, independent public or certified public accountants and other advisors, (v) all costs and expenses incurred in connection with the preparation, printing, shipping and distribution of the Preliminary Offering Memorandum, each Issuer Free Writing Prospectus and the Final Offering Memorandum, all amendments and supplements thereto and this Agreement, (vi) all filing fees, attorneys’ fees and expenses incurred by the Company or the Initial Purchasers in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Debentures for offer and sale under the state securities or blue sky laws, and, if requested by the Representatives, preparing and printing a “Blue Sky Survey” or memorandum, and any supplements thereto, advising the Initial Purchasers of such qualifications, registrations and exemptions, (vii)  the expenses of the Company and the Initial Purchasers in connection with the marketing and offering of the Debentures, including all transportation and other expenses incurred in connection with presentations to prospective purchasers of the Debentures, (viii) the fees and expenses associated with including the Conversion Shares on The Nasdaq Global Select Market and (ix) all expenses and fees in connection with admitting the Debentures for trading in the PORTAL Market.  Except as provided in this Section 4, Section 7, Section 10 and Section 11 hereof, the Initial Purchasers shall pay their own expenses, including the fees and disbursements of their counsel. Section 5. Conditions of the Obligations of the Initial Purchasers. The obligations of the several Initial Purchasers to purchase and pay for the Debentures as provided herein on the Closing Date and, with respect to the Optional Debentures, any Subsequent Closing Date, shall be subject to the accuracy of the representations and warranties on the part of the Company set forth in Section 1 hereof as of the date hereof and as of the Closing Date as though then made and, with respect to the Optional Debentures, as of the related Subsequent Closing Date as though then made, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the timely performance by the Company of its covenants and other obligations hereunder, and to each of the following additional conditions: (a) Accountants’ Comfort Letter.  On the date hereof, the Representatives shall have received from Deloitte & Touche LLP, independent public accountants for the Company a letter dated the date hereof addressed to the Initial Purchasers, in form and substance satisfactory to the Initial Purchaser, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to the Initial Purchaser, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletin), with respect to the audited and unaudited financial statements and certain financial information contained in the Offering Memorandum. (b) No Material Adverse Change or Rating Agency Change.  For the period from and after the date of this Agreement and prior to the Closing Date and, with respect to the Optional Debentures, any Subsequent Closing Date: (i) in the judgment of the Representatives there shall not have occurred any Material Adverse Change; and (ii) there shall not have been any change or decrease specified in the letter or letters referred to in paragraph (a) of this Section 5 which is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Debentures as contemplated by the Final Offering Memorandum; and (iii) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of the Company or any of its subsidiaries by any “nationally recognized statistical rating organization” as such term is defined for purposes of Rule 436(g)(2) under the Securities Act. (c) Opinion of Counsel for the Company.  On each of the Closing Date and any Subsequent Closing Date, the Representatives shall have received the favorable opinion of Godfrey & Kahn, S.C., counsel for the Company, dated as of such Closing Date, the form of which is attached as Exhibit A. (d) Opinion of Counsel for the Initial Purchasers.  On each of the Closing Date and any Subsequent Closing Date, the Representatives shall have received the favorable opinion of Fried, Frank, Harris, Shriver & Jacobson LLP, counsel for the Initial Purchasers, dated as of such Closing Date, in form and substance satisfactory to, and addressed to, the Representatives, with respect to the issuance and sale of the Debentures, the Final Offering Memorandum, (together with any supplement thereto), the Disclosure Package and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (e) Officers’ Certificate.  On each of the Closing Date and any Subsequent Closing Date, the Representatives shall have received a written certificate executed by the Chief Executive Officer or President of the Company and the Chief Financial Officer or Chief Accounting Officer of the Company, dated as of such Closing Date, to the effect that the signers of such certificate have carefully examined the Preliminary Offering Memorandum, the Final Offering Memorandum, any amendments or supplements thereto, any Issuer Free Writing Prospectus and any amendment or supplement thereto and this Agreement, to the effect that: (i) For the period from and after the date of this Agreement and prior to such Closing Date, there has not occurred any Material Adverse Change. (ii) the representations, warranties and covenants of the Company set forth in Section 1 of this Agreement are true and correct on and as of the Closing Date with the same force and effect as though expressly made on and as of such Closing Date; and (iii) the Company has complied with all the agreements hereunder and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date. (f) Bring-down Comfort Letter.  On each of the Closing Date and any Subsequent Closing Date, the Representatives shall have received from Deloitte & Touche LLP, letters dated such date, in form and substance satisfactory to the Representatives, to the effect that they reaffirm the statements made in the letter furnished by them pursuant to subsection (a) of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the Closing Date or Subsequent Closing Date, as the case may be. (g) Registration Rights Agreement.  The Company shall have executed and delivered the Registration Rights Agreement (in form and substance satisfactory to the Initial Purchasers), and the Registration Rights Agreement shall be in full force and effect. (h) Lock-Up Agreement from Certain Securityholders of the Company.  On or prior to the date hereof, the Company shall have furnished to the Representatives an agreement in the form of Exhibit B hereto from David Vander Zanden, David Gomach, Joseph Franzoi IV, Gregory Cessna, Steven Korte, Terry Lay, Ed Emma and Leo McKenna, and such agreement shall be in full force and effect on each of the Closing Date and any Subsequent Closing Date. (i) PORTAL Designation.  The Debentures shall have been designated PORTAL-eligible securities in accordance with the rules and regulations of the National Association of Securities Dealers, Inc. (j) The Company shall have filed a Notification Form: Listing of Additional Shares with The Nasdaq Stock Market and shall use its reasonable best efforts to effect the listing of the Conversion Shares prior to issuance of the Debentures and the Conversion Shares relating thereto. (k) Additional Documents.  On or before each of the Closing Date and any Subsequent Closing Date, the Representatives and counsel for the Initial Purchasers shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Debentures as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained. If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Representatives by notice to the Company at any time on or prior to the Closing Date and, with respect to the Optional Debentures, at any time prior to the applicable Subsequent Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 4, Section 7 Section 8 and Section 9 shall at all times be effective and shall survive such termination. Section 6. Representations, Warranties and Agreements of Initial Purchasers. Each of the Initial Purchasers represents and warrants that it is a “qualified institutional buyer,” as defined in Rule 144A of the Securities Act.  Each Initial Purchaser agrees with the Company that: (a) it has not offered or sold, and will not offer or sell, any Debentures within the United States or to, or for the account or benefit of, U.S. persons (x) as part of their distribution at any time or (y) otherwise until one year after the later of the commencement of the offering and the date of closing of the offering except to those it reasonably believes to be “qualified institutional buyers” (as defined in Rule 144A under the Act); (b) neither it nor any person acting on its behalf has made or will make offers or sales of the Debentures in the United States by means of any form of general solicitation or general advertising (within the meaning of Regulation D) in the United States; (c) it has taken or will take reasonable steps to ensure that the purchaser of such Debentures is aware that such sale is being made in reliance on Rule 144A; (d) any information provided by the Initial Purchasers to publishers of publicly available databases about the terms of the Debentures shall include a statement that the Debentures have not been registered under the Act and are subject to restrictions under Rule 144A under the Act; and (e) it acknowledges that additional restrictions on the offer and sale of the Debentures and the Common Stock issuable upon conversion thereof are described in the Final Offering Memorandum. Section 7. Reimbursement of Initial Purchasers’ Expenses. If this Agreement is terminated by the Representatives pursuant to Section 5 or Section 11, or if the sale to the Initial Purchasers of the Debentures on the Closing Date is not consummated because of any refusal, inability or failure on the part of the Company to perform any agreement herein or to comply with any provision hereof, the Company agrees to reimburse the Representatives and the other Initial Purchasers (or such Initial Purchasers as have terminated this Agreement with respect to themselves), severally, upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Representatives and the Initial Purchasers in connection with the proposed purchase and the offering and sale of the Debentures, including but not limited to fees and disbursements of counsel, printing expenses, travel expenses, postage, facsimile and telephone charges. Section 8. Indemnification. (a) Indemnification of the Initial Purchasers.  The Company agrees to indemnify and hold harmless each Initial Purchaser, its directors, officers and employees and agents, and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act and the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Initial Purchaser or such controlling person may become subject, insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Final Offering Memorandum (or any amendment or supplement thereto), any Issuer Free Writing Prospectus, the Final Term Sheet or the omission or alleged omission therefrom of a material fact, in each case, necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and to reimburse each Initial Purchaser and each such controlling person for any and all expenses (including the reasonable fees and disbursements of counsel chosen by BAS) as such expenses are reasonably incurred by such Initial Purchaser, its officers, directors, employees, agents or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Representatives expressly for use in the Preliminary Offering Memorandum or the Final Offering Memorandum (or any amendment or supplement thereto) or any Issuer Free Writing Prospectus.  The indemnity agreement set forth in this Section 8(a) shall be in addition to any liabilities that the Company may otherwise have. (b) Indemnification of the Company, its Directors and Officers.  Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Company, each of its directors, each of its officers and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company, or any such director, officer or controlling person may become subject, insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in any Issuer Free Writing Prospectus, the Final Term Sheet, the Preliminary Offering Memorandum or the Final Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact, in each case, necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, and only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Issuer Free Writing Prospectus, the Final Term Sheet, the Preliminary Offering Memorandum or the Final Offering Memorandum (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Company by the Representatives expressly for use therein; and to reimburse the Company, or any such director, officer or controlling person for any and all expenses (including the fees and disbursements of counsel chosen by the Company) as such expenses are reasonably incurred by the Company, or any such director, officer or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action.  The Company hereby acknowledges that the only information that the Initial Purchasers have furnished to the Company expressly for use in any Issuer Free Writing Prospectus, the Final Term Sheet, the Preliminary Offering Memorandum or the Final Offering Memorandum (or any amendment or supplement thereto) are the statements set forth in Schedule B.  The indemnity agreement set forth in this Section 8(b) shall be in addition to any liabilities that each Initial Purchaser may otherwise have. (c) Notifications and Other Indemnification Procedures.  Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof may be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof, but the failure to so notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above.  In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel satisfactory to such indemnified party; provided, however, 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 a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties.  Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party’s election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with local counsel), reasonably approved by the indemnifying party (or by BAS in the case of Section 8(b) and Section 9), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. (d) Settlements.  The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there is a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment.  Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(c) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent (x) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding and (y) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. Section 9. Contribution. If the indemnification provided for in Section 8 is for any reason unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Initial Purchasers, on the other hand, from the offering of the Debentures pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Initial Purchasers, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations.  The relative benefits received by the Company, on the one hand, and the Initial Purchasers, on the other hand, in connection with the offering of the Debentures pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Debentures pursuant to this Agreement (before deducting expenses) received by the Company, and the total discount received by the Initial Purchasers bear to the aggregate initial offering price of the Debentures.  The relative fault of the Company, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by the Company, on the one hand, or the Initial Purchasers, 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 expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Initial Purchasers 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 this Section 9. Notwithstanding the provisions of this Section 9, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Debentures purchased by it and distributed to investors were offered to investors exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  The Initial Purchasers’ obligations to contribute pursuant to this Section 9 are several, and not joint, in proportion to their respective commitments as set forth opposite their names in Schedule A.  For purposes of this Section 9, each officer and employee of an Initial Purchaser and each person, if any, who controls an Initial Purchaser within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as such Initial Purchaser, and each director of the Company, each officer of the Company, and each person, if any, who controls the Company within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Company. Section 10. RESERVED Section 11. Termination of this Agreement. On or prior to the Closing Date this Agreement may be terminated by the Representatives by notice given to the Company if at any time (i) trading or quotation in any of the Company’s securities shall have been suspended or limited by the Commission or by The Nasdaq Global Select Market, (ii) trading in securities generally on either the New York Stock Exchange or The Nasdaq Global Select Market shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or the NASD; (iii) a general banking moratorium shall have been declared by any federal or New York authority or a material disruption in commercial banking or securities settlement or clearance services in the United States has occurred; or (iv) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States’ or international political, financial or economic conditions, as in the judgment of the Representatives is material and adverse and makes it impracticable or inadvisable to market the Debentures in the manner and on the terms described in the Final Offering Memorandum or to enforce contracts for the sale of securities.  Any termination pursuant to this Section 11 shall be without liability on the part of (a) the Company to any Initial Purchaser, except that the Company shall be obligated to reimburse the expenses of the Representatives and the Initial Purchasers pursuant to Sections 4 and 7 hereof or (b) any Initial Purchaser to the Company. Section 12. No Advisory or Fiduciary Responsibility. The Company acknowledges and agrees that: (i) the purchase and sale of the Securities pursuant to this Agreement, including the determination of the offering price of the Securities and any related discounts and commissions, is an arm’s-length commercial transaction between the Company, on the one hand, and the several Initial Purchasers, on the other hand, and the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement; (ii) in connection with each transaction contemplated hereby and the process leading to such transaction each Initial Purchaser is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary of the Company or its affiliates, stockholders, creditors or employees or any other party; (iii) no Initial Purchaser has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Company with respect to any of the transactions contemplated hereby or the process leading thereto (irrespective of whether such Initial Purchaser has advised or is currently advising the Company on other matters) and no Initial Purchaser has any obligation to the Company with respect to the offering contemplated hereby except the obligations expressly set forth in this Agreement; (iv) the several Initial Purchasers and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and that the several Initial Purchasers have no obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Initial Purchasers have not provided any legal, accounting, regulatory or tax advice with respect to the offering contemplated hereby and the Company has consulted its own legal, accounting, regulatory and tax advisors to the extent it deemed appropriate. This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the several Initial Purchasers, or any of them, with respect to the subject matter hereof.  The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the several Initial Purchasers with respect to any breach or alleged breach of agency or fiduciary duty. Section 13. Representations and Indemnities to Survive Delivery. The respective indemnities, contribution, agreements, representations, warranties and other statements of the Company, of its officers and of the several Initial Purchasers set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation, or statement as to the result hereof, made by or on behalf of any Initial Purchaser or the Company or any of its or their partners, officers or directors or any controlling person, as the case may be, (ii) acceptance of the Debentures and payment for them hereunder or (iii) any termination of this Agreement. Section 14. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties hereto as follows: If to the Representatives: Banc of America Securities LLC 9 West 57th Street New York, New York  10019 Facsimile:  212-933-2217 Attention:  Syndicate Department with a copy to: Banc of America Securities LLC 9 West 57th Street New York, New York  10019 Facsimile:  (212) 457-3745 Attention:  Raymond P. Ko If to the Company: School Specialty, Inc. W6313 Design Drive Greenville, WI  54942 Facsimile:  (920) 882-5602 Attention:  David J. Vander Zanden Any party hereto may change the address for receipt of communications by giving written notice to the others. Section 15. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, and to the benefit of the employees, officers and directors and controlling persons referred to in Section 8 and Section 9, and in each case their respective successors, and no other person will have any right or obligation hereunder.  The term “successors” shall not include any purchaser of the Debentures as such from any of the Initial Purchasers merely by reason of such purchase. Section 16. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof.  If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. Section 17. Governing Law Provisions. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Section 18. General Provisions. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof.  This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement may not be amended or modified unless in writing by all of the parties hereto.  The Section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms. Very truly yours, SCHOOL SPECIALTY, INC. By: /s/ David J. Vander Zanden                   Name: David J. Vander Zanden       Title:   President and                 Chief Executive Officer The foregoing Underwriting Agreement is hereby confirmed and accepted by the Representatives as of the date first above written. BANC OF AMERICA SECURITIES LLC By: /s/ Derek Dillon                                     Authorized Signatory SCHEDULE A Initial Purchasers   Aggregate Principal Amount of Firm Debentures to be Purchased   Banc of America Securities LLC   $175,000,000                                   Total   $175,000,000   SCHEDULE B The final sentence in the last paragraph of the front cover of the Offering Memorandum. The first sentence of the third paragraph in “Plan of Distribution”. The information in the section entitled “Stabilization” in “Plan of Distribution”. SCHEDULE C Final Term Sheet dated November 16, 2006 as distributed to investors at 7:30 pm. EXHIBIT A [Form of Opinion of Counsel for the Company] The final opinion in draft form should be attached as Exhibit A at the time this Agreement is executed. Opinion of counsel for the Company to be delivered pursuant to Section 5(c) of the Purchase Agreement. References to the Final Offering Memorandum in this Exhibit A include any supplements thereto at the Closing Date. (i) The Company has been duly incorporated and is validly existing as a corporation in active status under the laws of the State of Wisconsin. (ii) The Company has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Disclosure Package and the Final Offering Memorandum and to enter into and perform its obligations under the Purchase Agreement. (iii) The Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. (iv) Each significant subsidiary of the Company (as defined in Rule 405 under the Securities Act) is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own or lease, as the case may be, and to operate its properties and to conduct its business as described in the Disclosure Package and the Final Offering Memorandum and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. (v) Based solely on a review of the stock records of each significant subsidiary of the Company, all of the issued and outstanding capital stock of each such significant subsidiary of the Company is owned of record by the Company, directly or through subsidiaries, and to such counsel’s knowledge, is so owned free and clear of any security interest, mortgage, pledge, lien, encumbrance (except for such security interests, mortgages, pledges, liens or encumbrances granted, made or existing under or in connection with the Company’s Credit Agreement or such as would not have a Material Adverse Effect) or, to the knowledge of such counsel, any pending or threatened claim. (vi) The Company’s authorized capitalization is as set forth in the Disclosure Package and the Final Offering Memorandum.  The authorized, issued and outstanding capital stock of the Company (including the Common Stock) conforms in all material respects to the descriptions thereof set forth in the Disclosure Package and the Final Offering Memorandum.   (vii) The Purchase Agreement has been duly authorized, executed and delivered by the Company. (viii) The Indenture has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery of the Indenture by the Trustee, constitutes a legally valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors’ or by general equitable principles; and the Indenture conforms in all material respects to the description thereof contained in (x) the Disclosure Package and the Final Term Sheet and (y) Final Offering Memorandum. (ix) The Debentures have been duly authorized by the Company; when the Debentures are executed, authenticated and issued in accordance with the terms of the Indenture and delivered to and paid for by the Initial Purchasers pursuant to the Purchase Agreement on the Closing Date, as the case may be (assuming due authentication of the Debentures by the Trustee), such Debentures will constitute legally valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles; and the Debentures conform in all material respects to the description thereof contained in (x) the Disclosure Package and the Final Term Sheet and (y) the Final Offering Memorandum. (x) To such counsel’s knowledge, neither the Company nor any significant subsidiary has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any certificate, authorization or permit necessary to conduct their respective businesses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, could be reasonably expected to have a Material Adverse Effect. (xi) To such counsel’s knowledge, neither the Company nor any of its subsidiaries has received any notice of infringement or conflict with asserted Intellectual Property Rights of others, which infringement or conflict, if the subject of an unfavorable decision, would, singly or in the aggregate, have a Material Adverse Effect. (xii) The shares of Common Stock initially issuable upon conversion of the Debentures have been duly authorized and reserved and, when issued upon conversion of the Debentures in accordance with the terms of the Debentures, will be validly issued, fully paid and non-assessable (except to the extent provided under former Section 180.0622(2)(b) and predecessor and successor statutes and judicial interpretations thereof with respect to obligations incurred by the Company prior to June 14, 2006), and the issuance of such shares will not be subject to any preemptive or similar rights. (xiii) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company. (xiv) Neither registration of the Debentures under the Securities Act of 1933, as amended, nor qualification of the Indenture under the Trust Indenture Act of 1939, as amended, is required for (i) the offer and sale of the Debentures by the Initial Purchasers or (ii) the re-offer and resale of the Debentures by the Initial Purchasers, in each case in the manner contemplated by the Purchase Agreement and the Final Offering Memorandum. (xv) No shareholder of the Company or any other person has any preemptive right, right of first refusal or other similar right to subscribe for or purchase securities of the Company arising (i) by operation of the charter or by-laws of the Company or the Wisconsin Business Corporation Law or (ii) to the knowledge of such counsel, otherwise. (xvi) Each document, if any, filed pursuant to the Exchange Act and incorporated by reference in the Disclosure Package or the Final Offering Memorandum complied in all material respects with the Exchange Act and the rules and regulations of the Commission thereunder. (xvii) The statements incorporated by reference in each of the Disclosure Package and the Final Offering Memorandum under the heading “Legal Proceedings” insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are accurate and fair summaries in all material respects of such legal matters, agreements, documents or proceedings. (xviii) The statements set forth in each of the Disclosure Package and the Final Offering Memorandum under the caption “Material U.S. Federal Income Tax Considerations” insofar as such statements purport to summarize matters of United States federal income tax laws or legal conclusions with respect thereto, and subject to the limitations, qualifications and assumptions set forth therein, fairly summarize in all material respects the matters set forth therein. (xix) To such counsel’s knowledge, there are no legal or governmental actions, suits or proceedings pending or threatened (i) against or affecting the Company or any of its significant subsidiaries, (ii) which has as the subject thereof any officer or director of, or property owned or leased by, the Company or any of its significant subsidiaries or (iii) relating to environmental or discrimination matters, where in any such case any such action, suit or proceeding, if determined adversely, would reasonably be expected to, singly or in the aggregate, have a Material Adverse Effect or adversely affect the consummation of the transactions contemplated by this Agreement.  To such counsel’s knowledge, there are no existing, threatened or pending, material labor dispute with the employees of the Company or any of its significant subsidiaries. (xx) No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental authority or agency is required for the Company’s execution, delivery and performance of the Purchase Agreement and consummation of the transactions contemplated thereby and by the Disclosure Package and the Final Offering Memorandum, except as required under the Securities Act, applicable state securities or blue sky laws and from the NASD. (xxi) The execution and delivery of the Purchase Agreement, the Indenture and the Debentures by the Company and the performance by the Company of its obligations thereunder (other than performance by the Company of its obligations under the indemnification section of the Purchase Agreement, as to which no opinion need be rendered) (i) will not result in any violation of the provisions of the charter or by-laws of the Company or any significant subsidiary; (ii) will not constitute a breach of, or Default or a Debt Repayment Triggering Event under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, (A) the Company’s Credit Agreement (except pursuant to restrictions contained within the Credit Agreement on prepayment of the Debentures in cash), Receivables Facility and existing 3.75% Convertible Subordinated Notes due 2023, or (B) to the knowledge of such counsel, any other material Existing Instrument; or (iii) to the knowledge of such counsel, will not result in any violation of any statute, law, rule, judgment, regulation, order or decree applicable to the Company or any of its significant subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its significant subsidiaries or any of its or their properties, except for such violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (xxii) The Company is not, and after receipt of payment for the Debentures and the application of the proceeds as contemplated under the caption, “Use of Proceeds” in the Final Offering Memorandum and the Disclosure Package will not be, an “investment company” within the meaning of Investment Company Act. (xxiii) To the knowledge of such counsel, neither the Company nor any subsidiary (A) is in violation of its charter or by-laws, or (B) in violation of any statute, law, rule, judgment, regulation, order or decree applicable to the Company or any of its significant subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its or their properties or (C) is in Default in the performance or observance of any obligation, agreement, covenant or condition contained in any material Existing Instrument, except in the case of clauses (B) and (C) for such violation or Defaults which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Company, representatives of the independent public or certified public accountants for the Company and with representatives of the Initial Purchasers at which the contents of the Disclosure Package and the Final Offering Memorandum, and any supplements or amendments thereto, and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Final Offering Memorandum and the Disclosure Package (other than as specified above), and any supplements or amendments thereto, on the basis of the foregoing, nothing has come to their attention which would lead them to believe that (i) the Final Offering Memorandum or any amendments thereto, as of its date or at the Closing Date or any Subsequent Closing Date, as the case may be, 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; or (ii) the Disclosure Package, as of the Execution Time, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of circumstances under which they were made, not misleading (it being understood that such counsel need express no belief as to the financial statements or schedules or other financial data derived therefrom, included in or omitted from the Final Offering Memorandum, the Disclosure Package or any amendments or supplements thereto). In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the General Corporation Law of the State of Delaware, the Wisconsin Business Corporation Law or the federal law of the United States, to the extent they deem proper and specified in such opinion, upon the opinion (which shall be dated the Closing Date or any Subsequent Closing Date, as the case may be, shall be reasonably satisfactory in form and substance to the Initial Purchasers, shall expressly state that the Initial Purchasers may rely on such opinion as if it were addressed to them and shall be furnished to the Representatives) of other counsel of good standing whom they believe to be reliable and who are reasonably satisfactory to counsel for the Initial Purchasers; provided, however, that such counsel shall further state that they believe that they and the Initial Purchasers are justified in relying upon such opinion of other counsel, and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. EXHIBIT B [Date] Banc of America Securities LLC 9 West 57th Street New York, NY  10019 Re: School Specialty, Inc. (the “Company”) Ladies and Gentlemen: The undersigned is an owner of record or beneficially of certain shares of common stock of the Company, par value $0.001 per share (the “Common Stock”) or securities convertible into or exchangeable or exercisable for Common Stock.  The Company proposes to carry out an offering of [  ]% Convertible Subordinated Debentures due 2026, which will be convertible into Common Stock (the “Offering”), for which you will act as the representatives of the initial purchaser.  The undersigned recognizes that the Offering will be of benefit to the undersigned and will benefit the Company.  The undersigned acknowledges that you and the initial purchaser are relying on the representations and agreements of the undersigned contained in this letter in carrying out the Offering and in entering into purchase arrangements with the Company with respect to the Offering. In consideration of the foregoing, the undersigned hereby agrees that the undersigned will not, (and will cause any spouse or immediate family member of the spouse or the undersigned living in the undersigned’s household not to), without the prior written consent of Banc of America Securities LLC (which consent may be withheld in its sole discretion), directly or indirectly, sell, offer, contract or grant any option to sell (including without limitation any short sale), pledge, transfer, establish an open “put equivalent position” or liquidate or decrease a “call equivalent position” within the meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended, or otherwise dispose of or transfer (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition of) including the filing (or participation in the filing of) of a registration statement with the Securities and Exchange Commission in respect of, any shares of Common Stock, options or warrants to acquire shares of Common Stock, or securities exchangeable or exercisable for or convertible into shares of Common Stock currently or hereafter owned either of record or beneficially (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) by the undersigned (or such spouse or family member), or publicly announce an intention to do any of the foregoing, for a period commencing on the date hereof and continuing through the close of trading on the date 90 days after the date of the Final Offering Memorandum (the “Lock-Up Period”).  If (i) the Company issues an earnings release or material news, or a material event relating to the Company occurs, during the last 17 days of the lock-up period, or (ii) prior to the expiration of the lock-up period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the lock-up period, the restrictions imposed by this agreement shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event, unless Banc of America Securities LLC waives, in writing, such extension. The undersigned hereby acknowledges that the Company has agreed in the Purchase Agreement to provide written notice of any event that would result in an extension of the Lock-Up Period pursuant to the previous paragraph to the undersigned (in accordance with Section 14 of the Purchase Agreement) and agrees that any such notice properly delivered will be deemed to have been given to, and received by, the undersigned. The undersigned hereby further agrees that, prior to engaging in any transaction or taking any other action that is subject to the terms of this Lock-Up Agreement during the period from the date of this Lock-Up Agreement to and including the 34th day following the expiration of the initial Lock-Up Period, it will give notice thereof to the Company and will not consummate such transaction or take any such action unless it has received written confirmation from the Company that the Lock-Up Period (as such may have been extended pursuant to the previous paragraph) has expired.  The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of shares of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock held by the undersigned except in compliance with the foregoing restrictions. This agreement is irrevocable and will be binding on the undersigned and the respective successors, heirs, personal representatives, and assigns of the undersigned.

EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT made and entered into on May 2, 2006, in Wakefield, Massachusetts by and between Karma Merger Sub, Inc. ("Merger Sub"), a wholly-owned subsidiary of Green Mountain Coffee Roasters, Inc. ("GMCR") and, as of the consummation of the Merger under (and as defined in) the Agreement and Plan of Merger by and among GMCR, Merger Sub, Keurig, Incorporated ("Pre-Merger Keurig") and the Securityholder Representative, in such capacity, named therein, dated as of May 1, 2006 (the "Merger Agreement"), Keurig, Incorporated (the "Company"), as the surviving corporation in the Merger and the successor to Merger Sub, and Nicholas Lazaris (the "Executive") to take effect upon the consummation of the Merger (such consummation, the "Closing"). WHEREAS, the Executive served since February 10, 1997 as the President and Chief Executive Officer and a member of the board of directors of Pre-Merger Keurig; WHEREAS, the Company wishes to be assured of the services of the Executive from and after the Closing and therefore wishes to continue to employ the Executive, and the Executive wishes to accept such employment, subject to the terms and conditions hereinafter set forth; WHEREAS, upon the Closing, as a result of the Merger, the Company, as the surviving corporation in the Merger, will succeed to and be bound by all the rights and obligations of Merger Sub hereunder; NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions and conditions set forth in this Agreement, the parties hereby agree as follows: 1. Employment. The Company hereby offers, and the Executive hereby accepts, employment subject to the terms and conditions set forth in this Agreement. 2. Term. Subject to earlier termination as hereinafter provided, the Executive's employment hereunder shall be for a term of four (4) years, commencing as of the date of, and immediately following, the Closing (the "Effective Date"), and shall renew automatically thereafter for successive terms of one year each, unless either party gives notice to the other at least six (6) months prior to the expiration of the initial or any renewal term that this Agreement shall not renew, in which event this Agreement shall expire on the last day of the then-current term. The term of this Agreement, as from time to time renewed, is hereafter referred to as "the term of this Agreement" or "the term hereof." 3. Capacity and Performance. (a) During the term hereof, the Executive shall serve the Company as its President, reporting directly to the chief executive officer of GMCR (the "CEO") and, through him, to the board of directors of GMCR (the "GMCR Board"), it being agreed that all references to decisions, determinations and the like of the Company hereunder shall mean decisions, determinations or the like of the CEO or the GMCR Board, as the GMCR Board shall direct. (b) During the term hereof, the Executive shall be employed by the Company on a full-time basis; shall have the responsibilities, authorities, powers, functions and duties appropriate to his position, which will be generally similar to those he had prior to the Closing Date except as they may be altered by the CEO or GMCR Board to reflect that the Executive will be President of a subsidiary of GMCR, rather than president, chief executive officer and board member of an independent corporation, and the Executive shall have such other responsibilities, authorities, powers, functions and duties on behalf of the Company, reasonably related to his position, as may be designated from time to time by the CEO or the GMCR Board. (c) As soon as is reasonably practical after the Effective Date, GMCR shall cause the Executive to be elected to the board of directors of the Company and shall cause him to be re-elected as appropriate throughout the term of this Agreement. The Executive agrees to resign from the Company's board of directors as of the termination of his employment hereunder, howsoever caused. (d) During the term hereof, the Executive shall devote his full business time and his best efforts, business judgment, skill and knowledge exclusively to the advancement of the business and interests of the Company and its Affiliates and to the discharge of his duties and responsibilities hereunder. During the term hereof, the Executive may engage in other business activities only if they do not give rise to a conflict of interest or other violation of Section 9 of this Agreement and do not individually or in the aggregate interfere with his performance of his duties and responsibilities hereunder. The Executive will otain the approval of the CEO or the GMCR Board in writing in advance before accepting membership on a governing board other than that of the Company. 4. Compensation and Benefits. As compensation for all services performed by the Executive under and during the term hereof and subject to performance of the Executive's duties and of the obligations of the Executive to the Company and its Affiliates pursuant to this Agreement: (a) Base Salary. During the term hereof, the Company shall pay the Executive a base salary at the rate of Three Hundred Thousand Dollars ($300,000) per year, payable in accordance with the payroll practices of the Company for its executives and subject to increase from time to time by the GMCR Board in its discretion. Such base salary, as from time to time increased, is hereafter referred to as the "Base Salary." (b) Annual Bonus Compensation. During the term hereof, the Executive shall be eligible to earn bonus compensation in accordance with the following: (i) With respect to the remainder of the 2006 calendar year following the Effective Date, and in satisfaction of all rights of the Executive with respect to bonus compensation for 2006, the Executive shall be eligible to continue participation in the annual bonus program as in effect immediately prior to the Effective Date; shall have bonus compensation for calendar 2006 in the amount of Ninety Thousand Dollars ($90,000), vested as of the Effective Date, but payable on March 15, 2007; and shall have an additional target bonus opportunity of up to One Hundred Sixty Five Thousand Dollars ($165,000) for the remainder of the calendar year. Following the end of the 2006 calendar year, the GMCR Board, or a designated committee thereof, shall determine in its reasonable judgment the portion of the additional target bonus opportunity that was earned by the Executive using the pre-existing 2006 bonus program as approved by the board of directors of Pre-Merger Keurig. Following the end of the 2006 calendar year, the GMCR Board, or a designated committee thereof, shall determine in its reasonable judgment the portion of the additional target bonus opportunity that was earned by the Executive. The Executive's annual bonus for 2007 shall be pro-rated for the period from January 1 through September 30, 2007, with a target bonus equal to sixty percent (60%) of the Base Salary earned by the Executive for that period. Commencing on October 1, 2007, the Executive's annual bonus shall be based on a Company fiscal year ending September 30, (which fiscal year shall, however, be subject to change thereafter as the GMCR Board in its discretion may determine) and the Executive's target bonus opportunity shall be 60% of the Base Salary. (ii) Except with respect to the 2006 calendar year, for which the goals and objectives for the Executive's annual bonus shall have been established prior to the Effective Date, for each bonus year (or portion thereof, as described in the paragraph immediately above) completed during the term hereof, the Executive shall have the opportunity to earn an annual bonus in an amount to be determined by the GMCR Board based on the performance of GMCR and its Affiliates against such financial and market-share objectives as may be established by the GMCR Board for that year; provided, however, that the GMCR Board may weight the objectives to the performance of the Company to the extent that the GMCR Board determines that to be fair and appropriate. Each bonus payable under this Section 4(b) is hereafter referred to as an "Annual Bonus." Except as otherwise provided in this Section 4(b), Annual Bonuses shall be paid not later than two and one-half months following the close of the fiscal year as to which the Annual Bonus is earned. (c) [Intentionally left blank.] (d) Stock Options. (i) As of the Closing Date, the GMCR Board shall grant to the Executive an option to purchase Fifty Thousand (50,000) shares of the common stock of GMCR at fair market value on the date of grant (the "Option"). The shares that are subject to the Option shall vest at the rate of twenty-five percent (25%) on each of the first four (4) anniversaries of the date of grant, provided that the Executive is still employed by the Company on each such vesting date. (ii) The Option and, except for the "Parent Options" referred to in Section 5.7(a)(ii) of the Merger Agreement which, at the Effective Time (as defined in the Merger Agreement), the Executive will receive or be entitled to receive (hereinafter referred to as the "Roll-Over Options"), all other options granted the Executive by the GMCR Board shall be subject to any applicable stock option plan, option certificate and shareholder and/or option holder agreements and other restrictions and limitations generally applicable to equity held by executives of GMCR and its Affiliates or otherwise required by law. Further, prior to issuing the Option or any other stock options to the Executive, the GMCR Board may require that the Executive provide such representations regarding the Executive's sophistication and investment intent and other such matters as the GMCR Board may reasonably request. (iii) The Executive shall not be eligible to receive any stock options, restricted stock or other equity of the Company or GMCR, whether under an equity incentive plan or otherwise, except as expressly provided in this Agreement, except for the Roll-Over Options, or as otherwise expressly authorized for him individually by the GMCR Board. (e) Vacations. As of the Effective Date, the Executive shall be credited with all vacation accrued in accordance the vacation policy to which the Executive was subject immediately prior to the Effective Date and unused as of that date. During the term hereof, in addition to holidays observed by the Company, the Executive shall be entitled to earn vacation at the rate of four (4) weeks per year, to be taken at such times and intervals as shall be determined by the Executive, subject to the reasonable business needs of the Company and with the approval of the CEO. Vacation shall otherwise be governed by the policies of the Company, as in effect from time to time. (f) Other Benefits. During the term hereof, the Executive shall be entitled to participate in any and all Employee Benefit Plans from time to time in effect for executives of the Company generally, except to the extent any such Employee Benefit Plan is in a category of benefit otherwise provided to the Executive (e.g., a severance pay plan). Such participation shall be subject to the terms of the applicable plan documents and generally applicable Company policies. The Company may alter, modify, add to or delete its Employee Benefit Plans at any time as it, in its sole judgment, determines to be appropriate, without recourse by the Executive. Without limiting the generality of the foregoing, consistent with the terms of the Merger Agreement, the Company may elect to implement Employee Benefit Plans of GMCR for employees of the Company, including the Executive. For purposes of this Agreement, "Employee Benefit Plan" shall have the meaning ascribed to such term in Section 3(3) of the federal Employee Retirement Income Security Act as amended from time to time ("ERISA"). . (g) Business Expenses. The Company shall pay or reimburse the Executive for all reasonable and necessary business expenses incurred or paid by the Executive in the performance of his duties and responsibilities hereunder, subject to any maximum annual limit and other restrictions on such expenses set by the CEO or the GMCR Board and to such reasonable substantiation and documentation as may be specified by the Company, the CEO or the GMCR Board from time to time. 5. Termination of Employment and Severance Benefits. Notwithstanding the provisions of Section 2 hereof, the Executive's employment hereunder shall terminate prior to the expiration of the term hereof under the following circumstances. (a) Death. In the event of the Executive's death during the term hereof, the Executive's employment hereunder shall immediately and automatically terminate. In such event, the Company shall pay to the Executive's designated beneficiary or, if no beneficiary has been designated by the Executive in writing, to his estate, (i) any Base Salary earned but not paid during the final payroll period of the Executive's employment through the date of termination of his employment (the "Termination Date"), (ii) pay for any vacation time earned but not used through the Termination Date, (iii) any bonus compensation awarded for the year preceding that in which termination occurs, but unpaid on the Termination Date and (iv) any business expenses incurred by the Executive but un-reimbursed on the Termination Date, provided that such expenses and required substantiation and documentation are submitted within ninety (90) days of termination and that such expenses are reimbursable under Company policy (all of the foregoing, "Final Compensation"). (b) Disability. (i) The Company may terminate the Executive's employment hereunder, upon notice to the Executive, in the event that the Executive becomes disabled during his employment hereunder through any illness, injury, accident or condition of either a physical or psychological nature and, as a result, is unable to perform substantially all of his duties and responsibilities hereunder for ninety (90) days during any period of three hundred and sixty-five (365) consecutive calendar days. Notwithstanding the foregoing, however, in the event that at any time during the two years immediately following the Closing, the Executive's employment is terminated under this Section 5(b) as a result of disability prior to his absence from the full-time performance of his duties for a period of six (6) consecutive months as a result of incapacity due to physical or mental illness, such termination shall be treated as a termination other than for Cause by the Company for purposes of the agreement captioned "Amended and Restated Executive Retention Agreement" between Keurig, Incorporated, the Delaware corporation existing immediately prior to the Closing, and the Executive dated as of February 2, 2006 (the "ERA"). (ii) The GMCR Board may designate another employee to act in the Executive's place during any period of the Executive's disability. Notwithstanding any such designation, the Executive shall continue to receive the Base Salary in accordance with Section 4(a) and benefits in accordance with Section 4(f), to the extent permitted by the then-current terms of the applicable benefit plans, until the Executive becomes eligible for disability income benefits under the Company's disability income plan or until the termination of his employment, whichever shall first occur. While receiving disability income payments under the Company's disability income plan, the Executive shall not be entitled to receive any Base Salary under Section 4(a) hereof, but shall continue to participate in Company benefit plans in accordance with Section 4(f) and the terms of such plans, until the termination of his employment. (iii) If any question shall arise as to whether during any period the Executive is disabled through any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to perform substantially all of his duties and responsibilities hereunder, the Executive may, and at the request of the CEO or the GMCR Board shall, submit to a medical examination by a physician selected by the GMCR Board or its designee to whom the Executive or his duly appointed guardian, if any, has no reasonable objection to determine whether the Executive is so disabled and such determination shall for the purposes of this Agreement be conclusive of the issue. If such question shall arise and the Executive shall fail to submit to such medical examination, the determination of the issue by the GMCR Board shall be binding on the Executive. (c) By the Company for Cause. The Company may terminate the Executive's employment hereunder for Cause at any time upon notice to the Executive setting forth in reasonable detail the nature of such Cause. During the two years immediately following the Closing, "Cause" shall have the meaning set forth in section 5 of the ERA, except that the term "Employer" therein shall mean the GMCR Board and all references to the "Confidentiality Agreement" shall mean, for any period during the term hereof, the provisions of Sections 7, 8 and 9 of this Agreement. Immediately following the expiration of that two year period, however, the following shall constitute Cause for termination: (i) The Executive's failure to perform in all material respects (other than by reason of disability), or gross negligence in the performance of, his duties and responsibilities to the Company or any of its Affiliates which remains uncured, continues or recurs after twenty (20) days' notice from the Company specifying in reasonable detail the nature of the failure or negligence; (ii) The Executive's fraud, embezzlement, theft or other dishonesty related to the Company or any of its Affiliates or his breach of any of his covenants or other obligations under Section 7, 8 or 9 hereof, including without limitation any of the Corporate Codes or Corporate Legal Requirements referenced in Section 9(b) hereof; (iii) Material breach by the Executive of any other provision of this Agreement or of any other agreement with the Company or GMCR; provided, however, that, if such breach is curable, such breach remains uncured, continues or recurs after twenty (20) days' notice from the Company specifying in reasonable detail the nature of the breach; (iv) The Executive's indictment or conviction of, or plea of nolo contendere to, (a) a felony or (b) any other crime involving moral turpitude or resulting in incarceration post-conviction or plea. (d) By the Company Other than for Cause. The Company may terminate the Executive's employment hereunder other than for Cause at any time upon notice to the Executive. (i) The Closing of the transaction described in the Merger Agreement having constituted a "Change in Control," as that term is defined in the ERA, in the event that a "Terminating Event," as defined in section 3 of the ERA (as amended hereby), occurs at any time during the two (2) years immediately following the Closing, then, in lieu of any severance pay or other termination benefits under this Agreement, other than Final Compensation, the Executive shall be entitled to receive the severance and other payments and health benefits described in section 6(c) of the ERA, subject, however, to the signing and return of a timely and effective release of claims in the form attached hereto as Exhibit A (the "Release of Claims") and to the Executive's performance under Sections 7, 8 and 9 of this Agreement, in lieu of the conditions set forth in the final paragraph, below clause (z), of section 6(c) of the ERA. The Company and GMCR call to the Executive's attention that the Release of Claims creates legally binding obligations on the part of the Executive and therefore advise the Executive to seek the advice of an attorney before signing it. As set forth above, in the ERA, after the Effective Date, the term "Employer" shall mean the GMCR Board. Also, it is agreed that the Executive's resignation under section 3(ii)(a) of the ERA shall constitute a Terminating Event only if he has suffered a significant reduction in the nature or scope of his responsibilities, authorities, powers, functions or duties from those described in Section 3 of this Agreement. (ii) In the event of termination by the Company other than for Cause at any time after the expiration of two years following the Effective Date, then, in addition to Final Compensation, and provided that no benefits are payable to the Executive under a separate severance agreement as a result of such termination, then (A) until the conclusion of a period of twelve (12) months following the Termination Date, the Company shall continue to pay the Executive, as severance pay, the Base Salary at the rate in effect on the Termination Date; (B) the Company shall pay up to a total of Ten Thousand Dollars ($10,000) toward the cost of outplacement services for the Executive by an outplacement firm selected by the Company to which the Executive has no reasonable objection, such payment to be made directly to the outplacement firm following receipt of its invoice; (C) subject to the exercise by the Executive and his qualified beneficiaries of their right to continue participation in the Company's group medical and dental plans under the federal law generally known as "COBRA" and to the Executive's payment of any employee contribution to the premium cost of such participation applicable to the Executive on the Termination Date, the Company shall continue to contribute to the premium cost of the Executive's participation and that of his qualified beneficiaries in the Company's group medical and dental plans until the expiration of twelve (12) months from the Termination Date or, if less, until the Executive becomes eligible for coverage under the medical and/or dental plan of another employer. Also, the Company shall provide to the Executive a bonus for the fiscal year (or partial fiscal year, as set forth in Section 4(b)(i) hereof) in which termination occurs calculated by multiplying the Annual Bonus the Executive would have received had his employment continued until the end of such fiscal year by a fraction, the numerator of which is the number of calendar days from the first day of the fiscal year (or the first day of the applicable portion thereof) through the Termination Date and the denominator of which is the number of calendar days in the fiscal year (or applicable portion thereof), which shall be paid at the time bonuses for the fiscal year in which the Termination Date occurs are paid to other executives of the Company generally. In addition, GMCR shall provide the Executive a period of three (3) months from the Termination Date to exercise any portion of the Option that has vested as of the Termination Date or any portion of any other option granted to the Executive by the GMCR Board that has vested as of the Termination Date, provided any such vested portion has not yet been exercised or cancelled or expired. Any obligation of the Company or GMCR to the Executive hereunder is conditioned, however, upon the Executive signing and returning to the Company a timely and effective Release of Claims. The Release of Claims required for separation benefits in accordance with Section 5(d), Section 5(e) or Section 5(g) creates legally binding obligations on the part of the Executive and the Company and GMCR therefore again advise the Executive to seek the advice of an attorney before signing it. Base Salary to which the Executive is entitled hereunder shall be payable in accordance with the normal payroll practices of the Company for its executives and will begin at the Company's next regular payroll period which is at least five (5) business days following the later of the effective date of the Release of Claims or the date the Release of Claims, signed by the Executive, is received by the Company, but the first payment shall be retroactive to next business day following the Termination Date. (e) By the Executive for Good Reason. The Executive's right to resign as a result of a Terminating Event, as defined under section 3 of the ERA (as amended by this Agreement) will end at the expiration of two (2) years from the Effective Date. Thereafter, Executive may terminate his employment hereunder for Good Reason upon notice to the Company setting forth in reasonable detail the nature of such Good Reason, provided that he gives such notice within ninety (90) days from the date the Executive became aware (or the date the Executive reasonably should have become aware) of the occurrence, without the Executive's express written consent, of any of the events constituting Good Reason, and provided further that the Company shall have failed to effect a cure within thirty (30) days following its receipt of such notice. The following shall constitute Good Reason for termination: (i) Removal of the Executive from the position of President of the Company (or a successor corporation); (ii) Material diminution in the nature or scope of the Executive's responsibilities, duties or authority; provided, however, that any diminution of the business of the Company or any of its Affiliates or any sale or transfer of equity, property or other assets of the Company or any of its Affiliates shall not constitute constitute Good Reason; (iii) Material failure of the Company to provide the Executive Base Salary, Annual Bonus and benefits in accordance with the terms of Section 4 hereof; or (iv) Relocation of the Executive's primary office more than thirty-five (35) miles from its then-current location. In the event of termination in accordance with this Section 5(e), and provided that no benefits are payable to the Executive under a separate severance agreement as a result of such termination, then the Executive will be entitled to the same payments and other benefits he would have been entitled to receive had the Executive been terminated by the Company other than for Cause in accordance with Section 5(d)(ii) above; provided that the Executive satisfies all conditions to such entitlement, including without limitation the signing of a timely and effective Release of Claims. (f) By the Executive other than for Good Reason. The Executive may terminate his employment hereunder other than for Good Reason at any time upon thirty (30) days' notice to the Company. In the event of termination by the Executive pursuant to this Section 5(f), the GMCR Board may elect to waive the period of notice, or any portion thereof, and, if the GMCR Board so elects, the Company will pay the Executive his Base Salary for the initial thirty (30) days of the notice period (or for any remaining portion of such period). In the event of such termination, the Company shall pay the Executive any Final Compensation owed to him. (g) Upon a Change in Control. (i) If a Change in Control of GMCR should occur after the Effective Date and, within twelve (12) months following such Change in Control, the Company terminates the Executive's employment other than for Cause or the Executive terminates his employment for Good Reason, then, in addition to any payments and other benefits to which the Executive is entitled in accordance with Section 5(d) or Section 5(e) hereof, the GMCR Board shall cause any portion of the Option, and any portion of any other option granted the Executive by the GMCR Board during his employment hereunder, in either case that remains unvested (and has not been exercised or cancelled and has not expired) on the Termination Date to vest on that Date (in the aggregate, the "Accelerated Options") and, provided that the Executive signs and returns to the Company a timely and effective Release of Claims, the Accelerated Options shall become and remain exercisable from the later of the effective date of the Release of Claims or the date the Release of Claims, signed by the Executive, is received by the Company until the expiration of three (3) months from the Termination Date. (ii) Notwithstanding anything to the contrary contained in this Agreement or the ERA, the payments and other benefits to which the Executive would be entitled in accordance with Section 5(d) or Section 5(e) and Section (g)(i) hereof as a result of a termination following a Change in Control shall be reduced to the maximum amount for which the Company will not be limited in its deduction pursuant to section 280G of the Internal Revenue Code of 1986, as amended, or any successor provision. Any such reduction shall be applied to the amounts due under Section 5(d) or Section 5(e) and Section (g)(i) as the Executive may reasonably determine or, if the Executive fails to make such determination within the time specified by the GMCR Board in the exercise of its reasonable judgment, then as the Company shall reasonably determine. (iii) A Change in Control of GMCR shall be deemed to take place if hereafter (A) any "Person" or " group," within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Act), other than GMCR or any of its Affiliates or any trustee or other fiduciary holding securities under an employee benefit plan of GMCR or one of its Affiliates, becomes a beneficial owner (within the meaning of Rule 13d-3 as promulgated under the Act), directly or indirectly, in one or a series of transactions, of securities representing more than fifty percent (50%) of the total number of votes that may be cast for the election of directors of the GMCR Board and after the event a majority of the GMCR Board is not comprised of directors who were such immediately prior to the event; (B) any merger or consolidation involving GMCR and after the event a majority of the GMCR Board is not comprised of directors of GMCR who were such immediately prior to the event; or (C) there occurs a closing of a sale or other disposition by GMCR of all or substantially all of the assets of GMCR other than to one or more of GMCR's Affiliates or any trustee or other fiduciary holding securities under an employee benefit plan of GMCR or any of its Affiliates. (iv) The Company shall promptly reimburse the Executive for the amount of all reasonable attorneys' fees and expenses incurred by the Executive in seeking to obtain or enforce any right or benefit provided the Executive under this Section 5(g). (h) Timing of Payments. If at the time of the Executive's separation from service, the Executive is a "specified employee," as hereinafter defined, any and all amounts payable under this Section 5 in connection with such separation from service that constitute deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended, ("Section 409A"), as determined by the Company in its sole discretion, and that would (but for this sentence) be payable within six months following such separation from service, shall instead be paid on the date that follows the date of such separation from service by six (6) months. For purposes of the preceding sentence, "separation from service" shall be determined in a manner consistent with subsection (a)(2)(A)(i) of Section 409A and the term "specified employee" shall mean an individual determined by the Company to be a specified employee as defined in subsection (a)(2)(B)(i) of Section 409A. (i) Post-Agreement Employment. In the event the Executive remains in the employ of the Company or any of its Affiliates following termination of this Agreement, by the expiration of the term or otherwise, then such employment shall be at will. 6. Effect of Termination. The provisions of this Section 6 shall apply to any termination, whether due to the expiration of the term hereof, pursuant to Section 5 or otherwise. (a) The Executive shall promptly give the Company notice of all facts necessary for the Company to determine the amount and duration of its obligations in connection with any termination pursuant to Section 5(d) or 5(e) hereof. (b) Except for any right of the Executive to continue medical and dental plan participation in accordance with applicable law, benefits shall terminate pursuant to the terms of the applicable benefit plans based on the date of termination of the Executive's employment without regard to any continuation of Base Salary or other payment to the Executive following such date of termination. (c) Except as otherwise expressly provided in Section 5(d), Section 5(e) or Section 5(g) hereof, any equity in GMCR held by the Executive on the Termination Date hereunder shall be governed by the terms of any applicable incentive plan, option certificate, option or shareholder agreement or other document governing such equity. (d) Provisions of this Agreement shall survive any termination if so provided herein or if necessary or desirable to accomplish the purposes of other surviving provisions, including without limitation the obligations of the Executive under Sections 7, 8 and 9 hereof. The obligation of the Company to make payments to or on behalf of the Executive under Section 5(d), 5(e) or Section 5(f) hereof and the obligations of GMCR under Section 5(d), 5(e) or 5(g) hereof with respect to the securities of GMCR are expressly conditioned on the Executive's continued full performance of his obligations under Sections 7, 8 and 9 hereof. The Executive recognizes that, except as expressly provided in Section 5(d), 5(e) or 5(f) (with respect to payment for waiver of any portion of the notice period), no compensation is earned after termination of employment. 7. Confidential Information. (a) The Executive acknowledges that he has had access to and developed Confidential Information in the course of providing services to, and his other associations with, Pre-Merger Keurig, all of which Confidential Information is acknowledged by the Executive to be the property of the Company as of the Closing; that the Company and its Affiliates themselves will continue to develop Confidential Information to which the Executive will have access during his employment and other associations with the Company and its Affiliates from and after the Closing; that the Executive will develop Confidential Information for the Company or its Affiliates; and that the Executive may learn of Confidential Information during the course of employment and other associations with the Company and its Affiliates. The Executive agrees to comply with the policies and procedures of the Company and its Affiliates for protecting Confidential Information and shall not disclose to any Person or use any Confidential Information developed or obtained by the Executive incident to his employment or any other association with the Company or any of the Company's Affiliates, other than as required for the proper performance of his duties and responsibilities for the Company or as required by applicable law after prompt notice to the Company and a reasonable opportunity for the Company to seek protection of the Confidential Information prior to any such disclosure. The Executive understands that these restrictions shall continue to apply after his employment terminates, regardless of the reason for such termination. The confidentiality obligation under this Section 7, however, shall not apply to information which as of the Closing is generally known or readily available to Persons with whom the Company competes or does business or with whom the Company plans to compete or do business and any information that becomes generally known to such Persons thereafter through no wrongful act on the part of the Executive or any other Person having an obligation of confidentiality to the Company or any of its Affiliates. (b) All documents, records, tapes and other media of every kind and description relating to the business, present or otherwise, of the Company or its Affiliates and any copies, in whole or in part, thereof (the "Documents"), whether or not prepared by the Executive, shall be the sole and exclusive property of the Company and its Affiliates, including without limitation all Documents created by the Executive during any association with the Company or Pre-Merger Keurig, all other Documents acquired by GMCR at the Closing and all Documents created or acquired by the Company during the Executive's employment with the Company or Pre-Merger Keurig. The Employee shall safeguard all Documents and shall surrender to the Company at the time his employment terminates, or at such earlier time or times as the CEO or the GMCR Board or the designee of either may specify, all Documents then in the Executive's possession or control. 8. Assignment of Rights to Intellectual Property. The Executive shall promptly and fully disclose all Intellectual Property to the Company. The Executive hereby assigns and agrees to assign to the Company (or as otherwise directed by the Company) the Executive's full right, title and interest in and to all Intellectual Property, whether such right, title or interest arose during the Executive's associations with the Company's predecessor prior to the Closing or arises during his the Executive's employment or other associations with the Company thereafter. The Executive agrees to execute any and all applications for domestic and foreign patents, copyrights or other proprietary rights and to do such other acts (including without limitation the execution and delivery of instruments of further assurance or confirmation) requested by the Company to assign the Intellectual Property to the Company and to permit the Company to enforce any patents, copyrights or other proprietary rights to the Intellectual Property. The Executive will not charge the Company for time spent in complying with these obligations. All copyrightable works that he/shethe Executive creates, including without limitation computer programs and documentation, shall be considered " work made for hire" and shall, upon creation, be owned exclusively by the Company. 9. Restricted Activities. The Executive agrees that some restrictions on his activities during and after his employment are necessary to protect the goodwill, Confidential Information and other legitimate interests of the Company and its Affiliates: (a) While the Executive is employed by the Company and for the period of eighteen (18) months immediately following the termination of his employment, the Executive shall not, directly or indirectly, whether as owner, partner, investor, consultant, agent, employee, co-venturer or otherwise, compete with the Company or any of the Served Affiliates (as defined below) in any state within the United States or any state, province or like political or geographic division within any other country in which the Company or any of the Served Affiliates is conducting, or is engaged in consideration or active planning to conduct, business and the Executive shall not undertake any planning for any business competitive with the Company or any of its Affiliates. Specifically, but without limiting the foregoing, the Executive agrees not to engage in any manner in any activity that is directly or indirectly competitive or potentially competitive with the business of the Company or any of the Served Affiliates as conducted or under consideration at any time during the Executive's employment and further agrees not to work or provide services, in any capacity, whether as a member of a governing board, an employee, independent contractor or otherwise, whether with or without compensation, to any Person who is engaged in any business that is competitive with the business of the Company or any of the Served Affiliates, as conducted or in planning during his employment. The foregoing, however, shall not prevent the Executive's passive ownership of one percent (1%) or less of the equity securities of any publicly traded company. (b) The Executive agrees that, during his employment with the Company, he will not undertake any outside activity, whether or not competitive with the business of the Company or any of its Affiliates, that could reasonably give rise to a conflict of interest or otherwise interfere with his duties and obligations to the Company or any of its Affiliates. The Executive further agrees that, during his employment with the Company, he will abide by any codes or policies of the Company or any of the Served Affiliates with respect to conflicts of interest, codes of conduct and business ethics, personal transactions in securities and insider trading and the like, as published from time to time by the Company or any of the Served Affiliates to their respective employees (all of the foregoing, in the aggregate, "Corporate Codes") and will also comply with all applicable laws, regulations, rules, directives and other legal requirements of federal, state and other governmental and regulatory bodies having jurisdiction over the Company or any of the Served Affiliates and all rules, policies and requirements imposed by NASDAQ (all of the foregoing, in the aggregate, "Corporate Legal Requirements"). (c) The Executive agrees that, during his employment and during the eighteen (18) month period immediately following termination of his employment, the Executive will not directly or indirectly (a) solicit or encourage any customer of the Company or any of the Served Affiliates to terminate or diminish its relationship with them; or (b) seek to persuade any such customer or prospective customer of the Company or any of the Served Affiliates to conduct with anyone else any business or activity which such customer or prospective customer conducts or could conduct with the Company or any of the Served Affiliates; provided however, that, with respect to any period of these restrictions that follows the termination of the Executive's employment, these restrictions shall apply (y) only with respect to those Persons who are or have been a customer of the Company or a Served Affiliates at any time within the twenty-four (24) months immediately preceding the Termination Date or whose business has been solicited on behalf of the Company or a Served Affiliate by any of their officers, employees or agents within said twenty-four (24) month period and other than by form letter, blanket mailing or published advertisement and (z) only if the Executive was introduced to, or otherwise had contact with such Person as a result of his employment or other associations with the Company or one of the Served Affiliates or had access to Confidential Information which would assist in the Executive's solicitation of such Person. (d) The Executive agrees that during his employment and and during the eighteen (18) month period immediately following termination of his employment, the Executive will not, and will not assist any other Person to, (a) hire or solicit for hiring any employee of the Company or any of its Affiliates or seek to persuade any employee of the Company or any of its Affiliates to discontinue employment or (b) solicit or encourage any independent contractor providing services to the Company or any of its Affiliates to terminate or diminish its relationship with them; provided, however, that, with respect to any period of these restrictions that follows the termination of the Executive's employment, these restrictions shall apply (x) only with respect to any individual who was employed by or provided services as an independent contractor to the Company or one of its Affiliate at any time within twenty-four (24) months prior to the Termination Date and (y) only if the Executive was introduced to, or otherwise had contact with such employee or independent contractor as a result of his employment or other associations with the Company or one of its Affiliates or had access to Confidential Information which would assist in the Executive's solicitation of such employee or independent contractor. 10. Notification Requirement. Until ten (10) business days have expired following the conclusion of the last of the Executive's obligations under Section 9 hereof, the Executive shall give notice to the Company of each new business activity he plans to undertake, at least ten (10) business days prior to beginning any such activity. Such notice shall state the name and address of the Person for whom such activity is undertaken and the nature of the Executive's business relationship(s) and position(s) with such Person. The Executive shall provide the Company with such other pertinent information concerning such business activity as the Company may reasonably request in order to determine the Executive's continued compliance with his obligations under Sections 7, 8 and 9 hereof. Such information shall be provided by the Executive to the CEO or, in the event of the unavailability of the CEO, with another designee of the GMCR Board and the CEO or such designee will disclose any such information with others only on a bona fide business need-to-know basis. 11. Enforcement of Covenants. The Executive acknowledges that he has carefully read and considered all the terms and conditions of this Agreement, including the restraints imposed on him pursuant to Sections 7, 8 and 9 hereof. The Executive agrees without reservation that each of the restraints contained herein is necessary for the reasonable and proper protection of the goodwill, Confidential Information and other legitimate interests of the Company and its Affiliates; that each and every one of those restraints is reasonable in respect to subject matter, length of time and geographic area; and that these restraints, individually or in the aggregate, will not prevent him from obtaining other suitable employment during the period in which the Executive is bound by these restraints. The Executive further agrees that he will not assert, or permit to be asserted on his behalf, in any forum, any position contrary to the foregoing. The Executive further acknowledges that, were he to breach any of the covenants contained in Sections 7, 8 or 9 hereof, the damage to the Company and its Affiliates would be irreparable. The Executive therefore agrees that the Company, in addition to any other remedies available to it, shall be entitled to preliminary and permanent injunctive relief against any breach or threatened breach by the Executive of any of said covenants, without having to post bond. The parties further agree that each of the Company's Affiliates shall have the right to enforce the Executive's obligations to that Affiliate under this Agreement, including without limitation those obligations arising under Sections 7, 8 and 9 hereof. 12. Conflicting Agreements. The Executive hereby represents and warrants that the execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any other agreement to which the Executive is a party or is bound and that the Executive is not now subject to any covenants against competition or similar covenants or any court order or other legal obligation that would affect the performance of his obligations hereunder (excluding only the covenants set forth in the ERA, which covenants would not affect the performance of his obligations hereunder). The Executive will not disclose to or use on behalf of the Company or any of its Affiliates any proprietary information of a third party without such party's consent. 13. Definitions. Words or phrases which are initially capitalized or are within quotation marks shall have the meanings provided in this Section and as provided elsewhere herein. For purposes of this Agreement, the following definitions apply: (a) "Affiliates" means all persons and entities directly or indirectly controlling, controlled by or under common control with a specified person or entity, where control may be by management authority, contract, equity interest or otherwise. (b) "Served Affiliate" means any Affiliate of the Company (including without limitation GMCR) or of GMCR for which, or with respect to which, the Executive has provided services or with respect to which the Executive has had access to Confidential Information which would be of assistance in competion with such Affiliate or in soliciting or diverting the customers or perspective customers of such Affiliate or in hiring or engaging any of the employees of or independent contractors providing services to such Affiliate. (c) "Confidential Information" means any and all information of the Company and its Affiliates that is not generally known by those with whom the Company or any of its Affiliates competes or does business, or with whom the Company or any of its Affiliates plans to compete or do business and any and all information, publicly known in whole or in part or not, which, if disclosed by the Company or any of its Affiliates would assist in competition against them. Confidential Information includes without limitation such information relating to (i) the development, research, testing, manufacturing, marketing and financial activities of the Company and its Affiliates, (ii) the products and services of the Company and its Affiliates, (iii) the costs, sources of supply, financial performance and strategic plans of the Company and its Affiliates, (iv) the identity and special needs of the customers of the Company and its Affiliates and (v) the people and organizations with whom the Company and its Affiliates have business relationships and the nature and substance of those relationships. Confidential Information also includes any information that the Company or any of its Affiliates has received, or may receive hereafter, belonging to customers or others with any understanding, express or implied, that the information would not be disclosed. (d) "Intellectual Property" means inventions, discoveries, developments, methods, processes, compositions, works, concepts and ideas (whether or not patentable or copyrightable or constituting trade secrets) conceived, made, created, developed or reduced to practice by the Executive (whether alone or with others, whether or not during normal business hours or on or off Company premises) during the Executive's employment that relate either to the products and services of the Company and its Affiliates or to any prospective activity of the Company or any of its Affiliates or that make use of Confidential Information or any of the equipment or facilities of the Company or any of its Affiliates. (e) "Person" means a natural person, a corporation, a limited liability company, an association, a partnership, an estate, a trust and any other entity or organization, other than the Company or any of its Affiliates; except that, as used in Section 5(g) hereof, "Person" shall have the meaning provided in Section 5(g)(iii)(A). 14. Withholding. All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law. 15. Assignment. Neither the Company nor the Executive may make any assignment of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other; provided, however, that the Company may assign its rights and obligations under this Agreement without the consent of the Executive in the event that the Executive is transferred to a position with any of its Affiliates or in the event that the Company shall hereafter affect a reorganization, consolidate with, or merge into, any Person or transfer all or substantially all of its properties or assets to any Person. This Agreement shall inure to the benefit of and be binding upon the Company and the Executive, their respective successors, executors, administrators, heirs and permitted assigns. The Executive expressly consents to be bound by the provisions of this Agreement for the benefit of the Company and of any Affiliate, successor or permitted assign thereof to whose employ the Executive may be transferred, without the necessity that this Agreement be re-signed at the time of such transfer. 16. Severability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 17. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of either party to require the performance of any term or obligation of this Agreement, or the waiver by either party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach. 18. Notices. Except as otherwise expressly provided in Section 5(e) hereof, any and all notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be effective when delivered in person, consigned to a reputable national courier service or deposited in the United States mail, postage prepaid, and addressed to the Executive at his last known address on the books of the Company or, in the case of the Company, to it c/o the CEO at the principal place of business of GMCR, with a copy to the chair of the GMCR Board at his/her principal place of business. 19. Entire Agreement and Waiver. This Agreement constitutes the entire agreement between the parties and supersedes all prior communications, agreements and understandings, written or oral, with respect to the terms and conditions of the Executive's employment, including without limitation the ERA, except to the extent the provisions of the ERA expressly have been retained in this Agreement, subject to any amendment or modification of those provisions by this Agreement; and provided further that this Agreement shall not supersede any effective assignment of any invention or other intellectual property to the Company in effect at the time of the Closing and shall not constitute a waiver by the Company of any rights it had as of the Closing under the ERA or under the agreement defined in the ERA as the "Confidentiality Agreement." 20. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by the CEO or other expressly authorized representative of the GMCR Board. 21. Headings and Counterparts. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. 22. Governing Law. This is a Massachusetts contract and shall be construed and enforced under and be governed in all respects by the laws of The Commonwealth of Massachusetts, without regard to the conflict of laws principles thereof. 23. Condition Precedent. The effectiveness of this Agreement is conditioned on the Closing. For the avoidance of doubt, in the event that the Closing does not occur and the Merger Agreement is terminated, this Agreement shall be void ab initio and of no force or effect. [Signature page follows immediately.]     IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company, by its duly authorized representative, and by the Executive, as of the date first above written. THE EXECUTIVE:                                                                                         THE COMPANY:                                                                                                                        KARMA MERGER SUB, INC.   _/s/ Nicholas Lazaris_______                                                                           By: /s/ Fran Rathke__________ Nicholas Lazaris                                                                                              Title: _President_____________     Green Mountain Coffee Roasters, Inc. shall be a party to this Agreement, but solely with respect to its agreements with respect to Section 3(c) and to its equity under Section 4(d), Section 5(d)(ii) and Section 5(g) hereof.                                                                                                                         GMCR:                                                                                                                         GREEN MOUNTAIN COFFEE ROASTERS, INC.                                                                                                                         By: __Fran Rathke__________________________                     Title: __Chief Financial Officer _________________  

Exhibit 10.1 Bristol West Holdings, Inc. Dated as of     May 25, 2006 James R. Fisher c/o Fisher Capital Corp. LLC 8 Clarke Drive Cranbury, New Jersey 08512 Dear Jim:           On behalf of Bristol West Holdings, Inc. (the “Company”), I am pleased to confirm your continued employment as the Executive Chairman of the Company, effective July 1, 2006, on the terms and conditions set forth in this letter agreement. Your employment agreement dated as of January 1, 2004 shall not be renewed and your employment as Chief Executive Officer shall terminate effective June 30, 2006.  In your capacity as Executive Chairman, you shall have such duties, responsibilities and authorities as the board of directors of the Company (the “Board”) shall determine are appropriate for your position, and you shall devote your reasonable business time to such duties, responsibilities and authorities. Such duties, responsibilities and authorities shall include, without limitation, preparing for and conducting Board meetings, communicating with Board members between meetings and consulting with the Chief Executive Officer and other senior executive officers on strategic and operational issues.           With respect to compensation for your services as the Executive Chairman of the Company, subject to your continued employment with the Company, you will receive the following compensation, from which the Company shall be entitled to withhold any amounts required by applicable law:   i)     Beginning on July 1, 2006, the Company shall pay you a base salary (“Base Salary”) at the rate of $350,000 per annum. Your Base Salary shall be payable quarterly in arrears within ten (10) business days after the end of each such quarter.  Your Base Salary may be changed at the sole discretion of the Compensation Committee of the Board (or, if necessary, such other committee that satisfies the requirements of Section 162(m) of the Internal Revenue Code and the regulations thereunder) (the “Committee”), but in no event shall your Base Salary be changed to a level below $350,000 per annum.       (ii)   You will be eligible to earn an annual bonus award  in such amounts, if any, as may be awarded by the Committee in its sole discretion in accordance with the Company’s annual incentive plans.       (iii)   You will be eligible to receive grants of long-term restricted stock awards in such   amounts, if any, that the Committee may choose to award in its sole discretion.           Subject to the terms and conditions set forth in this letter agreement, the term of your employment with the Company hereunder shall begin on July 1, 2006 and shall end on June 30, 2007 (the “Initial Term”); provided, however, that commencing on June 30, 2007 and on each June 30 thereafter, the term of your employment hereunder shall be automatically extended for an additional one-year period (each such period, an “Extended Term”).  Notwithstanding the foregoing, your employment hereunder will terminate upon the earliest to occur of: (i) the expiration of the Initial Term or any Extended Term, as applicable, in the event that you or the Company provides the other party with written notice of nonrenewal of such term no later than ninety (90) days prior to the commencement of any Extended Term; (ii) termination of your employment by the Company with or without Cause (as defined below) at any time following written notice to you thereof; or (iii) termination of your employment by you for any reason following ninety (90) days advance written notice to the Company thereof (except in the case of your death or permanent disability (as defined below)). -------------------------------------------------------------------------------- 2           If, during the Initial Term or any Extended Term, your employment is terminated for any reason by you or by the Company as provided above (including upon the nonrenewal of the term of your employment hereunder by either party), you will be entitled to receive such payments (including any accrued but unpaid Base Salary) as to which you may be entitled (or may have accrued) as of the date of termination. Also in the event of any termination of your employment, any Company Stock or options to purchase Company Stock that you hold, directly or indirectly, will be governed by the terms of the applicable agreements under which you hold such Company Stock and/or options.            In addition to the foregoing, if, during the Initial Term or any Extended Term, your employment is terminated (i) by the Company without Cause as provided above (which in no event shall include the nonrenewal of the term of your employment hereunder by the Company or any termination due to your death or permanent disability) or (ii) by you for any reason as a result of an Associates Sale (as defined below), following thirty (30) days advance written notice of such termination delivered to the Company not earlier than the date the Associates Sale occurs, subject to your continued compliance with the confidentiality and nondisparagement covenants contained herein (as described below), for the remainder of the Initial Term or the Extended Term, as applicable (in either case without any extensions thereof) the Company shall provide you with continued payment to you of your then Base Salary, payable as set forth above. These severance payments are in lieu of any other severance payments or benefits to which you may be entitled under any other Company severance plan or policy.  For purposes of this paragraph, “Associates Sale” shall mean the sale or other disposition (either in one transaction or in a series of transactions) of all of the shares of common stock in the Company (“Company Stock”) that Bristol West Associates LLC (“Associates”) owns, directly or indirectly.           For purposes of this letter agreement, (i) “Cause” shall mean (A) your willful and continued failure to perform your material duties with respect to the Company or its subsidiaries which continues beyond 10 days after a written demand for substantial performance is delivered to you by the Company, (B) your willful misconduct involving dishonesty or breach of trust in connection with your employment which results in a demonstrable injury (which is other than de minimis or insignificant) to the Company, (C) conviction for any felony or misdemeanor involving moral turpitude, or (D) any material breach of your covenant not to disclose Confidential Information or not to disparage the Company and its Beneficiaries, as provided below and (ii) “permanent disability” shall mean you are unable to engage in the activities required by your job by reason of any medically determined physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.           Upon any termination of your employment with the Company, you agree to resign, as of the date of such termination and to the extent applicable, from any board of directors or committees of the Company or its affiliates on which you serve and any board, committees or other organizations on which you serve in a representative capacity of the Company or its affiliates.           As a condition of your employment, you agree that you shall not at any time during or after your employment with the Company disclose any Confidential Information (as hereinafter defined) pertaining to the business of the Company or any of its subsidiaries, except (i) when required by applicable law or (ii) in connection with any strategic transaction involving the Company and only after receipt of authorization from the Board to disclose such Confidential Information.  For the purposes of this letter agreement, “Confidential Information” shall mean all non-public information concerning the financial data, strategic business plans, and other non-public, proprietary and confidential information of the Company, its subsidiaries, Associates, and their affiliates as in existence as of the date of your termination of employment. You also hereby agree not to issue any press release or otherwise make any private or public statement (whether oral, in writing or in any other form), directly or through any person or entity, which is derogatory, disparaging or damaging to, which alleges improper conduct by, or which is reasonably likely to result in or could reasonably be determined to be intended to cause damage or embarrassment to, the Company, its successors, subsidiaries, affiliates, officers, directors, employees, shareholders, representatives, agents, servants and assigns, or anyone acting on their behalf (the “Beneficiaries”), other than any such statement that may be required by applicable law. -------------------------------------------------------------------------------- 3           During the term of your employment with the Company and for 12 months thereafter, you agree that you shall not, without the Board’s written consent, directly or indirectly (i) be engaged in any business that is principally engaged, within the states in which the Company conducts business and all states contiguous thereto, in the principal business of the Company and its subsidiaries at the relevant time or (ii) solicit or offer employment to any person who has been employed by the Company or any of its subsidiaries at any time during the 12 months immediately preceding such solicitation. Notwithstanding anything herein to the contrary: (1) you shall be permitted to provide services, directly or indirectly, to Kohlberg Kravis Roberts & Co., L.P. or any affiliate thereof , to be paid for such services, and to continue to manage and direct your personal investments without limitation thereof; and (2) you may engage in certain investment and advisory activities related to your position with Fisher Capital Corp. LLC, which activities are not connected with your employment with the Company and for which you may receive compensation from sources that are not affiliated with the Company.           All notices or communications hereunder shall be in writing, addressed: (i) to the Company at its principal corporate headquarters, to the attention of the Board, and (ii) to you at the most recent residential address contained within the personnel records of the Company (or to such other address as such party may designate in a notice duly delivered as described below).  Any such notice or communication shall be delivered by telecopy, by hand, by courier or sent certified or registered mail, return receipt requested, postage prepaid, addressed as above, and in the case of delivery other than by hand, the third business day after the actual date of mailing shall constitute the time at which notice was given.           Any controversy or claim arising out of or relating to this letter agreement or the breach of this letter agreement that cannot be resolved by you and the Company, including any dispute as to the calculation of any payments hereunder, and the terms of this letter agreement, shall be exclusively resolved by way of confidential arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association, which arbitration shall take place in New York, New York.  This letter agreement shall be construed, interpreted and governed in accordance with the laws of New York.            This letter agreement contains the entire understanding of the parties with respect to your employment with the Company and there are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein.  This letter agreement may not be altered, modified or amended, except by written instrument signed by the parties hereto and may be executed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  The failure of a party to insist upon strict adherence to any term of this letter agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this letter agreement.           This letter agreement shall not be assignable by you but may be assigned by the Company to an entity, which is a successor in interest to substantially all of the Company Stock or assets of the Company. -------------------------------------------------------------------------------- 4           If the foregoing terms and conditions are acceptable and agreed to by you, please sign on the line provided below to signify such acceptance and agreement and return the executed copy to the undersigned.   BRISTOL WEST HOLDINGS, INC.           By: /s/ George G. O’Brien     --------------------------------------------------------------------------------   Name: George G. O’Brien   Title: Chief Legal Officer Accepted and Agreed as of this 25th day of May, 2006           /s/ James R. Fisher   --------------------------------------------------------------------------------   James R. Fisher   --------------------------------------------------------------------------------

      EXHIBIT 10.1     FORM OF MORTGAGE LOAN PURCHASE AGREEMENT This Mortgage Loan Purchase Agreement (the "Agreement") dated as of August 1, 2006 is between CitiMortgage, Inc. ("CMI" or the "Seller") and Citicorp Mortgage Securities, Inc., a Delaware corporation ("CMSI"). The Seller agrees to sell, and CMSI agrees to purchase, the mortgage loans originated or acquired by CMI as described and set forth in the Mortgage Loan Schedule attached as exhibit B (the "mortgage loans") to the Pooling and Servicing Agreement dated as of August 1, 2006 (the "Pooling Agreement"), between CMSI, CMI, U.S. Bank National Association, a national banking association, in its individual capacity and as Trustee (the "Trustee"), and Citibank, N.A., in its individual capacity and as Paying Agent, Certificate Registrar and Authentication Agent, relating to the issuance of Citicorp Mortgage Securities Trust, Series 2006-4 REMIC Pass-Through Certificates class A, class B and residual certificates. Terms used without definition herein shall have the respective meanings assigned to them in the Pooling Agreement or, if not defined therein, in the Underwriting Agreement dated July 25, 2006 (the "Underwriting Agreement"), among CMSI, Citigroup Inc. and Citigroup Global Markets Inc. (the "Underwriter"). Purchase Price. The purchase price (the "Purchase Price") for the mortgage loans shall consist of (a) cash in the amount of [                ]% of the aggregate scheduled principal balance thereof as of the cut-off date, plus accrued interest thereon at the rate of 6.00% per annum on the mortgage loans in pool I and 5.50% per annum on the mortgage loans in pool II and pool III, from and including the cut-off date to but excluding the closing date, (b) the class IA-IO, IIA-IO and IIIA-IO certificates, (c) the class LR certificates and (d) the class PR certificates. Such cash shall be payable by CMSI to the Seller on the closing date in same-day funds, and the Seller will receive on the closing date: (a) the class IA-IO, IIA-IO and IIIA-IO certificates and (b) the class LR and class PR certificates evidencing the residual interests in the lower-tier REMIC and the pooling REMIC, respectively. If CMSI for any reason shall repay to the Underwriter any portion of the price paid to CMSI by the Underwriter pursuant to the Underwriting Agreement, the Seller shall simultaneously and in the same manner repay to CMSI a proportionate amount of the Purchase Price as such repayment to the Underwriter. Upon payment of the Purchase Price, the Seller shall transfer, assign, set over and otherwise convey to CMSI without recourse all of the Seller's right, title and interest in and to the mortgage loans, including all interest and principal received or receivable by the Seller on or with respect to the mortgage loans (other than payments of principal and interest due and payable on the mortgage loans on or before the cut-off date and prepayments of principal on the mortgage loans received or posted prior to the close of business on the cut-off date), together with all of the Seller's right, title and interest in and to the proceeds of any related title, hazard or other insurance policies and Primary Mortgage Insurance Certificates. The Seller agrees to deliver to CMSI all documents, instruments and agreements required to be delivered by CMSI to the Trustee under the Pooling Agreement and such other documents, instruments and agreements as CMSI shall reasonably request. CMSI hereby directs the Seller to execute and deliver to the Trustee assignments of the Mortgages to the Trustee (and endorsements of any Mortgage Notes relating thereto) in recordable form. Such assignments and endorsements shall not affect the rights of the parties hereto or to the Pooling Agreement.   1 --------------------------------------------------------------------------------   1. Representations. The Seller hereby represents and warrants to CMSI (i) that CMSI's representations and warranties pursuant to the Pooling Agreement to the Trustee with respect to the mortgage loans are true and correct and (ii) that the Seller has not dealt with any broker, investment banker, agent or other person (other than CMSI and the Underwriter) who may be entitled to any commission or compensation in connection with the sale of the related mortgage loans. The Seller hereby agrees to cure any breach of such representations and warranties in accordance with the terms of the Pooling Agreement. 2. Underwriting. The Seller hereby agrees to furnish any and all information, documents, certificates, letters or opinions reasonably requested by CMSI in order to perform any of its obligations or satisfy any of the conditions on its part to be performed or satisfied at or prior to the closing date. 3. Costs. CMSI shall pay all expenses incidental to the performance of its obligations under the Underwriting Agreement, including without limitation (i) any recording fees or fees for title policy endorsements and continuations, (ii) the expenses of preparing, printing and reproducing the Registration Statement, the Prospectus, the Underwriting Agreement, the Pooling Agreement and the certificates and (iii) the cost of delivering the certificates to the offices of The Depository Trust Company or the Underwriter, as the case may be. 4. Indemnification. The Seller hereby agrees to indemnify, defend and hold harmless CMSI against any and all losses, claims, damages or liabilities (i) resulting from the Seller's failure to perform any of its obligations hereunder, (ii) resulting from the inaccuracy of the Seller's representations and warranties herein or of CMSI's representations and warranties in the Pooling Agreement or (iii) insofar as such losses, claims, damages or liabilities (or actions or demands for reimbursement or contribution in respect thereof) arise out of or are based upon information relating to the Seller or the mortgage loans pursuant to the Underwriting Agreement. 5. Purchase and Sale; Security Interest. The parties hereto intend the conveyance by the Seller to CMSI of all of its right, title and interest in and to the mortgage loans pursuant to this Agreement to constitute a purchase and sale and not a loan. Notwithstanding the foregoing, to the extent that such conveyance is held not to constitute a sale under applicable law, it is intended that this Agreement shall constitute a security agreement under applicable law and that the Seller shall be deemed to have granted to CMSI a first priority security interest in all of the Seller's right, title and interest in and to the mortgage loans. 6. Notices. All demands, notices and communications hereunder shall be in writing, shall be effective only upon receipt and shall, if sent to CMSI be addressed to it at 1000 Technology Drive, O’Fallon, Missouri 63368, Attn: Larry Kent Slough or if sent to Seller be addressed to it at 1000 Technology Drive, O’Fallon, Missouri 63368, Attn: General Counsel. 7. Trustee Beneficiary. The representations and agreements made by the Seller in this Agreement are made for the benefit of, and may be enforced by, the Trustee, and the holders of certificates to the same extent that the Trustee and the holders of certificates, respectively, have rights against CMSI under the Pooling Agreement in respect of representations and agreements made by CMSI therein.   2 --------------------------------------------------------------------------------   8. Cross-Receipt. The Seller, by executing this Agreement below, hereby acknowledges receipt of the Purchase Price from CMSI. CMSI, by executing this Agreement below, hereby acknowledges receipt of the Mortgage Loans from the Seller. 9. Miscellaneous. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated except by a writing signed by the party against whom enforcement of such change, waiver, discharge or termination is sought. This Agreement may not be changed in any manner which would have a material adverse affect on holders of any class of certificates without the prior written consent of the Trustee. The Trustee shall be protected in consenting to any such change to the same extent provided in section 10 of the Pooling Agreement. This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, which taken together shall constitute one and the same instrument. This Agreement shall bind and inure to the benefit of and be enforceable by CMSI and the Seller and their respective successors and assigns; provided, however, that this Agreement cannot be assigned by either party without the consent of the other party hereto, and any assignment hereof without such consent shall be void.   3 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, CMSI and the Seller have caused this Agreement to be duly executed by their respective officers as of the day and year first above written. CITIMORTGAGE, INC. By:--------------------------------------      David L. Hicks Assistant Vice President CITICORP MORTGAGE SECURITIES, INC. By:-------------------------------------      Larry Kent Slough Senior Vice President                 4

EXECUTION COPY AMENDMENT NO. 2 TO THE MASTER SELLER'S WARRANTIES AND SERVICING AGREEMENT (NATIONAL CITY MORTGAGE CO.) This Amendment No. 2 (this "Amendment"), dated as of October 1, 2004, by and between Bank of America, N.A., a national banking association (the "Purchaser") and National City Mortgage Co. (the "Company"), amends the Master Seller's Warranties and Servicing Agreement (the "Master Agreement"), dated September 1, 2003, by and between Banc of America Mortgage Capital Corporation (the "Initial Purchaser") and the Company, as amended by Amendment No. 1, dated as of July 1, 2004, by and among the Purchaser, the Company and the Initial Purchaser, and as further amended by the Master Assignment, Assumption and Recognition Agreement (the "MAAR and collectively with the Master Agreement and Amendment No. 1, the "Agreement"), dated as of July 1, 2004, by and among the Initial Purchaser, the Purchaser, the Company and Wachovia Bank, National Association. W I T N E S S E T H WHEREAS, pursuant to the Agreement, the Company has agreed to sell from time to time to the Purchaser conventional fixed rate and adjustable rate residential first lien mortgage loans; and WHEREAS, the Company and the Purchaser have agreed, subject to the terms and conditions of this Amendment No. 2, that the Agreement be further amended to reflect certain agreed upon revisions to the terms thereof. NOW, THEREFORE, in consideration of the mutual premises and mutual obligations set forth herein and other good and valuable consideration, the Company and the Purchaser agree as follows: 1. Article I of the Agreement is hereby amended by deleting the word "following" and replacing it with "preceding" in the definition of "Remittance Date." 2. Section 3.02(mm) of the Agreement is hereby amended by: a. inserting the language "as amended," immediately following "Act of 1994"; b. inserting the language "abusive," immediately before "covered"; c. inserting the language ", including refinance loans," immediately before "under any other applicable state"; d. inserting the language "or (c) a `High Cost Loan' or `Covered Loan' as defined in the S&P LEVELS(R) Glossary Version 5.6" immediately following "applicable local law." 3. Section 3.02 of the Agreement is hereby amended by inserting the following as the new subsection (ooo) therein: "(ooo) No Arbitration. No Mortgagor agreed to submit to arbitration to resolve any dispute arising out of or relating in any way to the related Mortgage Loan or the origination thereof." Upon execution of this Amendment No. 2, the Agreement as it relates to Mortgage Loans sold to the Purchaser by the Company on or after the date hereof will be read to contain the above amendments as of the date hereof, and any future reference to this Agreement will mean the Agreement as so modified as of the date hereof and thereafter. The parties hereto acknowledge that the Agreement has not been modified or amended, except as otherwise expressly described or provided herein. This Amendment No. 2 shall be construed in accordance with the laws of the State of New York, and the obligation, rights and remedies of the parties hereunder shall be determined in accordance with such laws. This Amendment No. 2 may be executed in one or more counterparts and by different parties hereto on separate counterparts, each of which, when so executed, shall constitute one and the same agreement. Any capitalized terms not otherwise defined herein will have the meanings assigned to them in the Agreement. [SIGNATURES ON THE FOLLOWING PAGE] 2 IN WITNESS HEREOF, the parties have caused their names to be signed to this Amendment No. 2 by their respective duly authorized officers as of the date first written above. BANK OF AMERICA, N.A. NATIONAL CITY MORTGAGE CO. Purchaser Company By: /s/ Bruce W. Good By: Theodore W. Tozer ----------------------------------- -------------------------------- Name: Bruce W. Good Name: Theodore W. Tozer --------------------------------- ------------------------------ Title: Vice President Title: Senior Vice President -------------------------------- ----------------------------- 3